UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
| Filed by the Registrant |
| Filed by a party other than the Registrant |
Check the appropriate box:
| Preliminary Proxy Statement |
| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| Definitive Proxy Statement |
| Definitive Additional Materials |
| Soliciting Material under Rule 14a-12 |
SELECT COMFORT CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| No fee required. |
| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| Fee paid previously with preliminary materials. |
| Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
Dear Shareholders,
Sleep Number’s long-term orientation, mission-driven culture and focus on our customer’s experience are creating value for our shareholders. Over the past five years we have invested $425 million to transform the company, establish our innovation leadership and strengthen our competitive advantages. The coordinated investments we have made in digital capabilities, stores, products, technologies and infrastructure have made us a stronger competitor with superior products and customer experiences. These investments culminate in 2017 as we launch the most significant innovation in our thirty-year history: Sleep Number 360™ smart beds.
We are capitalizing on momentous consumer trends – ranging from what consumers value in their lives to how they shop and what they expect from brands. This is an exciting time for companies like Sleep Number that have digital at their core and the ability to connect with customers from that first engagement to a life-long relationship. Our consumer innovation strategy has positioned us to succeed in this digitalized, fast-changing world.
We believe sleep is the center of a healthy mind, body and soul – and that great sleep should be smart and effortless. Our Sleep Number 360 smart beds sense what a person needs for their best sleep and automatically adjust the bed’s firmness, comfort and support – their Sleep Number® setting – to keep each person sleeping blissfully, all night long. The Sleep Number 360 smart bed is powered by SleepIQ® technology, which tracks your biometric sleep data, provides individualized sleep insights and connects to your apps and smart devices. The bed can even warm your feet to help you fall asleep faster, and can help relieve common, mild snoring. Our new product line was recognized with 13 awards at CES this year – including being named the Best of Innovation Honoree in the Home Appliances category. The demand potential and pricing power associated with our Sleep Number 360 smart beds – and our direct-to-consumer distribution – are significant growth drivers for our brand.
Our innovations, new technology platforms and improved operations are now delivering greater efficiency and a superior customer experience. We expect accelerated financial returns and free cash flow through our more efficient vertical business model. At our November 2016 Investor Conference, we outlined our multi-year path to achieve our goal of $2.75 in earnings per share by 2019.
The year 2016 was one of progress and recovery for Sleep Number. We delivered 8% net sales growth in fiscal 2016 and a 13% increase in earnings per share, despite a worsening consumer environment in the back half of the year. We generated a 40% increase in operating cash flows to a record $152 million, increased our store base 11%, and returned $125 million of cash to shareholders through share repurchases. Our full-year ROIC of 12.2% exceeded our weighted average cost of capital by 54%.
Following our ERP system implementation recovery, our customer experience and operational improvements – including in-store scheduling of home delivery and improved inventory control – led to margin expansion. Operating our vertically integrated business on one technology platform helps us achieve greater customer convenience, efficiency and scalability.
In one of Contentsour most demanding years ever, our talented team put forth extraordinary effort and remained engaged and committed. Their dedication to our mission of improving lives by individualizing sleep experiences is the reason we were again ranked “Highest in Customer Satisfaction with Mattresses” by J.D. Power in 2016 – the second year in a row.
We are all excited about changing lives with our revolutionary Sleep Number 360 smart beds and the opportunities we have to expand our market share and leverage our business model. We are executing the consumer innovation strategy that our board of directors and management team believe will create superior shareholder value for the long term. With our benefit-driven products – and a more convenient, connected customer experience – we expect to become a more broadly relevant and scalable brand in 2017 and beyond. We envision a future where everyone will sleep on a smart bed!
On behalf of all of us at Sleep Number, we thank our shareholders for your ongoing support and confidence in our future.
Sleep well, dream big,
Shelly Ibach, Sleep Number® setting 40, average SleepIQ® score of 82
President and Chief Executive Officer
9800 59th Avenue North
Plymouth, Minnesota 55442
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 16, 201617, 2017
TO THE SHAREHOLDERS OF SELECT COMFORT CORPORATION:
Select Comfort Corporation will hold its Annual Meeting of Shareholders at1:8:30 p.m.a.m. Central Time onMonday,Wednesday, May 16, 201617, 2017, at theMillennium Minneapolis Hotel located at 1313 Nicollet Mall, Minneapolis, Minnesota 55403 and. The meeting will be conducted completely as a virtual meeting via the Internet atwww.virtualshareholdermeeting.com/scss2016scss2017. The purposes of the meeting are to:
| 1. | Elect |
| 2. | Cast an advisory vote |
| 3. | Cast an advisory vote to approve the frequency of future advisory votes on |
| 4. | Cast an advisory vote to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the |
Shareholders of record at the close of business on March 21, 20162017 will be entitled to vote at the meeting and any adjournments thereof.
Your vote is important. Please be sure to vote your shares in favor of the Board of Directors’ recommendations in time for our May 16, 201617, 2017 meeting date.
Your attention is directed to the Proxy Statement accompanying this Notice for a more complete statement of the matters to be considered at the meeting. A copy of the Annual Report for the year ended January 2, 2016 also accompanies this Notice.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS’ MEETING TO BE HELD ONMAY 16, 2016:17, 2017: The Proxy Statement and Annual Report for the year ended January 2,December 31, 2016 and related materials are available atwww.sleepnumber.com/investor-relations.
| By Order of the Board of Directors, | ||
  | ||
| Mark A. Kimball | ||
| Senior Vice President, | ||
| Chief Legal and Risk Officer and Secretary |
April 1, 2016
4,2017
Plymouth, Minnesota
As used in this Proxy Statement, the terms “we,” “us,” “our,” the “company” and “Select Comfort” mean Select Comfort Corporation and its subsidiaries and the term “common stock” means our common stock, par value $0.01 per share.
i
9800 59th Avenue North
Plymouth, Minnesota 55442
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 16, 201617, 2017
FREQUENTLY ASKED QUESTIONS ABOUT THE MEETING AND VOTING
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Select Comfort Corporation for use at the 20162017 Annual Meeting of Shareholders.
When and where is the Annual Meeting and who may attend?
The Annual Meeting will be held at 1:8:30 p.m.a.m. Central Time on Monday,Wednesday, May 16, 2016, at the Millennium Minneapolis Hotel located at 1313 Nicollet Mall, Minneapolis, Minnesota 55403 and17, 2017. The meeting will be conducted completely as a virtual meeting via the Internet at www.virtualshareholdermeeting.com/scss2016.Internet. Shareholders who are entitled to vote may attend the meeting, vote their shares and submit questions electronically during the meeting via live webcast by visitingwww.virtualshareholdermeeting.com/scss2017. Our 2017 Annual Meeting will be held completely online to enable greater participation and improved communication, and to provide cost savings for shareholders and the company. Shareholders will need the 16-digit control number included in personNotice of Internet Availability of Proxy Materials, on the proxy card or viain the Internet.instructions that accompanied the proxy materials to enter the annual meeting and to vote their shares at the meeting.
Who is entitled to vote?
Shareholders of record at the close of business on March 21, 20162017 (the “Record Date”) are entitled to vote at the meeting. As of the Record Date, there were 47,150,94941,804,642 shares of common stock outstanding. Each share is entitled to one vote on each matter to be voted on at the Annual Meeting. Shareholders are not entitled to cumulative voting rights.
If I am eligible to vote and want to attend the Annual Meeting, what do I need to bring?
Shareholders of Record. If you are a Shareholder of Record and plan to attend the meeting, please bring the notice of the meeting and photo identification. Shareholders of Record who do not present the notice of the meeting will be admitted only upon verification of ownership at the meeting.
Beneficial Owners. If you are a Beneficial Owner and plan to attend the meeting, you must present proof of ownership of the company’s common stock as of the Record Date, such as a brokerage account statement, and photo identification. If you are a Beneficial Owner and wish to vote at the meeting, you must also bring a legal proxy from your bank, broker or other holder of record.
What is the difference between “Shareholders of Record” and “Beneficial Owners”?
If your shares are registered in your name in the records maintained by our stock transfer agent, you are a “Shareholder of Record.” If you are a Shareholder of Record, notice of the meeting was sent directly to you.
If your shares are held in the name of your bank, broker, nominee or other holder of record, your shares are held in “street name” and you are considered the “Beneficial Owner.” Notice of the meeting has been forwarded to you by your bank, broker, nominee or other holder of record, who is considered, with respect to those shares, the Shareholder of Record. As the Beneficial Owner, you have the right to direct your bank, broker, nominee or other holder of record how to vote your shares by using the voting instructions you received.
If you are a Beneficial Owner and you do not give instructions to the organization holding your shares, then that organization cannot vote your shares and the shares held by that organization will not be considered as present and will not be entitled to vote on any matter to be considered at the Annual Meeting.
How can I receive proxy materials?
We are furnishing proxy materials to our shareholders primarily via the Internet, instead of mailing a full set of printed proxy materials to each shareholder. On or about April 6, 2016,4, 2017, we will begin mailing to certain of our shareholders a Notice of Internet Availability of Proxy Materials (the “Shareholder Notice”), which includes instructions on (i) how to access our Proxy Statement and Annual Report on the Internet, (ii) how to request that a printed copy of these proxy materials be forwarded to you, and (iii) how to vote your shares. If you receive the Shareholder Notice, you will not receive a printed copy of the proxy materials unless you request a printed copy by following the instructions in the Shareholder Notice. All other shareholders will be sent the proxy materials by mail beginning on or about April 6, 2016.4, 2017.
Requests for printed copies of the proxy materials can be made by Internet at http://www.proxyvote.com, by telephone at 1-800-579-1639 or by email at sendmaterial@proxyvote.com by sending a blank email with your control number in the subject line.
What does it mean if I receive more than one proxy card or Shareholder Notice?
ItIf you received more than one proxy card or Shareholder Notice, it generally means you hold shares registered in more than one account. If you received a paper copy of the proxy statement and you choose to vote by mail, sign and return each proxy card. If you choose to vote by Internet or telephone, vote once for each proxy card and/or Shareholder Notice you receive. If you have received more than one Shareholder Notice, vote once for each Shareholder Notice that you receive.
What are shareholders being asked to vote on?
There are threefour items to be voted on at the meeting:
| The election of |
| ● | An advisory vote to approve executive compensation; |
| An advisory vote to approve the frequency of future advisory votes on executive compensation; and |
| An advisory vote |
What are my voting choices?
For proposal 1, the election of directors, you may:
| Vote in favor of all nominees; |
| Vote in favor of specific nominees and withhold a favorable vote for specific nominees; or |
| Withhold authority to vote for all nominees. |
For each of proposal 2 (the advisory vote onto approve executive compensation) and proposal 34 (the advisory vote on ratification ofto ratify the selection of independent auditors), you may:
| Vote in favor of the proposal; |
| Vote against the proposal; or |
| Abstain from voting on the proposal. |
For proposal 3 (the advisory vote to approve the frequency of future advisory votes on executive compensation), you may:
| ● | Vote in favor of every one year (annual vote); |
| ● | Vote in favor of every two years (biennial vote); |
| ● | Vote in favor of every three years (triennial vote); or |
| ● | Abstain from voting on the proposal. |
How does the Board recommend that I vote?
Select Comfort’s Board unanimously recommends that you vote your shares:
| “For”the election of each of the nominees for director nominated herein by the Board of Select Comfort; |
| “For”the advisory vote |
| For every “one year” as the frequency of future advisory votes on executive compensation; and |
| ● | “For”the advisory vote |
How are votes counted?
If you are a Shareholder of Record and grant a proxy by telephone or Internet without voting instructions, or sign and submit your proxy card without voting instructions, your shares will be voted “FOR” each director nominee, “FOR” proposal 2 (theevery “one year” on the frequency of future advisory votevotes on executive compensation),compensation and “FOR” proposal 3 (the advisory vote on ratificationeach of the selectionother proposals outlined above in accordance with the recommendations of independent auditors).the Board.
Proxies marked “Withhold” on proposal 1 (election of directors), or “Abstain” on proposal 2 (the advisory vote onto approve executive compensation) or proposal 34 (the advisory vote on ratification ofto ratify the selection of independent auditors), will be counted in determining the total number of shares entitled to vote on such proposals and will have the effect of a vote “Against” a director or a proposal. If you “Abstain” from voting on proposal 3 (the advisory vote to approve the frequency of future advisory votes on executive compensation), the abstention will not have an effect on the outcome of the vote.
If you are a Beneficial Owner and hold your shares in “street name,” such as through a bank, broker or other nominee, you generally cannot vote your shares directly and must instead instruct the broker how to vote your shares using the voting instruction form provided by the broker. When a beneficial owner of shares held by a bank, broker or other nominee fails to provide the record holder with voting instructions and such organization lacks the discretionary voting power to vote those shares with respect to a particular proposal, a “broker non-vote” (defined below) occurs.
What is a Broker Non-Vote?
If a Beneficial Owner does not provide timely instructions, the broker will not have the authority to vote on any non-routine proposals at the Annual Meeting, which includes proposals 1, 2 and 2.3. Brokers will have discretionary authority to vote on proposal 34 because the ratification of the appointment of independent auditors is considered a routine matter. If the broker votes on proposal 34 (the advisory vote on ratification ofto ratify the selection of independent auditors), but does not vote on another proposal because the broker does not have discretionary voting authority and has not received instructions from the Beneficial Owner, this results in a “broker non-vote” with respect to proposals 1 and 2.such proposal(s).
Broker non-votes on a matter may be counted as present for purposes of establishing a quorum for the meeting, but are not considered entitled to vote on that particular matter. Consequently, broker non-votes generally will have no effect on the outcome of the matter. However, if and to the extent that broker non-votes are required to establish the presence of a quorum at the Annual Meeting, then any broker non-votes will have the same effect as a vote “Withheld” or “Against” any matter that requires approval of a majority of the minimum number of shares required to constitute a quorum for the transaction of business at the Annual Meeting.
What is the vote required to approve each proposal?
Assuming that a quorum is present to vote on each of the proposals, each of the proposals 1, 2, and 4 before the shareholders will require the affirmative vote of holders of a majority of the shares represented and entitled to vote in person or by proxy on such action. For proposal 3, the choice that receives the most votes of the shares represented and entitled to vote in person or by proxy will be considered the preference of the company’s shareholders.
Please note that each of proposals 2, 3 and 34 are “advisory” votes, meaning that the shareholder votes on these items are for purposes of enabling shareholders to express their point of view or preference on these proposals, but are not binding on the company or its board of directors and do not require the company or its board of directors to take any particular action in response to the shareholder vote. The Board intends to consider fully the votes of our shareholders in the context of any further action with respect to these proposals.
What constitutes a “quorum,” or how many shares are required to be present to conduct business at the Annual Meeting?
The presence, in person or by proxy, of the holders of a majority of the outstanding shares of common stock entitled to vote (i.e., at least 23,575,47520,902,322 shares) will constitute a quorum for the transaction of business at the Annual Meeting. In general, shares of common stock represented by a properly signed and returned proxy card or properly voted by telephone or via the Internet will be counted as shares represented and entitled to vote at the Annual Meeting for purposes of determining a quorum, without regard to whether the card reflects abstentions and withhold votes (or is left blank) or reflects a “broker non-vote” on a matter.
How do I vote my shares?
If you are aShareholder of Record as of the record date, you can give a proxy forvote your shares to be voted in any of the following ways:
| Over thetelephone by calling the toll-free number on the proxy card; |
| Over theInternet by following the instructions on the proxy card; |
| Through themail – if you received a paper copy of the proxy statement, you may vote by mail by signing, dating and mailing your proxy card in the envelope provided; or |
| Over theInternet during the |
The telephone and Internet voting procedures have been set up for your convenience. We encourage you to save corporate expense by submitting your vote by telephone or Internet. The procedures have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly.
If you are aBeneficial Owner of shares held in “street name,” you must vote your shares in the manner prescribed by your bank, broker or other nominee. Your bank, broker or other nominee has provided notice by email or a printed voting instruction card for you to use in directing the bank, broker or nominee how to vote your shares. Telephone and Internet voting are also encouraged for Beneficial Owners who hold their shares in street name.
Beneficial Owners should be aware that brokers are not permitted to vote shares on non-routine matters, including the election of directors or matters related to executive compensation, without instructions from the Beneficial Owner. As a result, brokers are not permitted to vote shares on proposal 1 (election of directors) or, proposal 2 (the advisory vote to approve executive compensation) or proposal 3 (the advisory vote to approve the frequency of future advisory votes on executive compensation), without instructions from the Beneficial Owner. Therefore, Beneficial Owners are advised that if they do not timely provide instructions to their bank, broker or other holder of record with respect to proposals 1, 2 and/or 3, their shares will not be voted in connection with proposals 1 and 2.such proposals. Proposal 34 (the advisory vote on ratification ofto ratify the selection of independent auditors) is considered a routine matter and, as such, brokers will still be able to vote shares held in brokerage accounts with respect to proposal 3,4, even if they do not receive instructions from the Beneficial Owner.
Your vote is important. Whether or not you plan to attend the meeting, we urge you to vote your shares in time for our May 16, 201617, 2017 meeting date.
How do I vote my shares in person at the meeting?
If you are aShareholder of Record and prefer to vote your shares at the meeting, bring the accompanying proxy card (if you received a paper copy of the proxy statement) and photo identification. If you are aBeneficial Owner holding shares in “street name,” such as through a bank, brokerage account, trust or other nominee, you may vote the shares at the meeting only if you obtain a signed proxy from the record holder (i.e., the bank, broker, trust or other nominee who is the record holder of the shares) giving you the right to vote the shares.
Even if you plan to attend the meeting, we encourage you to vote your shares in advance by Internet, telephone or mail so that your vote will be counted in the event you are unable to attend.
May I revoke a proxy and change my vote?
Yes. Any shareholder giving a proxy may revoke it at any time prior to its use at the Annual Meeting by:
| Delivering written notice of revocation to the Corporate Secretary before 6:00 p.m., Eastern Daylight Time, on May |
| Submitting to the Corporate Secretary before 6:00 p.m., Eastern Daylight Time, on May |
| Voting again by Internet or telephone before 11:59 p.m., Eastern Daylight Time, on May |
Attendance at the Annual Meeting will not, by itself, revoke your proxy. For shares you hold in street name, such as through a brokerage account, bank, trust or other nominee, you would need to obtain a legal proxy from your broker or nominee and bring it to the meeting in order to revoke a prior proxy and to vote those shares at the Annual Meeting. Prior to the meeting, you may revoke your proxy by contacting your broker or nominee and following their instructions for revoking your proxy.
Can I receive future proxy materials electronically?
Yes. If you are a Shareholder of Record and you received a paper copy of the proxy materials, you may elect to receive future proxy statements and annual reports online as described in the next paragraph. If you elect this feature, you will receive an email message notifying you when the materials are available, along with a web address for viewing the materials. If you received this proxy statement electronically, you do not need to do anything to continue receiving proxy materials electronically in the future.
Whether you are a Shareholder of Record or a Beneficial Owner holding shares through a bank or broker, you can enroll for future electronic delivery of proxy statements and annual reports by following these steps:
| Go to our website atwww.sleepnumber.com; |
| In theInvestor Relationssection, click onElectronic Fulfillment; |
| Click on the check-marked box next to the statement“Shareholders can register for electronic delivery of proxy-related materials.”; and |
| Follow the prompts to submit your request to receive proxy materials electronically. |
Generally, banks and brokers offering this choice require that shareholders vote through the Internet in order to enroll. Beneficial Owners whose bank or broker is not included in this website are encouraged to contact their bank or broker and ask about the availability of electronic delivery. As is customary with Internet usage, the user must pay all access fees and telephone charges. You may view this year’s proxy materials atwww.proxyvote.com.www.proxyvote.com.
What are the costs and benefits of electronic delivery of Annual Meeting materials?
There is no cost to you for electronic delivery of annual meeting materials. You may incur the usual expenses associated with Internet access as charged by your Internet service provider. Electronic delivery ensures quicker delivery, allows you to view or print the materials at your computer and makes it convenient to vote your shares online. Electronic delivery also conserves natural resources and saves the company printing, postage and processing costs.
Who bears the proxy solicitation costs?
The proxies being solicited hereby are being solicited by the Board of Directors of the company. The cost of preparing and mailing the notice of Annual Meeting, this proxy statement and the accompanying proxy and the cost of solicitation of proxies on behalf of the Board of Directors will be borne by the company. The company may solicit proxies by mail, internet (including by email, Twitter, the use of our investor relations website and other online channels of communication), telephone, facsimile and other electronic channels of communication, town hall meetings, personal interviews, press releases, and press interviews. Our directors, officers and regular employees may, without compensation other than their regular compensation and the reimbursement of expenses, solicit proxies by telephone or personal conversation. In addition, we may reimburse brokerage firms and others for their reasonable and documented expenses incurred in connection with forwarding proxy materials to the Beneficial Owners of our common stock.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table shows the beneficial ownership of Select Comfort common stock as of February 27, 201625, 2017 (unless another date is indicated) by (a) each director, each nominee for director recommended by our Board and each executive officer named in the Summary Compensation Table on page 50 of this Proxy Statement, (b) all directors and executive officers as a group and (c) each person known by us to be the Beneficial Owner of more than 5% of Select Comfort common stock.
| Title of Class | Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership(2) | Percent of Class | Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership(2) | Percent of Class |
| Common Stock | Daniel I. Alegre | 11,250 | * | Daniel I. Alegre | 15,120 | * |
| Common Stock | Andrea L. Bloomquist(3) | 63,528 | * | Andrea L. Bloomquist(3) | 100,800 | * |
| Common Stock | David R. Callen | 17,699 | * | David R. Callen(4) | 40,108 | * |
| Common Stock | Andrew P. Carlin(4) | 56,346 | * | Andrew P. Carlin(3) | 96,588 | * |
| Common Stock | Stephen L. Gulis, Jr. (5) | 126,413 | * | Stephen L. Gulis, Jr.(5) | 119,783 | * |
| Common Stock | Michael J. Harrison(5) | 33,720 | * | Michael J. Harrison(5) | 37,590 | * |
| Common Stock | Shelly R. Ibach(6) | 285,003 | * | Shelly R. Ibach(6) | 388,551 | * |
| Common Stock | David T. Kollat | 174,744 | * | Suresh Krishna | 24,405 | * |
| Common Stock | Brenda J. Lauderback(5) | 81,095 | * | Brenda J. Lauderback(5) | 65,549 | * |
| Common Stock | Barbara R. Matas(7) | --- | * | Barbara R. Matas(5) | 1,659 | * |
| Common Stock | Kathleen L. Nedorostek(5) | 32,749 | * | Kathleen L. Nedorostek(5) | 36,619 | * |
| Common Stock | Vicki A. O’Meara(7) | --- | * | Vicki A. O’Meara | — | * |
| Common Stock | Michael A. Peel(5) | 119,509 | * | Michael A. Peel(5) | 108,629 | * |
| Common Stock | Kathryn V. Roedel(8) | 183,523 | * | Jean-Michel Valette | 273,141 | * |
| Common Stock | Jean-Michel Valette | 279,771 | * | All directors and executive officers as a group (19 persons)(7) | 1,746,214 | 4.0% |
| Common Stock | All directors and executive officers as a group (20 persons)(9) | 1,804,992 | 3.7% | Vulcan Value Partners, LLC(8) 2801 Highway 280 South, Suite 300 | 6,033,958 | 14.3% |
| Common Stock | BlackRock, Inc.(10) 55 East 52nd Street New York, New York 10022 | 4,862,132 | 10.2% | BlackRock, Inc.(9) 55 East 52nd Street New York, New York 10055 | 5,232,647 | 12.4% |
| Common Stock | The Vanguard Group, Inc.(11) 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 3,936,723 | 8.2% | Disciplined Growth Investors, Inc.(10) 150 South Fifth Street, Suite 2550 Minneapolis, Minnesota 55402 | 3,776,347 | 8.9% |
| Common Stock | Disciplined Growth Investors, Inc.(12) 150 South Fifth Street, Suite 2100 Minneapolis, Minnesota 55402 | 3,716,397 | 7.8% | The Vanguard Group, Inc.(11) 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 3,753,670 | 8.9% |
| Common Stock | Columbia Wanger Asset Management, LLC(13) 227 West Monroe Street Suite 3000 Chicago, Illinois 60606 | 2,957,480 | 6.2% | FMR LLC(12) 245 Summer Street Boston, Massachusetts 02210 | 2,768,173 | 6.5% |
| Common Stock | FMR LLC(14) 245 Summer Street Boston, Massachusetts 02210 | 2,776,051 | 5.8% | |||
| Common Stock | AllianceBerstein L.P.(15) 1345 Avenue of the Americas New York, New York 01015 | 2,651,958 | 5.6% | |||
* Less than 1% of the outstanding shares.
| (1) | The business address for each of the directors and executive officers of the company is c/o Select Comfort Corporation, 9800 59th Avenue North, Plymouth, Minnesota 55442. |
| (2) | The shares shown include the following shares that directors and executive officers have the right to acquire within 60 days through the exercise of stock options: Mr. Alegre |
| (3) | Includes |
| (4) | Includes |
| (5) | The Amended and Restated 2010 Omnibus Plan (the Plan) permits non-employee directors to receive director fees in the form of common stock in lieu of cash, and to defer receipt of such shares. In addition, the Plan permits non-employee directors to defer receipt of shares of the company’s common stock under an Incentive Award granted under the Plan (referred to as Restricted Stock Units or RSUs). The directors are entitled to the deferred shares and fully-vested RSUs upon separation of service from the company. Mr. Gulis’s amount includes 49,746 shares that were deferred in lieu of director fees and |
| (6) | Includes |
| (7) |
| Includes an aggregate of |
| (9) | BlackRock, Inc. reported in a Schedule 13G/A filed with the Securities and Exchange Commission on January 17, 2017 that as of December 31, 2016 it beneficially owned 5,232,647 shares of Common Stock of Select Comfort Corporation, had sole power to vote or to direct the vote with respect to 5,078,461 shares and sole dispositive power with respect to 5,232,647 shares. |
| (10) | Disciplined Growth Investors, Inc. reported in a Schedule 13F filed with the Securities and Exchange Commission on February 13, 2017 that as of December 31, 2016 it beneficially owned 3,776,347 shares of Common Stock of Select Comfort Corporation, had sole dispositive power with respect to 3,776,347 shares, sole power to vote or to direct the vote with respect to 3,186,187 shares and no voting power with respect to 590,160 shares. |
| (11) | The Vanguard Group, Inc. reported in a Schedule 13G/A filed with the Securities and Exchange Commission on February |
| (12) |
(Proposal 1)
Nomination
Article XIV of our Third Restated Articles of Incorporation provides that the number of directors must be at least one but not more than 12 and must be divided into three classes as nearly equal in number as possible. The exact number of directors is determined from time-to-time by the Board of Directors. The term of each class is three years and the term of one class expires each year in rotation.
