UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule
14a-101)
SCHEDULE 14A INFORMATION
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:
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Preliminary Proxy Statement
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Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under
§240.14a-12
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ACADIA HEALTHCARE COMPANY, INC.
(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):
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☒
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No fee required.
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Fee computed on table below per Exchange Act Rules
14a-6(i)(1)
and
0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount previously paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing party:
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(4)
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Date filed:
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6100 TOWER CIRCLE, SUITE 1000
FRANKLIN, TENNESSEE 37067
March 21, 2019
TO OUR STOCKHOLDERS:
You are cordially invited to attend the 2019 Annual Meeting of Stockholders (the Annual Meeting) of Acadia Healthcare Company,
Inc., to be held on Thursday, May 2, 2019, at 9:30 a.m. (Central Time), at our executive offices located at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067. The matters to be acted upon at the Annual Meeting are more fully described in
the accompanying Proxy Statement and related materials.
In accordance with rules adopted by the Securities and Exchange Commission, we
are mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of the Proxy Statement and our 2018 Annual Report to Stockholders. The Notice of Internet Availability of Proxy Materials contains
instructions on how stockholders can access the proxy documents over the internet as well as how stockholders can receive a paper copy of our proxy materials, including the Proxy Statement, the 2018 Annual Report to Stockholders and a form of proxy
card.
It is important that your shares be represented at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, please
vote by proxy as soon as possible by following the instructions located in the Notice of Internet Availability of Proxy Materials sent to you or in the Proxy Statement. If you attend the Annual Meeting, you may withdraw your proxy and vote your
shares personally.
We look forward to seeing you at the Annual Meeting.
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Sincerely,
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Debra K. Osteen
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Chief Executive Officer and Director
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YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD
AS PROMPTLY AS POSSIBLE.
6100 TOWER CIRCLE, SUITE 1000
FRANKLIN, TENNESSEE 37067
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 2, 2019
TO OUR
STOCKHOLDERS:
The 2019 Annual Meeting of Stockholders (the Annual Meeting) of Acadia Healthcare Company, Inc. will be held on
Thursday, May 2, 2019, at
9:30 a.m. (Central Time), at our executive offices located at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, for the following purposes:
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(1)
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To elect two nominees as Class II directors;
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(2)
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To approve, on a
non-binding
advisory basis, the compensation of our
named executive officers;
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(3)
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To approve, on a
non-binding
advisory basis, the frequency of a
non-binding
advisory vote on the compensation of our named executive officers;
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(4)
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm
for the fiscal year ending December 31, 2019;
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(5)
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To transact any other business that properly comes before the Annual Meeting or any adjournments or
postponements thereof.
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The matters to be acted upon at the Annual Meeting are more fully described in the Proxy
Statement and related materials. Please read the materials carefully.
The Board of Directors has fixed the close of business on
March 11, 2019 as the record date for determining stockholders entitled to notice of and to vote at the Annual Meeting or any adjournments or postponements thereof.
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Dated: March 21, 2019
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By order of the Board of Directors,
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Debra K. Osteen
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Chief Executive Officer and Director
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IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, TO ASSURE THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
TABLE OF CONTENTS
6100 TOWER CIRCLE, SUITE 1000
FRANKLIN, TENNESSEE 37067
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors (the Board or Board of
Directors) of Acadia Healthcare Company, Inc. (the Company) of proxies to be voted at the 2019 Annual Meeting of Stockholders (the Annual Meeting), to be held at our executive offices located at 6100 Tower Circle, Suite
1000, Franklin, Tennessee 37067, on Thursday, May 2, 2019, at
9:30 a.m. (Central Time), for the purposes set forth in the accompanying notice, and at any adjournments or postponements thereof. This Proxy Statement and the accompanying
proxy are first being mailed or made available to stockholders on or about March 21, 2019.
INFORMATION
CONCERNING SOLICITATION AND VOTING
Record Date
The close of business on March 11, 2019 has been fixed as the record date for the determination of stockholders entitled to vote at the
Annual Meeting. As of such date, we had 180,000,000 authorized shares of common stock, $0.01 par value per share (Common Stock), of which 88,446,348
shares were outstanding and entitled to vote, and
10,000,000
authorized shares of preferred stock, $0.01 par value per share, of which no shares were outstanding. Common Stock is our only outstanding class of voting stock. Each share of Common Stock will have one vote on each matter to be voted upon at
the Annual Meeting.
Quorum Requirements
A majority of the shares of Common Stock entitled to vote, represented in person or by proxy, is required to constitute a quorum. Abstentions
and broker
non-votes
will be counted for purposes of determining the presence of a quorum at the Annual Meeting. If a quorum is not present at the time of the Annual Meeting, the stockholders entitled to vote,
present in person or represented by proxy, shall have the power to adjourn the Annual Meeting until a quorum shall be present or represented by proxy. The Annual Meeting may be adjourned from time to time, whether or not a quorum is present, by the
affirmative vote of a majority of the votes present and entitled to be cast at the Annual Meeting.
Voting Procedures
Whether you hold shares directly as the stockholder of record or through a broker, trustee or other nominee, as the beneficial owner, you may
direct how your shares are voted without attending the Annual Meeting. If you hold shares in street name, you must vote by giving instructions to your broker or nominee. You should follow the voting instructions on any form that you receive from
your broker or nominee. The availability of telephone and Internet voting for shares held in street name will depend on your brokers or nominees voting process. Please refer to the instructions in the materials provided in the Notice of
Internet Availability of Proxy Materials or proxy card provided to you for information on the available voting methods.
If a proxy is
properly given prior to or at the Annual Meeting and not properly revoked, it will be voted in accordance with the instructions, if any, given by the stockholder. Subject to the requirements described below, if no instructions are given, each proxy
will be voted:
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FOR
the election as directors of the nominees described in this Proxy Statement;
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1
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FOR
the approval, on a
non-binding
advisory basis, of the
compensation of our executive officers named in the section below entitled EXECUTIVE COMPENSATION Summary Compensation Table (the Named Executive Officers);
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For a frequency of every year for future
non-binding
advisory votes on
the compensation of our Named Executive Officers;
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FOR
ratification of the appointment of Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2019; and
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In accordance with the recommendation of the Board on any other proposal that may properly come before the Annual
Meeting or any adjournment thereof.
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The persons named as proxies were selected by our Board of Directors.
Without your instructions, your broker or nominee is permitted to use its own discretion and vote your shares on certain routine matters (such
as Proposal 4), but is not permitted to use its discretion and vote your shares on
non-routine
matters (such as Proposals 1, 2 and 3). We urge you to give voting instructions to your broker or nominee on all
proposals. Shares that are not permitted to be voted by your broker or nominee are called broker
non-votes.
Broker
non-votes
are not considered votes for or
against a proposal and, therefore, will have no direct impact on any proposal. If you abstain from voting on Proposal 1, your abstention will have no effect on the outcome of the election. If you abstain from voting on Proposals 2, 3 or 4, your
abstention will have the same legal effect as a vote against these proposals.
Stockholders who give proxies have the right to revoke them
at any time before they are voted by delivering a written request to Christopher L. Howard, Esq., Executive Vice President, General Counsel and Secretary, at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, prior to the Annual Meeting or by
submitting another proxy at a later date. The giving of the proxy will not affect the right of a stockholder to attend the Annual Meeting and vote in person.
Miscellaneous
We will bear the cost of
printing, mailing and other expenses in connection with this solicitation of proxies and will also reimburse brokers and other persons holding shares of Common Stock in their names or in the names of nominees for their expenses in forwarding the
proxy materials to the beneficial owners of such shares. Certain of our directors, officers and employees may, without any additional compensation, solicit proxies in person or by telephone.
Our management is not aware of any matters other than those described in this Proxy Statement that may be presented for action at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is intended that the proxies will be voted with respect thereto in accordance with the judgment of the person or persons voting such proxies subject to the direction of our
Board of Directors.
2
PROPOSAL 1: ELECTION OF DIRECTORS
Introduction
Our Amended and Restated
Certificate of Incorporation, as amended (Certificate of Incorporation), provides that our Board of Directors shall be divided into three classes. All classes of directors have three-year terms. The terms of our Class II directors
expire at the Annual Meeting.
Our Board of Directors has nominated the individuals named below under the caption Class II
Nominees for election as directors to serve until the annual meeting of stockholders in 2022 and their successors have been elected and take office or until their earlier death, resignation or removal. Each nominee has consented to be a
candidate and to serve if elected. Proxies cannot be voted for a greater number of persons than the nominees named. In connection with the expiration of the current term of the Class II directors, we plan to reduce the size of the Board from
nine to eight members effective at the Annual Meeting.
Qualification of Directors
As described below, our Board of Directors is composed of individuals from differing backgrounds and experiences. We believe that each of our
directors possesses unique qualifications, skills and attributes that complement the performance of the full Board. The experience that each has obtained from his or her professional background, as set forth below, has qualified him or her to serve
on our Board of Directors.
Class II Nominees
The following table shows the names, ages and principal occupations of each of the nominees designated by our Board of Directors to become
directors and the year in which each nominee was first appointed or elected to the Board of Directors:
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Name
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Age
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Principal Occupation/Other Directorships
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Director
Since
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William F. Grieco
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65
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Since March 2018, Mr. Grieco has served as Vice President and Chief Compliance Officer of NX Development Corporation, the U.S. life sciences affiliate of Tokyo-based SBI Holdings, Inc. Also, since 2008, Mr. Grieco has
served as the Managing Director of Arcadia Strategies, LLC, a legal and business consulting organization servicing healthcare, science and technology companies. From 2003 to 2008, he served as Senior Vice President and General Counsel of American
Science and Engineering, Inc., an
x-ray
inspection technology company. From 2001 to 2002, he served as Senior Vice President and General Counsel of IDX Systems Corporation, a healthcare information technology
company. Previously, from 1995 to 1999, he was Senior Vice President and General Counsel for Fresenius Medical Care North America, a dialysis service and products company. Prior to that, Mr. Grieco was a partner in the Healthcare
Department at Choate, Hall & Stewart, a general service law firm. Mr. Grieco previously served on the board of directors of PHC, Inc. Our Board believes that Mr. Grieco is qualified to serve as a director because of, among other
things, his extensive knowledge of and experience in the healthcare industry and his general business and financial acumen.
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2011
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Reeve B. Waud
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55
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Since December 16, 2018, Mr. Waud has served as the Chairman of our Board. Mr. Waud previously served as the Lead Director of the Board from April 2012 to December 2018. Mr. Waud formed Waud Capital Partners,
L.L.C. (WCP) in 1993 and has served as the Managing Partner of WCP since that time. Prior to
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2005
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3
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Name
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Principal Occupation/Other Directorships
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Director
Since
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founding WCP, Mr. Waud was an investment professional at Golder, Thoma, Cressey, Rauner, Inc. (GTCR), a private equity investment group based in Chicago, Illinois. Before joining GTCR, Mr. Waud was in the
Corporate Finance Group of Salomon Brothers Inc and was a founding member of its Venture Capital Group. Mr. Waud is a trustee of St. Pauls School in Concord, New Hampshire and is a member of the executive committee and chairman of the
audit and finance committee of the John G. Shedd Aquarium. He is a member of the Northwestern Memorial HealthCare finance committee, a trustee of the Art Institute of Chicago and serves on the board of directors of The Economic Club of Chicago. In
addition, Mr. Waud is a member of the Illinois State Police Merit Board which has oversight responsibility for the Illinois State Police. Our Board believes that Mr. Waud is qualified to serve as a director because of, among other things,
his extensive knowledge of and experience in the healthcare industry and his general business and financial acumen. Mr. Waud was originally designated as a director by WCP.
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Required Vote
Our Certificate of Incorporation provides that, in an uncontested election, a nominee is elected if a majority of the votes cast by the holders
of the shares of Common Stock entitled to vote in the election at a meeting at which a quorum is present are cast in favor of such nominees election. In contested elections, directors are elected by a plurality of the votes cast. Our
Certificate of Incorporation does not provide for cumulative voting, and, accordingly, the stockholders do not have cumulative voting rights with respect to the election of directors. Consequently, each stockholder may cast one vote per share of
Common Stock held of record for each nominee. Abstentions and broker
non-votes
will have no effect on the outcome of the election. If a nominee becomes unavailable for election, shares covered by a proxy will
be voted for a substitute nominee selected by our Board of Directors.
The Board of Directors recommends that the stockholders vote FOR
each of the Class II nominees.
Continuing Directors
Each of the persons named below will continue to serve as a director until the annual meeting of stockholders in the year indicated and a
successor is elected and takes office or until his or her earlier death, resignation or removal. Stockholders are not voting on the election of the Class I directors or Class III directors. The following table shows the names, ages,
principal occupations and other directorships of each continuing director and the year in which each was first appointed or elected to our Board or that of our predecessor, Acadia Healthcare Company, LLC:
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Name
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Age
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Principal Occupation/Other Directorships
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Director
Since
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Class III
Term Expiring in 2020
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Christopher R. Gordon
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46
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Mr. Gordon has been a Managing Director of Bain Capital Private Equity, LP (BCPE) since 2009. Prior to joining BCPE, Mr. Gordon was a consultant at Bain & Company, Inc. Mr. Gordon currently serves
as a director of Aveanna Healthcare, LLC, Beacon Health Options, Cereval Therapeutics, Grupo Notre Dame Intermedica, Kestra Medical Technologies, Inc. and Waystar. Mr.
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2015
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4
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Name
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Principal Occupation/Other Directorships
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Director
Since
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Gordon also serves on the board of directors for Year Up Boston, the Boston Medical Center Foundation Board, and the Boston Medical Center Health Plan Board and serves as a Trustee of the Dana Farber Cancer Center. Our Board
believes that Mr. Gordon is qualified to serve as a director because of, among other things, his experience in the healthcare industry and his general business and financial acumen. Mr. Gordon provided notice of his intention to resign
from our Board effective May 28, 2019.
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Wade D. Miquelon
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54
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Mr. Miquelon is the Chief Executive Officer and President of
Jo-Ann
Stores, LLC
(Jo-Ann),
the nations leading fabric and craft
specialty retailer. Prior to that, he served as the Chief Financial Officer and Executive Vice President of
Jo-Ann.
Prior to joining
Jo-Ann,
he served as Chief Financial
Officer, Executive Vice President and President International for Walgreen Co. from June 2008 to August of 2014. From 2006 to 2008, he was Executive Vice President and Chief Financial Officer at Tyson Foods, Inc. Prior to that, Mr. Miquelon
served Procter and Gamble in a number of positions of increasing responsibility. Our Board believes that Mr. Miquelon is qualified to serve as a director because of, among other things, his extensive knowledge and background in public
accounting and finance.
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2012
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William M. Petrie, M.D.
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72
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Dr. Petrie is Professor of Clinical Psychiatry in the Department of Psychiatry at the Vanderbilt University School of Medicine, where he has served for more than 20 years. He is also Director, Vanderbilt Senior Assessment
Clinic in the Department of Psychiatry at the Vanderbilt University School of Medicine. Previously, Dr. Petrie served as President and
Co-Director
of Research at Psychiatric Consultants, P.C., a leading
psychiatry practice in Nashville, Tennessee, and Chairman, Department of Psychiatry, Parthenon Pavilion at Centennial Medical Center. Dr. Petrie served as a director for Psychiatric Solutions, Inc. (PSI), from September 2004 until
November 2010. Our Board believes that Dr. Petrie is qualified to serve as a director because of, among other things, his extensive healthcare experience, particularly in the psychiatric and behavioral healthcare fields.
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2012
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Class I
Term Expiring in 2021
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E. Perot Bissell
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Since 2016, Mr. Bissell has been a Managing Partner of Egis Capital Partners, LLC, a private equity firm that invests in the security and protection industries. Mr. Bissell served as the Chairman and Chief Executive
Officer of Next Generation Energy Logistics, LLC, an energy logistics development company, from 2013 to 2015. Before that, Mr. Bissell served as the Vice Chairman of Pilot Logistics Services, a provider of drilling and exploration support
services, from September 2012 until July 2013. From 2006 to 2012, he served as Chief Executive Officer for Maxum Petroleum, Inc., an independent energy logistics company. Prior to that, Mr. Bissell was a Partner of Northwest Capital
Appreciation, Inc., a merchant banking and private equity firm, and before that, the
Co-Managing
Partner and Chief Financial Officer of SLP Capital, a specialty finance company. Mr. Bissell also
serves on the board of directors of Cactus Energy, LLC and has served on a number of charitable boards. Our Board believes that Mr. Bissell is qualified to serve as a director because of, among other things, his extensive corporate finance
background and his general business and financial acumen.
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2013
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5
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Name
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Age
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Principal Occupation/Other Directorships
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Director
Since
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Vicky B. Gregg
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64
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Since November 2014, Ms. Gregg has served as
Co-Founder
and Partner of Guidon Partners, an investor and consultant for an array of privately held healthcare companies. She served as Chief
Executive Officer of BlueCross BlueShield of Tennessee from January 2003 through the end of 2012. Ms. Gregg currently serves on the board of directors of Quest Diagnostics Incorporated and Elara Caring, LLC. Our Board believes that
Ms. Gregg is qualified to serve as a director because of, among other things, her extensive healthcare background and her general business and financial acumen.
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2016
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Debra K. Osteen
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63
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Since December 16, 2018, Ms. Osteen has served as our Chief Executive Officer. Ms. Osteen has extensive experience in the behavioral health industry. Prior to joining the Company in 2018, she served as Senior Vice
President of United Health Services, Inc. (NYSE: UHS) since 2005 and President, Behavioral Health Division since 1999. Our Board believes that Ms. Osteen is qualified to serve as a director because of, among other things, her 35 years of
experience in the healthcare industry and her general business and financial acumen.
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2018
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6
PROPOSAL 2:
NON-BINDING
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank
Act) enables our stockholders to vote to approve, on a
non-binding
advisory basis, the compensation of our Named Executive Officers as described below in the sections entitled COMPENSATION
DISCUSSION AND ANALYSIS and EXECUTIVE COMPENSATION. Because your vote is advisory, it will not be binding on the Board of Directors or the Compensation Committee, override any decision made by the Board of Directors or the
Compensation Committee or create or imply any additional fiduciary duty of the Board of Directors or the Compensation Committee. The Compensation Committee will, however, review the voting results and take them into consideration when making future
decisions regarding executive compensation.
Our executive compensation program is vital to our ability to attract, motivate and retain a
highly experienced team of executives. We believe that the program is structured in a manner that supports our company and our business objectives.
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, we are asking our stockholders to indicate their
support for the compensation of our Named Executive Officers disclosed in this Proxy Statement. This proposal, commonly known as a
say-on-pay
proposal, gives
our stockholders the opportunity to express their views on the compensation of our Named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers
and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote FOR the following resolution at the Annual Meeting:
RESOLVED, that the Companys stockholders approve, on a
non-binding
advisory basis, the
compensation of the Named Executive Officers as disclosed in the Companys Proxy Statement for the 2019 annual meeting of stockholders pursuant to Item 402 of Regulation
S-K,
including the sections
entitled COMPENSATION DISCUSSION AND ANALYSIS and EXECUTIVE COMPENSATION.
Although the results of this advisory
vote are not binding on the Board of Directors or the Compensation Committee, the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation.
The Board of Directors recommends that stockholders vote FOR the resolution to approve, on a
non-binding
advisory basis, the compensation of our Named Executive Officers.
7
PROPOSAL 3:
NON-BINDING
ADVISORY VOTE ON THE FREQUENCY
OF THE VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act requires us to include, at least once every six years, a
non-binding
advisory vote
regarding the frequency of the
non-binding
advisory vote on executive compensation. In casting their advisory vote, stockholders may choose among four options:
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A vote every two years;
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A vote every three years; or
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To abstain from voting.
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The last time the Companys stockholders cast a frequency vote was at the 2013 annual meeting of stockholders. The stockholders voted in
favor of a frequency of every year. Based on these results and the reasons described below, the Board of Directors has determined that a
non-binding
advisory vote on executive compensation that occurs every
year is the most appropriate alternative for us at this time. The Board of Directors believes that an advisory vote every year will be the most effective timeframe for us to respond to stockholders feedback and provide us with sufficient time
to engage with stockholders to understand and respond to the vote results. Setting a
one-year
period will enhance stockholder communication by providing a clear, simple means for us to obtain information on
investor sentiment about our executive compensation philosophy.
Although this advisory vote is
non-binding,
the Board of Directors and the Compensation Committee will review the voting results and will respect the expressed desire of the Companys stockholders by implementing the option, if any,
that receives an affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter. If no option receives a majority, the Board will select
the annual option to be in effect until the next vote on the frequency of the vote on executive compensation.
The Board of Directors
recommends that stockholders vote for a frequency of every year for future
non-binding
stockholder advisory votes on the compensation of our Named Executive Officers.
8
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed Ernst & Young LLP as our independent registered public accounting firm
for the fiscal year ending December 31, 2019. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they desire and will be available to respond to
appropriate questions. Although ratification is not required by our Amended and Restated Bylaws, as amended (Bylaws), or otherwise, our Board of Directors is submitting the selection of Ernst & Young LLP to our stockholders for
ratification as a matter of good corporate practice.
Fees
The following table presents fees for professional services rendered by Ernst & Young LLP for the audit of our annual financial
statements for the years ended December 31, 2018 and 2017, and fees incurred for other services rendered by Ernst & Young LLP for such years:
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2018
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2017
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Audit Fees
(1)
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$
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4,238,924
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$
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4,247,839
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Audit-Related Fees
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Tax Fees
(2)
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870,843
|
|
|
|
2,749,039
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
5,109,767
|
|
|
$
|
6,996,878
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Primarily for the audit of our annual financial statements and the review of our quarterly financial
statements, and services provided in connection with acquisition due diligence.
|
(2)
|
Primarily for tax compliance services and other tax planning and tax advice services.
|
Pre-approval
of Auditor Services
The charter of the Audit Committee provides that the Audit Committee must
pre-approve
all auditing and
non-auditing
services to be provided by our auditor. In addition, the Audit Committee shall have the sole authority to approve any compensation to our auditor for any approved audit or
non-audit
services. For 2018, all services provided by Ernst & Young LLP were
pre-approved
by the Audit Committee. All
non-audit
services were reviewed by the Audit Committee, and the Audit Committee concluded that the provision of such services by Ernst & Young LLP was compatible with the maintenance of that
firms independence in the conduct of its auditing functions.