On March 15, 2016, we announced that Vicki A. O’Meara and Barbara R. Matas were appointed to serve on our Board of Directors effective as of April 25, 2016. Ms. Matas was appointed to the class of directors serving for a term expiring at the 2016 Annual Meeting of Shareholders. Ms. O’Meara was appointed to the class of directors serving for a term expiring at the 2017 Annual Meeting of Shareholders and is expected to stand for election at that meeting for a three-year term expiring at the 2020 Annual Meeting of Shareholders.
Immediately prior to the 20162017 Annual Meeting, our Board will consist of 11 members. David T. Kollat plans to retire from the Board when his term expires at the 2016 Annual Meeting and our Board will thereafter consist of 10 members, threefour of which will be up for election at the 20162017 Annual Meeting. The Board has nominatedKathleen L. Nedorostek, Vicki A. O’Meara, Michael J. Harrison, Shelly R. IbachA. Peel and Barbara R. MatasJean-Michel Valettefor election to the Board, each for a term of three years expiring at the 20192020 Annual Meeting, or until their successors are elected and qualified. Ms. Nedorostek, Ms. O’Meara, Mr. Harrison, Ms. Ibach,Peel and Ms. MatasMr. Valette have each consented to being named as a nominee in this proxy statement and to serve as a director if elected. Mr. HarrisonMs. Nedorostek has served on our Board since 2011; Ms. IbachO’Meara has served on our Board since 2012; and Ms. Matas was appointed to2016; Mr. Peel has served on our Board effective as of April 25, 2016.since 2003 and Mr. Valette has served on our Board since 1994.
Vote Required
The election of each nominee for director requires the affirmative vote of a majority of the shares represented and entitled to vote on the election of directors at the Annual Meeting. Any broker non-votes on the election of each nominee for director will be treated as shares not entitled to vote on that matter, and thus will not be counted in determining whether the director has been elected.
Board Recommendation
The Board recommends a vote “For” the election of each of Ms. Nedorostek, Ms. O’Meara, Mr. Harrison, Ms. IbachPeel and Ms. Matas.Mr. Valette. In the absence of other instructions, properly signed and delivered proxies will be voted “For” the election of each of these nominees.
If prior to the Annual Meeting the Board should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for such nominee will be voted for such substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for such fewer number of nominees as results from the inability of any such nominee to serve. The Board has no reason to believe that any of the nominees will be unable to serve.
Information about the Board’s Nominees and Other Directors
The following table provides information as of the date of this Proxy Statement about each individual serving as a Director of our company and each individual nominated by the Board to serve as a Director. Each Director or Nominee has furnished the information included below that relates to his or her respective age, principal occupation and business experience, as well as the names of other boards on which he or she currently serves as a director or has served in the past. In addition, the table below highlights the relevant experience, qualifications, attributes and skills that led our Board to conclude that each director or nominee should serve as a director of our company.
Name and Age of Nominee and/or Director | Principal Occupation, Business Experience And Directorships of Other Companies | Director Since | ||
| Nominees for election this year to three-year terms expiring in | ||||
Age | Occupation: | |||
| ||||
| ||||
| ||||
| ||||
| 2011 | |||
| Qualifications:Ms. Nedorostek provides our Board with significant experience leading high-end, multi-national branded consumer products companies with both manufacturing and retail operations. Her experience includes strategic planning for global businesses, P&L oversight, organizational strategy and change management, product design, global licensing and distribution, brand marketing and real estate. | ||||
Vicki A. O’Meara Age | Occupation:Chief Executive Officer of Analytics Pros, Inc., a digital analytics consultancy, since 2014; Executive Vice President of Pitney Bowes, Inc. and President of Pitney Bowes Service Solutions with responsibility for global document management, marketing services and e-commerce units from 2010 to 2013; Previously served for over 10 years in various senior management positions at Ryder Systems, Inc., including as head of Ryder’s U.S. Supply Chain Solutions business from 2005 to 2007; Ms. O’Meara’s career began as an attorney and Army Captain, and she served in several senior federal government positions. |
| Qualifications:Ms. O’Meara brings to our Board extensive global leadership and operational experience in a variety of functional areas relevant to our business and strategic direction, including supply chain, digital analytics, marketing, corporate governance, environmental health and safety and government affairs. Ms. O’Meara also brings experience from prior service on two public company boards. | ||||
Other Public Company Boards: Prior: Health Management Associates, Inc. and Laidlaw, Inc. | ||||
Michael A. Peel Age | Occupation:Elected an Officer of Yale University in October 2008 and currently Vice President for Human Resources and Administration; Previously a 17-year member of the | 2003 | ||
| Qualifications:Mr. Peel’s experience at large, consumer-oriented, publicly traded companies and large institutions provides our Board with senior level perspective on organizational |
Other Public Company Boards: Current: Pier 1 Imports, Inc. | ||||
Jean-Michel Valette Age | Occupation:Chairman of our Board since May 2010; Independent adviser to branded consumer companies; Currently serves as Lead Director of The Boston Beer Company; Served as Chairman of the Board of Directors of Peet’s Coffee and Tea, Inc. from January 2004 to October 2012; Also served as non-executive Chairman of the Robert Mondavi Winery from April 2005 to October 2006 and was its Managing Director from October 2004 to April 2005; Head of Branded Consumer Equity Research and Branded Consumer Venture Capital Investments at Hambrecht & Quist LLC, an investment banking firm, during the 1990s. | 1994 | ||
| Qualifications:Mr. Valette provides our Board with significant, relevant leadership and a proven track record of shareholder value creation with multiple successful branded consumer growth companies as well as valuable perspective in guiding the company on strategy, financial performance and corporate governance practices. | ||||||||
Other Public Company Boards: Current: Lead Director of The Boston Beer Company
| ||||||||
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE | ||||||||
Directors not standing for election this year whose terms expire in 2018: | ||||||||
Daniel I. Alegre Age | Occupation:President of Global Partner Business Solutions for Google, Inc. since November 2012; Held various roles at Google since 2004, including President of Asia Pacific and Japan, overseeing all regional operations, and Vice President of Latin American and Asia Pacific Business Development; Previously, Mr. Alegre was Vice President at Bertelsmann, responsible for business development of its ecommerce division. | 2013 | ||||||
| Qualifications:Mr. Alegre provides the Board with valuable insight into mobile and technology platforms, digital brand building and advertising, and e-commerce deployment and strategy, as well as extensive leadership in global operations and expansion, partner management and business development in technology and mass media industries. | ||||||||
Stephen L. Gulis, Jr. Age | Occupation: | 2005 | ||
| Qualifications:Mr. Gulis provides the Board with extensive experience as a senior executive of a publicly traded consumer products company, including as a chief financial officer and treasurer with responsibility for capital stewardship and cash management, significant M&A activity and broad oversight of financial reporting and controls. Mr. Gulis also brings expertise in risk management, implementation of enterprise technology platforms, global operations, human resources and product sourcing and quality directives. |
Other Public Company Boards: Current: Independent Bank Corporation
| ||||
Brenda J. Lauderback Age | Occupation:Former President of the Retail and Wholesale Group for the Nine West Group, Inc., a designer and marketer of women’s footwear and accessories, from May 1995 until January 1998; Previous roles include President of Wholesale and Manufacturing for US Shoe Corporation and more than 18 years in senior merchandising roles at the Department Store Division of Target Corporation. | 2004 | ||
| Qualifications:Ms. Lauderback brings to our Board extensive leadership in merchandising, marketing, product development and design and manufacturing at prominent national wholesale and retail companies. Her breadth of experience as a director on several other publicly traded company boards also provides our Board with significant insight into leading practices in executive compensation and corporate governance. Ms. Lauderback is a National Association of Corporate Directors (NACD) Board Leadership Fellow, having completed NACD’s comprehensive program of study for directors and corporate governance professionals. She supplements her skill sets through ongoing engagement with the director community, and access to leading practices. | ||||
Other Public Company Boards: Current: Denny’s Corporation and Wolverine World Wide, Inc. Prior: Big Lots, Inc., Louisiana-Pacific Corporation, Irwin Financial Corporation, Jostens Corporation | ||||
Directors not standing for election this year whose terms expire in 2019: | ||||
Michael J. Harrison Age 56 | Occupation:Board Director since January 2016, and previously interim CEO from March 2014 to May 2015, of OOFOS, LLC, a leader in the emerging global category of recovery footwear for athletes; President & Chief Operating Officer of Grand Circle Corporation, a leading overseas travel company serving U.S. travelers age 50+, from August 2016 through January 2017; Board Director of Totes Isotoner Corporation, a leading global marketer of umbrellas, gloves, rainwear, slippers and other weather-related accessories from December 2014 to August 2016; Previously Chief Brand Officer for The Timberland Company, a leading brand of outdoor footwear, apparel and gear from July 2009 through November 2012; Prior to 2009, Mr. Harrison held various senior leadership roles at Timberland and Procter & Gamble Co., including positions with significant responsibility for international marketing, global operations and business development. | 2011 | ||
| Qualifications:Mr. Harrison brings 30 years of business acumen to our Board from his senior executive experience in marketing, product design and development, retailing and international management with leading consumer brands. | ||||
Other Company Boards (privately held): Current: OOFOS, LLC Prior: Totes/Isotoner Corporation | ||||
Shelly R. Ibach Age 57 | Occupation:President and Chief Executive Officer of Select Comfort Corporation since June 2012; Executive Vice President and Chief Operating Officer from June 2011 to June 2012; Executive Vice President, Sales & Merchandising from October 2008 to June 2011; Previously held various senior executive operations and merchandising roles at Macy’s, Inc. and the Department Store Division at Target Corporation for more than 25 years. | 2012 | ||
| Qualifications:Ms. Ibach brings experience and perspective as Select Comfort’s President and CEO as well as intimate knowledge of our customer, culture, strategy, product, marketing, operations and competitive environment gained during nine years in executive management with the company. Ms. Ibach also brings more than two decades of retail experience with P&L oversight, brand and product development and customer-focused leadership experience with prominent national retailers. | ||||
Barbara R. Matas Age 57 | Occupation: Former Managing Director and Chairman, Leveraged Finance, Citigroup Global Markets, Inc. from 2013 to 2016, and co-head from 2006 to 2013; From 1985 to 2006 Ms. Matas held various leadership positions in leveraged finance and high yield capital markets at Citicorp, Salomon Brothers and Citigroup; Ms. Matas began her career as an auditor at Touche Ross & Co. | 2016 |
| Qualifications:Ms. Matas brings to our board substantial expertise in capital structure and financial strategy gained through more than 30 years of professional experience in advising boards and management teams on capital markets, capital structure and risk assessment and management. | ||||
Other Public Company Boards: Current: Apollo Investment Corporation |
David T. Kollat retired from the board when his term expired at the 2016 Annual Meeting of Shareholders, after serving more than 20 years as a Select Comfort director. Following his retirement from the Board Mr. Kollat was appointed to continue to serve in a non-voting advisory role to the board, as Director Emeritus, for a period of twelve months. In this capacity, Mr. Kollat has received compensation in line with that of non-employee directors.
Corporate Governance
Information about the Board of Directors and its Committees
The Board of Directors has determined that each of the following directors who either served as a member of our Board during any part of fiscal 2015 or has been appointed to our Board during 2016 is an “independent director” as defined by applicable rules of the NASDAQ Stock Market and the rules and regulations of the Securities and Exchange Commission (“SEC”):
| Daniel I. Alegre | Stephen L. Gulis, Jr. | Michael J. Harrison | |
| Brenda J. Lauderback | Barbara R. Matas | ||
| Kathleen L. Nedorostek | |||
| Vicki A. O’Meara | Michael A. Peel | ||
| Jean-Michel Valette |
The Board maintains three standing committees, including an Audit Committee, a Management Development and Compensation Committee and a Corporate Governance and Nominating Committee. Each of the committees of the Board has a charter and each of these charters is included in the investor relations section of the company’s website athttp://www.sleepnumber.com/sn/en/investor-relations. The information contained in or connected to our website is not incorporated by reference into or considered a part of this Proxy Statement.
The current members of each of the Board committees are identified in the table below. In his capacity as non-executive Chairman of the Board, Mr. Valette may attend and vote at any committee meeting.
Director | Audit
Committee | Management Development and Compensation Committee | Corporate Governance and Nominating Committee | ||||
| Daniel I. Alegre | X | ||||||
| Stephen L. Gulis, Jr. | Chair | X | |||||
| Michael J. Harrison | X | X | |||||
| Brenda J. Lauderback | X | Chair | |||||
| X | |||||||
| Kathleen L. Nedorostek | X | X | |||||
| Vicki A. O’Meara | X | ||||||
| Michael A. Peel | X | Chair | |||||
| Jean-Michel Valette* |
Table*In his capacity as non-executive Chairman of Contents
Upon their appointment to the Board, effective as of April 25, 2016, each of Barbara R. Matas and Vicki A. O’Meara will also serve on the Audit Committee. In connection with the Annual Meeting of Shareholders in May of 2016, the Board intends to review and reconfigure Board Committee assignments.Mr. Valette generally attends all committee meetings.
The Board has determined that each director serving on a committee meets the independence and other requirements applicable to such committee prescribed by applicable rules and regulations of the NASDAQ Stock Market, the SEC and the Internal Revenue Service.
The Board of Directors has further determined that two current members of the Audit Committee, Stephen L. Gulis, Jr. and Jean-Michel Valette, as well as Barbara R. Matas, upon her appointment to the Board and Audit Committee effective as of April 25, 2016, meet the definition of “audit committee financial expert” under rules and regulations of the SEC and meet the qualifications of “financial sophistication” under the Marketplace Rules of the NASDAQ Stock Market. These designations related to our Audit Committee members’ experience and understanding with respect to certain accounting and auditing matters are disclosure requirements of the SEC and the NASDAQ Stock Market and do not impose upon any of them any duties, obligations or liabilities that are greater than those generally imposed on a member of our Audit Committee or of our Board of Directors.
The Board of Directors met in person or by telephone conference ninesix times during 2015.2016. The Audit Committee met in person or by telephone conference eightnine times during 2015.2016. The Management Development and Compensation Committee met in person or by telephone conference fivefour times during 2015.2016. The Corporate Governance and Nominating Committee met in person or by telephone conference fivenine times during 2015.2016. All of the members of our Board of Directors serving in 20152016 attended 75% or more of all meetings of the Board and committees on which they served during fiscal 2015.2016.
Audit Committee. The Audit Committee is comprised entirely of independent directors, currently including Stephen L. Gulis, Jr. (Chair), Michael J. Harrison, Brenda J. Lauderback, Kathleen L. NedorostekBarbara R. Matas and Jean-Michel Valette.Vicki A. O’Meara. The Audit Committee provides assistance to the Board in satisfying its fiduciary responsibilities relating to accounting, auditing, operating and reporting practices of our company. The Audit Committee is responsible for providing independent, objective oversight with respect to our company’s accounting and financial reporting functions, internal and external audit functions, systems of internal controls regarding financial matters and legal, ethical and regulatory compliance. The responsibilities and functions of the Audit Committee are further described in the Audit Committee Report beginning on page 6366 of this Proxy Statement.
Management Development and Compensation Committee. The Management Development and Compensation Committee is comprised entirely of independent directors, currently including Brenda J. Lauderback (Chair), Daniel I. Alegre, David T. KollatKathleen L Nedorostek and Michael A. Peel. The principal function of the Committee is to discharge the responsibilities of the Board relating to executive compensation and development of current and future leadership resources.
The Committee is responsible for establishing the procedures for setting annual and long-term performance goals for the Chief Executive Officer and for the evaluation by the full Board of his or her performance against such goals. The Committee meets at least annually with the Chief Executive Officer to receive her recommendations concerning such goals. Both the annual goals and the annual performance evaluation of the Chief Executive Officer are reviewed and discussed by the outside directors at a meeting or executive session of that group. The Committee is also responsible for setting annual and long-term performance goals and compensation for the direct reports to the Chief Executive Officer.
The Committee has the authority under its charter to retain and consult with independent advisors to assist the Committee in fulfilling these responsibilities and duties.
The Committee usually meets four to six times per year in person or by telephone conference as needed. The Chairman of the Committee works with members of our senior management team and with the Committee’s independent compensation consultant to determine the agenda for each meeting.
At the beginning of each fiscal year, the Committee reviews and approves compensation for the CEO and each of the other executive officers, which generally includes:
| Changes, if any, to base salaries; |
| Establishing the annual cash incentive program, including the target cash incentive levels, the performance measures and goals, and the threshold, target and maximum payout amounts; and |
| Establishing the long-term equity incentive program, including the mix of stock options and performance share awards, the performance measures and goals applicable to the performance shares, the threshold, target and maximum payout amounts applicable to the performance shares, any special recognition or retention awards, and the grant levels for each of the executive officers. |
In connection with this review and approval, the independent compensation consultant provides relevant market data and trends for the Committee to consider, and the Committee compares each element of total compensation against this market data as it makes compensation decisions.
Following the end of each fiscal year, the Committee reviews and confirms the level of achievement of performance goals previously established for the fiscal year and approves any resulting annual cash incentive or performance share payouts that may be applicable.
Also on an annual basis, the Committee leads the Chief Executive Officer performance evaluation process and reviews the development and succession plans with respect to the entire executive team.
The responsibilities and functions of the Management Development and Compensation Committee, as well as its processes and procedures for consideration and determination of executive and director compensation, are further described in the Compensation Discussion and Analysis beginning on page 2928 of this Proxy Statement.
Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee is comprised entirely of independent directors, currently including Michael A. Peel (Chair), Stephen L. Gulis, Jr., Michael J. Harrison and Kathleen L. Nedorostek. The primary functions of the Corporate Governance and Nominating Committee are to develop and recommend to the Board corporate governance principles to govern the Board, its committees, and our executive officers and employees in the conduct of the business and affairs of our company; to identify and recommend to the Board individuals qualified to become members of the Board and its committees; and to develop and oversee the annual Board and Board committee evaluation process.
Board Leadership Structure
Our Board is currently comprised of eightnine independent directors and one executive director, Shelly R. Ibach, who has served as our President and Chief Executive Officer since June 2012. Two additional independent directors have been appointed to serve on the Board effective as of April 25, 2016. Since February 2008, the Board has determined to separate the positions of Chairman of the Board and Chief Executive Officer. Based on its ongoing review of best practices in corporate governance, and to enable the President and Chief Executive Officer to focus all of her time and energy in leadership of the day-to-day operations of the company and its growth and profitability initiatives, the Board continues to believe it is best for the company to separate these positions. Jean-Michel Valette, an independent director, has served as Chairman of the Board since May 2010.
Consistent with the company’s Corporate Governance Principles, the Board retains the right to review this determination and to either continue to maintain these positions as separated positions or to combine the positions, as the Board determines to be in the best interests of the company at the time. Under the company’s Corporate Governance Principles, during any period in which the positions of Chairman of the Board and Chief Executive Officer are combined, the Board would appoint a Lead Director from among the independent members of the Board, who would have certain Board leadership responsibilities specified in our Corporate Governance Principles.
Board Role in Risk Oversight
Our Board is responsible for overseeing the company’s policies and practices with respect to risk assessment and risk management, and has delegated to the Audit Committee the responsibility of assisting the Board in fulfilling this role. Among its duties and processes, the Audit Committee (a) reviews and discusses with management the company’s policies and practices with respect to risk assessment and risk management; (b) oversees the company’s internal audit function and processes; (c) establishes and oversees procedures for receiving and addressing complaints regarding accounting, internal controls or auditing matters; (d) reviews legal compliance and other legal matters with the company’s counsel; and (e) reports to the full Board with respect to matters within its area of responsibility.
The Audit Committee oversees the company’s internal audit function, which is responsible for undertaking an annual risk assessment process and reporting to the Audit Committee with respect to this assessment and related risk management strategies. The Audit Committee reviews and approves, at least annually, the company’s internal audit plan and receives quarterly reports with respect to the results of internal audits. The leader of the company’s internal audit function reports directly to the Audit Committee with respect to internal audit matters, and the Audit Committee has authority to review and approve the appointment, replacement or dismissal of the leader of this function. The leader of the internal audit function meets regularly in executive session with the Audit Committee without any other members of the company’s management team present.
In addition to the Audit Committee’s role, each of the other committees considers risks within its respective areas of responsibility. We believe our current Board leadership structure helps ensure proper risk oversight, based on the allocation of duties among committees and the role of our independent directors in risk oversight.
Director Nominations Process
The Corporate Governance and Nominating Committee (the “CGNC”) administers the process for nominating candidates to serve on our Board of Directors. The CGNC recommends candidates for consideration by the Board as a whole, which is responsible for appointing candidates to fill any vacancy that may be created between meetings of the shareholders and for nominating candidates to be considered for election by shareholders at our Annual Meeting.
Consistent with the company’s Corporate Governance Principles, the CGNC periodically reviews with the Board the appropriate skills and characteristics required of Board members in the context of the current membership of the Board and the strategic direction of the company.
The Board has established selection criteria to be applied by the CGNC and by the full Board in evaluating candidates for election to the Board. These criteria include general characteristics, areas of specific expertise and experience, and considerations of diversity. The general characteristics include:
| Independence; |
| Integrity; |
| A proven record of accomplishment and sound judgment in areas relevant to our business; |
| Belief in and passion for our mission and vision; |
| The ability to bring strategic and innovative insights to the discussion and challenge and stimulate management; |
| Willingness to both speak one’s |
| Understanding of, and ability to commit sufficient time to, Board responsibilities and duties; and |
| Subject matter expertise. |
The specific areas of expertise and experience sought by the CGNC and the Board from time to time will vary depending on the composition of the Board and the strategic direction of the company at the time, but will generally include CEO experience, executive level experience with analogous businesses and industries, and functional expertise relevant to the strategic direction of the company or the needs of the committees of the Board.