Required Vote
The affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting
and entitled to vote on the matter is needed to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. Under Delaware law, an abstention will have
the same legal effect as a vote against the ratification of Ernst & Young LLP, and broker
non-votes
will have no effect on the outcome of the ratification of the independent registered public
accounting firm. If the appointment is not ratified, the matter will be referred to the Audit Committee for further review.
The Audit
Committee and the Board of Directors recommend that the stockholders vote FOR ratification
of the appointment of Ernst &
Young LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2019.
9
CORPORATE GOVERNANCE
Independence of the Board of Directors
Our Board annually reviews the independence of all of our directors and affirmatively makes a determination as to the independence of each
director based on whether such director satisfies the definition of independent director as set forth in the applicable rules of The NASDAQ Stock Market. Our Board has determined that all of our directors are independent directors other
than Ms. Osteen and Mr. Jacobs.
Code of Conduct and Code of Ethics for Senior Financial Officers
Our Board of Directors has adopted a Code of Conduct which is applicable to all of our officers, employees and directors, including our Chief
Executive Officer, Chief Financial Officer, the principal accounting officer or controller and all persons performing similar functions (together, the Senior Financial Officers). In addition, our Board has adopted a Code of Ethics that
applies to the Senior Financial Officers. Both the Code of Conduct and the Code of Ethics are available on our website at
www.acadiahealthcare.com
under the webpage Investors Corporate Governance.
Committees of the Board of Directors
Our
Board of Directors has established three standing committees a Compensation Committee, an Audit Committee and a Nominating and Governance Committee, each of which is described below.
Compensation Committee
Our Board
of Directors has appointed a Compensation Committee to assist it with executive compensation matters. The primary responsibilities and duties of the Compensation Committee are:
|
|
|
Reviewing and approving for the Chief Executive Officer and other executive officers (a) the annual base
salary level, (b) bonus and other annual incentives, (c) equity compensation, (d) employment agreements, severance arrangements and change in control arrangements, and (e) any other benefits, compensation, compensation policies
or arrangements;
|
|
|
|
Reviewing and making recommendations to the Board regarding the compensation policy for such other officers as
directed by the Board;
|
|
|
|
Preparing a report to be included in the annual report or proxy statement that describes: (a) the criteria
on which compensation paid to the Chief Executive Officer for the last completed fiscal year is based; (b) the relationship of such compensation to our performance; and (c) the Compensation Committees executive compensation policies
applicable to executive officers; and
|
|
|
|
Overseeing the administration and approval of our current equity-based compensation plans and making
recommendations to our Board of Directors with respect to amendments to the plans, changes in the number of shares reserved for issuance thereunder and other equity-based compensation plans proposed for adoption.
|
The Compensation Committee is currently composed of Ms. Gregg, Messrs. Gordon and Miquelon and Dr. Petrie, with Mr. Miquelon
serving as Chairman. During 2018, the Compensation Committee held five meetings and took action by written consent two times. The Compensation Committee has a written charter that is available on our website at
www.acadiahealthcare.com
under
the webpage Investors Corporate Governance.
10
Audit Committee
Our Board of Directors has appointed an Audit Committee to assist it in fulfilling its oversight responsibilities for our financial reports,
systems of internal control over financial reporting and accounting policies, procedures and practices. The primary responsibilities and duties of the Audit Committee are:
|
|
|
Appointing, retaining, evaluating and, when appropriate, replacing our independent registered public accounting
firm, whose duty it is to audit our financial statements and our internal control over financial reporting for the fiscal year in which it is appointed;
|
|
|
|
Determining the compensation to be paid to our independent registered public accounting firm (subject to
ratification by our stockholders) and, in its sole discretion, approving all audit and engagement fees and terms and
pre-approve
all auditing and
non-auditing
services
of our independent registered public accounting firm;
|
|
|
|
Reviewing and discussing our system of internal control over financial reporting, audit procedures and the
adequacy and effectiveness of our disclosure controls and procedures with management, our independent registered public accounting firm and our internal auditors;
|
|
|
|
Reviewing the internal audit function of the Company, including the independence of its reporting obligations and
the adequacy of the internal audit budget and staffing;
|
|
|
|
Reviewing and discussing with management and our independent registered public accounting firm the audited
financial statements to be included in our Annual Report on Form
10-K,
the quarterly financial statements to be included in our Quarterly Reports on Form
10-Q,
our
disclosures under Managements Discussion and Analysis of Financial Condition and Results of Operations and the selection, application and disclosure of critical accounting policies used in our financial statements;
|
|
|
|
Reviewing and discussing with management the Companys major risk exposures with respect to the
Companys accounting and financial reporting policies and procedures;
|
|
|
|
Reviewing and discussing with management all existing related-party transactions and approving any proposed
related-party transactions to ensure that they are in our best interest;
|
|
|
|
Reviewing and discussing with management the quarterly earnings press releases and financial information and
earnings guidance provided to analysts and rating agencies;
|
|
|
|
Establishing and overseeing procedures for receiving, retaining and treating complaints received by the Company
regarding accounting, internal accounting controls or auditing matters; and
|
|
|
|
Reviewing and reassessing the performance of the Audit Committee and the adequacy of the Audit Committee charter
adopted by our Board of Directors and recommending proposed changes to the Board.
|
The Audit Committee is currently
composed of Messrs. Bissell, Gordon and Grieco, with Mr. Grieco serving as Chairman. Our Board of Directors has determined that each of Messrs. Bissell, Gordon and Grieco is an audit committee financial expert as defined in rules
promulgated by the SEC under the Exchange Act, and that each member of the Audit Committee meets the financial literacy requirements under the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) and rules and regulations of NASDAQ and
the SEC. Our Board has determined that each of Messrs. Bissell, Gordon and Grieco satisfies the independence requirements for audit committee members set forth in the applicable rules of The NASDAQ Stock Market. The Audit Committee held four
meetings during 2018. The Audit Committee has a written charter available on our website,
www.acadiahealthcare.com
under the webpage Investors Corporate Governance.
11
Nominating and Governance Committee
Our Board of Directors has appointed a Nominating and Governance Committee (the Nominating Committee) to assist it with director
nominations matters. The primary responsibilities and duties of the Nominating Committee are:
|
|
|
Identifying, recruiting and recommending individuals qualified to serve on the Board;
|
|
|
|
Reviewing the qualifications and performance of incumbent directors to determine whether to recommend them as
nominees for
re-election;
|
|
|
|
Reviewing and considering candidates who may be properly suggested by any director or executive office of the
Company, or by any stockholder of the Company;
|
|
|
|
Periodically reviewing the composition of the Board, including size of the Board and the minimum qualifications
for director nominees;
|
|
|
|
Reviewing the performance of members of the Board; and
|
|
|
|
Carrying out such other responsibilities delegated by the Board relating to the director nominations process and
procedures.
|
The Nominating Committee is currently composed of Ms. Gregg, Messrs. Bissell and Grieco and
Dr. Petrie, with Mr. Bissell serving as Chairman. During 2018, the Nominating Committee held two meetings. The Nominating Committee has a written charter available on our website,
www.acadiahealthcare.com
under the webpage
Investors Corporate Governance.
Meetings of our Board of Directors and Committees
During 2018, our Board of Directors held a total of sixteen meetings and took action by written consent one time.
Each director
attended 75% or more of the meetings of our Board and the committees of our Board of Directors on which such director served.
Nomination of
Directors
Nominations By the Nominating Committee
Directors may be nominated by our Nominating Committee, Board, executive officers or by our stockholders in accordance with our Bylaws,
Certificate of Incorporation, applicable laws and any guidelines developed by Nominating Committee or the Board. The Nominating Committee is responsible for identifying individuals qualified to become members of the Board and its committees, and
recommending candidates for the Boards selection as director nominees for election at the annual or other properly convened meeting of the stockholders in accordance with our Bylaws and applicable laws and regulations. The Nominating Committee
meets to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the Board. The Nominating Committee considers each identified candidates
qualifications, which include the nominees experience, business acumen, education, integrity, character, commitment, diligence, conflicts of interest and ability to exercise sound business judgment. While we have not established diversity
standards for nominees, as a matter of practice, we generally seek nominees with a broad diversity of experience, professions, skills and backgrounds. We do not currently pay a fee to any third party to identify or assist in identifying or
evaluating potential nominees.
12
Nominations By Our Stockholders
Our Bylaws govern stockholder nominations of directors. To make a director nomination at the 2020 annual meeting, a stockholder of record
entitled to vote at the annual meeting must deliver a written notice (containing certain information specified in our Bylaws as discussed below) to Christopher L. Howard, Esq., Executive Vice President, General Counsel and Secretary, at Acadia
Healthcare Company, Inc., 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067 between the close of business on January 3, 2020 and the close of business on February 2, 2020. If the date of the 2020 annual meeting is more than 30 days
before or more than 70 days after May 2, 2020, the stockholders notice must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the
90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Company. To make a director nomination to be voted on at a special meeting of stockholders called
for the purpose of electing directors, a stockholder of record entitled to vote in such election must deliver written notice to our secretary at the address above no earlier than the close of business on the 120th day prior to such special meeting
and no later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which we first publicly announce the date of the special meeting and the nominees proposed by the Board to be
elected at such meeting.
For a stockholder nomination to be deemed proper, the notice must contain certain information specified in our
Bylaws, including information as to the director nominee(s) proposed by the stockholder, the name and address of the stockholder, the class and number of shares of our capital stock beneficially owned by the stockholder, a description of all
arrangements or understandings between the stockholder and any other persons (including each proposed nominee(s) if applicable) in connection with the proposed nominations, and a representation that such stockholder intends to appear in person or by
proxy at the meeting to bring such business or nominate the person(s) named in the notice.
Majority Voting for Uncontested Director Elections;
Director Resignation Policy
In May 2017, amendments to our Certificate of Incorporation and Bylaws became effective that adopted a
majority voting standard for uncontested director elections. In contested elections, directors will continue to be elected by a plurality of the votes cast. The Board also adopted a Director Resignation Policy requiring a nominee for director to
submit a written offer of resignation to the Board in the event such nominee does not receive a majority of the votes cast in an uncontested election of directors. The Director Resignation Policy addresses the continuation in office of a
holdover director, so that an incumbent director who does not receive the requisite affirmative majority of the votes cast for his or her
re-election
must tender his or her resignation to the
Board. In the event a nominee submits a written officer of resignation to the Board, the Nominating and Governance Committee will promptly consider the directors offer of resignation and recommend to the Board whether to accept the resignation
or reject it. The Board will act on such recommendation within 90 days following receipt of the recommendation.
Communicating with the Board
All stockholder communications with our Board of Directors should be directed to Christopher L. Howard, Esq., Executive Vice President, General
Counsel and Secretary, at Acadia Healthcare Company, Inc., 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, and should prominently indicate on the outside of the envelope that it is intended for our Board of Directors or for an individual
director. Each communication intended for our Board of Directors and received by Mr. Howard will not be opened, but will be promptly forwarded unopened to the Chairman of the Audit Committee following its clearance through normal security
procedures.
Attendance by Members of the Board of Directors at the Annual Meeting of Stockholders
We encourage each member of our Board of Directors to attend the annual meeting of stockholders. For the 2018 annual meeting of stockholders,
each director
attended in person or participated by phone.