The director nomination process specifically includes consideration of diversity, such as diversity of age, gender, race and national origin, educational and professional experience and differences in viewpoints. The CGNCcompany does not have a formal policy with respect to diversity; however,diversity. However, the CGNC considers the Board’s overall composition when considering Director candidates, including whether the Board has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of the company’s current and expected future needs. In addition, the CGNC believealso believes that it is essential thatdesirable for new candidates to contribute to a variety of viewpoints on the Board, members represent diverse perspectives.
Tablewhich may be enhanced by a mix of Contentsdifferent professional and personal backgrounds and experiences. Currently, 50% of our Directors are women.
The CGNC reviews these selection criteria and the overall director nomination process at least annually in connection with the nomination of directors for election at the company’s annual meeting for consistency with best practices in corporate governance and effectiveness in meeting the needs of the Board from time-to-time.
The CGNC may use a variety of methods for identifying potential nominees for election to the Board, including consideration of candidates recommended by directors, officers or shareholders of the company. The CGNC also has the authority under its charter to engage professional search firms or other advisors to assist the CGNC in identifying candidates for election to the Board, or to otherwise assist the CGNC in fulfilling its responsibilities.
Shareholder nominations of candidates for membership on the Board submitted in accordance with the terms of our Bylaws will be reviewed and evaluated by the CGNC in the same manner as for any other nominations. Any shareholder who wishes the CGNC to consider a candidate should submit a written request and related information to our Corporate Secretary. Under our Bylaws, if a shareholder intends to nominate a person for election to the Board of Directors at a shareholder meeting, the shareholder is required to give written notice of the proposed nomination to the Corporate Secretary at least 120 days prior to the first anniversary of the date that the company first released or mailed its proxy materials to shareholders in connection with the preceding year’s regular or annual meeting. The shareholder’s notice must include, for each nominee whom the shareholder proposes to nominate for election as a director: (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class and number of shares of capital stock of the company that are beneficially owned by the nominee, and (iv) any other information concerning the nominee that would be required under the rules of the Securities and Exchange Commission in a proxy statement soliciting proxies for the election of such nominee. The shareholder’s notice must also include: (i) the name and address of the nominating shareholder, as they appear on the company’s books, and (ii) the class and number of shares of the company that are owned beneficially and of record by the shareholder. The shareholder’s notice must also be accompanied by the proposed nominee’s signed consent to serve as a director of the company.
Shareholder Communications with the Board
Shareholders may communicate with the Board of Directors, its Committees or any individual member of the Board of Directors by sending a written communication to our Corporate Secretary at 9800 59th Avenue North, Plymouth, MN 55442. The Corporate Secretary will promptly forward any communication so received to the Board, any Committee of the Board or any individual Board member specifically addressed in the communication. In addition, if any shareholder or other person has a concern regarding any accounting, internal control or auditing matter, the matter may be brought to the attention of the Audit Committee, confidentially and anonymously, by calling 1-800-835-5870, inserting the I.D. Code of AUDIT (28348) and following the prompts from the recorded message. The company reserves the right to revise this policy in the event that the process is abused, becomes unworkable or otherwise does not efficiently serve the purposes of the policy.
Policy Regarding Director Attendance at Annual Meeting
Our policy is to require attendance by all of our directors at our Annual Meeting of Shareholders, except for absences due to causes beyond the reasonable control of the director. All of the directors then serving on our Board were in attendance at our 20152016 Annual Meeting of Shareholders.
Corporate Governance Principles
. Our Board of Directors has adopted Corporate Governance Principles that were originally developed and recommended by the Corporate Governance and Nominating Committee.CGNC. These Corporate Governance Principles are available in the investor relations section of the company’s website athttp://www.sleepnumber.com/sn/en/investor-relations. The information contained in or connected to our website is not incorporated by reference into or considered a part of this Proxy Statement. Among these Corporate Governance Principles are the following:
Independence. A substantial majority of the members of the Board should be independent, non-employee directors. It is the responsibility of the Board to establish the standards for independence and the Board has followed the independence standards for companies listed on The NASDAQ Stock Market. All of our directors are independent except Shelly R. Ibach. All Committees of the Board are composed entirely of independent directors.
Chairman and Chief Executive Officer Positions. At the present time, the Board believes that it is in the best interests of the company and its shareholders for the positions of Chairman of the Board and Chief Executive Officer to be separated, and for the position of Chairman of the Board to be held by a non-executive, independent member of the Board. The Board retains the right to review this determination and to either continue to maintain these positions as separated positions or to combine the positions, as the Board determines to be in the best interests of the company at the time. During any period in which the positions of Chairman of the Board and Chief Executive Officer are combined, the Board will appoint a Lead Director from among the independent members of the Board.
Classified Board Structure. Our Third Restated Articles of Incorporation provide for a classified Board serving staggered terms of three years each. The Board will periodically review its classified Board structure in the context of other provisions and measures applicable to unsolicited takeover proposals with the objective of positioning the Board and the company to maximize the long-term value of our company for all shareholders.
Majority Voting Standard with Resignation Policy for Board Elections. Our Third Restated Articles of Incorporation provide for a majority voting standard in the case of uncontested elections of directors and a plurality voting standard in the case of contested elections of directors in order to reduce the risk of a “failed election” in the context of a contested director election.
Requirement of Incumbent Directors who do not Receive a Majority Vote in an Uncontested Election to Tender Resignation. If a nominee for Director who is an incumbent Director is not elected at a meeting of shareholders and no successor to the incumbent Director is elected at the meeting of shareholders, the incumbent Director shall promptly offer to tender his or her resignation to the Board. The Corporate Governance and Nominating Committee shallCGNC may make a recommendation to the Board on whether to accept or reject the offer, or whether other action should be taken. The Board shall act on whether to accept the Director’s offer, taking into account the Corporate Governance and Nominating Committee’sCGNC’s recommendation, and publicly disclose (by press release, a filing with the Securities and Exchange CommissionSEC or other broadly disseminated means of communication) its decision and the supporting rationale within 90 days after the date of the certification of the election results. The Corporate Governance and Nominating Committee,CGNC, in making its recommendation, and the Board, in making its decision, may each consider any factors or other recommendations that it considers relevant and appropriate. The incumbent Director who offers to tender his or her resignation shall not participate in the Board’s decision. If such incumbent Director’s offer to tender his or her resignation is not accepted by the Board, such Director shall continue to serve until his or her successor is duly elected, or his or her earlier death, resignation, retirement, disqualification or removal.
Board Diversity. The company does not have a formal policy with respect to diversity. Instead,However, the CGNC considers the Board’s overall composition when considering Director candidates, including whether the Board has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of the company’s current and expected future needs. In addition, the CGNC Committee also believes that it is desirable for new candidates to contribute to a variety of viewpoints on the Board, which may be enhanced by a mix of different professional and personal backgrounds and experiences.
Approach to Term and Age Limits. The Board has determined to not adoptWe believe that specific or fixed term or age limits in ordercould cause the company to not arbitrarily lose important contributors to the Board. In order to ensure an appropriate balance between new perspectives and experienced Directors, ifIt is the median tenuresense of the Board, exceeds 8.5 yearshowever, that a Director who reaches the age of 72 should promptly tender his or ifher resignation to the majorityChair of the Directors are 60 years of age or older, thenCGNC, and the Board may consider alternativesshould have an opportunity to achieve an appropriate balancereview the qualifications of new perspectivesthe director for continued Board membership. The CGNC will review the qualifications of the director for continued Board membership annually and experienced directors onmake a recommendation to the Board over the ensuing years. Such alternatives may be considered in the context of an evaluation of the Board’s needs at the time and into the future and individual Directors’ contributionseach year, which will make a final determination with respect to the Board.tendered resignation.
Change in Responsibilities. The Board does not believe that Directors who retire or who have a change in their principal employment or affiliation after joining the Board should not necessarily leave the Board. There should, however, be an opportunity for the Board through the Corporate Governance and Nominating Committee, to review the qualifications of the director for continued Board membership. Any Director who undergoes a material change in principal employment or affiliation is requiredwill promptly tender his or her resignation to promptly notify the Chair of the Corporate Governance and Nominating CommitteeCGNC. The CGNC will review the qualifications of the change.director for continued Board membership and make a recommendation to the Board, which will make a final determination with respect to the tendered resignation.
Other Board or Audit Committee Service. The Board recognizes that service on other boards can in some circumstances limit the time that Directors may have to devote to fulfilling their responsibilities to the company. It is the Board’s guideline that no Director shall serve on more than a total of six public company boards (including the Select Comfort Board), and that no member of the company’s Audit Committee shall serve on more than a total of three public company audit committees (including the Select Comfort Audit Committee). If any Director exceeds or proposes to exceed these guidelines, the Director is required to promptly notify the Chair of the Corporate Governance and Nominating CommitteeCGNC and the committee will review the facts and circumstances and determine whether such service would interfere with the Director’s ability to devote sufficient time to fulfilling the Director’s responsibilities to the company. Currently, none of the Directors serve on more than five public company boards, including the Select Comfort Board.
Chief Executive Officer Service on Other Boards. The Chief Executive Officer shallmay not serve on more than two public company boards other than the Select Comfort Board of Directors of the company.Directors.
Board and Committee Evaluations. The Board believes that the company’s governance and the Board’s effectiveness can be continually improved through evaluation of both the Board as a whole and its committees. The Corporate Governance and Nominating CommitteeCGNC is responsible for annually evaluating effectiveness in these areas and reviewing the results and recommendations for improvement with the full Board.
Board Executive Sessions. Executive sessions or meetings of independent directors without management present will be held at least twice each year. At least one session will be to review the performance criteria applicable to the Chief Executive Officer and other senior managers, the performance of the Chief Executive Officer against such criteria, and the compensation of the Chief Executive Officer and other senior managers. Additional executive sessions or meetings of outside directors may be held from time-to-time as required. The Board’s practice has been to meet in executive session for a portion of each regularly scheduled meeting of the Board. Any member of the Board may request at any time an executive session without the presence of management.
Paid Consulting Arrangements. The Board believes that the company should not enter into paid consulting arrangements with independent directors.
Board Compensation. Board compensation should encourage alignment with shareholders’ interests and should be at a level equitable to comparable companies. The Management Development and Compensation Committee is responsible for periodic assessments to assure these standards are being met.
Share Ownership Guidelines for Executive Officers and Directors. The Board has established the stock ownership guidelines described below for executive officers and directors. For purposes of these guidelines, stock ownership includes the fair market value of (1) all shares of common stock owned outright, (2) unvested restricted stock and restricted stock units that are subject only to time-vesting, net of an assumed effective tax rate of 40%, and (3) vested stock options, net of an assumed effective tax rate of 40%. The fair market value of stock options shall mean the then-current market price less the exercise price. Unvested performance shares, whether in the form of restricted stock or restricted stock units, will not count toward stock ownership.
| Executive Officer Ownership Guidelines. |
| Board Ownership Guidelines. Within five years of joining the company’s Board of Directors, each director is expected to achieve and maintain stock ownership equal to five times the director’s annual cash retainer. |
Prohibition of Hedging or Pledging of Shares. Under our policy with respect to trading in the company’s securities, directors, officers and other employees whose duties regularly bring them into contact with confidential or proprietary information (“insiders”) are prohibited from engaging in any form of hedging or monetization transactions involving the company’s securities. In addition, insiders are prohibited from engaging in short sales of the company’s securities and from trading in any form of publicly traded options, puts, calls or other derivatives of the company’s securities. Insiders are also prohibited from engaging in any form of pledging of the company’s securities, including (i) purchasing company securities on margin; (ii) holding company securities in any account which has a margin debt balance; (iii) borrowing against any account in which company securities are held; or (iv) pledging company securities as collateral for a loan.
Conflicts of Interest. Directors are expected to avoid any action, position or interest which conflicts with an interest of the company, or that gives the appearance of a conflict. If any member of the Board becomes aware of any such conflicting or potentially conflicting interest involving any member of the Board, the director should immediately bring such information to the attention of the Chairman of the Board, the Chief Executive Officer and the General Counsel of the company.
Performance Goals and Evaluation. The Management Development and Compensation Committee is responsible for establishing the procedures for setting annual and long-term performance goals for the Chief Executive Officer and for the evaluation by the full Board of his or her performance against such goals. The Committee meets at least annually with the Chief Executive Officer to receive his or her recommendations concerning such goals. Both the annual goals and the annual performance evaluation of the Chief Executive Officer are reviewed and discussed by the outside directors at a meeting or executive session of that group. The Committee is also responsible for setting annual and long-term performance goals and compensation for the direct reports to the Chief Executive Officer.
Compensation Philosophy. The Board supports and, through the Management Development and Compensation Committee, oversees employee compensation programs that are closely linked to business performance and emphasize equity ownership.
Senior Management Depth and Development. The Chief Executive Officer reports to the Board, at least annually, on senior management depth and development, including a discussion of assessments, leadership development plans and other relevant factors.
Provisions Applicable to Unsolicited Takeover Attempts or Proposals. The Board will periodically review (not less often than every three years) the company’s Third Restated Articles of Incorporation and Bylaws and various provisions that are designed to maximize shareholder value in the event of an unsolicited takeover attempt or proposal. Such review includes consideration of matters such as the company’s state of incorporation, whether the company should opt in or out of applicable control share acquisition or business combination statutes, and provisions such as the company’s classified Board structure. The objective of this review is to maintain a proper balance of provisions that will not deter bona fide proposals from coming before the Board, and that will position the Board and the company to maximize the long-term value of our company for all shareholders.
Shareholder Approval of Equity-Based Compensation Plans. Shareholder approval will be sought for all equity-based compensation plans.
Code of Conduct
We have developed and circulated to all of our employees a Code of Business Conduct addressing legal and ethical issues that may be encountered by our employees in the conduct of our business. Among other things, the Code of Business Conduct requires that our employees comply with applicable laws, engage in ethical and safe conduct in our work environment, avoid conflicts of interests, conduct our business with integrity and high ethical standards, and safeguard our company’s assets. A copy of the Code of Business Conduct is included in the investor relations section of our website athttp://www.sleepnumber.com/sn/en/investor-relations. We intend to disclose any amendments to and any waivers from a provision of our Code of Business Conduct on our website. The information contained in or connected to our website is not incorporated by reference into or considered a part of this Proxy Statement.
Employees are required to report any conduct that they believe in good faith violates our Code of Business Conduct. The Code of Business Conduct also sets forth procedures under which employees or others may report through our management team and, ultimately, directly to our Audit Committee (confidentially and anonymously, if so desired) any questions or concerns regarding accounting, internal accounting controls or auditing matters.
All of our employees are required to periodically certify their commitment to abide by our Code of Business Conduct. We also provide training in key areas covered by the Code of Business Conduct to help our employees to comply with their obligations.
Related Party Transactions Policy
The Board of Directors has adopted a written policy intended to ensure the proper approval and reporting of transactions between the company and any of its directors, nominees for director, executive officers or significant stockholdersshareholders or entities or persons related to them that would be required to be disclosed by the company pursuant to Item 404 or Regulation S-K of the Federal securities laws. Under this policy, any proposed or existing related party transaction is subject to the approval or ratification of the Corporate Governance and Nominating Committee. A copy of the Related Party Transactions Policy can be accessed through our Investor Relations website athttp://www.sleepnumber.com/sn/en/investor-relations. The information contained in or connected to our website is not incorporated by reference into or considered a part of this Proxy Statement. There were no related party transactions during the year ended December 31, 2016 and there are none currently contemplated.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORSDIRECTORS AND COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION COMMITTEE REPORT
The Management Development and Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed the following Compensation Discussion and Analysis (CD&A) with management and, based on this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Management Development and Compensation Committee
Brenda J. Lauderback, Chair
Daniel I. Alegre
David T. Kollat
Kathleen L. Nedorostek
Michael A. Peel
This Compensation Committee Report shall not be deemed to be “filed” with the Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, in whole or in part, this Compensation Committee Report shall not be incorporated by reference into any such filings.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis describes the key principles and programs used to determine the compensation of the named executive officers (NEOs) for fiscal 20152016 (January 4, 20153, 2016 through January 2,December 31, 2016) and explains how the company’s practices align with our pay for performance philosophy.
For fiscal 2015,2016, our NEOs were:
| NAME | PRINCIPAL POSITION |
| Shelly R. Ibach | President & Chief Executive Officer (CEO) |
| David R. Callen | Senior Vice President & Chief Financial Officer (CFO) |
| Executive Vice President & Chief | |
| Suresh Krishna | Senior Vice President & Chief Operations, Supply Chain and Lean Officer |
| Andrea L. Bloomquist | Senior Vice President & Chief Product Officer |
Our CD&A is divided into the following sections:
| Executive Summary |
| Compensation Governance |
| Compensation Framework and Actions |
| Executive Compensation Tables |
Executive Summary
Compensation Philosophy:
Select Comfort’s executive compensation philosophy is to provide compensation opportunities that attract, retain and motivate talented key executives to deliver sustainable profitable growth. Our program generally consists of a fixed base salary, variable performance-based cash incentive and long-term equity awards including Performance Sharesperformance units and Stock Optionstock option grants. Our program is designed to align executive compensation with shareholder interests by:
| Linking annual incentive awards to the achievement of key financial, strategic and operational goals which closely correlate with shareholder value creation; | ||
| Providing opportunities for company executives to earn meaningful performance-based equity incentive awards | ||
| Establishing performance goals with consideration for recent peer group and broader industry growth and earnings results and our strategic plan, with the objective of requiring | ||
| Evaluating the effectiveness of compensation programs in motivating superior competitive performance when compared with both industry peers and other prestigious specialty retailers. |
Annual cash and equity-based incentive compensation opportunity is directly tied to achievement of key financial, strategic and operating performance objectives. Specifically, the annual cash incentive is dependent on achieving an earnings before interest, income taxes, depreciation and amortization (EBITDA)(adjusted EBITDA) performance objective and is awarded to motivate and reward performance of a large portion of the company’s employee population, including the NEOs. As discussed below, the payout for 2016 was determined based on an Economic Adjusted EBITDA measure. The long-term equity-based awards are tied to growth in revenue (or net sales,sales) and growth in net operating profit (NOP), (or operating income). As discussed below, in 2015, the Management Development and Compensation Committee (for the difference betweenpurposes of this report, the “Committee”) added a return on invested capital (ROIC) premium andobjective to the program to ensure that payouts under the long-term equity-based awards are reduced for failure to generate returns that are sufficiently above the company’s weighted average cost of capital (WACC). All standard annual and long-term incentive awards include performance thresholds that must be met in order for any payout to be issued.
2015 Target Compensation Levels2016 Performance and Incentive Design:Payouts:
The Management DevelopmentIn 2016, the Enterprise Resource Planning Technology (“ERP”) implementation impacted sales and Compensation Committee (the “Committee”) established target compensation levelscosts in the first half of 2016. However, we recovered from these challenges in the back half of the year and incentive design in March 2015. When establishing these compensation levels and design, the Committee evaluated both: a) 2014demonstrated improved financial performance and stock price performance,appreciation. Our 2016 one-year and b) continued progress on four strategic differentiators:
Our 2014three-year growth in revenue (or net sales), adjusted EBITDA, NOP (or operating income), and Total Shareholder Return which(TSR)* is providedsummarized below.
| 2014 - 2016 | ||
| 2016 Growth | Growth | |
| CAGR | ||
| Revenue | 8% | 11% |
| Adjusted EBITDA | 9% | 5% |
| Net Operating Profit | 2% | -5% |
| Total Shareholder Return | 6% | 2% |
* Total shareholder return refers to the percentage change in the table below, demonstratedvalue of a shareholder’s investment in the significant progress we madecompany over the relevant time period, as determined by dividends paid and the change in delivering on our strategic differentiators and transformative initiatives throughout recent years.
the company’s share price during the period.
Through the end of 2014, the transformation of our retail operations, product innovation strategy, and marketing strategy had all worked together to yield strong growth in profit and shareholder returns that allowed the company to fund the new ERP implementation from both a cash and risk perspective. All four elements of this transformation are critical to achieving our stated long-term EPS goal of $2.75 by 2019.
The Committee considered this performance and the significant progress we made in delivering on our strategic differentiators and transformative initiatives throughout recent years when making the following decisions to establish target compensation levels and design for 2015:
LTI awards in 2015 were delivered 25% in stock options and 75% in performance-vested restricted stock units (RSU). Similar to the 2014 design, the RSUs will be earned based on annual growth in Revenue and Net Operating Profit over a three-year performance period. Reflecting the continued importance to the company of return on investment, the Committee added a provision for NEOs in 2015 that aligns the RSU payout at the end of the three-year performance period with return on invested capital performance. Specifically, the RSU payout will be subject to a reduction if Return On Invested Capital is not sufficiently above the company’s Weighted Average Cost of Capital (WACC).
As a result ofHowever, because these actions, target Total Direct Compensation was aligned with the median of the market for the CEO, Ms. Ibach, and other NEOs as a group, reinforcing the company’s compensation philosophy to align pay with performance.
2015 Performance and Incentive Payouts:
Our success with three of the company’s transformative differentiators (retail, product innovation, and marketing) led to year-over-year growth of 20% in net sales and 51% in diluted EPS during the first nine months of 2015. However, during our fiscal 2015 fourth quarter, we experienced greater than expected challenges with our ERP implementation, which disrupted our ability to efficiently ship product and realize revenue. As a result, our 2015 full-year growth in revenue, EBITDA, NOP, and Total Shareholder Return was negatively affected, as summarized below.
These 2015 financial results were well below the plancompany’s plans, both for the year,2016 Annual Incentive Plan and the 2014-2016 Long-Term Incentive Plan, our compensation payouts were also well below target.
Our 2015 strategic performance reflects the Company’s commitment to invest in the business for the long-term. The negative impact of the ERP implementation in the fourth quarter of 2015 overshadowed strong financial performance through the first three quarters that was driven by the success of our retail, product innovation and marketing strategy. Significant progress on the ERP implementation continued into 2016. The new system is the right enabler for growth, scale and efficiency.
Executive compensation payouts for 2015 underscore the company’s commitment to pay for performance delivered. While significant strategic progress was accomplished, the 2015 financial performance resulted in payouts that were well below target for both the Annual Incentive Plan and Long-Term Incentive awards earned:target:
As shown in the chart below, annual cash incentive payouts relative to adjusted EBITDA and NOP performance throughout the 2007 – 2015over a 10-year period reinforce our compensation philosophy and program design.
2007 - 2015 EBITDA and Annual Incentive Payout
The three-year performance-vested long-term incentive program demonstrates a similar commitment to pay for performance alignment, as outlined below:
| Grant Year | 2011 | 2012 | 2013 | 2014 | 2015 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | ||||||
| Performance Period End | 2013 | 2014 | 2015 | 2016 | 2017 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||
| Performance Metric(s) | Market Share Free Cash Flow | Market Share | Revenue NOP Margin | Revenue Growth NOP Growth | Revenue Growth NOP Growth ROIC Modifier | Market Share | Market Share | Net Sales | Net Sales Growth | Net Sales Growth | Net Sales Growth | ||||||
| Free Cash Flow | NOP Margin | NOP Growth | NOP Growth | NOP Growth | |||||||||||||
| ROIC Modifier | ROIC Modifier | ||||||||||||||||
| 3-Year Revenue Growth CAGR | 17% | 16% | 9% | TBD | TBD | 17% | 16% | 9% | 11% | TBD | TBD | ||||||
| 3-Year NOP Growth CAGR | 20% | 4% | -16% | TBD | TBD | 20% | 4% | -16% | -5% | TBD | TBD | ||||||
| Final Payout % of Target | 85% | 40% | 20% | TBD | TBD | 85% | 40% | 20% | 85% | TBD | TBD | ||||||
| Performance-Vested RSU % of Total LTI Grant Value | 50% | 50% | 75% | 75% | 50% | 50% | 50% | 75% | 75% | 75% | |||||||
Table of Contents* 2011 was the first year we granted performance-vested long-term incentive awards.
For discussion of the revenue growth and NOP margin growth targets and payouts under the 2014-2016 plan, see the company’s 2016 proxy statement, filed with the SEC on April 1, 2016; for a discussion of the market share targets under the 2012-2014 plan, see the company’s 2015 proxy statement, filed with the SEC on March 31, 2015, and for a discussion of the market share and free cash flow targets under the 2011-2013 plan, see the company’s 2014 proxy statement, filed with the SEC on April 4, 2014.