Board Leadership Structure
The Board of Directors does not have a formal policy on whether the roles of Chief Executive Officer and Chairman of the Board of Directors
should be separate. While historically these roles have been combined, the Company currently has separate individuals serve in those positions. Reeve B. Waud serves as the Chairman of the
13
Board and Debra K. Osteen serves as our Chief Executive Officer. Ms. Osteen is also a member of the Board. The Board of Directors has carefully considered its leadership structure and
believes at this time that the Company and its stockholders are best served by having the positions of Chairman of the Board and Chief Executive Officer filled by different individuals. This allows the Chief Executive Officer to, among other things,
focus on the Companys
day-to-day
business, while allowing the Chairman to lead the Board of Directors in its fundamental role of providing advice and oversight of
management. In addition, our independent directors bring experience, oversight and expertise from outside our Company and industry, while the Chief Executive Officer brings Company-specific experience and expertise. The Board of Directors recognizes
that depending on future circumstances, other leadership models may become more appropriate. Accordingly, the Board of Directors will continue to periodically review its leadership structure.
Risk Oversight
Our Board is responsible
for overseeing our risk management process. The Board fulfills its responsibility by delegating many of these functions to its committees. Under its charter, the Audit Committee is responsible for meeting periodically with management to review our
major financial risks and the steps management has taken to monitor and control such risks. The Audit Committee also oversees our financial reporting and internal controls and compliance programs.
The Board receives reports on risk management from our senior officers and from the Chairman of the Audit Committee. Also, our Executive Vice
President, General Counsel and Secretary provides a summary of our outstanding litigation and any governmental investigations to our Board at each Board meeting. Additionally, our Board regularly engages in discussions of the most significant risks
that we are facing and how these risks are being managed. Our Board of Directors believes that the work undertaken by the Audit Committee, together with the oversight provided by the full Board of Directors, enables the Board to oversee our risk
management function effectively.
Non-Management
Executive Sessions
We had seven independent directors in 2018. During 2018, there were seven executive sessions of the independent directors.
Compensation Committee Interlocks and Insider Participation
Since May 19, 2016, the Compensation Committee has consisted of Ms. Gregg, Messrs. Gordon and Miquelon and Dr. Petrie, none of
whom has at any time been one of our officers or employees. None of our executive officers serves, or in the past year served, as a member of the board of directors or compensation committee of any entity that has or had one or more of its executive
officers serving on our Board or Compensation Committee.
Policy on Reporting of Concerns Regarding Accounting Matters
The Audit Committee has adopted a policy on the reporting of concerns regarding accounting, internal accounting controls or auditing matters.
We have established a compliance hotline called ValuesLine
(800-500-0333),
which is administered by a third party, as a hotline for the receipt, retention and treatment
of complaints from employees or others regarding accounting, internal accounting controls and auditing matters. Information received through the hotline is conveyed directly to our Chief Compliance Officer. Complaints relating to accounting,
internal accounting controls or auditing matters will then be directed to the Chairman of the Audit Committee. Any complaint may be made anonymously if the claimant so desires, and all claimants will be provided confidentiality in the handling of
the complaint.
14
Procedure for Approval of Transactions with Related Persons
We have established policies and other procedures regarding approval of transactions between the Company and any employee, officer, director,
and certain of their family members and other related persons, including those required to be reported under Item 404 of Regulation
S-K
promulgated under the Securities Act of 1933, as amended (the
Securities Act). These policies and procedures are generally not in writing, but are evidenced by principles set forth in our Code of Conduct or adhered to by our Board. As set forth in the Audit Committee Charter, the Audit Committee
reviews and approves all related person transactions after reviewing such transaction for potential conflicts of interests and improprieties. Accordingly, all such related person transactions are submitted to the Audit Committee for ongoing review
and oversight. Generally speaking, we enter into related person transactions only on terms that we believe are at least as favorable to the Company as those that we could obtain from an unrelated third party. See the section below entitled
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS for additional information.
15
MANAGEMENT
Executive Officers
Below are the names
and ages (as of March 1, 2019) of our executive officers and a brief account of the business experience of the executive officers who are not members of our Board.
|
|
|
|
|
Name
|
|
Age
|
|
Title
|
Debra K. Osteen
|
|
63
|
|
Chief Executive Officer
|
Ronald M. Fincher
|
|
65
|
|
Chief Operating Officer
|
Brent Turner
|
|
53
|
|
President
|
Christopher L. Howard
|
|
52
|
|
Executive Vice President, General Counsel and Secretary
|
David M. Duckworth
|
|
39
|
|
Chief Financial Officer
|
The term of each executive officer runs until his or her successor is appointed and qualified, or until his or
her earlier death, resignation or removal.
Ronald M. Fincher
joined the Company in February 2011 and has served as our Chief
Operating Officer since that time. Previously, Mr. Fincher served as PSIs Chief Operating Officer from October 2008 to November 2010. As Chief Operating Officer of PSI, Mr. Fincher oversaw hospital operations for 95 facilities.
Mr. Fincher served as PSIs Division President from April 2003 to October 2008. As a Division President, Mr. Fincher was responsible for managing the operations of multiple inpatient behavioral healthcare facilities owned by
PSI. Prior to joining PSI, Mr. Fincher served as a Regional Vice President of Universal Health Services, Inc. from 2000 until 2003.
Brent Turner
joined the Company in February 2011 and served as
Co-President
from that time
until April 2012, when he was named President. Previously, Mr. Turner served as the Executive Vice President, Finance and Administration of PSI from August 2005 to November 2010 and as the Vice President, Treasurer and Investor Relations of PSI
from February 2003 to August 2005. From 2008 through 2010, Mr. Turner also served as a Division President of PSI overseeing facilities in Texas, Illinois and Minnesota. From 1996 until January 2001, Mr. Turner was employed by
Corrections Corporation of America, a prison operator, serving as Treasurer from 1998 to 2001. Mr. Turner serves on the board of directors of LHC Group, Inc. (NASDAQ: LHCG), Surgery Partners, Inc. (NASDAQ: SRGY), and the National Association of
Behavioral Health (NABH), where he served as Chairman in 2018 and 2009.
Christopher
L. Howard
joined the
Company in February 2011 and has served as our Executive Vice President, General Counsel and Secretary since that time. Before joining the Company, Mr. Howard served as PSIs Executive Vice President, General Counsel and Secretary from
September 2005 to November 2010. Prior to joining PSI, Mr. Howard was a partner at Waller Lansden Dortch & Davis, LLP, a law firm based in Nashville, Tennessee.
David M. Duckworth
joined the Company as our Controller in April 2011 and became Chief Accounting Officer in January 2012 and Chief
Financial Officer in July 2012. From May 2010 to April 2011, Mr. Duckworth served as Director of Finance at Emdeon Inc., a leading provider of revenue and payment cycle management and clinical information exchange solutions. Prior to joining
Emdeon, Mr. Duckworth was a Manager with Ernst & Young LLP, which he joined in 2002.
16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information with respect to ownership of our Common Stock as of March 11, 2019, by:
|
|
|
Each person who we know to be the beneficial owner of more than 5% of the outstanding shares of Common Stock;
|
|
|
|
Each of our directors and nominees;
|
|
|
|
Each of our Named Executive Officers; and
|
|
|
|
All of our directors and executive officers as a group.
|
To our knowledge, unless otherwise indicated, each stockholder listed below has sole voting and investment power with respect to the shares
beneficially owned. All computations are based on 88,446,348
shares of Common Stock outstanding on March 11, 2019, unless otherwise indicated.
|
|
|
|
|
|
|
|
|
Name of Beneficial
Owner
(1)
|
|
Amount and Nature of
Beneficial Ownership
(2)
|
|
|
Percent of
Class
|
|
T. Rowe Price Associates, Inc.
(3)
|
|
|
13,066,400
|
|
|
|
14.8
|
%
|
Wellington Management Group LLC
(4)
|
|
|
10,035,793
|
|
|
|
11.3
|
%
|
BlackRock, Inc.
(5)
|
|
|
8,016,872
|
|
|
|
9.1
|
%
|
The Vanguard Group
(6)
|
|
|
7,942,610
|
|
|
|
9.0
|
%
|
Aristotle Capital Management, LLC
(7)
|
|
|
7,078,871
|
|
|
|
8.0
|
%
|
Dimensional Fund Advisors LP
(8)
|
|
|
5,591,881
|
|
|
|
6.3
|
%
|
JPMorgan Chase & Co.
(9)
|
|
|
4,624,655
|
|
|
|
5.2
|
%
|
Debra K. Osteen
(10)
|
|
|
240,942
|
|
|
|
|
*
|
Brent
Turner
(11)
|
|
|
127,258
|
|
|
|
|
*
|
Ronald M. Fincher
(12)
|
|
|
94,407
|
|
|
|
|
*
|
Christopher L. Howard
(13)
|
|
|
184,442
|
|
|
|
|
*
|
David M. Duckworth
(14)
|
|
|
57,799
|
|
|
|
|
*
|
Reeve B. Waud
(15)
|
|
|
807,841
|
|
|
|
|
*
|
Joey A. Jacobs
(16)
|
|
|
593,831
|
|
|
|
|
*
|
E. Perot Bissell
(17)
|
|
|
17,575
|
|
|
|
|
*
|
Christopher R. Gordon
(17)
|
|
|
12,328
|
|
|
|
|
*
|
Vicky B. Gregg
(17)
|
|
|
10,717
|
|
|
|
|
*
|
William F. Grieco
(18)
|
|
|
66,406
|
|
|
|
|
*
|
Wade D. Miquelon
(17)
|
|
|
29,643
|
|
|
|
|
*
|
William M. Petrie, M.D.
(17)
|
|
|
21,364
|
|
|
|
|
*
|
All directors and executive officers as a group (13
persons)
(19)
|
|
|
2,264,553
|
|
|
|
2.6
|
%
|
(1)
|
Unless otherwise indicated, the address of each beneficial owner is c/o Acadia Healthcare Company, Inc., 6100
Tower Circle, Suite 1000, Franklin, Tennessee 37067.
|
(2)
|
Under SEC rules, the number of shares shown as beneficially owned includes shares of Common Stock subject to
options that currently are exercisable or will be exercisable within 60 days of March 11, 2019. Such shares are deemed to be outstanding for the purpose of computing the percent of class for that individual, but are not deemed
outstanding for the purpose of computing the percentage of any other person.
|
(3)
|
Information is based solely on the Schedule 13G/A filed by T. Rowe Price Associates, Inc. (Price
Associates) with the SEC on February 14, 2019. Price Associates reported that it possesses (i) sole voting power with respect to 3,607,485 shares, and (ii) sole dispositive power with respect to all of the shares. These
securities are owned by various individual and institutional investors for which Price Associates serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For the purposes of the reporting
requirements of the Exchange Act, Price Associates is deemed to be the beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. The address for Price Associates
is 100 E. Pratt Street, Baltimore, Maryland 21202.
|
17
(4)
|
Information is based solely on the Schedule 13G/A filed by Wellington Management Group LLP
(Wellington) with the SEC on February 12, 2010. Wellington reported that it possessed shared dispositive power with respect to all of the shares. The address for Wellington is 280 Congress Street, Boston, Massachusetts 02210.