Compensation Governance
Our compensation programs are structured to align the interests of our executive officers with the interests of our shareholders. They are designed to attract, retain and motivate a talented management team to deliver on the company’s strategic and operational goals, capitalize on our competitive advantages and achieve sustainable profitable growth. Key objectives include:
| Performance-Based Compensation. We believe that linking pay to performance is critical, and as a result, we favor variable compensation that is tied to company performance. We target total direct compensation near the market median, with the opportunity to earn total direct compensation above the market median when company and/or individual performance exceeds performance objectives. |
| Reward Company and Individual Achievement. In determining annual cash and equity incentive awards, emphasis is placed on achievement of specific company performance objectives. However, we may also recognize and reward superior individual performance, primarily through merit increases in base salaries and long-term equity awards. |
| Emphasize Stock Ownership. We believe that employee stock ownership is critical in aligning the interests of employees with those of our shareholders. The company has established specific stock ownership guidelines for executive officers as well as for members of the Board of Directors. The company also provides opportunities for broader employee stock ownership through our long-term incentive plans and our 401(k) savings plan. |
Practices and Policies
In order to meet the key objectives of our executive compensation program, the company has adopted a strong corporate governance framework with the following practices and policies that ensure alignment of interests between shareholders and executives.
| |||
| PRACTICE | SELECT COMFORT POLICY | ||
| Pay for Performance | YES | A significant percentage of the total direct compensation package is performance-based. | |
| Robust stock ownership guidelines | YES | We have stock ownership guidelines for executive officers and Board members.
● 5x base salary for the CEO
● 3x base salary for non-CEO executive officers, and
● 5x annual cash retainer for Board members
Executives are required to hold 50% of the after-tax value delivered from LTI vesting and option exercise until meeting the guideline level of ownership. Directors are expected to achieve the guideline level of ownership within 5 years of the appointment to the Board. Unearned performance-vested awards | |
| Annual Shareholder “Say on Pay” | YES | We value our shareholders’ input on our executive compensation programs. Our Board of Directors seeks an annual non-binding advisory vote from shareholders to approve the executive compensation disclosed in our CD&A, tabular disclosures and related narrative of this proxy statement. | |
| Annual compensation risk assessment | YES | A risk assessment of our compensation programs is performed on an annual basis. |
| Clawback policy | YES | Our policy allows recovery of incentive cash and earned equity compensation in the event of inaccurate financial statements or other actions that would constitute “cause” or “adverse action.” In addition, certain participants are subject to automatic forfeiture in connection with material noncompliance, as a result of misconduct, resulting in an accounting restatement. |
| Independent compensation consultant | YES | The Management Development and Compensation Committee retains an independent compensation consultant to advise on the executive compensation program and practices. |
| Double-Trigger Vesting | YES | An executive officer’s unvested equity awards will vest upon a change in control only if the executive also experiences a qualifying termination of employment or significant diminution in role. |
| Hedging of Company stock | NO | Executive officers and members of the Board of Directors may not directly or indirectly engage in transactions intended to hedge or offset the market value of Select Comfort common stock owned by them. |
| Pledging of Company stock | NO | Executive officers and members of the Board of Directors may not directly or indirectly pledge Select Comfort common stock as collateral for any obligation. |
| Tax gross-ups | NO | We do not provide tax gross-ups on any benefits or perquisites, other than for relocation benefits that are applied consistently for all employees. |
| Repricing of stock options | NO | Our equity incentive plan does not permit repricing of stock options without shareholder approval or the granting of stock options with an exercise price below fair market value. |
| Employment contracts | NO | None of our current named executive officers has an employment contract that provides for continued employment for any period of time. |
Shareholder Engagement
As part of its commitment to strong corporate governance, the company’s management team and its Board of Directors maintain an active shareholder relations effort and welcome shareholder feedback. During the past year, we conducted shareholder meetings and phone calls that included direct shareholder contact with board members, as appropriate.members. These discussions addressed a variety of topics that are important to our business, including company strategy, financial performance, capital allocation, corporate governance and executive compensation. We appreciate the opportunity to hear from our shareholders on relevant business topics and engage in open dialogue with them. These conversations, as well as our strong commitment to pay for performance, will continue to inform the Management Development and Compensation Committee’s decisions related to executive compensation in 20162017 and beyond.
Board Compensation Committee and Independent Consultant
The Committee is comprised entirely of independent, non-employee directors. The responsibilities of the Committee include:
| Review and approve the company’s compensation philosophy | ||
| Establish executive compensation structure and programs designed to motivate and reward superior company performance | ||
| Lead the Board of Directors’ annual process to evaluate the performance of the Chief Executive Officer | ||
| Determine the composition and value of compensation for the Chief Executive Officer and other executive officers including base salaries, annual cash incentive awards, equity-based awards, benefits, and perquisites | ||
| Establish, administer, amend and terminate executive compensation and major employee benefit programs | ||
| Assess management development progress and talent depth, organizational strategy, and succession planning for key leadership positions in the context of the company’s strategic, operational and financial growth objectives | ||
| Establish structure and amount of non-employee director compensation |
Under its charter, the Committee has the authority to retain and consult with independent advisors to assist in fulfilling these responsibilities and duties. To maintain the independence of these advisors, use by the company of any of these advisors for work other than that expressly commissioned by the Committee must be approved in advance by the Committee.
Since fiscal 2013, the Committee has retained the firm of Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant. At the Committee’s request, FW Cook provided information addressing its independence as well as the independence of its individual advisors, including the following disclosures:
| any other services it provides to the company; | ||
| fees paid by the company as a percentage of the consulting firm’s total revenue; | ||
| policies and procedures adopted by the consulting firm to prevent conflicts of interest; | ||
| any business or personal relationships between the individual compensation advisors and a member of the Committee; |
| any company stock owned by the individual compensation advisors; and | ||
| any business or personal relationships between Select Comfort’s executive officers and the individual compensation advisors or consulting firm. |
The Committee assessed these factors in light of SEC rules and NASDAQ listing standards and concluded that no conflict of interest or independence concerns exist in the engagement of FW Cook as Select Comfort’s independent compensation consultant.
In the course of its engagement, the independent compensation consultant:
| Provides on-going assessment of each of the principal elements of the company’s executive compensation program; | ||
| Advises the Committee on the design of both the annual cash incentive plan and the long-term equity incentive program; | ||
| Works with the Committee and representatives of senior management to assess and refine the company’s peer group for ongoing comparative analysis purposes; | ||
| Provides the Committee with updates related to regulatory and legislative matters; | ||
| Reviews market data, trends and analyses from general industry and proxy peer group surveys to inform executive compensation levels and design; and | ||
| Provides advice and guidance to the Committee on pay actions for executives. | ||
The Committee usually meets four to six times per year in person, or by telephone conference as needed. The Chair of the Committee works with members of our senior management team and with the Committee’s independent compensation consultant to determine the agenda for each meeting. Following the development of the agenda, members of senior management and our human capital function, along with the Committee’s independent compensation consultant, prepare materials for each meeting of the Committee. These materials are typically reviewed with the Chair of the Committee in advance of distribution to the entire Committee. Our Chief Executive Officer, other members of our management team involved in the development and administration of our compensation programs and the Committee’s independent compensation consultant may be invited to attend all or a portion of a Committee meeting, depending on the nature of the agenda. The Committee also typically meets in executive session without any members of management present.
Neither our Chief Executive Officer nor any other member of our management team votes on any matters before the Committee. The Committee, however, solicits the views of our Chief Executive Officer on compensation matters generally, other than her own, and particularly with respect to the compensation of members of the senior management team reporting to the Chief Executive Officer. The Committee also solicits the views of other members of senior management and the company’s human capital department on topics related to key compensation elements and broad-based employee benefit plans.
Benchmarking Using Compensation Peer Groups
In determining each executive’s annual Total Direct Compensation,total direct compensation, the Committee considers peer group market positioning, utilizing relevant market data developed by management and trends providedreviewed by the independent compensation consultant.TheFW Cook. The market data and trends are developed from the Towers Watson Compensation Data Bank (CDB), General Industry Executive Compensation Survey Report and from compensation data obtained from publicly available proxy statements for an industry peer group.
The Committee, in consultation with the independent compensation consultant,FW Cook, annually reviews the composition of the industry peer group to ensure that the included companies are appropriate in terms of size and business focus. The selected peer group generally consists of meaningfulpublicly traded industry competitors, as well as a representative group of similarly sized companies involved in development, manufacturing and/or retailing of home furnishings and other consumer durableproducts, with which we compete for talent and for shareholder investments. In order to ensure that our peer group includes companies of appropriate size and scope, we generally aim to select peers that have net sales, EBITDA and market capcapitalization within a range of one-half to two times our own net sales, EBITDA and market cap. In September 2015, we removedcapitalization. The Committee prefers to limit the following two companies from ouramount of change to the peer group because they were recently acquired:year-over-year, however, changes may be necessary to address industry merger and acquisition activity and/or significant shifts in peer business strategy.
Prior to this action, theseThe following 16 publicly traded companies were included in our peer group and were therefore part of the competitive analysis used for compensation decisions made in March and August 2015. Also in September 2015, we added Container Store Group, Inc. and Kate Spade & Company to our peer group. As a result,comprise our current peer group for benchmarking executive compensation going forward consists of the following companies:compensation:
| Container Store Group, Inc. | La-Z-Boy Inc. | ||
| Columbia Sportswear Co. | Lumber Liquidators Holdings Inc. | ||
| Deckers Outdoor Corp. | Mattress Firm Holding Corp. | ||
| Ethan Allen Interiors Inc. | Pier 1 Imports Inc. | ||
| Express Inc. | Restoration Hardware Holdings Inc. | ||
| Haverty Furniture Companies Inc. | Steven Madden Ltd. | ||
| Kate Spade & Company | Tempur Sealy International Inc. | ||
| Kirkland’s Inc. | Vitamin Shoppe Inc. |
Compensation Risk Assessment
The company has established an annual process to assess whether its compensation practices are reasonably likely to have a material adverse effect on the company. This process includes:
| Compilation of a comprehensive inventory of the company’s compensation policies, practices and programs; |
| Identification of potential areas of risk by members of a cross-functional team, comprised of internal company representatives from Legal, Human Capital and Risk Management; |
| Review of compensation programs in light of risks identified; |
| Review of plans and controls in place to mitigate potential risks; |
| Review of the assessment process and cross-functional team’s conclusions by |
| Review of the assessment process and conclusions by the Committee with members of the senior management team and FW Cook representatives. |
Based on this assessment, the company has determined that none of its compensation policies, practices or programs is reasonably likely to have a material adverse effect on the company.
Results of 20152016 Advisory Vote to Approve Executive Compensation
We welcome communication with shareholders and value their viewpoints. At our 20152016 Annual Meeting, our shareholders approved our Say on Pay proposal in support of our executive compensation program, with more than 9699 percent of the votes cast by our shareholders on this proposal in favor of the “say on pay” vote (excluding broker non-votes). The Committee believes that these voting results affirm shareholder support of our approach to executive compensation.
Compensation Framework and Actions
Compensation Program Elements and 20152016 Actions
Our executive compensation program is designed to attract, motivate, reward and retain the senior management talent required to achieve our corporate objectives and create long-term value for our shareholders. We do not have employment agreements with any of our executive officers that provide for continued employment for any period of time. Our program currently consists of the following key elements:
| Base salary; |
| Annual cash incentive compensation; |
| Long-term equity-based incentive compensation; |
| Non-qualified deferred compensation plan; |
| Broad-based benefit plans available to other employees generally; |
| Limited perquisites; and |
| Severance compensation upon termination of employment under certain circumstances. |
With the assistance of the independent compensation consultant,FW Cook, the Committee uses target opportunity and actual payouts for incentive compensation to value the total compensation of executive officers and assess its competitive positioning. This competitive analysis is just one factor considered when making compensation decisions. However, the Committee generally seeks to align target compensation opportunities with the median of the market, while providing opportunity for top quartile compensation for performance above target and below median compensation for performance below target. Additionally, performance goals are set with consideration for historical peer group growth levels, with the goal of ensuring that above target payouts require performance above the median of the peer group.
The target compensation mix for NEOs is substantially weighted towards performance oriented programs that only deliver value if the Company meets pre-determined performance goals. The Annual Incentive Plan focuses NEOs on achievement of the financial plan for the year. The long-term incentive plan provides alignment with shareholders and focuses NEOs on long-term growth in revenue and NOP. For the CEO and Other NEOs respectively, 78% and 61% of target compensation is weighted towards these performance-oriented programs (i.e., only 22% and 39% of target compensation is delivered in salary for CEO and Other NEOs respectively).
Base Salary. Base salary for executive officers is a fixed compensation component that is reviewed annually and adjusted as appropriate. When making base salary decisions, the Committee considers the external market data that is reviewed and validated by our independent compensation consultant as well as a variety of internal criteria, including:
| the scope and complexity of each officer’s responsibilities; |
| each executive officer’s qualifications, skills and experience; |
| internal pay equity among senior executives; and |
| individual job performance, including both impact on current financial results and contributions to building longer-term competitive advantage and shareholder value. |
No specific formula or weight is applied to the various criteria considered.
The Compensation Committee also considered the following factors when making the salary adjustments for 20152016 that are noted in the table below:
| Under the current leadership, the company has significantly transformed its retail operations, introduced product innovation and improved its marketing effectiveness, in support of its long-term strategy. |
| ● | Mr. Carlin’s adjustment reflects the increased responsibility tied to his promotion to EVP Chief Sales and Service Officer. |
| ($000s) | ||||
| Salary | ||||
| Name | Title | 2015 | 2016 | % Increase |
| Shelly R. Ibach | President and CEO | $800 | $815 | 1.9% |
| David R. Callen | SVP and CFO | $384 | $404 | 5.0% |
| Andrew P. Carlin | EVP, Chief Sales and Service Officer | $380 | $426 | 12.0% |
| Suresh Krishna | SVP, Chief Operations, Supply Chain and Lean Officer | n/a | $390 | n/a |
| Andrea L. Bloomquist | SVP, Chief Product Officer | $390 | $406 | 4.0% |
Salaries above are represented at the annual rates effective March 29, 2015 and March 27, 2016, with the exception of Mr. Carlin’s promotional increase with effective date of April 10, 2016. Mr. Krishna’s first day of employment was April 11, 2016. These values are different from the Summary Compensation Table, which represents actual salary earned. | ||||
| ($000s) | ||||
| Salary | ||||
| Name | Title | 2014 | 2015 | % Increase |
| Shelly R. Ibach | President and CEO | $700 | $800 | 14.3% |
| David R. Callen | SVP and CFO | $375 | $384 | 2.5% |
| Kathryn V. Roedel | EVP, Chief Services and Fulfillment Officer | $388 | $398 | 2.5% |
| Andrea L. Bloomquist | SVP, Chief Product Officer | $321 | $390 | 21.5% |
| Andrew P. Carlin | SVP, Chief Sales Officer | $326 | $380 | 16.6% |
Salaries above are represented at the annual rates effective March 30, 2014 and March 29, 2015 (or August 16, 2015 for Mr. Carlin and Ms. Bloomquist). These values are different from the Summary Compensation Table, which represents actual salary earned.
Annual Cash Incentive Compensation. Consistent with the company’s performance-based compensation philosophy, the opportunity to earn an annual cash incentive is designed to motivate performance at or above the company’s targeted annual financial objectives. Achievement of these results delivers compensation near the market median. Total compensation can exceed the median for above-target performance or fall below median for below-target performance. The annual cash incentive program is awarded to motivate and reward performance of a large portion of the company’s employee population, including NEOs.
Each fiscal year, the Committee manages three principal elements of the annual cash incentive plan, including:
| Performance Goals. The Committee determines both the type and the specific targets of the performance goals for each fiscal year. Since 2001, the Committee has selected an annual profit metric as the primary company performance measure based on its belief that |
| Belief that Adjusted EBITDA is a useful indicator of the company’s financial performance and ability to generate cash from operating activities. |
TableWe define earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net income plus: income tax expense, interest expense, depreciation and amortization, stock-based compensation and asset impairments (as detailed in our quarterly and annual financial filings). For a description of Contentshow we calculate Adjusted EBTIDA from Net Income, see “Non-GAAP Data Reconciliations” on page 23 of the company’s Annual Report on Form 10-K filed on February 24, 2017. For a description of how we calculate Adjusted EBTIDA from Net Income, see “Non-GAAP Data Reconciliations” on page 23 of the company’s Annual Report on Form 10-K filed on February 24, 2017.
Starting in 2015, we measuremeasured Adjusted EBITDA for the Annual Incentive Plan by considering the full value of both revenue and expenses related to our SleepIQ product® technology in the year of the transaction.transaction (“Economic Adjusted EBITDA”). This “economic value” of SleepIQ revenue and expenses is different than the GAAP accounting treatment to defer these amounts and recognize them over the products’ estimated useful life. We use this Economic Adjusted EBITDA for the following reasons:
| To maintain consistency with our broad-based retail compensation plans, which provide commissions aligned with the date of the sales transaction. |
| To motivate and align employees in support of the company’s strategic initiative to activate SleepIQ |
In 2017, the Committee has determined it will no longer use “economic value” treatment in future awards. Historically, the majority of SleepIQ revenues were generated through an optional add-on by customers purchasing a mattress. Using the “economic value” approach in 2015 and 2016 provided valuable incentive to successfully launch and advance the Sleep IQ brand. Starting in 2017, we will use the GAAP accounting treatment of SleepIQ revenue and expenses for the Annual Incentive Plan because SleepIQ technology will be automatically included as part of our new Sleep Number 360™ smart bed and no additional incentive is needed to activate Sleep IQ accounts.
See below for a reconciliation of the 20152016 Adjusted EBITDA as reported in our annual report2016 Annual Report on Form 10-K and the Economic Adjusted EBITDA we use for the Annual Incentive Plan ($000s).
| December 31, | |||||||
| January 2, 2016 | 2016 | ||||||
| Adjusted EBITDA | $ | 133,057 | $ | 145,689 | |||
| Economic adjustment | 8,607 | 16,080 | |||||
| Economic Adjusted EBITDA | $ | 141,664 | $ | 161,769 | |||
See “Non-GAAP Data Reconciliations” on page 23 of the company’s Annual Report on Form 10-K filed on February 24, 2017 for a reconciliation of Adjusted EBTIDA to Net Income.
In order to maintain focus on near-term, critical business objectives, cash incentive payments were based in part on semi-annual performance versus targets derived from the annual operating plan, with the opportunity to realize up to 50 percent of pro-rated target cash incentive levels for achievement of semi-annual performance objectives for the first half of the year. To maintain a strong continuing incentive, if the semi-annual target was not achieved, the opportunity remained to earn the full-year bonus if the full-year target was achieved.
The Economic Adjusted EBITDA target is approved by the Committee with consideration for performanceafter deduction of all annual cash incentive payments.
| Target and Actual Incentive Levels.For |
The table below provides detail for the 20152016 target incentive and target total cash compensation levels for NEOs, as well as consideration for actual cash compensation with a mid-yearthe 43.7% of target payout for 20152016 performance. Both outcomes are consistent with our compensation payout philosophy, which is to pay close to the median of the market for target performance, and close to 25th percentile for performance that does not meet the annual performanceis close to threshold. With the 20152016 payout of less than 25%43.7% of target, cash compensation (base and annual incentive) was belowclose to the 25th percentile of the market.
| ($000s) | ||||||
| 2015 Target Cash Compensation | 2015 Actual Total Cash Compensation* | |||||
| Name | Title | Annual Incentive Target | Target Total Cash | Annual Incentive $ | Actual Total Cash | |
| % of Salary | $ | |||||
| Shelly R. Ibach | President and CEO | 100% | $800 | $1,600 | $188 | $988 |
| David R. Callen | SVP and CFO | 55% | $211 | $596 | $52 | $437 |
| Kathryn V. Roedel | EVP, Chief Services & Fulfillment Officer | 60% | $239 | $636 | $59 | $457 |
| Andrea L. Bloomquist | SVP, Chief Product Officer | 55% | $215 | $605 | $46 | $436 |
| Andrew P. Carlin | SVP, Chief Sales Officer | 55% | $209 | $589 | $46 | $426 |
* Cash compensation numbers above represent annualized pay levels for both target and actual, as adjusted for the Mid-Year Payout that was 22% - 25% of the full-year target for NEOs. These values are different from the Summary Compensation Table, which represents actual salary and actual incentive earned.
| ($000s) | ||||||
| 2016 Annual Target Cash Compensation | 2016 Actual Total Cash* | |||||
| Annual Incentive Target | Target Total Cash | Annual Incentive $ | Actual Total Cash | |||
| Name | Title | % of Salary | $ | |||
| Shelly R. Ibach | President and CEO | 100% | $812 | $1,627 | $355 | $1,170 |
| David R. Callen | SVP and CFO | 55% | $220 | $623 | $96 | $500 |
| Andrew P. Carlin | EVP, Chief Sales and Service Officer | 55% / 60% | $243 | $669 | $106 | $532 |
| Suresh Krishna | SVP, Chief Operations, Supply Chain and Lean Officer | 55% | $215 | $605 | $70 | $460 |
| Andrea L. Bloomquist | SVP, Chief Product Officer | 55% | $221 | $627 | $97 | $502 |
* Cash compensation numbers above represent annualized pay levels for both target and actual. These values may differ from the Summary Compensation Table, which represents actual salary earned for the year. Suresh Krishna total cash payout for 2016 was the full target amount of $215k because he was guaranteed this payout in his first year of employment. The Summary Compensation Table shows the incremental payment of $144k as a discretionary bonus. Andy Carlin's target bonus % was increased from 55% of salary to 60% of salary when he was promoted to EVP on April 11, 2016, and this higher target bonus % applied to earnings after his promotion date.
| ||||||
| Leverage Curve of the Annual Cash Incentive Payout. The Committee seeks to set the leverage curve of the annual cash incentive payout, or the percentage of incremental Economic Adjusted EBITDA that is used to fund the overall annual incentive pool, in a manner that both provides a strong motivation for achievement of stretch performance objectives and a reasonable sharing rate of incremental Economic Adjusted EBITDA. Our plan provides for up to 250 percent of target payout opportunity for maximum Economic Adjusted EBITDA performance, and no payout if threshold levels of Economic Adjusted EBITDA are not achieved. |
For the first half of the year, Economic Adjusted EBITDA (before incentive payout) of $92$72.5 million (or 54% growth vs. first half 2014) exceeded our plansemi-annual target of $79$72.2 million, and we therefore paid the 50% of the target opportunity for the first half of the year. ThisThe table below provides the details for this payout represented approximately 22% to 25% of the full annual target Annual Incentive for NEOs, as outlined in the table beloweach NEO ($000s):
| Full Name | Position Name | First Half Eligible | Target AIP % | First Half | Actual | Mid-Year |
| Shelly R. Ibach | President & Chief Executive Officer | $377 | 100% | $377 | $188 | 23.6% |
| David R. Callen | SVP and Chief Financial Officer | $190 | 55% | $105 | $52 | 24.7% |
| Kathryn V. Roedel | EVP - Chief Services & Fulfillment Officer | $197 | 60% | $118 | $59 | 24.7% |
| Andrea L. Bloomquist | SVP - Chief Sales Officer | $168 | 55% | $92 | $46 | 21.5% |
| Andrew P. Carlin | SVP - Chief Product Officer | $166 | 55% | $91 | $46 | 21.8% |
| Full Name | Position Name | First Half Eligible Earnings | Target AIP % | First Half Target AIP $ | Actual Payout: 50% of First Half Target $ |
| Shelly R. Ibach | President and CEO | $404 | 100% | $404 | $202 |
| David R. Callen | SVP and CFO | $197 | 55% | $109 | $54 |
| Andrew P. Carlin* | EVP, Chief Sales and Service Officer | $201 | 55%/60% | $116 | $58 |
| Suresh Krishna | SVP, Chief Operations, Supply Chain and Lean Officer | $90 | 55% | $50 | $25 |
| Andrea L. Bloomquist | SVP, Chief Product Officer | $199 | 55% | $110 | $55 |
| * Mr. Carlin was promoted to EVP on April 10, 2016, and his target AIP was increased from 55% of salary to 60% of salary for eligible earnings for the remainder of the fiscal year. | |||||
For the full-year 2015,2016, our actual Economic Adjusted EBITDA (after deduction of annual incentive expense) of $142$162 million was below our target of $177 million and above our threshold of $152 million,$156 million. This performance between threshold and thistarget resulted in no additionala total Annual Incentive payments for annual performance.payout of 43.7% of target (inclusive of the mid-year progress payment referenced above). The table below provides more detail for the performance goals used to determine this result ($ millions):
| Payout | Economic Adjusted EBITDA | |||
| $ | % Growth | |||
| Threshold | 20% | $152 | 0% | |
| Target | 100% | $177 | 16% | |
| Maximum | 250% | $220 | 44% | |
| Payout | Economic Adjusted EBITDA After Annual Incentive Payout | ||
| $ | % Growth | ||
| Threshold | 20% | $156 | 10% |
| Actual Performance | 43.7% | $162 | 14% |
| Target | 100% | $177 | 25% |
| Maximum | 250% | $213 | 50% |
TableThe table below reflects the total Annual Incentive Payout for the full year at 43.7% of Contentstarget as well as the incremental payments made at year-end, in excess of the mid-year payouts ($000s).
| Full Name | Position Name | Target AIP % | Full Year Target AIP $ | Full-Year Actual Payout at 43.7% of Target | End of Year Payout (Net of Mid-Year) |
| Shelly R. Ibach | President and CEO | 100% | $812 | $355 | $153 |
| David R. Callen | SVP and CFO | 55% | $220 | $96 | $42 |
| Andrew P. Carlin* | EVP, Chief Sales and Service Officer | 55%/60% | $243 | $106 | $49 |
| Suresh Krishna** | SVP, Chief Operations, Supply Chain and Lean Officer | 55% | $161 | $70 | $46 |
| Andrea L. Bloomquist | SVP, Chief Product Officer | 55% | $221 | $97 | $42 |
* Mr. Carlin was promoted to EVP on April 10, 2016, and his target AIP was increased from 55% of salary to 60% of salary for eligible earnings for the remainder of the fiscal year. ** Mr. Krishna was guaranteed a full year target AIP payout in his offer letter. Accordingly, a discretionary bonus in the amount of $144k was paid at year-end in order to increase the total payout to the $215k, which is equal to his full year target AIP. | |||||
Long-Term Equity-Based Incentive Compensation. The company makes long-term, equity-based incentive compensation grants to its executive officers and other employees in order to align their interests with those of our shareholders, as well as to provide total compensation that is competitive in the marketplaces in which the company competes for top talent. The Committee seeks to grant equity awards designed to provide total direct compensation that is near the market median, with the potential for greater earningearnings when the company outperforms its long-term performance targets and the potential for lower earnings in the event the company underperforms its performance targets. As the company offers no pension plan, this equity-based pay component is an important enabler of retirement security for executives and other employees who have dedicated a significant portion of their working careers to our business.