|
(5)
|
Information is based solely on the Schedule 13G/A filed by BlackRock, Inc. (BlackRock) with the SEC
on February 4, 2018. BlackRock reported that it possessed (i) sole voting power with respect to 7,671,917 shares and (ii) sole dispositive power with respect to all of the shares. The address for BlackRock is 55 East 52nd Street, New
York, New York 10055.
|
(6)
|
Information is based solely on the Schedule 13G/A filed by The Vanguard Group (Vanguard) with the
SEC on February 11, 2019. Vanguard reported that it possessed (i) sole voting power with respect to 42,298 shares, (ii) sole dispositive power with respect to 7,900,449 shares, and (iii) shared dispositive power with respect to
42,161 shares. The address for Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
|
(7)
|
Information is based solely on the Schedule 13G filed by Aristotle Capital Management, LLC
(Aristotle) with the SEC on February 4, 2019. Aristotle reported that it possessed (i) sole voting power with respect to 3,480,504 shares and (ii) sole dispositive power with respect to all of the shares. The address for
Aristotle is 11100 Santa Monica Blvd., Suite 1700, Los Angeles, California 90025.
|
(8)
|
Information is based solely on the Schedule 13G/A filed by Dimensional Fund Advisors LP
(Dimensional) with the SEC on February 8, 2019. Dimensional reported that it possessed (i) sole voting power with respect to 5,434,730 shares and (ii) sole dispositive power with respect to all of the shares. The address
for Dimensional is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
|
(9)
|
Information is based solely on the Schedule 13G/A filed by JPMorgan Chase & Co. (JPMorgan)
with the SEC on January 16, 2019. JPMorgan reported that it possessed (i) sole voting power with respect to 4,230,061 shares, (ii) sole dispositive power with respect to 4,622,391 shares, and (iii) shared dispositive power with
respect to 964 shares. The address for JPMorgan is 270 Park Avenue, New York, New York 10017.
|
(10)
|
Includes 240,942 shares of restricted stock. The shares of restricted stock held by Ms. Osteen will be
reduced by a number of shares (valued at the effective date of her employment) equal to any amounts received by Ms. Osteen in respect of stock options issued by her former employer and held by her on December 12, 2018.
|
(11)
|
Includes 14,549 shares of restricted stock and options to purchase 30,032 shares of Common Stock.
|
(12)
|
Includes 3,712 shares held by the Ras W. Fincher II Trust u/a/d 9/13/11, 3,711 shares held by the Morgan M.
Fincher Trust u/a/d 9/13/11, 3,712 shares held by the Cody C. Fincher Trust u/a/d 9/13/11, 15,761 shares of restricted stock and options to purchase 7,159 shares of Common Stock.
|
(13)
|
Includes 51,578 shares held by the Christopher L. Howard Family 2017 Grantor Retained Annuity Trust, 51,578
shares held by the Angie Parrott Howard Family 2017 Grantor Retained Annuity Trust, 8,422 shares held by Mr. Howards wife, 12,554 shares of restricted stock and options to purchase 22,103 shares of Common Stock.
|
(14)
|
Includes 10,764 shares of restricted stock and options to purchase 22,677 shares of Common Stock.
|
(15)
|
Includes 7,575 shares of restricted stock. The 807,841 shares of Common Stock are owned of record as follows:
(i) 355,912 shares by the Halcyon Exempt Family Trust (the Halcyon Trust); (ii) 33,333 shares by Melissa W. Waud, Mr. Wauds wife; (iii) 37,493 shares by Waud Capital Partners, L.L.C; (iv) 183,445 shares by the Reeve B.
Waud Jr. 2012 Family Trust (the 2012 RBW Jr Family Trust); (v) 183,445 shares by the Cecily R.M. Waud 2012 Family Trust (the 2012 CRMW Family Trust) and (vi) 14,213 shares directly held by Mr. Waud.
|
18
Mr. Waud may be deemed to beneficially own the shares of Common Stock reported herein by
virtue of (A) his being the investment advisor of the Halcyon Trust of which Mr. Wauds children are beneficiaries, (B) his being married to Ms. Waud, (C) his being the sole manager of WCP LLC, and (D) his being
the investment advisor of the 2012 RBW Jr Family Trust and the 2012 CRMW Family Trust of which Mr. Wauds grandchildren are beneficiaries.
(16)
|
Includes 133,825 shares held by the Jeremy Brent Jacobs GST
Non-Exempt
Trust u/a/d 04/26/2011, 133,824 shares held by the Scott Douglas Jacobs GST
Non-Exempt
Trust u/a/d 04/26/2011, 69,001 shares of restricted stock and options to purchase 59,794 shares of Common Stock.
|
(17)
|
Includes 7,575 shares of restricted stock.
|
(18)
|
Includes 7,575
shares of restricted stock and options to purchase 10,000 shares of Common Stock.
|
(19)
|
Includes
418,954 shares of restricted stock and options to purchase 151,765
shares of Common
Stock.
|
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of our Common
Stock to file with the SEC initial reports of ownership and reports of changes in ownership of our Common Stock. These officers, directors and greater than 10% stockholders are required by SEC rules to furnish us with copies of all
Section 16(a) reports they file. There are specific due dates for these reports and we are required to report in this Proxy Statement any failure to file reports in a timely manner as required during 2018. Based upon a review of these filings
and written representations from our directors and executive officers, we believe that all reports required to be filed with the SEC pursuant to Section 16(a) during 2018 were filed in a timely manner except:
|
|
|
Each of
Joey A. Jacobs, Brent Turner, Ronald M. Fincher, David M. Duckworth and Christopher L. Howard
filed a report on Form 4 on March 7, 2018 with respect to an award of restricted stock on March 2, 2018; and
|
|
|
|
Joey A. Jacobs filed a Form 5 report on February 13, 2019 with respect to the disposition of Common Stock on
December 16, 2018.
|
19
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides a detailed description of our executive compensation philosophy and programs, the
compensation arrangements that we have with our Named Executive Officers, and the alignment of our executive compensation programs with Company performance.
Table of Contents
Named Executive Officers
Our Named Executive Officers for 2018 were:
|
|
|
Name
|
|
Title
|
Debra K. Osteen
|
|
Chief Executive Officer and Director
|
Ronald M. Fincher
|
|
Chief Operating Officer
|
Brent Turner
|
|
President
|
Christopher L. Howard
|
|
Executive Vice President, General Counsel and Secretary
|
David M. Duckworth
|
|
Chief Financial Officer
|
Joey A. Jacobs
|
|
Director (Former Chief Executive Officer and Chairman of the Board)
|
Executive Summary
Acadia is the leading publicly traded pure-play provider of behavioral healthcare services, with operations in the United States and the United
Kingdom. Our business strategy is to acquire and develop behavioral healthcare facilities and improve our operating results within our facilities and our other behavioral healthcare operations. We strive to improve the operating results of our
facilities by providing quality patient care, expanding referral networks and marketing initiatives while meeting the increased demand for behavioral healthcare services through expansion of our current locations as well as developing new services
within existing locations. The Company grew rapidly between becoming a publicly-traded company in late 2011 and 2016, completing several significant acquisitions during that period. Since acquiring Priory Group No. 1 Limited in early 2016,
acquisition activity has slowed considerably compared to prior years, while organic growth through bed additions and development has continued. The Company experienced various business challenges beginning in 2017 and continuing through 2018,
including challenges with its United Kingdom operations relating to, among other things, a lower census than expected and higher labor expense resulting from staffing shortages
Acadia has a history of motivating leaders through the use of performance-based pay with challenging annual and long-term incentives and a
record of good alignment with stockholders interests as a result of incentive designs and executive equity ownership. As described in greater detail below, our executive compensation program seeks to:
|
(i)
|
attract and retain superior executives by providing the opportunity to earn competitive compensation packages,
|
|
(ii)
|
align the pay of our executive officers with Company performance, and
|
20
|
(iii)
|
recognize and reward senior managements individual and collective efforts relating to the financial
performance of the Company and creation of stockholder value.
|
Despite various challenges and external headwinds, the
Company produced solid operating results in 2018 as described below.
Nonetheless, the Companys performance fell short of target goals set for management in early 2018 and, accordingly, executives did not realize the full potential of
the Companys annual and long-term incentive compensation opportunities for 2018. Further, the realizable value (as defined below) of outstanding equity awards held by our executives decreased consistent with the decline in our stock price. We
believe that the compensation of our executive officers was well aligned with our financial and operating performance, and the returns experienced by our stockholders, and reflected the challenging year. We remain committed to providing quality
patient care at our facilities and supporting our long-term strategic objectives. We believe that the Company is well positioned to address the challenges facing it and to grow through future acquisitions and same-facility growth, both of which will
contribute to additional stockholder value creation in the future.
Following the
say-on-pay
vote at our 2017 Annual Meeting of Stockholders and extensive review and discussions with our independent compensation consultant, Pay Governance LLC (Pay Governance), about our
executive compensation program and that of our peer companies, we initiated several changes to our executive compensation program aimed at further aligning our executive compensation program with long-term stockholder interests. Those changes are
reflected in the executive compensation programs implemented in 2018 as described below.
On December 16, 2018, the Company
announced a leadership transition whereby Debra K. Osteen became the Companys Chief Executive Officer and a member of the Board, and Reeve B. Waud became the Chairman of the Board, separating the roles of Chief Executive Officer and Chairman
of the Board. Joey A. Jacobs was removed from his positions as the Chief Executive Officer and Chairman of the Board. In connection with this transition, Ms. Osteen received a compensation package as described below in Chief Executive
Officer Transition - Ms. Osteens Compensation Arrangements and Mr. Jacobs received the compensation described below in Chief Executive Officer Transition - Mr. Jacobs Payments Upon Termination.
Summary of 2018 Company Performance
Results for 2018 include:
|
|
|
Revenue for 2018 remained strong at $3,012.4 million. For purposes of our 2018 equity and
non-equity
incentive awards, our target level revenue was $3,060.0
million.
|
|
|
|
Adjusted EPS (as defined below) for purposes of our compensation plans was $2.39 for 2018 compared with $2.41 for
2017, on a 0.4% increase in weighted average basic shares outstanding. For purposes of our 2018 equity and
non-equity
incentive awards, our target level Adjusted EPS was $2.45.
|
|
|
|
Adjusted EBITDA (as defined below) for purposes of our compensation plans was approximately $597.2 million
for 2018 compared with approximately $602.1 million for 2017. For purposes of our 2018 equity and
non-equity
incentive awards, our target level Adjusted EBITDA was $640.5 million.
|
|
|
|
We added over 650 beds to our operations through organic growth, including approximately 500 beds added at
existing facilities during 2018 (and over 150 beds at two de novo facilities), ending the year with over 18,100 beds in 583 facilities in 40 states, the United Kingdom and Puerto Rico.
|
|
|
|
Our
one-year
total stockholder return (TSR) for 2018 was
approximately (21)%. Our five-year TSR for 2014 through 2018 was approximately (46)%. However, our TSR
year-to-date
through March 1, 2019 has increased to
approximately 18%.
|
A reconciliation of
non-GAAP
financial measures can be found
beginning on page 59 of this Proxy Statement.
21
Pay for Performance
Compensation paid to executive officers for 2018 reflects the alignment of pay with the Companys performance, as more fully described in
this Compensation Discussion and Analysis:
|
|
|
Below Target Payment of 2018
Non-Equity
Incentive Compensation.