Executive officers and other key employees are eligible for equity-based grants upon joining the company and thereafter on an annual basis. In determining the economic value of equity awards to be granted to executive officers, the Committee considers primarily the competitive position of each executive officer’s targeted total direct compensation, including the current value of proposed equity awards, in relation to market data. The Committee also considers a variety of other factors, including:
| recent organizational performance relative to the peer group, |
| individual performance, including levels of responsibility, and the individual’s impact on current results and our long-term competitive position, |
| prior awards, including the number of shares awarded and the accumulated “holding power” of unvested equity to motivate both performance and retention, and |
| the dilutive impact of equity awards in relation to market data. |
The company has historically granted both (i) stock option awards with an exercise price equal to the fair market value on the date of grant, typically vesting ratably over a period of years, and
(ii) “full value” restricted stock awards, typically vesting 100 percent at the end of a period of years from the date of grant. In recent years, consistent with the company’s emphasis on performance-based compensation, the full value restricted stock awards granted to executive officers have generally been “performance shares” subject to adjustment based on actual performance versus targets established at the date of grant. The only exceptions have been for new hires whoand promotions, both of whom typically receive a special award of restricted stock units that vest for continued service over a period of three years in order toyears. These awards encourage retention and shareholder alignment, as well as provide an up-front equity stake upon hire.hire for new executives.
For the 20152016 long-term incentive program, the Committee continued to grant 75% of the annual award value in performance-vested RSU value,RSUs, with the remaining 25% in stock options. See “Grant of Plan-Based Awards” table below. These grants were approved by the Committee in March 2016. Grant value for Ms. Ibach increased slightly (5%, from $2.0 million to $2.1 million) to align with the median of the market, and annual grant values for other Named Executive Officers remained flat to 2015, with the exception of Mr. Callen’s award which increased from $300,000 to $400,000 in order to align closer to the median of the market and the Committee considered the strong performance through year-end 2014 as a primary factor when determining the size of these awards.other NEOs.
Total Direct Compensation (TDC)direct compensation for NEOs was aligned with the median of the market following strong performance in 2014.market. The table below provides detail for total grant value of long-term incentives (LTI) awarded in 20142015 and 2015,2016, as well as the resulting 20152016 Target TDC.total direct compensation (sum of base salary, value of target annual incentive opportunity and the grant value of LTI).
| ($000s) | |||||
| Name | Title | LTI Target Grant Value (Annual Award) | |||
| 2015 | 2016 | % Increase | 2016 Target TDC | ||
| Shelly R. Ibach | President and CEO | $2,000 | $2,100 | 5.0% | $3,727 |
| David R. Callen | SVP and CFO | $300 | $400 | 33.3% | $1,023 |
| Andrew P. Carlin | EVP, Chief Sales and Service Officer | $400 | $400 | 0.0% | $1,069 |
| Suresh Krishna | President and CEO | n/a | $500 | n/a | $1,105 |
| Andrea L. Bloomquist | SVP, Chief Product Officer | $400 | $400 | 0.0% | $1,027 |
| LTI grant values are converted to a number of shares using a 20-day average stock price leading up to date of grant in order to mitigate short-term stock price volatility. As such, values in the table above are different from the grant date fair values in the Summary Compensation Table. | |||||
| ($000s) | |||||
| Name | Title | LTI Target Grant Value (Annual Award) | |||
| 2014 | 2015 | % Increase | 2015 Target TDC | ||
| Shelly R. Ibach | President and CEO | $1,100 | $2,000 | 81.8% | $3,600 |
| David R. Callen | SVP and CFO | $300 | $300 | 0.0% | $896 |
| Kathryn V. Roedel | EVP, Chief Services and Fulfillment Officer | $400 | $400 | 0.0% | $1,036 |
| Andrea L. Bloomquist | SVP, Chief Product Officer | $375 | $400 | 6.7% | $1,005 |
| Andrew P. Carlin | SVP, Chief Sales Officer | $375 | $400 | 6.7% | $989 |
LTI grant values are converted to a number of shares using a 20-day average stock price leading up to date of grant in order to mitigate short-term stock price volatility. As such, values in the table above are different from the grant date fair values in the Summary Compensation Table.
Performance-vested share payouts and grants.
20132014 Performance-Vested Shares: The performance-vested sharesunits granted in 20132014 were earned at 20 percent84.6% of target based on 2015 Revenueannual growth during each of 2014 – 2016 in revenue and Net Operating Profit Margin.net operating profit (NOP), and determining the average of each measure. The shares earned willare scheduled to vest in full on the third anniversary of the grant date (April 1, 2016)(March 28, 2017). Revenue (or net sales) and NOP (or operating income) are both GAAP measures as reported in the company’s Annual Report on Form 10-K.
Revenue and NOP are equally weighted. This plan is a full three-year performance plan. There is no payout, if any, until the end of the three-year period and the percentage growth goals (e.g. “performance levels”) are determined at the beginning of the performance period and are not changed. The performance levels indicated below are applied to each prior year actual revenue and NOP outcome to develop the goals for each year of the three-year performance period. Each year growth in both revenue and NOP is measured to determine a total of six performance scores over the three-year period (i.e., three scores for revenue growth and three scores for NOP growth each year).
| Performance Level | Payout | Revenue | NOP |
| Below Threshold | 0% | <4% | <4% |
| Threshold | 50% | 4% | 4% |
| Target | 100% | 7% | 9% |
| Max | 200% | 15% | 20% |
The three revenue scores are averaged to determine the revenue payout for the three-year period, and the three NOP scores are averaged to determine the NOP payout for the three-year period. Each of the revenue and the NOP scores are weighed 50%. The table below provides additional contextdetail for the performance goals, actualresults used to determine the 84.6% of target payout for the 2014 – 2016 performance period. The payout was positively influenced by strong revenue growth well-above peer group median levels, and resulting payouts. negatively impacted by NOP performance in 2015 and 2016 due largely to ERP implementation impacts and strategic investments made to support our long-term strategy.
| Year | Revenue (Net Sales) - GAAP | NOP - Excluding ERP Launch Cost* | ||||
| $ | Growth | Perf Score | $ | Growth | Perf Score | |
| 2013 | $960 | $91 | ||||
| 2014 | $1,157 | 20.5% | 200% | $102 | 12.2% | 129% |
| 2015 | $1,214 | 4.9% | 65% | $87 | -14.8% | 0% |
| 2016 | $1,311 | 8.0% | 113% | $77 | -11.5% | 0% |
| Average | 126% | 43% | ||||
| Weighting | 50% | 50% | ||||
| Total Payout % of Target | 84.6% | |||||
| *NOP excludes 2015 ERP Launch Costs of $11.6 million, including the one-time expenses for system training and implementation. This adjustment ensures that both 2015 and 2016 annual NOP growth rates accurately reflect the performance of the underlying business, rather than the impact of one-time, non-recurring expenses. This adjustment ultimately did not change the payout for the award (i.e., the payout would have still been 84.6% if 2015 performance had been measured inclusive of the $11.6 million in ERP Launch Costs). | ||||||
| 2013 Grants - Earned for Revenue and NOP Margin through 2015; Vested in 2016 | ||||
| Performance Level | Payout % of Target | Revenue ($thousands) | Operating Margin - GAAP | |
| Below Threshold | 0% | |||
| Threshold | 25% | $1,100 | 13.4% | |
| Below Target | 50% | $1,300 | 13.6% | |
| Target | 100% | $1,400 | 14.5% | |
| Above Target | 150% | $1,500 | 15.0% | |
| Max | 200% | $1,600 | 16.0% | |
| 2015 Performance | $1,214 | 6.2% | total | |
| Payout | 39% | 0% | 20% | |
20152016 Performance-Vested Shares: The performance-vested sharesunits granted in 20152016 follow a similar structure as the 2014 awards described above. Performance units will be earned based on annual growth in net salesRevenue and NOP, equally weighted, through 2017,2018, and will vest in March 2018. Each of these metrics is weighted equally, and final payout will be determined at the end of the three-year2019 depending on performance period.achievement. Performance below the defined threshold would reduceresult in a payout to zero, and theof zero. The maximum payout is 200 percent of the target number of sharesunits granted. The Committee also added a Return on Invested Capital (ROIC) objective to the program in 2015 to ensure that payouts are reduced for failure to generate returns that are sufficiently above the company’s Weighted Average Cost of Capital (WACC). If three-year average ROIC does not exceed WACC by a pre-defined threshold level, then the final payout will be reduced by a minimum of 5% and a maximum of 20% of the target number of units. See “Non-GAAP Data Reconciliations” in the company’s Annual Report on Form 10-K filed on February, 24, 2017 for more details on how we calculate ROIC.
The Committee incorporated ROIC for the following reasons:
| Belief that ROIC is a useful indicator of our financial performance and ability to generate appropriate returns from our capital investments. |
| ROIC objective ensures that we are investing capital efficiently to generate both net sales growth and NOP growth over the long-term. |
As part of their responsibility as financial stewards of the company’s assets, both Management and the Board are committed to deploying capital in a prudent and efficient manner in order to generate a superior return for shareholders.
2016 Special LTI Award:Consistent with our compensation philosophy and historical practices, the Committee also granted a special award to Mr. Carlin on April 10, 2016, the effective date of his promotion to Executive Vice President, Chief Sales and Service Officer. This award, valued at $350,000, was granted in Restricted Stock Units that will vest in full on the third anniversary of grant (i.e., 3-year cliff vest). In making this award, the Committee recognizes Mr. Carlin’s additional responsibilities, which now includes delivery of our product with the Field Services team. In addition, the grant reinforces the company’s confidence in Mr. Carlin’s leadership and strengthens executive alignment with shareholders.(LTI grant values are converted to a number of shares using a 20-day average stock price leading up to date of grant in order to mitigate short-term stock price volatility. As such, the value referenced above are different from the grant date fair values in the Summary Compensation Table.)
New Hire Awards: Consistent with our compensation philosophy and approach, the Committee granted one-time new hire awards to Mr. Krishna in 2016. These awards are provided for the following reasons:
| ● | Up-front equity stake that aligns the executive with shareholders and provides retention with vesting for continued service over a period of three years. |
| ● | Appropriate incentive for the executive to make the transition to the new role, given that unvested long-term incentive value may be forfeited upon departure from previous role. |
| ● | Consistent with standard market practices. |
The awards granted to Mr. Krishna, effective on April 11, 2016, his first day of employment, are in addition to the annual awards described in the table on page 44. They include:
| ● | Signing Bonus delivered in RSUs with a grant value of $100,000 and vesting on the first anniversary of the grant date. |
| ● | New Hire RSUs with a grant value of $500,000 and a two-year ratable vesting period (50% on each of the first two anniversaries of the grant date). |
| ● | Stock options with both performance-vest and service-vest requirements and a grant value of $312,000. The performance condition stipulates that the award is earned for a stock price that exceeds $27.00 for 20 consecutive trading days at any point in the 10-year term of the option, while the service condition is met on the third anniversary of the grant date. |
(LTI grant values are converted to a number of shares using a 20-day average stock price leading up to date of grant in order to mitigate short-term stock price volatility. As such, the values referenced above are different from the grant date fair values in the Summary Compensation Table.)
Severance Compensation. In February of 2007, the Board adopted the Select Comfort Corporation Executive Severance Pay Plan (the “Severance Plan”) in order to establish consistent severance benefits for senior executives upon termination of their employment by the company without cause or upon resignation for “good reason” as defined by the Severance Plan. The Severance Plan was also established in order to the bring the company’s executive severance arrangements into compliance with IRS regulations issued under Internal Revenue Code Section 409A that apply to deferred compensation. Prior to the adoption of the Severance Plan some, but not all, of our senior executives were entitled to severance benefits pursuant to their employment offer letters. The Severance Plan provides more uniform benefits across the senior management team, including NEOs and others. No executive officer would be entitled to any severance compensation in excess of the benefits provided under the company’s Severance Plan.
In developing the Severance Plan and determining the benefits payable under the Severance Plan, the Committee considered market data received from its independent compensation consultant relative to typical severance benefits and concluded that the benefits payable under the Severance Plan were generally at or below the market data.
Benefits under the Severance Plan are conditioned upon execution and delivery to the company of a general release of claims and return of any company property. In addition, in the event the signed general release of claims is subsequently declared invalid or is revoked or attempted to be revoked, or in the event of a violation by the former executive of a non-compete or confidentiality agreement with the company, any unpaid severance compensation would be terminated. Each NEO has signed a non-compete agreement extending for one year following termination of employment and a confidentiality agreement of indefinite duration.
The Severance Plan establishes severance benefits payable to the CEO and other executive officers upon termination of their employment by the company without cause or upon resignation for good reason. Specifically, the CEO would be entitled to a base amount of severance pay equal to:
| two times the sum of annual base salary and annual target cash incentive, plus |
| a pro rata target cash incentive for the year of termination. |
Each of the other NEOs would be entitled to a base amount of severance pay equal to:
| one times the sum of annual base salary and annual target cash incentive, plus |
| a pro rata target cash incentive for the year of termination. |
The base severance compensation would be paid in a lump sum within a reasonable time following the employee’s termination of employment and in no event later than March 1 of the year following the year during which the termination occurs. None of the amounts payable under the Severance Plan are subject to any “gross-up” for tax purposes in the event of the applicability of any excise or similar taxes.
In addition to the base severance compensation described above, the Severance Plan provides for reimbursement of the cost of “COBRA” medical and dental continuation coverage, less the amount paid by an active full-time employee for the same level of coverage, until the earlier of:
| the end of the period of time reflected in the base severance compensation (i.e., two years for CEO and one year for the other NEOs); |
| the end of the participant’s eligibility for COBRA continuation coverage; or |
| the date the participant becomes eligible to participate in another group medical plan or dental plan. |
The Severance Plan also provides for outplacement services in an amount up to $15,000 for the CEO and up to $10,000 for other senior executives.
No severance payment would be triggered solely by a change-in-control of the company. The Severance Plan does provide, however, that during a 24-month period following a change-in-control of the company, the company may not terminate the Severance Plan and may not reduce the severance benefits payable to participants who are employed by the company immediately prior to the change-in-control. For additional information, see “Potential Payments to Named Executive Officers,” below.
Non-Qualified Deferred Compensation Plan. As described in more detail on page 56 of this Proxy Statement, certain executive employees (for example, director level and above) may defer a portion of their compensation and defer payment of restricted stock unit awards under a non-qualified deferred compensation plan that offers a range of investment options similar to those available under our 401(k) plan. The company may also make discretionary employer credits to this plan although it has not elected to do so.
Benefits and Perquisites. Our executive officers generally receive the same menu of benefits offered to other full-time employees including, but not limited to, our 401(k) plan. After completing an eligibility service period, our employees who have attained age 21 are eligible to participate in our 401(k) plan. The 401(k) plan includes company stock as an investment option, providing another opportunity for our senior executives and other employees to build stock ownership in our company. The company has historically made discretionary matching contributions (at various levels) of a portion of employees’ contributions to the 401(k) plan.
As the company provides no defined benefit pension plan, we believe the 401(k) plan and the non-qualified deferred compensation plan are important elements in retirement planning for executives and other eligible employees.
We generally avoid special executive perquisites. We do offer two executive benefits to senior management that are designed to address specific corporate purposes:
| Annual Physical Exam. Members of our senior management team are encouraged to annually undergo a comprehensive physical examination. The company offers several executive physical options, which generally range in cost from $2,300 to $4,000. These costs, after insurance coverage, are paid by the company and constitute taxable wages to the executive that are not “grossed up” for tax purposes. This benefit is designed to promote preventive care, enhance the health and wellness of senior management and to catch potential health issues at an early stage. |
| Tax and Financial Planning. Members of our senior management team are eligible for reimbursement of expenses for tax and financial planning services up to |
Chief Executive Officer Compensation and Performance
The compensation for Shelly R. Ibach, our President and Chief Executive Officer, consists of an annual base salary, annual cash incentive compensation and long-term equity-based incentive compensation. The Committee determines the level for each of these compensation elements using methods consistent with those used for the company’s other senior executives, including the assessment of individual performance and review of competitive data. The Committee evaluates Ms. Ibach’s performance by soliciting input from all members of the Board as well as members of the senior management team. The Board also assesses Ms. Ibach’s performance against objectives incorporating key operational and strategic factors, including growth, profitability, product innovation, advancement of strategic initiatives, organizational development and investor relations. The CEO performance feedback from all independent Board members is consolidated into a detailed performance review which is the basis of a full Board discussion in Executive Session led by the Chair of the Committee. The Board’s assessment of Ms. Ibach’s performance is a major consideration in determining any compensation adjustments for the coming year.
Tax and Accounting Implications
Deductibility of Executive Compensation. Section 162(m) of the Internal Revenue Code requires that we meet specific criteria, including shareholder approval of certain stock and incentive plans, in order to deduct, for federal income tax purposes, compensation over $1 million per individual paid to our Chief Executive Officer and each of our three other most highly compensated executives (other than the Chief Financial Officer). Our equity-based incentive plans and our annual cash bonus plan are designed to permit the grant and payment of equity or cash incentive awards that are fully deductible as performance-based compensation under the Internal Revenue Code. In reviewing and adopting other executive compensation programs, the Committee plans to continue to consider the impact of Section 162(m) limitations in light of the materiality of the deductibility of potential benefits and the impact of such limitations on other compensation objectives. Because the Committee seeks to maintain flexibility in accomplishing the company’s compensation goals, however, it has not adopted a policy that all compensation must be fully deductible.
Summary Compensation Table
The following table summarizes the total compensation paid or earned by each of the named executive officers for the 20152016 fiscal year ended January 2,December 31, 2016 (and for the 20142015 and 20132014 fiscal years if the individual was a named executive officer in those years, respectively). The details of our named executive officers’ compensation are discussed in detail in the Compensation Discussion and Analysis beginning on page 29.28.
| Name And Principal Position | Year | Salary ($) | Bonus(4) ($) | Stock Awards(1) ($) | Option Awards(1) ($) | Non- Equity Incentive Plan Compensa- tion(2) ($) | All Other Compensa- tion(3) ($) | Total ($) | Year | Salary ($) | Bonus(6)(7) ($) | Stock | Option | Non- | All Other | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Shelly R. Ibach President and CEO | 2015 | $ | 779,231 | --- | $ | 1,561,875 | $ | 484,356 | $ | 188,462 | $ | 12,700 | $ | 3,026,624 | 2016 | $ | 814,615 | — | $ | 1,597,928 | $ | 493,284 | $ | 354,998 | $ | 23,205 | $ | 3,284,030 | |||||||||||||||||||||||||||||||||||
| 2014 | $ | 697,846 | --- | $ | 1,388,066 | $ | 260,799 | $ | 1,049,478 | $ | 20,360 | $ | 3,416,549 | 2015 | $ | 779,231 | — | $ | 1,561,875 | $ | 484,356 | $ | 188,462 | $ | 12,700 | $ | 3,026,624 | ||||||||||||||||||||||||||||||||||||
| 2013 | $ | 660,000 | --- | $ | 460,553 | $ | 441,184 | --- | $ | 15,150 | $ | 1,576,887 | 2014 | $ | 697,846 | — | $ | 1,388,066 | $ | 260,799 | $ | 1,049,478 | $ | 20,360 | $ | 3,416,549 | |||||||||||||||||||||||||||||||||||||
David R. Callen SVP and CFO | 2015 | $ | 383,618 | --- | $ | 234,240 | $ | 72,621 | $ | 52,257 | $ | 8,570 | $ | 751,306 | 2016 | $ | 400,637 | — | $ | 304,346 | $ | 93,979 | $ | 96,034 | $ | 9,327 | $ | 904,323 | |||||||||||||||||||||||||||||||||||
| 2014 | $ | 278,365 | $ | 173,329 | $ | 463,599 | $ | 68,600 | $ | 224,993 | $ | 193,197 | $ | 1,402,083 | 2015 | $ | 383,618 | — | $ | 234,240 | $ | 72,621 | $ | 52,257 | $ | 8,570 | $ | 751,306 | |||||||||||||||||||||||||||||||||||
| 2014 | $ | 278,365 | $ | 173,329 | $ | 463,599 | $ | 68,600 | $ | 224,993 | $ | 193,197 | $ | 1,402,083 | |||||||||||||||||||||||||||||||||||||||||||||||||
Kathryn V. Roedel EVP, Chief Services and Fulfillment Officer | 2015 | $ | 396,835 | --- | $ | 312,375 | $ | 96,855 | $ | 58,971 | $ | 8,620 | $ | 873,656 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Andrew P. Carlin EVP, Chief Sales and Services Officer | 2016 | $ | 415,369 | — | $ | 670,240 | $ | 93,979 | $ | 106,385 | $ | 8,025 | $ | 1,293,998 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | $ | 385,797 | --- | $ | 605,626 | $ | 94,793 | $ | 348,053 | $ | 9,520 | $ | 1,443,789 | 2015 | $ | 354,728 | — | $ | 312,375 | $ | 96,855 | $ | 46,156 | $ | 7,950 | $ | 818,064 | ||||||||||||||||||||||||||||||||||||
| 2013 | $ | 368,713 | --- | $ | 167,649 | $ | 160,383 | --- | $ | 9,170 | $ | 705,915 | 2014 | $ | 324,607 | — | $ | 536,250 | $ | 88,898 | $ | 268,468 | $ | 12,147 | $ | 1,230,370 | |||||||||||||||||||||||||||||||||||||
| Suresh Krishna SVP and Chief Operations, Supply Chain and Lean Officer | 2016 | $ | 285,000 | $ | 144,127 | $ | 1,059,989 | $ | 437,402 | $ | 70,373 | $ | 17,095 | $ | 2,013,986 | ||||||||||||||||||||||||||||||||||||||||||||||||
Andrea L. Bloomquist SVP and Chief Product Officer | 2015 | $ | 355,915 | --- | $ | 312,375 | $ | 96,855 | $ | 45,563 | $ | 7,950 | $ | 818,658 | 2016 | $ | 403,500 | — | $ | 304,346 | $ | 93,979 | $ | 96,718 | $ | 11,960 | $ | 910,503 | |||||||||||||||||||||||||||||||||||
| 2014 | $ | 317,146 | --- | $ | 536,250 | $ | 88,898 | $ | 262,146 | $ | 8,901 | $ | 1,213,341 | 2015 | $ | 355,915 | — | $ | 312,375 | $ | 96,855 | $ | 45,563 | $ | 7,950 | $ | 818,658 | ||||||||||||||||||||||||||||||||||||
| 2013 | $ | 293,750 | --- | $ | 125,255 | $ | 120,419 | --- | $ | 11,621 | $ | 551,045 | 2014 | $ | 317,146 | — | $ | 536,250 | $ | 88,898 | $ | 262,146 | $ | 8,901 | $ | 1,213,341 | |||||||||||||||||||||||||||||||||||||
Andrew P. Carlin SVP and Chief Sales Officer | 2015 | $ | 354,728 | --- | $ | 312,375 | $ | 96,855 | $ | 46,156 | $ | 7,950 | $ | 818,064 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | $ | 324,607 | --- | $ | 536,250 | $ | 88,898 | $ | 268,468 | $ | 12,147 | $ | 1,230,370 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | $ | 311,250 | --- | $ | 125,255 | $ | 120,419 | --- | $ | 9,681 | $ | 566,605 | |||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Reflects the aggregate grant date fair value of stock and option awards granted during fiscal years 2016, 2015 2014 and 2013,2014, computed in accordance with FASB ASC Topic 718. See Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2,December 31, 2016, for a discussion of the relevant assumptions used in calculating these amounts.
(2) The “Stock Awards” column includes performance stock awards. The amounts included for the performance stock awards represent the grant date fair value assuming the achievement of the target performance award level. The following table presents the grant date fair value of the performance stock awards included in the “Stock Awards” column and the maximum grant date fair value of these awards assuming that the highest level of performance conditions would be achieved.
| 2015 | 2014 | 2013 | ||||||||||||||||||||||
| Grant Date | Maximum | Grant Date | Maximum | Grant Date | Maximum | |||||||||||||||||||
| Fair Value | Value | Fair Value | Value | Fair Value | Value | |||||||||||||||||||
| Ms. Ibach | $ | 1,561,875 | $ | 3,123,750 | $ | 833,413 | $ | 1,666,826 | $ | 460,553 | $ | 921,106 | ||||||||||||
| Mr. Callen | $ | 234,240 | $ | 468,480 | $ | 219,604 | $ | 439,208 | --- | --- | ||||||||||||||
| Ms. Roedel | $ | 312,375 | $ | 624,750 | $ | 303,156 | $ | 606,312 | $ | 167,649 | $ | 335,298 | ||||||||||||
| Ms. Bloomquist | $ | 312,375 | $ | 624,750 | $ | 284,142 | $ | 568,285 | $ | 125,255 | $ | 250,510 | ||||||||||||
| Mr. Carlin | $ | 312,375 | $ | 624,750 | $ | 284,142 | $ | 568,285 | $ | 125,255 | $ | 250,510 | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||||||||
| Grant Date | Maximum | Grant Date | Maximum | Grant Date | Maximum | |||||||||||||||||||
| Fair Value | Value | Fair Value | Value | Fair Value | Value | |||||||||||||||||||
| Ms. Ibach | $ | 1,597,928 | $ | 3,195,857 | $ | 1,561,875 | $ | 3,123,750 | $ | 833,413 | $ | 1,666,826 | ||||||||||||
| Mr. Callen | $ | 304,346 | $ | 608,692 | $ | 234,240 | $ | 468,480 | $ | 219,604 | $ | 439,208 | ||||||||||||
| Mr. Carlin | $ | 304,346 | $ | 608,692 | $ | 312,375 | $ | 624,750 | $ | 284,142 | $ | 568,285 | ||||||||||||
| Mr. Krishna | $ | 407,658 | $ | 815,317 | — | — | — | — | ||||||||||||||||
| Ms. Bloomquist | $ | 304,346 | $ | 608,692 | $ | 312,375 | $ | 624,750 | $ | 284,142 | $ | 568,285 | ||||||||||||
(2)
(3) The “Option Awards” column includes a market-based option award in 2016 for Mr. Krishna. The associated $312,625 grant date fair value included in the “Option Awards” column is also the maximum value of the award assuming that the market condition would be achieved. The market condition requires the company’s closing stock price to exceed $27.00 for 20 consecutive trading days and can be achieved any time prior to April 11, 2026, subject to continuing employment.
(4) Represents annual incentive compensation earned under the Select Comfort Corporation ExecutiveAIP. See discussion in the Compensation Discussion and Key EmployeeAnalysis under the heading “Annual Cash Incentive Plan.Compensation.”
(3)(5) All other compensation includes the costs of (i) reimbursement for personal financial planning and tax advice; (ii) company sponsored physical exam; and (iii) company contribution to the executive’s 401(k) account. For 2014, includes relocation reimbursements for Mr. Callen of $126,671 and the related tax gross-up of the relocation benefits of $60,085.
(4)(6) In 2014, Mr. Callen received sign-on and discretionary relocation benefits.
Table of Contents(7) For 2016, Mr. Krishna was guaranteed a minimum payment equal to the target incentive level under the AIP. The amount in the Non-Equity Incentive Plan Compensation column reflects the amount that would have been earned under the plan if there had been no guarantee. The amount in the Bonus column reflects the difference between the guaranteed minimum payment and the amounts that would have been earned under the plan if there had been no guarantee.See discussion in the Compensation Discussion and Analysis under the heading “Annual Cash Incentive Compensation.”
Grant of Plan-Based Awards
The following table summarizes grants of equity and non-equity plan-based awards to each of the named executive officers during the 20152016 fiscal year ended January 2,December 31, 2016.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Thresh- old ($) | Target ($) | Maxi- mum ($) | Thresh- old (#) | Target (#) | Maxi- mum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Under- lying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||
| Shelly R. Ibach | $ | 155,385 | $ | 776,923 | $ | 1,942,308 | ||||||||||||||||||||||||||||||||||
| 3/16/15(2) | 3,905 | 46,875 | 93,750 | $1,561,875 | ||||||||||||||||||||||||||||||||||||
| 3/16/15 | 29,480 | $33.32 | $ 484,356 | |||||||||||||||||||||||||||||||||||||
| David R. Callen | $ | 42,043 | $ | 210,216 | $ | 525,541 | ||||||||||||||||||||||||||||||||||
| 3/16/15(2) | 586 | 7,030 | 14,060 | $ 234,240 | ||||||||||||||||||||||||||||||||||||
| 3/16/15 | 4,420 | $33.32 | $ 72,621 | |||||||||||||||||||||||||||||||||||||
| Kathryn V. Roedel | $ | 47,446 | $ | 237,228 | $ | 593,070 | ||||||||||||||||||||||||||||||||||
| 3/16/15(2) | 781 | 9,375 | 18,750 | $ 312,375 | ||||||||||||||||||||||||||||||||||||
| 3/16/15 | 5,895 | $33.32 | $ 96,855 | |||||||||||||||||||||||||||||||||||||
| Andrea L. Bloomquist | $ | 39,044 | $ | 195,220 | $ | 488,051 | ||||||||||||||||||||||||||||||||||
| 3/16/15(2) | 781 | 9,375 | 18,750 | $ 312,375 | ||||||||||||||||||||||||||||||||||||
| 3/16/15 | 5,895 | $33.32 | $ 96,855 | |||||||||||||||||||||||||||||||||||||
| Andrew P. Carlin | $ | 38,905 | $ | 194,525 | $ | 486,312 | ||||||||||||||||||||||||||||||||||
| 3/16/15(2) | 781 | 9,375 | 18,750 | $ 312,375 | ||||||||||||||||||||||||||||||||||||
| 3/16/15 | 5,895 | $33.32 | $ 96,855 | |||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||||||||
| All Other | ||||||||||||||||||||||||||||||||||||||
| All | Option | |||||||||||||||||||||||||||||||||||||
| Other | Awards: | Grant | ||||||||||||||||||||||||||||||||||||
| Stock | Number | Date | ||||||||||||||||||||||||||||||||||||
| Awards: | of | Exercise | Fair | |||||||||||||||||||||||||||||||||||
| Number | Securities | or Base | Value of | |||||||||||||||||||||||||||||||||||
| of Shares | Under- | Price of | Stock and | |||||||||||||||||||||||||||||||||||
| Thresh- | Maxi- | Thresh- | Maxi- | of Stock | lying | Option | Option | |||||||||||||||||||||||||||||||
| Grant | old | Target | mum | old | Target | mum | or Units | Options | Awards | Awards | ||||||||||||||||||||||||||||
| Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | ($)(8) | |||||||||||||||||||||||||||
| Shelly R. Ibach | $ | 162,308 | $ | 811,538 | $ | 2,028,846 | ||||||||||||||||||||||||||||||||
| 3/22/16(2) | 7,051 | 84,951 | 169,902 | $ | 1,597,928 | |||||||||||||||||||||||||||||||||
| 3/22/16(5) | 57,790 | $ | 18.81 | $ | 493,284 | |||||||||||||||||||||||||||||||||
| David R. Callen | $ | 43,907 | $ | 219,537 | $ | 548,843 | ||||||||||||||||||||||||||||||||
| 3/22/16(2) | 1,343 | 16,180 | 32,360 | $ | 304,346 | |||||||||||||||||||||||||||||||||
| 3/22/16(5) | 11,010 | $ | 18.81 | $ | 93,979 | |||||||||||||||||||||||||||||||||
| Andrew P. Carlin | $ | 48,640 | $ | 243,200 | $ | 608,000 | ||||||||||||||||||||||||||||||||
| 3/22/16(2) | 1,343 | 16,180 | 32,360 | $ | 304,346 | |||||||||||||||||||||||||||||||||
| 3/22/16(5) | 11,010 | $ | 18.81 | $ | 93,979 | |||||||||||||||||||||||||||||||||
| 4/11/16(7) | 18,880 | $ | 365,894 | |||||||||||||||||||||||||||||||||||
| Suresh Krishna | $ | 214,500 | $ | 214,500 | $ | 536,250 | ||||||||||||||||||||||||||||||||
| 4/11/16(2) | 1,746 | 21,035 | 42,070 | $ | 407,658 | |||||||||||||||||||||||||||||||||
| 4/11/16(3) | 5,610 | $ | 108,722 | |||||||||||||||||||||||||||||||||||
| 4/11/16(4) | 28,050 | $ | 543,609 | |||||||||||||||||||||||||||||||||||
| 4/11/16(5) | 14,310 | $ | 19.38 | $ | 124,777 | |||||||||||||||||||||||||||||||||
| 4/11/16(6) | 30,500 | 30,500 | 30,500 | $ | 19.38 | $ | 312,625 | |||||||||||||||||||||||||||||||
| Andrea L. Bloomquist | $ | 44,220 | $ | 221,100 | $ | 552,750 | ||||||||||||||||||||||||||||||||
| 3/22/16(2) | 1,343 | 16,180 | 32,360 | $ | 304,346 | |||||||||||||||||||||||||||||||||
| 3/22/16(5) | 11,010 | $ | 18.81 | $ | 93,979 | |||||||||||||||||||||||||||||||||
(1)This represents the cash incentive opportunity for 20152016 under the Select Comfort Corporation Executive and Key Employee Incentive Plan. TheAIP. For all named executive officers except for Mr. Krishna, the actual amounts earned under this plan for 20152016 are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. TheExcept for Mr. Krishna, the threshold reflects the amount that would be payable under the plan if the minimum performance level is achieved for annual company-wide performance goals. If the minimum performance level for payment of the threshold amount is not achieved, then no annual incentive would be payable under the plan. For 2016, Mr. Krishna was guaranteed a minimum payment equal to the target incentive level and therefore the threshold and target amounts are the same. For Mr. Krishna, the amounts that would have been earned under the plan if there had been no guarantee are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table and the difference between the guaranteed minimum payment and the amounts that would have been earned under the plan if there had been no guarantee are reflected in the Bonus column of the Summary Compensation Table. Grantees had the opportunity to realize up to 50 percent of pro-rated target incentive levels for achievement of semi-annual performance objectives for the first half of the year. See discussion in the Compensation Discussion and Analysis under the heading “Annual Cash Incentive Compensation.”
(2)These awards represent performance stock unit awards described in greater detail in the Compensation Discussion and Analysis under the heading, “Long-Term Equity-Based Incentive Compensation.” The target number of sharesunits may be adjusted based on company performance during the performance period which ends December 30, 201729, 2018 (fiscal 20172018 year-end). The adjusted amount of the award then fully vests after three years from the grant date. If any dividends are paid on our common stock, the holders of the performance stock units awards would receive dividends at the same rate as paid to other shareholders if and when the performance stock unit award becomes fully vested.
(3) These awards represent restricted stock units which vest 100% on the one-year anniversary of the grant date, subject to continuing employment.
(4) These awards represent restricted stock units which vest one-half each year on each of the first two anniversaries of the grant date, subject to continuing employment.
(5) These awards represent stock options described in greater detail in the Compensation Discussion and Analysis under the heading, “Long-Term Equity-Based Incentive Compensation.” These stock options have an exercise price equal to the closing trading price of the company’s common stock on the grant date. The options become exercisable in installments of one-third of the options awarded on each of the first three anniversaries of the grant date. These options remain exercisable for up to 10 years from the grant date, subject to earlier termination upon certain events related to termination of employment.
(4)(6) These awards represent market-based stock options described in greater detail in the Compensation Discussion and Analysis under the heading, “New Hire Awards.” These stock options have an exercise price equal to the closing trading price of the company’s common stock on the grant date. The options vest 100% on the third anniversary of the grant date, subject to continuing employment and achievement of the market condition. The market condition requires the company’s closing stock price to exceed $27.00 for 20 consecutive trading days and can be achieved any time prior to April 11, 2026, subject to continuing employment. These options remain exercisable for up to 10 years from the grant date, subject to earlier termination upon certain events related to termination of employment.
(7) These awards represent restricted stock units which vest 100% on the three-year anniversary of the grant date, subject to continuing employment.
(8) Reflects the grant date fair value computed in accordance with FASB Accounting ASC Topic 718. The value for awards subject to market or performance conditions reflects the target payout.
Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the total outstanding equity awards for each of the named executive officers as of January 2,December 31, 2016.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) |
Market |
Equity (#) |
Equity | ||||||||||||||||||||||||
| Shelly R. Ibach | 14,500 | --- | $ | 18.22 | 4/2/2017 | --- | --- | --- | --- | |||||||||||||||||||||||
| 21,000 | --- | $ | 10.63 | 11/27/2017 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 6,610 | --- | $ | 3.76 | 3/7/2018 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 7,500 | --- | $ | 0.79 | 6/18/2019 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 27,375 | --- | $ | 9.75 | 6/4/2020 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 14,038 | --- | $ | 17.34 | 5/11/2021 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 13,425 | 4,475 | (1) | $ | 28.99 | 2/23/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 3,800 | (2) | $ | 81,358 | --- | --- | |||||||||||||||||||||||
| 10,144 | 3,382 | (3) | $ | 25.99 | 6/1/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 2,863 | (4) | $ | 61,297 | --- | --- | |||||||||||||||||||||||
| 27,967 | 13,983 | (5) | $ | 21.15 | 4/1/2023 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 4,687 | (6) | $ | 100,349 | --- | --- | |||||||||||||||||||||||
| 9,144 | 18,286 | (7) | $ | 17.77 | 3/28/2024 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 46,900 | (8) | $ | 1,004,129 | |||||||||||||||||||||||
| --- | --- | --- | --- | 37,225 | (9) | $ | 796,987 | --- | --- | |||||||||||||||||||||||
| --- | 29,480 | (13) | $ | 33.32 | 3/16/2025 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 46,875 | (14) | $ | 1,003,594 | |||||||||||||||||||||||
| David R. Callen | 2,465 | 4,930 | (10) | $ | 17.36 | 4/7/2024 | --- | --- | --- | --- | ||||||||||||||||||||||
| --- | --- | --- | --- | 9,370 | (11) | $ | 200,612 | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 12,650 | (12) | $ | 270,837 | |||||||||||||||||||||||
| --- | 4,420 | (13) | $ | 33.32 | 3/16/2025 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 7,030 | (14) | $ | 150,512 | |||||||||||||||||||||||
| Kathryn V. Roedel | 11,400 | --- | $ | 24.65 | 3/2/2016 | --- | --- | --- | --- | |||||||||||||||||||||||
| 5,376 | --- | $ | 0.94 | 6/1/2019 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 20,000 | --- | $ | 0.79 | 6/18/2019 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 44,250 | --- | $ | 9.75 | 6/4/2020 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 13,224 | --- | $ | 17.34 | 5/11/2021 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 9,450 | 3,150 | (1) | $ | 28.99 | 2/23/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 2,691 | (2) | $ | 57,614 | --- | --- | |||||||||||||||||||||||
| 3,123 | 1,042 | (3) | $ | 25.99 | 6/1/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 882 | (4) | $ | 18,884 | --- | --- | |||||||||||||||||||||||
| 10,167 | 5,083 | (5) | $ | 21.15 | 4/1/2023 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 1,706 | (6) | $ | 36,525 | --- | --- | |||||||||||||||||||||||
| 3,324 | 6,646 | (7) | $ | 17.77 | 3/28/2024 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 17,060 | (8) | $ | 365,255 | |||||||||||||||||||||||
| --- | --- | --- | --- | 20,300 | (9) | $ | 434,623 | --- | --- | |||||||||||||||||||||||
| --- | 5,895 | (13) | $ | 33.32 | 3/16/2025 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 9,375 | (14) | $ | 200,719 | |||||||||||||||||||||||
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market | Equity Incentive (#) | Equity | |||||||||||||||||||||||
| Shelly R. Ibach | 9,700 | — | $ | 18.22 | 4/2/2017 | — | — | — | — | ||||||||||||||||||||||
| 14,000 | — | $ | 10.63 | 11/27/2017 | — | — | — | — | |||||||||||||||||||||||
| 6,610 | — | $ | 3.76 | 3/7/2018 | — | — | — | — | |||||||||||||||||||||||
| 7,500 | — | $ | 0.79 | 6/18/2019 | — | — | — | — | |||||||||||||||||||||||
| 27,375 | — | $ | 9.75 | 6/4/2020 | — | — | — | — | |||||||||||||||||||||||
| 14,038 | — | $ | 17.34 | 5/11/2021 | — | — | — | — | |||||||||||||||||||||||
| 17,900 | — | $ | 28.99 | 2/23/2022 | — | — | — | — | |||||||||||||||||||||||
| 13,526 | — | $ | 25.99 | 6/1/2022 | — | — | — | — | |||||||||||||||||||||||
| 41,950 | — | $ | 21.15 | 4/1/2023 | — | — | — | — | |||||||||||||||||||||||
| 18,287 | 9,143 | (1) | $ | 17.77 | 3/28/2024 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | 39,678 | (2) | $ | 897,516 | — | — | ||||||||||||||||||||||
| — | — | — | — | 37,225 | (3) | $ | 842,030 | — | — | ||||||||||||||||||||||
| 9,827 | 19,653 | (7) | $ | 33.32 | 3/16/2025 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 46,875 | (8) | $ | 1,060,313 | ||||||||||||||||||||||
| — | 57,790 | (9) | $ | 18.81 | 3/22/2026 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 84,951 | (10) | $ | 1,921,592 | ||||||||||||||||||||||
| David R. Callen | 4,930 | 2,465 | (4) | $ | 17.36 | 4/7/2024 | — | — | — | — | |||||||||||||||||||||
| — | — | — | — | 4,685 | (5) | $ | 105,975 | — | — | ||||||||||||||||||||||
| — | — | — | — | 10,702 | (6) | $ | 242,079 | — | — | ||||||||||||||||||||||
| 1,474 | 2,946 | (7) | $ | 33.32 | 3/16/2025 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 7,030 | (8) | $ | 159,019 | ||||||||||||||||||||||
| — | 11,010 | (9) | $ | 18.81 | 3/22/2026 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 16,180 | (10) | $ | 365,992 | ||||||||||||||||||||||
| Andrew P. Carlin | 4,000 | — | $ | 3.76 | 3/7/2018 | — | — | — | — | ||||||||||||||||||||||
| 10,500 | — | $ | 0.94 | 6/1/2019 | — | — | — | — | |||||||||||||||||||||||
| 9,845 | — | $ | 9.75 | 6/4/2020 | — | — | — | — | |||||||||||||||||||||||
| 200 | — | $ | 17.34 | 5/11/2021 | — | — | — | — | |||||||||||||||||||||||
| 3,000 | — | $ | 28.99 | 2/23/2022 | — | — | — | — | |||||||||||||||||||||||
| 4,165 | — | $ | 25.99 | 6/1/2022 | — | — | — | — | |||||||||||||||||||||||
| 11,450 | — | $ | 21.15 | 4/1/2023 | — | — | — | — | |||||||||||||||||||||||
| 6,233 | 3,117 | (1) | $ | 17.77 | 3/28/2024 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | 13,528 | (2) | $ | 306,003 | — | — | ||||||||||||||||||||||
| — | — | — | — | 16,920 | (3) | $ | 382,730 | — | — | ||||||||||||||||||||||
| 1,965 | 3,930 | (7) | $ | 33.32 | 3/16/2025 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 9,375 | (8) | $ | 212,063 | ||||||||||||||||||||||
| — | 11,010 | (9) | $ | 18.81 | 3/22/2026 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 16,180 | (10) | $ | 365,992 | ||||||||||||||||||||||
| — | — | — | — | 18,880 | (11) | $ | 427,066 | — | — | ||||||||||||||||||||||
Outstanding Equity Awards at Fiscal Year-End, continued
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) |
Market | Equity |
Equity | ||||||||||||||||||||||||
| Andrea L. Bloomquist | 3,000 | --- | $ | 3.07 | 5/5/2018 | --- | --- | |||||||||||||||||||||||||
| 1,750 | --- | $ | 0.94 | 6/1/2019 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 13,125 | --- | $ | 9.75 | 6/4/2020 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 3,100 | --- | $ | 17.34 | 5/11/2021 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 2,250 | 750 | (1) | $ | 28.99 | 2/23/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 673 | (2) | $ | 14,409 | --- | --- | |||||||||||||||||||||||
| 2,499 | 833 | (3) | $ | 25.99 | 6/1/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 705 | (4) | $ | 15,094 | --- | --- | |||||||||||||||||||||||
| 7,633 | 3,817 | (5) | $ | 21.15 | 4/1/2023 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 1,275 | (6) | $ | 27,298 | --- | --- | |||||||||||||||||||||||
| 3,117 | 6,233 | (7) | $ | 17.77 | 3/28/2024 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 15,990 | (8) | $ | 342,346 | |||||||||||||||||||||||
| --- | --- | --- | --- | 16,920 | (9) | $ | 362,257 | --- | --- | |||||||||||||||||||||||
| --- | 5,895 | (13) | $ | 33.32 | 3/16/2025 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 9,375 | (14) | $ | 200,719 | |||||||||||||||||||||||
| Andrew P. Carlin | 4,000 | --- | $ | 3.76 | 3/7/2018 | --- | --- | --- | --- | |||||||||||||||||||||||
| 10,500 | --- | $ | 0.94 | 6/1/2019 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 9,845 | --- | $ | 9.75 | 6/4/2020 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 3,400 | --- | $ | 17.34 | 5/11/2021 | --- | --- | --- | --- | ||||||||||||||||||||||||
| 2,250 | 750 | (1) | $ | 28.99 | 2/23/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 673 | (2) | $ | 14,409 | --- | --- | |||||||||||||||||||||||
| 3,123 | 1,042 | (3) | $ | 25.99 | 6/1/2022 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 882 | (4) | $ | 18,884 | --- | --- | |||||||||||||||||||||||
| 7,633 | 3,817 | (5) | $ | 21.15 | 4/1/2023 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | 1,275 | (6) | $ | 27,298 | --- | --- | |||||||||||||||||||||||
| 3,117 | 6,233 | (7) | $ | 17.77 | 3/28/2024 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 15,990 | (8) | $ | 342,346 | |||||||||||||||||||||||
| --- | --- | --- | --- | 16,920 | (9) | $ | 362,257 | --- | --- | |||||||||||||||||||||||
| --- | 5,895 | (13) | $ | 33.32 | 3/16/2025 | --- | --- | --- | --- | |||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | 9,375 | (14) | $ | 200,719 | |||||||||||||||||||||||
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | |||||||||||||||||||||||
| Suresh Krishna | — | 14,310 | (12) | $ | 19.38 | 4/11/2026 | — | — | — | — | |||||||||||||||||||||
| — | 30,500 | (13) | $ | 19.38 | 4/11/2026 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | 5,610 | (14) | $ | 126,898 | — | — | ||||||||||||||||||||||
| — | — | — | — | 28,050 | (15) | $ | 634,491 | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 21,035 | (16) | $ | 475,812 | ||||||||||||||||||||||
| Andrea L. Bloomquist | 3,000 | — | $ | 3.07 | 5/5/2018 | — | — | — | — | ||||||||||||||||||||||
| 1,750 | — | $ | 0.94 | 6/1/2019 | — | — | — | — | |||||||||||||||||||||||
| 13,125 | — | $ | 9.75 | 6/4/2020 | — | — | — | — | |||||||||||||||||||||||
| 3,100 | — | $ | 17.34 | 5/11/2021 | — | — | — | — | |||||||||||||||||||||||
| 3,000 | — | $ | 28.99 | 2/23/2022 | — | — | — | — | |||||||||||||||||||||||
| 3,332 | — | $ | 25.99 | 6/1/2022 | — | — | — | — | |||||||||||||||||||||||
| 11,450 | — | $ | 21.15 | 4/1/2023 | — | — | — | — | |||||||||||||||||||||||
| 6,233 | 3,117 | (1) | $ | 17.77 | 3/28/2024 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | 13,528 | (2) | $ | 306,003 | — | — | ||||||||||||||||||||||
| — | — | — | — | 16,920 | (3) | $ | 382,730 | — | — | ||||||||||||||||||||||
| 1,965 | 3,930 | (7) | $ | 33.32 | 3/16/2025 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 9,375 | (8) | $ | 212,063 | ||||||||||||||||||||||
| — | 11,010 | (9) | $ | 18.81 | 3/22/2026 | — | — | — | — | ||||||||||||||||||||||
| — | — | — | — | — | — | 16,180 | (10) | $ | 365,992 | ||||||||||||||||||||||
(1)These stock options were granted on February 23, 2012 and vest 25% each year on each of the first four anniversaries of the date of grant, subject to continuing employment.