The Adjusted EBITDA, Adjusted EPS and revenue measures set forth in our
non-equity
incentive compensation plan for 2018 were achieved at 93.2%, 97.6% and 98.4% of target, respectively, resulting in the
payment of below-target cash bonuses to our Named Executive Officers as described below in the section entitled Components of Executive Compensation Annual
Non-Equity
Incentive Compensation.
|
|
|
|
Below Target Vesting of 2018 Equity Awards.
Based on actual 2018 Adjusted EPS performance in relation to
targets, the first tranche of the performance vesting restricted stock units granted in 2018 were earned below target levels. As further described in the section below entitled Components of Executive Compensation
Equity-Based
Compensation, approximately 83.8% of the first tranche of both the 2018 restricted stock unit annual award and 2018 restricted stock unit transition award was earned, subject to the three-year TSR modifier, and performance vesting restricted
stock units issued in 2017 and 2016 did not vest and were forfeited.
|
|
|
|
Reduction in Realizable Value of Outstanding Equity Awards.
Given the trading price of our common stock,
the realizable value of prior-year equity awards was significantly below the granted opportunity as of the end of 2018. For example, realizable value as of December 31, 2018 of equity awards granted to our Chief Executive Officer
(Mr. Jacobs for purposes of this analysis) during the past three fiscal years represents approximately 34% of the originally granted target opportunity. See the section below entitled Assessment of Realizable Pay and
Performance.
|
Stockholder Approval of Executive Compensation on an Advisory Basis
At our 2018 Annual Meeting of Stockholders in May 2018, we held an advisory vote to approve the compensation of our Named Executive Officers as
disclosed in our Proxy Statement dated March 23, 2018 related to the annual meeting. Stockholders of the Company expressed strong support for the compensation of our Named Executive Officers, with approximately 97% of the votes cast supporting
the Companys executive compensation. Given the strong support of the stockholders and the significant changes implemented in the 2018, the Compensation Committees approach to compensation programs for 2019 has remained relatively
consistent with 2018.
Executive Compensation Highlights
Following the
say-on-pay
vote at our 2017 Annual Meeting of
Stockholders and extensive review and discussions with our independent compensation consultant, Pay Governance LLC (Pay Governance), about our executive compensation program and that of our peer companies, our executive compensation
program included the following features for 2018:
|
|
|
No Salary Increase for our Chief Executive Officer
Modest 2% raises to the base salary of each of
our applicable Named Executive Officers for 2018, except for Mr. Jacobs whose base salary did not increase for 2018;
|
|
|
|
Re-affirm
our Approach of Allocating the Majority of Equity Value to
Performance-Based Awards
75% of overall long-term incentive value for each Named Executive Officer is delivered as performance vesting restricted stock units and 25% as time-vesting restricted stock awards.
|
|
|
|
Introduction of Relative TSR to Performance-Based Equity Incentive Awards
Adopted an additional
performance metric under performance vesting restricted stock unit awards, in the form of a modifier based on our three-year TSR relative to the companies listed in the S&P Composite 1500 Index within the GICS Healthcare Providers and Services
Industry Group, plus Brookdale Senior Living Inc. and Civitas Solutions, Inc. (collectively, the TSR Peer Group);
|
22
|
|
|
Three-Year Performance Period for Restricted Stock Units
The performance-based restricted stock
units will vest only after the three-year performance period and only if the Company meets or exceeds established Adjusted EPS goals, with shares earned based on Adjusted EPS performance to be adjusted up or down based on our three-year TSR relative
to the TSR Peer Group.
|
|
|
|
Introduction of Revenue as Component of Annual
Non-Equity
Incentive
Awards
Revenue added as a financial measure for determining annual cash incentive awards, strengthening our focus on continued strong growth and reducing the weight of Adjusted EPS in the calculation. The Compensation Committee reviewed
the relationship between performance in each of our three primary incentive plan metrics (revenue, Adjusted EPS and Adjusted EBITDA) and long-term stockholder value creation and found each to be strongly correlated to long-term stockholder value.
|
|
|
|
Reductions in our Chief Executive Officers 2018 Long-Term Incentive Opportunity
In addition
to the performance award design changes described above, we reduced Mr. Jacobs 2018 target long-term incentive award value by $500,000, or 7%, when compared to his 2017 target award.
|
The Compensation Committee approved the following annual compensation package for Ms. Osteen for 2019, separate from her initial stock
grant in February 2019 and any retention bonus to be paid in 2019:
|
(i)
|
base salary of $900,000,
|
|
(ii)
|
non-equity
incentive award with threshold, target and maximum award
levels at 50%, 100% and 200%, respectively,
|
|
(iii)
|
equity incentive awards consisting of a grant of performance vesting restricted stock units and shares of time
vesting restricted stock, with a target value of at least $3.2 million, and
|
|
(iv)
|
insurance, health and welfare benefits generally applicable to our Named Executive Officers.
|
See Components of Executive Compensation Annual
Non-Equity
Incentive Compensation and Components of Executive Compensation Equity-Based Compensation for more information about awards of
non-equity
and equity compensation. See EXECUTIVE
COMPENSATION Summary Compensation Table for more information about the compensation paid to our Named Executive Officers.
Assessment of Realizable Pay and Performance
The Compensation Committee believes that the best way to drive stockholder value
creation is to design compensation programs that motivate management and reward success by aligning executive rewards with stockholders and limiting realizable compensation when stockholder value declines and/or goals are not achieved. Acadias
performance-based executive compensation program historically has resulted in strong alignment between realizable pay and company performance.
In assessing pay and performance, the Companys independent compensation consultant, Pay Governance, analyzed the realizable pay of our
former Chief Executive Officer in relation to originally granted opportunity and to the Companys performance as defined by TSR. Unlike the results reported in the Summary Compensation Table in EXECUTIVE COMPENSATION, realizable pay
looks at the pay an executive earned or could have earned for a period based on the actual financial performance against the Companys incentive goals and the share price performance that drove those results. The Compensation Committee believes
that realizable pay is a better gauge for assessing pay and performance alignment than the data found in the Summary Compensation Table.
For purposes of this review, realizable pay includes the actual rewards Mr. Jacobs
earned from 2016 to 2018 including base
salaries received, actual
non-equity
compensation earned, current value (as opposed to grant date or accounting value used in the Summary Compensation Table) of time-based restricted stock awards granted
during the period, and current value of shares earned or estimated to be earned from performance vesting restricted stock unit awards granted in the three-year period, but excluding any amounts payable to him related to his termination as an
employee of the Company in December 2018. Outstanding equity awards are valued using the Companys stock price as of December 31, 2018, the last trading day of the year.
23
Pay Governance compared, and our Compensation Committee reviewed, Mr. Jacobs
realizable compensation to granted pay opportunity at target and to company performance, including performance relative to our compensation peers and found alignment between realizable pay and TSR performance. As shown in the graphs below, the
Companys pay program has produced realizable pay levels that are directionally and reasonably aligned with the Companys performance. From 2016 through 2018, we granted Mr. Jacobs approximately $28.3 million in total direct
compensation (TDC) opportunity, yet his realizable pay for such compensation as of the end of 2018 was only approximately $13.5 million (48% of the granted opportunity). The significant driver was long-term incentive awards, with
$7.0 million realizable by Mr. Jacobs compared to $20.7 million of granted opportunity. This compares to the Companys three-year TSR of (26)% from 2016 to 2018. Peer median TSR over the same three-year period was 7%.
For purpose of the graph, TDC is comprised of (1) actual base salary, (2) annual
non-equity
incentive awards (target for granted opportunity; actual for realizable pay), and (3) long-term equity incentive awards (at grant date fair value for granted opportunity; at current values based on
year-end
stock price for realizable pay). To facilitate this comparison, we have calculated these amounts without regard to vesting requirements.
Compensation Process and Philosophy
The Compensation Committee is responsible for discharging our Board of Directors responsibilities relating to the oversight,
administration and approval of our compensation plans, policies and programs for our executive officers and directors. The primary responsibilities and duties of the Compensation Committee are described above in the section entitled CORPORATE
GOVERNANCE Committees of the Board of Directors Compensation Committee.
Our executive compensation program seeks to:
|
|
|
Link the interests of management with those of our stockholders by encouraging stock ownership and aligning
performance equity awards with stockholder returns;
|
|
|
|
Attract and retain superior executives by providing them with the opportunity to earn total compensation packages
that are competitive within the healthcare industry;
|
|
|
|
Recognize and reward senior managements individual and collective efforts relating to the financial
performance of the Company and creation of stockholder value through salary, annual cash incentives and long-term stock-based incentives; and
|
|
|
|
Manage compensation based on the individuals level of skill, knowledge, effort and responsibility.
|
24
The Compensation Committee believes that the compensation of our executive officers should
provide a competitive level of total compensation necessary to attract and retain talented and experienced executives, and motivate them to contribute to our success. The Compensation Committee has a
pay-for-performance
philosophy that works to align the interests of management with the interests of stockholders through the use of incentive compensation and an approach that puts a majority of the
compensation of our Named Executive Officers at risk if the Company does not perform.
Our Compensation Committee reviews and approves, in
advance, employment and similar arrangements or payments to be made to any executive officer. Historically, Mr. Jacobs provided the Compensation Committee with input regarding the performance of and compensation recommendations for other
executive officers based on his direct knowledge of their contributions during the year. Our Chief Executive Officer does not play any role with respect to the deliberations and determinations about his or her own compensation. Our Chief Executive
Officer considers internal pay equity issues, individual contribution and performance, competitive pressures and our financial performance in making his or her recommendations to the Compensation Committee.
Our Compensation Committee believes that our executive compensation program should be internally consistent and equitable in order to achieve
our compensation goals. The Compensation Committee relies on its collective judgment together with the information provided to it by management, the analyses and goals described above and the recommendations of our Chief Executive Officer. The
Compensation Committee also considers the qualifications, length of service, experience, consistency of performance, position, responsibilities, individual performance and available competitive alternatives of our executives, their existing
compensation and our financial resources, performance and prospects in determining appropriate levels of compensation for our executives.
Executive
Compensation Practices
Highlighted below are some of the key elements of our compensation program that the Compensation Committee
believes evidence strong corporate governance and alignment of our executive compensation with long-term stockholder interests.
What
We Do
|
✓
|
Vast majority of pay is performance-based and not guaranteed
|
|
✓
|
Engage stockholders and seek feedback on our executive compensation program
|
|
✓
|
Apply stringent share ownership and share retention policies
|
|
✓
|
Use of peer market data for benchmarking and calibration
|
|
✓
|
Consult with an independent compensation consultant
|
|
✓
|
Prohibit hedging and short sales by officers and directors
|
|
✓
|
Prohibit officers and directors from pledging Company stock or holding Company stock in a margin account
|
|
✓
|
Utilize double trigger severance agreements upon a change in control
|
|
✓
|
Include clawback provisions in our key compensation programs
|
|
✓
|
Conduct an annual
risk assessment of our compensation program
|
|
✓
|
Separate Chief Executive Officer and Chairman of the Board (as of December 2018)
|
What We Dont Do
|
X
|
No supplemental executive retirement plans
|
|
X
|
No stock option repricing or exchanges without stockholder approval
|
|
X
|
No single trigger vesting of equity or cash severance payments upon a change in control
|
|
X
|
No excessive perquisites
|
|
X
|
No tax
gross-ups
related to change in control or otherwise
|
25
Role of Compensation Consultant
Following the
say-on-pay
vote at our Annual Meeting of
Stockholders in May 2017, our Compensation Committee interviewed various compensation consultants and retained Pay Governance to evaluate the Companys executive compensation program and advise it regarding potential changes for 2018. Pay
Governance supported the Compensation Committee in its review of pay programs and practices in light of the 2017
say-on-pay
vote and within the context of continuing and
improving the alignment of executive pay with stockholders. The Compensation Committee used this information to make compensation decisions for 2018 and to implement the changes described herein. The Compensation Committee has retained Pay
Governance to advise it with respect to 2019.