(2)These performance stock awards were granted on February 23, 2012 and vest 100% on February 23, 2016, subject to continuing employment. The shares are reflected at actual performance achievement level. The performance period was completed as of fiscal 2014 year end.
(3)These stock options were granted on June 1, 2012 and vest 25% each year on each of the first four anniversaries of the date of grant, subject to continuing employment.
(4)These performance stock awards were granted on June 1, 2012 and vest 100% on June 1, 2016, subject to continuing employment. The shares are reflected at actual performance achievement level. The performance period was completed as of fiscal 2014 year end.
(5)These stock options were granted on April 1, 2013 and vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment.
(6)These performance stock awards were granted on April 1, 2013 and vest 100% on April 1, 2016, subject to continuing employment. The shares are reflected at actual performance achievement level. The performance period was completed as of fiscal 2015 year end.
(7)These stock options were granted on March 28, 2014 and vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment.employment through the applicable vesting date.
(8)(2) These performance stock units were granted on March 28, 2014 and vest 100% on March 28, 2017, subject to continuing employment.employment through the vesting date. The shares are reflected at the target awardactual performance achievement level. The performance period continues throughwas completed as of fiscal 2016 year end.
(9)(3) These market-based stock units were granted on March 28, 2014 and vest 100% on March 28, 2017, subject to continuing employment.employment through the vesting date. The shares are reflected at the target award level, which is the same as the maximum award level. The market condition performance period continues through March 28, 2017. However, all market conditions were met in fiscal 2014.
(10)(4) These stock options were granted on April 7, 2014 and vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment.employment through the applicable vesting date.
(11)(5) These restricted stock units were granted on April 7, 2014 and vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment.employment through the applicable vesting date.
(12)(6) These performance stock units were granted on April 7, 2014 and vest 100% on April 7, 2017, subject to continuing employment.employment through the vesting date. The shares are reflected at the target awardactual performance achievement level. The performance period continues throughwas completed as of fiscal 2016 year end.
(13)(7) These stock options were granted on March 16, 2015 and vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment.employment through the applicable vesting date.
(14)
(8) These performance stock units were granted on March 16, 2015 and vest 100% on March 16, 2018, subject to achieving performance criteria and continuing employment.employment through the vesting date. The shares are reflected at the target award level. The performance period continues through fiscal 2017 year end.
Table(9) These stock options were granted on March 22, 2016 and vest one-third each year on each of Contentsthe first three anniversaries of the date of grant, subject to continuing employment through the applicable vesting date.
(10) These performance stock units were granted on March 22, 2016 and vest 100% on March 22, 2019, subject to achieving performance criteria and continuing employment through the vesting date. The shares are reflected at the target award level. The performance period continues through fiscal 2018 year end.
(11) These restricted stock units were granted on April 11, 2016 and vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment through the applicable vesting date.
(12) These stock options were granted on April 11, 2016 and vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment through the applicable vesting date.
(13) These market-based stock options were granted on April 11, 2016 and vest 100% on April 11, 2019, subject to continuing employment through the vesting date; provided, however, that the options will only become exercisable if the market condition is achieved. The shares are reflected at the target award level, which is the same as the maximum award level. The market condition requires the company’s closing stock price to exceed $27.00 for 20 consecutive trading days and can be achieved any time prior to April 11, 2026, subject to continuing employment. As of December 31, 2016, the market condition had not been achieved.
(14) These restricted stock units were granted on April 11, 2016 and vest 100% on April 11, 2017, subject to continuing employment through the vesting date.
(15) These restricted stock units were granted on April 11, 2016 and vest one-half each year on each of the first two anniversaries of the date of grant, subject to continuing employment through the applicable vesting date.
(16) These performance stock units were granted on April 11, 2016 and vest 100% on April 11, 2019, subject to achieving performance criteria and continuing employment through the vesting date. The shares are reflected at the target award level. The performance period continues through fiscal 2018 year end.
(17) Calculated by multiplying unvested shares by $22.62, the closing price of the company’s common stock on the Nasdaq Stock Market on December 30, 2016.
Option Exercises and Stock Vested
The following table summarizes the stock options exercised and restricted stock awards vested for each of the named executive officers during the fiscal year ended January 2,December 31, 2016.
| Option Awards | Stock Awards | |||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||||||||
| Shelly R. Ibach | 14,688 | $ | 310,208 | 14,770 | $ | 463,332 | 11,800 | $ | 156,616 | 11,350 | $ | 223,293 | ||||||||||
| David R. Callen | --- | --- | 4,685 | $ | 157,885 | — | — | 4,685 | $ | 89,811 | ||||||||||||
| Kathryn V. Roedel | --- | --- | 7,319 | $ | 232,232 | |||||||||||||||||
| Andrew P. Carlin | 3,200 | $ | 34,119 | 2,830 | $ | 56,932 | ||||||||||||||||
| Suresh Krishna | — | — | — | — | ||||||||||||||||||
| Andrea L. Bloomquist | --- | --- | 5,224 | $ | 163,098 | — | — | 2,653 | $ | 52,844 | ||||||||||||
| Andrew P. Carlin | --- | --- | 6,895 | $ | 214,978 | |||||||||||||||||
| (1) | The value realized on the exercise of stock options for purposes of this table is based on the difference between the fair market value of our common stock on the date of exercise and the exercise price of the stock option. |
| (2) | The value realized on the vesting of stock awards for purposes of this table is based on the fair market value of our common stock on the date of vesting of the award. |
Equity Compensation Plan Information
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted average exercise price of outstanding options, warrants and rights(3) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)(4) | |||||||||
| Equity compensation plans approved by security holders | 2,379,276 | (2) | $ | 18.44 | 4,709,009 | |||||||
| Equity compensation plans not approved by security holders | None | Not applicable | None | |||||||||
| Total | 2,379,276 | $ | 18.44 | 4,709,009 | ||||||||
Nonqualified Deferred Compensation
The following table summarizes the aggregate earnings and balances for each of the named executive officers under the Select Comfort Executive Investment Plan, the company’s non-qualified deferred compensation plan (described in greater detail below), for the 20152016 fiscal year ended January 2,December 31, 2016.
| Name | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions | Aggregate Earnings in Last Fiscal Year(1) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End(1) ($) | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End(1) ($) | ||||||||||||||||||||||||||||||
| Shelly R. Ibach | $ | 215,962 | --- | $ | (6,226 | ) | --- | $ | 209,736 | $ | 154,591 | — | $ | 23,637 | — | $ | 387,965 | |||||||||||||||||||||||
| David R. Callen | $ | 35,616 | --- | $ | 348 | --- | $ | 35,964 | $ | 739 | — | $ | 826 | — | $ | 37,529 | ||||||||||||||||||||||||
| Kathryn V. Roedel | --- | --- | $ | 2,117 | --- | $ | 98,746 | |||||||||||||||||||||||||||||||||
| Andrew P. Carlin | $ | 234,957 | — | $ | 51,419 | — | $ | 599,201 | ||||||||||||||||||||||||||||||||
| Suresh Krishna | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Andrea L. Bloomquist | --- | --- | --- | --- | --- | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Andrew P. Carlin | $ | 169,533 | --- | $ | (1,205 | ) | --- | $ | 312,825 | |||||||||||||||||||||||||||||||
(1)Among the named executive officers, Ms. Ibach, Mr. Callen Ms. Roedel and Mr. Carlin had account balances under the plan as of January 2,December 31, 2016. Ms. Roedel did not elect to make additional contributions (salary or bonus deferrals) to the plan in fiscal year 2015.Mr. Krishna and Ms. Bloomquist did not elect to participate in the plan in fiscal year 2015.2016.
As determined by the plan administrator each year, certain executive employees (for example, director level and above) may be eligible to participate in the Select Comfort Executive Investment Plan, a non-qualified deferred compensation plan. Under this plan, eligible employees may defer up to 50% of base salary and up to 75% of bonus compensation on a pre-tax basis. These voluntary employee salary and bonus deferrals are credited to the participant’s “savings account.” (Elective deferrals made by eligible employees prior to January 1, 2009 could have been credited to a “fixed period account.”) No employees were eligible to make deferrals of base salary or bonus during the 2009, 2010 and 2011 plan years and the first six months of the 2012 plan year.
In addition to deferrals made by eligible employees, the company may elect to credit eligible employees with discretionary employer credits to a “retirement account.” The company has not elected to make any discretionary employer credits under this plan.
A participant’s account under the plan is also credited with earnings credits which are based on deemed investment in a variety of funds made available by the plan administrator and which are currently similar to the investment fund options available under the company’s 401(k) plan. The participant selects the funds into which the account balance is deemed to be invested and these allocations may be changed by the participant at any time.
Amounts credited to savings and retirement accounts are paid out no later than 90 days (or six months for executive officers) after the participant’s “termination date” (which means the date the participant separates from service as defined under Internal Revenue Code Section 409A). Payment of the fixed period account depends on the date (or dates) of distribution elected by the participant at the time he or she made the election to defer salary or bonus to a fixed period account. Distributions to the participant may be made in a lump sum payment or in annual installment payments. Prior to the termination date (or the fixed payment date of a fixed period account), a participant may be allowed to receive a lump sum distribution from his or her account in the event of certain unforeseeable emergencies. The participant’s account (if any) upon his or her date of death is paid in a lump sum to the participant’s plan beneficiary or beneficiaries.
Employment Arrangements, Potential Payments upon Change in Control
No Employment ArrangementsAgreements. All Select Comfort employees, including all executive officers, are “at will” employees, meaning that the employee or the company may terminate the employment relationship with or without cause and with or without notice, at any time at the option of either the employee or the company. No executive officer of the company has any contractual or other right to employment for any term or period of time. In addition, no executive officer would be entitled to any severance compensation in excess of the benefits provided under the company’s Severance Plan described above.
Change in Control Provisions –2004 Stock Incentive Plans
Under our company’s 2004 Stock Incentive Plan (the “2004 Plan”), if a “change in control” of our company occurs, then, unless the Compensation Committee decides otherwise either at the time of grant of an incentive award or at any time thereafter, all outstanding stock options will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the participant to whom such options have been granted remains in the employ or service of our company or any subsidiary.
In addition, under the 2004 Plan, if a “change in control” of our company occurs, then, unless the Compensation Committee decides otherwise either at the time of grant of an incentive award or at any time thereafter:
| All outstanding stock appreciation rights will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the participant to whom such stock appreciation rights have been granted remains in the employ or service of our company or any subsidiary; |
| All outstanding restricted stock awards will become immediately fully vested and non-forfeitable; and |
| All outstanding performance units, stock bonuses and performance stock awards will vest and/or continue to vest in the manner determined by the Compensation Committee and set forth in the agreement evidencing such performance units or stock bonuses. |
There are presently no outstanding stock appreciation rights, performance units or stock bonuses.
In the event of a change in control, the Compensation Committee may pay cash for all or a portion of the outstanding options. The amount of cash the participants would receive will equal (a) the fair market value of such shares immediately prior to the change in control minus (b) the exercise price per share and any required tax withholding.
Under the 2004 Plan, a “change in control” will include any of the following:
| The sale, lease, exchange or other transfer of all or substantially all of the assets of our company to a corporation not controlled by our company; |
| The approval by our shareholders of a plan or proposal for the liquidation or dissolution of our company; |
| Any change in control that is required by the Securities and Exchange Commission to be reported; |
| Any person who was not a shareholder of our company on the effective date of the Plan becomes the beneficial owner of 50% or more of the voting power of our company’s outstanding common stock; or |
| The “continuity” directors (directors as of the effective date of the Plan and their future nominees) ceasing to constitute a majority of the Board of Directors. |
The foregoing provisions applicable to changes in control under our 2004 Plan apply equally to all employees holding incentive awards under this plan.
Change in Control Provisions – 2010 Omnibus Incentive Plan
While the events that are considered a change in control under our 2004 Plan and Amended and Restated 2010 Omnibus Incentive Plan (the “2010 Plan”) are identical, our 2010 Plan, which governs incentive awards granted in 2010 and future years, contains a “double-trigger” change in control provision. Under this provision, if the company is the surviving company, or the surviving or acquiring company assumes our outstanding incentive awards or provides for their equivalent substitutes, then vesting of incentive awards is accelerated only upon the termination of the employee’s service, a material reduction in an employee’s base salary, a discontinuation of participation in certain long-term cash or equity benefits provided to comparable employees, a significant change in job responsibilities or the need to relocate, provided these events occur within two years following a change in control.
Potential Payments to Named Executive Officers
The following table summarizes the amount of compensation and benefits payable to each named executive officer in the event of (i) any voluntary termination or resignation or termination for cause, (ii) an involuntary termination without cause, (iii) a change in control, (iv) a qualifying change in control termination, and (v) termination by reason of an executive’s death or disability. The amounts shown assume that the applicable triggering event occurred on January 2,December 31, 2016 (fiscal year-end).
| Triggering Events | Triggering Events | |||||||||||||||||||||||||||||||||||||||||||
| Name | Type of Payment | Voluntary/ Involuntary Termination For Cause ($) | Involuntary Termination without Cause(1) ($) | Change in Control ($) | Qualifying Change in Control Termination(2) ($) | Death or Disability ($) | Type of Payment | Voluntary/ Involuntary Termination For Cause ($) | Involuntary Termination without Cause(1) ($) | Change in Control ($) | Qualifying Change in Control Termination(2) ($) | Death or Disability ($) | ||||||||||||||||||||||||||||||||
| Shelly R. Ibach | Cash Severance(3) | --- | $ | 4,000,000 | --- | $ | 4,000,000 | --- | Cash Severance(3) | — | $ | 4,075,000 | — | $ | 4,075,000 | — | ||||||||||||||||||||||||||||
| Option Award Acceleration(4) | --- | $ | 27,686 | --- | $ | 70,197 | $ | 70,197 | Option Award Acceleration(4) | — | $ | 88,303 | — | $ | 264,523 | $ | 264,523 | |||||||||||||||||||||||||||
| Stock Award Acceleration(5) | --- | $ | 1,526,426 | --- | $ | 3,047,714 | $ | 3,047,714 | Stock Award Acceleration(5) | — | $ | 2,693,522 | — | $ | 4,721,450 | $ | 4,721,450 | |||||||||||||||||||||||||||
| Benefit Continuation(6) | --- | $ | 19,801 | --- | $ | 19,801 | --- | Benefit Continuation(6) | — | $ | 14,567 | — | $ | 14,567 | — | |||||||||||||||||||||||||||||
| Outplacement | --- | $ | 15,000 | --- | $ | 15,000 | --- | Outplacement | — | $ | 15,000 | — | $ | 15,000 | — | |||||||||||||||||||||||||||||
| Total | --- | $ | 5,588,913 | --- | $ | 7,152,712 | $ | 3,117,911 | Total | — | $ | 6,886,392 | — | $ | 9,090,540 | $ | 4,985,973 | |||||||||||||||||||||||||||
| David R. Callen | Cash Severance(3) | --- | $ | 807,188 | --- | $ | 807,188 | --- | Cash Severance(3) | — | $ | 847,547 | — | $ | 847,547 | — | ||||||||||||||||||||||||||||
| Option Award Acceleration(4) | --- | --- | --- | $ | 19,967 | $ | 19,967 | Option Award Acceleration(4) | — | — | — | $ | 54,914 | $ | 54,914 | |||||||||||||||||||||||||||||
| Stock Award Acceleration(5) | --- | --- | --- | $ | 621,961 | $ | 621,961 | Stock Award Acceleration(5) | — | — | — | $ | 873,064 | $ | 873,064 | |||||||||||||||||||||||||||||
| Benefit Continuation(6) | --- | $ | 12,944 | --- | $ | 12,944 | --- | Benefit Continuation(6) | — | $ | 19,229 | — | $ | 19,229 | — | |||||||||||||||||||||||||||||
| Outplacement | --- | $ | 10,000 | --- | $ | 10,000 | --- | Outplacement | — | $ | 10,000 | — | $ | 10,000 | — | |||||||||||||||||||||||||||||
| Total | --- | $ | 830,132 | --- | $ | 1,472,059 | $ | 641,927 | Total | — | $ | 876,776 | — | $ | 1,804,754 | $ | 927,978 | |||||||||||||||||||||||||||
| Kathryn V. Roedel | Cash Severance(3) | --- | $ | 874,760 | --- | $ | 874,760 | --- | ||||||||||||||||||||||||||||||||||||
| Andrew P. Carlin | Cash Severance(3) | — | $ | 893,760 | — | $ | 893,760 | — | ||||||||||||||||||||||||||||||||||||
| Option Award Acceleration(4) | — | — | — | $ | 57,066 | $ | 57,066 | |||||||||||||||||||||||||||||||||||||
| Stock Award Acceleration(5) | — | — | — | $ | 1,693,853 | $ | 1,693,853 | |||||||||||||||||||||||||||||||||||||
| Benefit Continuation(6) | — | $ | 19,044 | — | $ | 19,044 | — | |||||||||||||||||||||||||||||||||||||
| Outplacement | — | $ | 10,000 | — | $ | 10,000 | — | |||||||||||||||||||||||||||||||||||||
| Total | — | $ | 922,804 | — | $ | 2,673,723 | $ | 1,750,919 | ||||||||||||||||||||||||||||||||||||
| Suresh Krishna | Cash Severance(3) | — | $ | 819,000 | — | $ | 819,000 | — | ||||||||||||||||||||||||||||||||||||
| Option Award Acceleration(4) | --- | $ | 10,062 | --- | $ | 25,513 | $ | 25,513 | Option Award Acceleration(4) | — | — | — | $ | 145,184 | $ | 145,184 | ||||||||||||||||||||||||||||
| Stock Award Acceleration(5) | --- | $ | 622,410 | --- | $ | 1,113,620 | $ | 1,113,620 | Stock Award Acceleration(5) | — | — | — | $ | 1,237,201 | $ | 1,237,201 | ||||||||||||||||||||||||||||
| Benefit Continuation(6) | --- | $ | 9,901 | --- | $ | 9,901 | --- | Benefit Continuation(6) | — | $ | 16,502 | — | $ | 16,502 | — | |||||||||||||||||||||||||||||
| Outplacement | --- | $ | 10,000 | --- | $ | 10,000 | --- | Outplacement | — | $ | 10,000 | — | $ | 10,000 | — | |||||||||||||||||||||||||||||
| Total | --- | $ | 1,527,133 | --- | $ | 2,033,794 | $ | 1,139,133 | Total | — | $ | 845,502 | — | $ | 2,227,887 | $ | 1,382,385 | |||||||||||||||||||||||||||
| Andrea L. Bloomquist | Cash Severance(3) | --- | $ | 819,000 | --- | $ | 819,000 | --- | Cash Severance(3) | — | $ | 851,760 | — | $ | 851,760 | — | ||||||||||||||||||||||||||||
| Option Award Acceleration(4) | --- | --- | --- | $ | 23,681 | $ | 23,681 | Option Award Acceleration(4) | — | — | — | $ | 57,066 | $ | 57,066 | |||||||||||||||||||||||||||||
| Stock Award Acceleration(5) | --- | --- | --- | $ | 962,123 | $ | 962,123 | Stock Award Acceleration(5) | — | — | — | $ | 1,266,788 | $ | 1,266,788 | |||||||||||||||||||||||||||||
| Benefit Continuation(6) | --- | --- | --- | --- | --- | Benefit Continuation(6) | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Outplacement | --- | $ | 10,000 | --- | $ | 10,000 | --- | Outplacement | — | $ | 10,000 | — | $ | 10,000 | — | |||||||||||||||||||||||||||||
| Total | --- | $ | 829,000 | --- | $ | 1,814,804 | $ | 985,804 | Total | — | $ | 861,760 | — | $ | 2,185,614 | $ | 1,323,854 | |||||||||||||||||||||||||||
| Andrew P. Carlin | Cash Severance(3) | --- | $ | 798,000 | --- | $ | 798,000 | --- | ||||||||||||||||||||||||||||||||||||
| Option Award Acceleration(4) | --- | --- | --- | $ | 23,681 | $ | 23,681 | |||||||||||||||||||||||||||||||||||||
| Stock Award Acceleration(5) | --- | --- | --- | $ | 965,912 | $ | 965,912 | |||||||||||||||||||||||||||||||||||||
| Benefit Continuation(6) | --- | $ | 12,822 | --- | $ | 12,822 | --- | |||||||||||||||||||||||||||||||||||||
| Outplacement | --- | $ | 10,000 | --- | $ | 10,000 | --- | |||||||||||||||||||||||||||||||||||||
| Total | --- | $ | 820,822 | --- | $ | 1,810,415 | $ | 989,593 | ||||||||||||||||||||||||||||||||||||
(1)If a named executive officer’s employment is terminated by reason of involuntary termination without cause or their retirement at or beyond age fifty-five (55) and they have five (5) or more years of service with the company prior to retirement, the named executive officer will become vested in the stock and option awards pro rata based on the number of months elapsed in the restriction period as of the date of retirement.
(2)The amounts payable to the named executive officers upon a change in control may be subject to reduction under Sections 280G and 4999 of the Internal Revenue Code.
(3)For the CEO, the cash severance compensation is equal to (a) two times the sum of (i) annual base salary and (ii) annual target bonus, plus (b) a pro rata target bonus for the year of termination. For each of the other named executive officers, the cash severance compensation is equal to (a) one times the sum of (i) annual base salary and (ii) annual target bonus, plus (b) a pro rata target bonus for the year of termination.
(4)The value of the automatic acceleration of the vesting of unvested stock options held by a named executive officer is based on the difference between: (i) the fair market value of our common stock as of December 31, 201530, 2016 ($21.41)22.62), and (ii) the per share exercise price of the options held by the executive. The range of exercise prices of unvested stock options held by our named executive officers included in the table as of January 2,December 31, 2016 was $17.36 to $33.32.
(5)The value of the automatic acceleration of the vesting of stock awards held by a named executive officer is based on: (i) the number of unvested stock awards held by the executive as of January 2,December 31, 2016, multiplied by (ii) the fair market value of our common stock on December 31, 2015,30, 2016 ($21.41)22.62).
(6)Represents the cost of “COBRA” medical and dental continuation coverage, less the amount paid by an active full-time employee for the same level of coverage.