Our Compensation Committee has considered the relationships that Pay Governance has had
with the Company, the members of the Compensation Committee and our executive officers, and has taken into account the factors required by NASDAQ to be considered when assessing a consultants independence. After considering such relationships
and factors, the Compensation Committee determined that the work of Pay Governance in 2017 and 2018 did not raise any conflicts of interest. Outside of their direct engagement by the Compensation Committee as independent compensation consultants to
the Compensation Committee with respect to executive compensation matters, Pay Governance has not provided other services to the Company in 2017 or 2018.
Peer Group Comparison
In late
2017, for purposes of reviewing 2017 compensation and setting 2018 compensation for our executive officers and in determining to make the changes for 2018 described herein, Pay Governance assisted the Compensation Committee in establishing a peer
group of publicly-traded healthcare companies generally similarly sized and with similar service offerings to us
(the 2018 Peer Group). The 2018 Peer Group consisted of the following companies:
|
|
|
Amedisys, Inc.
|
|
LifePoint Health,
Inc.
(1)
|
|
|
Brookdale Senior Living Inc.
|
|
Magellan Health, Inc.
|
|
|
Civitas Solutions, Inc.
|
|
MEDNAX, Inc.
|
|
|
The Ensign Group, Inc.
|
|
Molina Healthcare, Inc.
|
|
|
Envision Healthcare Holdings, Inc.
(1)
|
|
Quest Diagnostics Incorporated
|
|
|
Encompass Health Corporation (formerly HealthSouth Corp.)
|
|
Select Medical Holdings Corporation
|
|
|
Kindred Healthcare,
Inc.
(1)
|
|
Universal Health Services, Inc.
|
|
|
Laboratory Corporation of America Holdings
|
|
|
(1)
|
Ceased to be a publicly traded company during 2018.
|
The 2018 Peer Group was established using similar criteria for selection of the prior years peer group selected by our Compensation
Committee, specifically: industry, market capitalization, revenue and revenue growth, and adjusting for mergers and acquisition activity among peers. For purposes of comparison, our projected revenue at the time the 2018 Peer Group was selected
placed us below the 25
th
percentile of the 2018 Peer Group, allowing for continued growth. Our market capitalization was approximately $2.8 billion as of October 25, 2017, which placed
us between the 50
th
and 75
th
percentiles of the 2018 Peer Group.
In late 2018, for purposes of reviewing 2018 compensation and setting 2019 compensation for our executive officers, Pay Governance assisted
the Compensation Committee in establishing a peer group for 2019 (the 2019 Peer Group). The 2019 Peer Group consisted of all of the companies in the 2018 Peer Group with the exception of Kindred Healthcare, Inc.
26
Chief Executive Officer Transition
Ms. Osteens Compensation Arrangements
Ms. Osteens annual base salary is $900,000 and her target annual
non-equity
incentive
compensation for each calendar year during her employment period with the Company is 100% of her base salary. For 2019, Ms. Osteen is entitled to a long-term incentive award with a target value equal to not less than $3.2 million.
Thereafter, Ms. Osteen will be eligible to receive annual grants of equity or other long-term incentive awards in amounts as determined by the Compensation Committee. To offset the value of compensation forfeited or forgone and compensate for
other economic consequences of revoking her separation agreement with her former employer and joining the Company, Ms. Osteen received (1) a
one-time
equity grant of restricted stock units with a
grant date fair value of $6.65 million that will vest ratably on the first two anniversaries of the effective date of her employment (which shares of restricted stock will be reduced by a number of shares (valued at the effective date of her
employment) equal to any amounts received by Ms. Osteen in respect of stock options issued by her former employer and held by her on December 12, 2018), (2) a
one-time
cash
sign-on
bonus in the amount of $350,000
and (3) an additional $2.5 million cash payment on the first anniversary of the effective date of her employment (subject to Ms. Osteens employment
at such time). See EXECUTIVE COMPENSATION Potential Payments Upon Termination or Change in Control under the Employment Agreements for more information about the terms of Ms. Osteens Employment Agreement.
Mr. Jacobs Payments Upon Termination
In December 2018, Mr. Jacobs was removed from his positions as the Chief Executive Officer and Chairman of the Board of Directors of the
Company. In connection with his termination and pursuant to the terms of his employment agreement with the Company, Mr. Jacobs received cash payments of approximately $8.1 million, representing an aggregate amount equal to the sum of
(A) three times his base salary, (B) three times his target
non-equity
incentive compensation for 2018, (C) unpaid base salary through the termination date, (D) unreimbursed expenses through the
termination date and (E) payment in respect of unused paid time off and sick pay accrued as of the termination date. Mr. Jacobs also received his
pro-rata
annual
non-equity
incentive compensation for 2018 in March 2019 and is entitled to receive an amount equal to the cost of COBRA premiums for continued health and dental insurance for 36 months after termination as
well as a
pay-out
of amounts under the Companys Nonqualified Deferred Compensation plan. In addition, all of Mr. Jacobs unvested restricted stock became vested upon termination and
Mr. Jacobs will be entitled to receive additional shares of common stock in the future pursuant to his performance vesting restricted stock units based upon the Companys performance. Mr. Jacobs did not receive any payments or
benefits in addition to those described above that were paid pursuant to the terms of his employment agreement with the Company. See Executive Compensation for additional details.
Separation of Chief Executive Officer and Chairman Roles
In conjunction with our Chief Executive Officer transition, we separated the roles of Chief Executive Officer and Chairman of the Board.
Ms.
Osteen serves as our Chief Executive Officer and a member of the Board of Directors while Reeve B. Waud became the Chairman of the Board.
Components of Executive Compensation
The components of our compensation program for executive officers include base salary,
performance-based cash and equity incentive compensation, and time-based equity awards.
27
The following table summarizes the elements of our compensation program for our Named Executive Officers and
provides information about each element:
|
|
|
|
|
|
|
Category of
Compensation
|
|
Elements of
Compensation
|
|
Metrics Used
|
|
Rationale for Compensation
|
Base Compensation
|
|
Base Salary
|
|
N/A
|
|
Attract, retain, and motivate key executive talent
Provide income security
Recognizes different levels of responsibility
|
Short-Term Incentives
|
|
Annual Cash Payment
|
|
Adjusted EBITDA
Adjusted EPS Revenue
|
|
Motivate and reward annual performance results
Encourages focus on growth of Company
|
Long-Term Incentives
|
|
Time-Vesting and
Performance-Based
Equity
Grants
|
|
Adjusted EPS
|
|
Attract, retain, and motivate key executive talent
Align interests of executives and stockholders
Motivate and reward long-term financial performance
Encourage executive stock ownership
|
Benefits
|
|
Retirement Benefits
Personal Benefits
Severance & Change in
Control Benefits
|
|
N/A
|
|
Attract and retain key executive talent
Enhance executive productivity
Provide opportunity for financial security in retirement
|
As illustrated in the charts below and consistent with our
pay-for-performance
philosophy, 80% of our former Chief Executive Officers total direct compensation and, on average, 68% of the other Named Executive Officers (other than Ms. Osteen) total
direct compensation for 2018 was performance-based pay, with a significant emphasis on long-term performance and stockholder value creation. For the purposes of these charts, total direct compensation includes base salary, actual
non-equity
incentive compensation and the grant date fair value of our annual equity grants made in 2018.
The stock awards portion of these charts were determined using a Monte-Carlo simulation value and
assume that target performance goals for performance vesting restricted stock units issued in 2018 are attained during the initial year of the performance period in accordance with ASC 718 rather than during all three years of the performance period
given the change in structure of the 2018 awards compared to the performance vesting restricted stock units issued in prior years. See EXECUTIVE COMPENSATION Summary Compensation Table for more information about the compensation
paid to our Named Executive Officers.
Base Salary
Our Compensation Committee generally meets on an annual basis to review each Named Executive Officers base salary and to consider
adjustments to each Named Executive Officers base salary for the following year. The base salaries under the employment agreements for our Named Executive Officers are subject to an annual increase in the sole discretion of the Compensation
Committee.
28
In setting base salaries for 2018 and 2019, the Compensation Committee reviewed the composition
of the relevant peer group and discussed peer group information with the Compensation Committees independent compensation consultants. For 2018, for Named Executive Officers other than himself and Ms. Osteen, Mr. Jacobs provided the
Compensation Committee with an evaluation of the individual performance and roles and responsibilities of each executive officer. Given our financial performance for 2018 and other considerations deemed relevant by the Compensation Committee, the
committee determined
to provide modest 2.0% raises to the base salary of each of our Named Executive Officers for 2019 except for Ms. Osteen and Messrs. Turner and Jacobs.
The base salaries for the Named Executive Officers effective as of January 1, 2018 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base Salary
As of January 1, 2018
|
|
|
Base Salary
As of January 1, 2019
|
|
|
Percentage
Increase
|
|
Debra K. Osteen
|
|
|
N/A
|
|
|
$
|
900,000
|
|
|
|
N/A
|
|
Ronald M. Fincher
|
|
$
|
689,520
|
|
|
|
703,310
|
|
|
|
2.0
|
%
|
Brent Turner
|
|
|
636,480
|
|
|
|
636,480
|
|
|
|
N/A
|
|
Christopher L. Howard
|
|
|
548,250
|
|
|
|
559,215
|
|
|
|
2.0
|
%
|
David M. Duckworth
|
|
|
610,878
|
|
|
|
623,096
|
|
|
|
2.0
|
%
|
Joey A. Jacobs
|
|
|
1,124,500
|
|
|
|
N/A
|
|
|
|
N/A
|
|
See EXECUTIVE COMPENSATION Summary Compensation Table for more information about the base
salaries paid to our Named Executive Officers.
Annual
Non-Equity
Incentive Compensation
Annual
non-equity
incentive awards paid to our Named Executive Officers are a reward for the
realization of established performance objectives. Our Compensation Committee annually adopts a cash bonus plan pursuant to the Companys Amended and Restated Incentive Compensation Plan (the Incentive Plan) for each Named Executive
Officer. The Compensation Committee generally meets in February or March to review whether and the extent to which performance objectives have been achieved for the prior year. All
non-equity
incentive awards
are subject to the review and approval of the Compensation Committee, which has the discretion to adjust any and all such awards.
2018 Awards
For 2018, based on input from Pay Governance and a review of the relative correlation between internal financial metrics and stockholder value
creation, the Compensation Committee determined that revenue should be added as a component of our
non-equity
incentive compensation program for executive officers and that the impact of Adjusted EPS should be
reduced but maintained given its strong relationship to driving stockholder value. Therefore, annual
non-equity
incentive compensation payable to our Named Executive Officers for 2018 was based 100% on the
Company-wide measures Adjusted EBITDA, Adjusted EPS and revenue, with Adjusted EBITDA determining 50% of the total incentive award, Adjusted EPS determining 30% of the total incentive award and revenue determining 20% of the total incentive award.