Director Compensation
The following table summarizes the total compensation paid or earned by each of the non-employee members of our Board of Directors for the 20152016 fiscal year ended January 2,December 31, 2016.
| Name | Fees Cash ($) | Stock | Option | All Other Compensation ($) | Total ($) | Fees Earned or Cash ($) | Stock Awards(1)(5) ($) | Option Awards(2) ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||
| Daniel I. Alegre | $ | 69,250 | $ | 72,438 | $ | 22,470 | --- | $ | 164,158 | $ | 76,500 | $ | 71,807 | $ | 24,093 | — | $ | 172,400 | ||||||||||||||||||||||
| Stephen L. Gulis, Jr.(3) | $ | 82,000 | $ | 72,438 | $ | 22,470 | --- | $ | 176,908 | $ | 89,000 | $ | 71,807 | $ | 24,093 | — | $ | 184,900 | ||||||||||||||||||||||
| Michael J. Harrison(3) (4) | $ | 72,250 | $ | 72,438 | $ | 22,470 | --- | $ | 167,158 | |||||||||||||||||||||||||||||||
| David T. Kollat | $ | 71,500 | $ | 72,438 | $ | 22,470 | --- | $ | 166,408 | |||||||||||||||||||||||||||||||
| Michael J. Harrison(3) | $ | 78,500 | $ | 71,807 | $ | 24,093 | — | $ | 174,400 | |||||||||||||||||||||||||||||||
| Brenda J. Lauderback(3) | $ | 79,500 | $ | 72,438 | $ | 22,470 | --- | $ | 174,408 | $ | 87,000 | $ | 71,807 | $ | 24,093 | — | $ | 182,900 | ||||||||||||||||||||||
| Barbara R. Matas(3) (4) | $ | 56,250 | $ | 71,807 | $ | 24,093 | — | $ | 152,150 | |||||||||||||||||||||||||||||||
| Kathleen L. Nedorostek | $ | 69,250 | $ | 72,438 | $ | 22,470 | --- | $ | 164,158 | $ | 78,500 | $ | 71,807 | $ | 24,093 | — | $ | 174,400 | ||||||||||||||||||||||
| Vicki A. O’Meara | $ | 56,250 | $ | 71,807 | $ | 24,093 | — | $ | 152,150 | |||||||||||||||||||||||||||||||
| Michael A. Peel(3) | $ | 80,000 | $ | 72,438 | $ | 22,470 | --- | $ | 174,908 | $ | 88,500 | $ | 71,807 | $ | 24,093 | — | $ | 184,400 | ||||||||||||||||||||||
| Jean-Michel Valette | $ | 169,250 | $ | 72,438 | $ | 22,470 | --- | $ | 264,158 | $ | 175,000 | $ | 71,807 | $ | 24,093 | — | $ | 270,900 | ||||||||||||||||||||||
(1)Reflects the aggregate grant date fair value of 2,3753,303 restricted stock awards granted during fiscal year 2015,2016, computed in accordance with FASB ASC Topic 718. See Note 10,Shareholders’ Equity, to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2,December 31, 2016, for a discussion of the relevant assumptions used in calculating these amounts.
(2)Reflects the aggregate grant date fair value of 1,4952,247 stock option awards granted during fiscal year 2015,2016, computed in accordance with FASB ASC Topic 718. See Note 10,Shareholders’ Equity, to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2,December 31, 2016, for a discussion of the relevant assumptions used in calculating these amounts. As of January 2,December 31, 2016, the aggregate number of stock options outstanding held by those who served as non-employee directors during fiscal 20152016 was as follows: Mr. Alegre, 7,235;9,482; Mr. Gulis, 55,610;47,357; Mr. Harrison, 10,704; Dr. Kollat, 55,610;12,951; Ms. Lauderback, 55,610;47,357; Ms. Matas, 2,247; Ms. Nedorostek, 13,110;15,357;
Ms. O’Meara, 2,247; Mr. Peel 47,723;35,220; and Mr. Valette, 28,610.20,357.
(3)Under the 2010 Omnibus Incentive Plan, non-employee directors may elect to defer receipt of any shares of the company’s common stock under an Incentive Award granted to non-employee directors under the Plan. For fiscal 2015,2016, the following Directors have elected to defer receipt of their 20152016 Incentive Award: Mr. Gulis, 2,375 shares,3,303 shares; Mr. Harrison, 2,375 shares,3,303 shares; Ms. Lauderback, 2,375 shares3,303 shares; Ms. Matas, 2,642 shares; and Mr. Peel, 2,3753,303 shares.
(4)Mr. Harrison elected to receive a portion of his director fees Beginning in the form of common stock under the company’s 2010 Omnibus Incentive Plan, and to defer receipt of such shares. The number of shares paid is determined by dividing the amount of the director’s fees to be deferred by the fair market value per share of our common stock on the date the fees otherwise would have been payable in cash. The number of shares to be received by this director in lieu of cash compensation for fiscal 2015 is 552 shares.
(5)June 2016, Ms. NedorostekMatas elected to receive all director fees in the form of common stock under the company’s 2010 Omnibus Incentive Plan, and to defer receipt of such shares. The number of shares paid is determined by dividing the amount of the director’s fees to be deferred by the fair market value per share of our common stock on the date the fees otherwise would have been payable in cash. The number of shares to be received by this director in lieu of cash compensation for fiscal 20152016 is 2,715 shares.1,659 shares and the related grant date fair value was $37,500.
(6)(5) As of January 2,December 31, 2016, the aggregate number of shares outstanding under stock awards, including restricted stock, restricted stock units and phantom stock, held by those who served as non-employee directors during fiscal year 20152016 was as follows: Mr. Alegre, 2,3753,303 shares; Mr. Gulis, 61,16364,466 shares; Mr. Harrison, 14,918 shares; Dr. Kollat, 2,37518,221 shares; Ms. Lauderback, 11,41712,640 shares; Ms. Matas, 4,962 shares; Ms. Nedorostek, 14,46715,395 shares;
Ms. O’Meara, 3,303 shares; Mr. Peel, 7,88511,188 shares, and Mr. Valette, 2,3753,303 shares.
Annual Retainer. Effective asFor each of May 2015,the last two years, all of our non-employee directors are entitled to receivehave received an annual cash retainer of $75,000. The Chairs of each of the Committees of the Board receive additional compensation of $10,000 per year. No Committee members other than the Chair receive additional compensation for service on any Committee. The non-executive Chairman of the Board receives an additional retainer of $100,000 per year.
Meeting Fees. Non-employee directors are entitled to payment of meeting fees for Board and Committee meetings beyond the normal number of regular or typical meetings for the Board and each Committee in a fiscal year. Pursuant to this approval, non-employee directors (other than the Chairman of the Board) are entitled to (i) Board meeting fees of $1,000 per in-person meeting and $500 per telephonic meeting after a minimum of four Board meetings for the fiscal year, and (ii) Committee meeting fees of $750 per in-person Committee meeting and $500 per telephonic Committee meeting after a minimum of eight Audit Committee meetings and after a minimum of four meetings of each other Committee for the fiscal year.
Equity Compensation. Coincident with the annual meeting of shareholders, non-employee directors are eligible to receive equity compensation in amounts determined by the Management Development and Compensation Committee, of which generally 75 percent would be paid in the form of restricted stock and 25 percent in stock options, based on Black-Scholes valuation, with the grants to vest on the earlier of one year from the date of grant or the date of the next annual meeting at which directors are elected to the Board, so long as the director continues to serve on our Board of Directors. All options granted to directors have an exercise price equal to the fair market value of our common stock on the date of grant and remain exercisable for a period of up to 10 years, subject to earlier termination following retirement from the Board.
Reimbursement of Expenses. All of our directors are reimbursed for travel expenses for attending meetings of our Board or any Board committee and for attending director continuing education programs.
No Director Compensation for Employee Directors. Any director who is also an employee of our company does not receive additional compensation for service as a director.
ADVISORY VOTE ONTO APPROVE EXECUTIVE COMPENSATION (“Say-on-Pay”)
(Proposal 2)
Background
Consistent with the views expressed by shareholders at our 2011 Annual Meeting, the Board of Directors has determined to hold an advisory vote to approve executive compensation annually. Subject to the outcome of the advisory vote on the frequency of future advisory votes on executive compensation (see proposal 3), the company expects to continue to hold such votes annually.
This advisory resolution, commonly referred to as “say-on-pay”, is non-binding on the company and the Board of Directors. However, the Board and the Compensation Committee value the opinions of our shareholders and will carefully consider the outcome of the vote when making future compensation decisions. Our shareholders will have an opportunity to cast an advisory vote on the frequency of our say-on-pay vote at least every six years. The next advisory vote on the frequency of the say-on-pay vote will occur no later than our 2017 Annual Meeting of Shareholders.
As described more fully in the Compensation Discussion and Analysis section of this Proxy Statement, our compensation programs are structured to align the interests of our executive officers with the interests of our shareholders. They are designed to attract, retain, and motivate a talented management team to preserve its competitive advantage in the marketplace and deliver sustainable profitable growth. Shareholders are urged to read the CD&A, which discusses in-depth how our executive compensation programs are aligned with our performance and the creation of shareholder value.
Proposal
The Board of Directors recommends that shareholders vote “For” approval of the following non-binding advisory resolution at the 20162017 annual meeting:
RESOLVED, that the shareholders of Select Comfort Corporation approve, on an advisory basis, the compensation of the company’s named executive officers as described in the Compensation Discussion and Analysis, tabular disclosures and other executive compensation narrative provided in this Proxy Statement for the company’s 20162017 Annual Meeting of Shareholders.
Vote Required
The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote in person or by proxy on this matter at the Annual Meeting, and at least a majority of the minimum number of shares necessary for a quorum, is necessary for approval of the foregoing resolution. Unless a contrary choice is specified, proxies solicited by the Board of Directors will be voted “For” approval of the foregoing resolution.
ADVISORY VOTE TO APPROVE THE FREQUENCY OF
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
(Proposal 3)
Background
Pursuant to the Dodd-Frank Act, we are required to ask our shareholders to cast an advisory vote at least every six years as to whether future advisory votes on executive compensation, or “say-on-pay” votes, should occur every year, every two years or every three years.
We initially asked shareholders to cast an advisory vote to approve the frequency of say-on-pay votes at our 2011 annual meeting. At that time, approximately 64% of the votes cast by shareholders on the question were in favor of annual say-on-pay votes. Our Board determined to conduct annual say-on-pay votes and we have continued to do so.
The Board of Directors believes that it is in the best interests of our shareholders to continue to conduct annual say-on-pay votes for a number of reasons, including that annual votes (1) will enable shareholders to review and provide input on our executive compensation program every year, and (2) are consistent with our cycle for annual review of the principal elements of our executive compensation program.
Proposal
Shareholders have four choices on the proxy card for their preference for the frequency of future say-on-pay votes: every year, every two years, every three years, or abstain. Shareholders are not voting to approve or disapprove the Board’s recommendation. This advisory vote to approve the frequency of future advisory votes on executive compensation will not be binding on the company or the Board of Directors. However, the Board of Directors will take the outcome of the vote into account in determining the frequency of future advisory votes on executive compensation. Notwithstanding the Board’s recommendation, or the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on evolving trends in corporate governance, discussions with shareholders, changes in compensation programs or other considerations.
Board Recommendation
The Board of Directors recommends that shareholders vote for every year (annually) for the frequency of future advisory votes on executive compensation.
Vote Required
No particular vote is required to approve or disapprove this matter. The choice that receives the most votes of the shares of common stock present and entitled to vote in person or by proxy on this matter at the Annual Meeting will be considered the preference of the company’s shareholders. Unless a contrary choice is specified, proxies solicited by the Board of Directors will be voted for every year (annually) for the frequency of future advisory votes on executive compensation.
Equity Compensation Plan Information
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted average exercise price of outstanding options, warrants and rights(3) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)(4) | |||||||||
| Equity compensation plans approved by security holders | 2,835,148 | (2) | $ | 18.70 | 3,914,705 | |||||||
| Equity compensation plans not approved by security holders | None | Not applicable | None | |||||||||
| Total | 2,835,148 | $ | 18.70 | 3,914,705 | ||||||||
| Includes the Select Comfort Corporation 2004 Stock Incentive Plan and the Select Comfort Corporation 2010 Omnibus Incentive Plan. |
| (2) | This amount includes 511,461 restricted stock units, 779,054 performance-based stock units, 119,783 market-based stock units, and 70,530 phantom shares. Performance-based stock units for which the performance period has not yet been completed are shown at target. The actual number of shares to be issued under performance-based stock unit awards depends on company performance against goals. |
| (3) | The weighted average exercise price does not take into account the unvested restricted stock units, performance-based stock units, market-based stock units or phantom shares, which have no exercise price. |
| (4) | The number of shares of common stock available for issuance under the 2010 Plan is reduced by 1.15 shares for each share issued pursuant to a “full value” award or potentially issuable pursuant to a “full value” award, which are awards other than stock options or SARs that are settled by the issuance of shares of our common stock. |
The Audit Committee of the Board of Directors is responsible for providing independent, objective oversight with respect to our company’s accounting and financial reporting functions, internal and external audit functions, systems of internal controls regarding financial matters and legal, ethical and regulatory compliance. The Audit Committee operates under a written charter approved by the Board of Directors. A copy of the charter is available at the investor relations section of the company’s website athttp://www.sleepnumber.com/sn/en/investor-relations.
The Audit Committee is currently composed of five directors, each of whom is independent as defined by the National Association of Securities Dealers’NASDAQ listing standards. Throughout 2015, the Audit Committee includedstandards and SEC Rule 10A-3. Stephen L. Gulis, Jr. (Chair), Michael J. Harrison and Brenda Lauderback served on the Audit Committee throughout 2016 and through the date of this report. Kathleen L. Nedorostek and Jean-Michel Valette. Daniel I. AlegreValette served on the Audit Committee from the beginning of the year until2016 and through the annual meeting of shareholders in May of 2015. Brenda J. Lauderback was appointed to serve on2016. Barbara R. Matas and Vicki A. O’Meara joined the Audit Committee followingupon their appointment to the annual meetingBoard effective as of shareholders in MayApril 25, 2016 and have continued to serve through the date of 2015.this report.
Management is responsible for our company’s financial reporting processes and internal control over financial reporting. Deloitte & Touche LLP, our Independent Registered Public Accounting Firm, is responsible for auditing our company’s consolidated financial statements for the 20152016 fiscal year. This audit is to be conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Audit Committee’s responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee met in person or by telephone conference eightnine times during 2015.2016. These meetings involved representatives of management, internal audit and the independent auditors. At each of its regularly scheduled quarterly meetings, the Audit Committee meets in executive session and also meets in separate executive sessions with representatives of the Independent Registered Public Accounting Firm and with the executive who leads our internal audit function.
Management represented to the Audit Committee that our company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit Committee has reviewed and discussed the consolidated financial statements, together with the results of management’s assessment of the company’s internal control over financial reporting, with management and the Independent Registered Public Accounting Firm. The Audit Committee discussed with the Independent Registered Public Accounting Firm the matters required to be discussed with the auditors under Statement on Auditing Standards No. 1661 “Communication with Audit Committees” (Codification of Statements on Auditing Standards, AU 380)., as amended. The Independent Registered Public Accounting Firm provided the Audit Committee with written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board, and the Audit Committee discussed with the Independent Registered Public Accounting Firm that firm’s independence.
Based upon the Audit Committee’s discussions with management, internal audit and the Independent Registered Public Accounting Firm, and the Audit Committee’s review of the representations of management and the Independent Registered Public Accounting Firm, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our company’s Annual Report on Form 10-K for the year ended January 2,December 31, 2016, for filing with the Securities and Exchange Commission.
This Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
The Audit Committee of the Board of Directors
Stephen L. Gulis, Jr., Chair
Michael J. Harrison
Brenda J. Lauderback
Kathleen L. Nedorostek
Jean-Michel ValetteBarbara R. Matas
Vicki A. O’Meara
RATIFICATION OF SELECTION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 3)4)
Selection of Independent Registered Public Accounting Firm
The Audit Committee of our Board of Directors selected Deloitte & Touche LLP (“Deloitte”) as the company’s independent registered public accounting firm (“Independent Auditors”) for the 20162017 fiscal year ending December 31, 2016.30, 2017. Deloitte has served as our Independent Auditors since the 2010 fiscal year.
Although the Board is not required to submit the selection of Independent Auditors to shareholders for ratification, and the Board would not be bound by shareholder ratification or failure to ratify the selection, the Board wishes to submit the selection of Deloitte to serve as our Independent Auditors for the 20162017 fiscal year to our shareholders for ratification consistent with best practices in corporate governance.
If shareholders do not ratify the selection of Deloitte as our Independent Auditors, the Audit Committee will reconsider whether to retain Deloitte and may determine to retain that firm or another firm without resubmitting the matter to shareholders. Even if the selection of Deloitte is ratified by shareholders, the Audit Committee may, in its discretion, direct the appointment of a different firm of Independent Auditors at any time during the year if it determines that such a change would be in the best interests of the company and our shareholders.
Representatives of Deloitte will be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to questions from shareholders.
Audit and Other Fees
The aggregate fees billed for professional services by the Independent Auditors in 20152016 and 20142015 were:
| 2016 | 2015 | |||||||
| Audit fees(1) | $ | 554,000 | $ | 791,830 | ||||
| Audit-related fees(2) | 2,000 | 2,000 | ||||||
| Audit and audit-related fees | $ | 556,000 | $ | 793,830 | ||||
| Tax fees(3) | 124,119 | 182,788 | ||||||
| All other fees | — | — | ||||||
| Total | $ | 680,119 | $ | 976,618 | ||||
| 2015 | 2014 | |||||||
| Audit fees (1) | $ | 791,830 | $ | 432,933 | ||||
| Audit-related fees (2) | 2,000 | 2,000 | ||||||
| Audit and audit-related fees | $ | 793,830 | $ | 434,933 | ||||
| Tax fees (3) | 182,788 | 80,838 | ||||||
| All other fees | --- | --- | ||||||
| Total | $ | 976,618 | $ | 515,771 | ||||
| (1) | The 2015 |
| (2) | These fees related to access to an online accounting research tool. |
| (3) | These fees are primarily for tax compliance services based on time and materials. The 2015 |
Under the Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange Commission regarding auditor independence, the engagement of the company’s Independent Auditors to provide audit or non-audit services for the company must either be approved by the Audit Committee before the engagement or entered into pursuant to pre-approval policies and procedures established by the Audit Committee. Our Audit Committee has not established any pre-approval policies or procedures and therefore all audit or non-audit services performed for the company by the Independent Auditors must be approved in advance of the engagement by the Audit Committee. Under limited circumstances, certain de minimus non-audit services may be approved by the Audit Committee retroactively. All services provided to the company by the Independent Auditors in 20152016 were approved in advance of the engagement by the Audit Committee and no non-audit services were approved retroactively by the Audit Committee pursuant to the exception for certain de minimus services described above.
Board Recommendation
The Board recommends a vote “For” ratification of the selection of Deloitte as our Independent Auditors for the 20162017 fiscal year ending December 31, 2016.30, 2017. Unless a contrary choice is specified, proxies solicited by the Board will be voted “For” the ratification of the selection of Deloitte as Independent Auditors.
Vote Required
Assuming a quorum is present, the affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote in person or by proxy on this matter at the Annual Meeting is necessary for approval of this proposal. Unless a contrary choice is specified, proxies solicited by the Board of Directors will be voted “For” approval of this proposal.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and all persons who beneficially own more than 10% of the outstanding shares of our common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock. Executive officers, directors and greater than 10% beneficial owners are also required to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based upon a review of the copies of such reports furnished to us during the 20152016 fiscal year ended January 2,December 31, 2016 and written representations by such persons, all reports were filed on a timely basis.
Shareholder Proposals for 20172018 Annual Meeting
Any shareholder proposal requested to be included in the proxy materials for the 20172018 Annual Meeting of Shareholders must (i) be received by our Senior Vice President, General Counsel and Secretary on or before December 2, 20164, 2017 and (ii) satisfy all of the requirements of, and not otherwise be permitted to be excluded under, Rule 14a-8 promulgated by the SEC and our Bylaws.
Our Bylaws require advance written notice to our company of shareholder-proposed business or of a shareholder’s intention to make a nomination for director at an annual meeting of shareholders. They also limit the business which may be conducted at any special meeting of shareholders to business brought by the Board.
Specifically, the Bylaws provide that business may be brought before an annual meeting by a shareholder only if the shareholder provides written notice to the Secretary of our company not less than 120 days prior to the first anniversary of the date that we first released or mailed our proxy materials to shareholders in connection with the preceding year’s annual meeting. Under these provisions, notice of a shareholder proposal to be presented at the 20172018 Annual Meeting of Shareholders (but that is not requested to be included in the proxy materials) must be provided to the Secretary of our company on or before December 2, 2016.5, 2017. In the event, however, that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the preceding year’s annual meeting date, notice by the shareholder to be timely must be so delivered not later than the close of business on the later of the 120th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made.
A shareholder’s notice must set forth:
| A description of the proposed business and the reasons for it, |
| The name and address of the shareholder making the proposal, |
| The class and number of shares of common stock owned by the shareholder, and |
| A description of any material interest of the shareholder in the proposed business. |
Our Bylaws also provide that a shareholder may nominate a director at an annual meeting only after providing advance written notice to the Secretary of our company within the time limits described above. The shareholder’s notice must set forth all information about each nominee that would be required under SEC rules in a proxy statement soliciting proxies for the election of such nominee, as well as the nominee’s business and residence address. The notice must also set forth the name and record address of the shareholder making the nomination and the class and number of shares of common stock owned by that shareholder. The required procedures for a shareholder to nominate a director are described in more detail above under the heading “Corporate Governance – Director Nominations Process.”
Other Business
Management of our company does not intend to present other items of business and knows of no items of business that are likely to be brought before the Annual Meeting except those described in this Proxy Statement. However, if any other matters should properly come before the Annual Meeting, the persons named in the enclosed proxy will have discretionary authority to vote such proxy in accordance with the best judgment on such matters.
Copies of 20152016 Annual Report
We will furnish to our shareholders without charge a copy of our Annual Report on Form 10-K (without exhibits) for the 20152016 fiscal year ended January 2,December 31, 2016. Any request for an Annual Report should be sent to:
|
|
|
| Select Comfort Corporation |
|
| Investor Relations Department |
|
| 9800 59th Avenue North |
|
Plymouth, Minnesota 55442 |
Householding Information
“Householding” is a program, approved by the SEC, which allows companies and intermediaries (e.g. banks and brokers or other nominees) to satisfy the delivery requirements for proxy statements and annual reports by delivering only one package of shareholder proxy material to any household at which two or more shareholders reside. If you and other residents at your mailing address own shares of our common stock in a “street name,” your broker or bank may have notified you that your household will receive only one copy of our proxy materials. Once you have received notice from your broker that they will be “householding” materials to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. Any shareholder who is receiving multiple copies of these documents and would like to receive only one copy per household should contact the shareholder’s bank, broker or other nominee record holder. If you hold shares of our common stock in your own name as a holder of record, “householding” will not apply to your shares.
We will promptly deliver an additional copy of any of these documents to you if you call us at (763) 551-7498 or write us at the following address:
|
|
|
| Select Comfort Corporation |
|
| Investor Relations Department |
|
| 9800 59th Avenue North |
|
Plymouth, Minnesota 55442 |
Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote your shares of common stock “For” the Board’s nominees and “For” each of the other proposals before you at the Annual Meeting promptly by mail, telephone, or Internet as instructed on your proxy card.
| By Order of the Board of Directors | |
| |
| Mark A. Kimball | |
| Senior Vice President, | |
| Chief Legal and Risk Officer and Secretary | |
| April | |
| Plymouth, Minnesota |
SELECT COMFORT CORPORATION
9800 59TH AVENUE NORTH
PLYMOUTH, MN 55442
VOTE BY INTERNET
9800 59TH AVENUE NORTH
PLYMOUTH, MN 55442
VOTE BY INTERNET
Before The Meeting- Go towww.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting- Go towww.virtualshareholdermeeting.com/scss2016scss2017
You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
V.1.
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SELECT COMFORT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, May 17, 2017
8:30 a.m. Local Time
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Combined Document is available at www.proxyvote.com.
ANNUAL MEETING OF SHAREHOLDERS
Monday, May 16, 20161:30 p.m. Local Time
Millennium Minneapolis Hotel
1313 Nicollet Mall
Minneapolis, MN 55403
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Combined Document is available at www.proxyvote.com.
V.1. |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||