The Compensation Committee used these measures for determining annual cash incentive awards because they are important measures of our performance and the performance of our management, they drive our success and growth and they are key criteria by
which management plans and analyzes our business.
For purposes of determining 2018
non-equity
incentive compensation, we define Adjusted EBITDA as the sum of the following: (a) net income from continuing operations, (b) interest expense, (c) income tax expense, (d) depreciation and amortization expense,
(e) equity-based compensation expense, (f) transaction-related expenses, (g) loss on extinguishment of debt, (h) impairment and other
non-cash
charges, (i) legal settlement costs,
(j) severance and restructuring costs and (k) gain or loss on foreign currency derivatives. Adjusted EPS is defined as (a) adjusted income from continuing operations attributable to the Company divided by (b) diluted
weighted-average shares
29
outstanding. Adjusted income from continuing operations attributable to the Company is defined as the sum of (a) net income attributable to the Company; (b) income or loss from
discontinued operations; and (c) provision for income taxes; plus the sum of (d) transaction-related expenses (e.g. acquisition-related diligence and advisory costs, contract termination costs, etc.); (e) gain or loss on extinguishment of
debt; (f) impairment and other
non-cash
gains and charges (e.g. gain or loss on disposal of property); (g) legal settlement costs; (h) severance and restructuring costs; and (i) gain or loss on
foreign currency derivatives; minus (j) adjusted income tax provision, as disclosed in or derived from the Companys Annual Report on Form
10-K,
press releases or other financial records, as
appropriate. Adjusted EBITDA and Adjusted EPS are calculated net of
non-equity
incentive payments and excluding the impact of gains or losses as a result of foreign currency conversions or fluctuations in
foreign currency exchange rates. For purposes of determining whether 2018 performance objectives were met, our Adjusted EBITDA and revenue goals are adjusted to include 90% of earnings generated by acquisitions completed during 2018, while Adjusted
EPS is adjusted to include 50% of earnings generated by acquisitions completed during 2018, in order to incentivize management to pursue accretive acquisitions that will benefit the Company without inequitably adjusting performance objectives.
The Compensation Committee did not make any further adjustments in determining Adjusted EBITDA, Adjusted EPS and revenue for 2018 compensation plan purposes.
The table below sets forth the threshold, target and maximum cash incentive award for 2018 (as a percentage of base salary) for each of the
Named Executive Officers (other than Ms. Osteen).
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Threshold
(1)
|
|
|
Target
|
|
|
Maximum
|
|
Ronald M. Fincher
|
|
|
42.5
|
%
|
|
|
85
|
%
|
|
|
170
|
%
|
Brent Turner
|
|
|
42.5
|
%
|
|
|
85
|
%
|
|
|
170
|
%
|
Christopher L. Howard
|
|
|
42.5
|
%
|
|
|
85
|
%
|
|
|
170
|
%
|
David M. Duckworth
|
|
|
37.5
|
%
|
|
|
75
|
%
|
|
|
150
|
%
|
Joey A. Jacobs
|
|
|
65
|
%
|
|
|
130
|
%
|
|
|
260
|
%
|
(1)
|
As described below, Named Executive Officers may receive an aggregate of less than the threshold percentage of
their base salary listed above if performance exceeds the threshold level of one or more, but not all, of the applicable performance measures.
|
These target and maximum percentages are no less than the target and maximum percentages that each executive is eligible to earn (as a percentage of base
salary) pursuant to the employment agreements entered into with each applicable executive in April 2014.
For purposes of our 2018
non-equity
incentive awards, our target level Adjusted EBITDA was $640.5
million, our target level Adjusted EPS was $2.45 and our target level revenue was $3,060.0
million. Threshold and
maximum performance levels for each of these measures was 92.5% and 107.5% of target, respectively. The measures are not weighted equally. For example, if our actual Adjusted EBITDA for 2018 was $640.5 million, Mr. Jacobs would receive 65%
of his base salary with respect to the EBITDA portion (50%) of his target bonus (130% of base salary). If our Adjusted EPS for 2018 was $2.45, Mr. Jacobs would receive 39% of his base salary with respect to the Adjusted EPS portion (30%) of his
target bonus (130% of base salary). If our revenue for 2018 was $3,060.0
million, Mr. Jacobs would receive 26% of his base salary with respect to the revenue portion (20%) of his target bonus (130% of base salary). Straight-line
interpolation is used to determine awards for performance between goal levels.
On March 7, 2019, the Compensation Committee met to
determine whether and the extent to which the performance goals for the 2018 annual
non-equity
incentive awards had been achieved. Actual Adjusted EBITDA for purposes of our 2018
non-equity
incentive awards was approximately $597.2 million, actual Adjusted EPS was $2.39
and actual revenue was $3.012
million. The Compensation Committee determined that actual
Adjusted EBITDA for 2018 was 93.2% of target Adjusted EBITDA, actual Adjusted EPS for 2018 was 97.6% of target Adjusted EPS, and actual revenue was 98.4% of target revenue. The payout as a percentage of target was 70.5%. As a result of these
performance measures, the Named Executive Officers (other than Ms. Osteen) received the following cash incentive payments with respect to 2018:
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
EBITDA
Component
|
|
|
EPS
Component
|
|
|
Revenue
Component
|
|
|
Total Cash
Incentive Payment
|
|
Ronald M. Fincher
|
|
$
|
160,949
|
|
|
$
|
147,292
|
|
|
$
|
105,073
|
|
|
$
|
413,314
|
|
Brent Turner
|
|
|
148,568
|
|
|
|
135,961
|
|
|
|
96,991
|
|
|
|
381,520
|
|
Christopher L. Howard
|
|
|
127,973
|
|
|
|
117,114
|
|
|
|
83,546
|
|
|
|
328,633
|
|
David M. Duckworth
|
|
|
125,817
|
|
|
|
115,140
|
|
|
|
82,138
|
|
|
|
323,095
|
|
Joey A. Jacobs
|
|
|
384,947
|
|
|
|
352,281
|
|
|
|
251,307
|
|
|
|
988,535
|
|
The amount set forth in the table above as payable to Mr. Jacobs is a pro rata amount based on the date
of his termination. In addition to the cash incentive payment set forth in the table, pursuant to the terms of his employment agreement with the Company, Mr. Jacobs was paid an amount equal to three times his target annual
non-equity
incentive plan compensation for 2018 following his termination in December 2018. See Executive Compensation for additional information about amounts paid to Mr. Jacobs.
2019 Awards
In March 2019, the
Compensation Committee approved
non-equity
incentive awards for each of our Named Executive Officers (other than Mr. Jacobs) for 2019 with potential cash incentive payments to be based 100% on the
following company-wide measures:
|
|
|
|
|
Measure
|
|
Weight
|
|
Adjusted EBITDA
|
|
|
50
|
%
|
Adjusted EPS
|
|
|
30
|
%
|
Revenue
|
|
|
20
|
%
|
The table below sets forth the threshold, target and maximum cash incentive award for 2019 (as a percentage of
base salary) for each of the Named Executive Officers (other than Mr. Jacobs).
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Debra K. Osteen
|
|
|
50.0
|
%
|
|
|
100
|
%
|
|
|
200
|
%
|
Ronald M. Fincher
|
|
|
42.5
|
%
|
|
|
85
|
%
|
|
|
170
|
%
|
Brent Turner
|
|
|
42.5
|
%
|
|
|
85
|
%
|
|
|
170
|
%
|
Christopher L. Howard
|
|
|
42.5
|
%
|
|
|
85
|
%
|
|
|
170
|
%
|
David M. Duckworth
|
|
|
42.5
|
%
|
|
|
85
|
%
|
|
|
170
|
%
|
Equity-Based Compensation
Our Compensation Committee believes that time vesting restricted stock and performance vesting restricted stock units are a key component to
the compensation of our executive officers, and providing a mix of different types of equity awards is consistent with market practice for executive officers in our peer group. The Compensation Committee believes that restricted stock and restricted
stock units provide a substantial incentive to our Named Executive Officers by allowing them to directly participate in any increase in our long-term value. These incentives are intended to reward, motivate and retain the services of our Named
Executive Officers. The Compensation Committee believes that a mix of equity awards aligns the interests of our Named Executive Officers with those of our stockholders and is consistent with our
pay-for-performance
philosophy. Equity-based awards are typically granted under the Incentive Plan in February or March of each year.
2018 Annual Awards
As discussed earlier,
the Compensation Committee implemented significant changes to our compensation program for 2018. The Compensation Committee continued to maintain Adjusted EPS as the core long-term metric for purposes of performance vesting equity awards and
continues to believe that a substantial portion of equity awards should be performance based (with 75% of awards being performance vesting restricted stock units and 25% of awards being time vesting restricted stock). However, it made the following
changes for 2018 awards:
|
|
|
The Compensation Committee reduced Mr. Jacobs 2018 target long-term incentive award by $500,000, or
7%, when compared to his 2017 target award.
|
31
|
|
|
Financial performance will be measured annually, with Adjusted EPS goals for each of the three years in the
performance period set at the beginning of each year of the three-year term of the award.
|
|
|
|
A TSR modifier that measures the Companys TSR performance relative to a group of industry comparators over
the full three-year performance period was added.
|
|
|
|
Shares earned annually based on Adjusted EPS results are accumulated and released at the end of the three-year
term of the award, subject to adjustment based on the new relative TSR modifier. The Compensation Committee believes that release of shares at the end of the three-year term in combination with the application of a three-year relative TSR modifier
increases the long-term orientation of the compensation program.
|
|
|
|
The number of shares accumulated during the term are increased or decreased by up to 25% at the end of the
three-year term based on our three-year TSR relative to that of the TSR Peer Group. If our absolute TSR is negative, the TSR modifier is capped at 100% and cannot increase the share payout.
|
|
|
|
The Adjusted EPS performance range has been expanded to a range of 92.5% to 107.5%. This more expansive range
recognizes potential business volatility over a three-year term and is consistent with the approach taken by our peers.
|
|
|
|
Given the longer three-year payout, an executive whose employment is terminated during the three-year performance
period due to death, disability, retirement, or without cause or for good reason will vest at the end of the three-year performance period, subject to the Companys achievement of the performance goals.
|
Effective March 2, 2018, the Compensation Committee approved grants of the following number of performance vesting restricted stock units
(subject to the achievement of certain performance goals and continued employment) and shares of time vesting restricted stock under the Incentive Plan to our Named Executive Officers (other than Ms. Osteen):
|
|
|
|
|
|
|
|
|
Name
|
|
Performance
Restricted Stock Units
|
|
|
Restricted Stock
|
|
Ronald M. Fincher
|
|
|
30,741
|
|
|
|
10,247
|
|
Brent Turner
|
|
|
28,377
|
|
|
|
9,459
|
|
Christopher L. Howard
|
|
|
24,443
|
|
|
|
8,148
|
|
David M. Duckworth
|
|
|
21,183
|
|
|
|
7,061
|
|
Joey A. Jacobs
|
|
|
128,241
|
|
|
|
42,747
|
|
The allocation among performance vesting restricted stock units (75% of the total equity award) and restricted
stock (25% of the total equity award) is not based on a formula approach but reflects the Compensation Committees view that most equity-based incentives should be performance-based and at risk. The Named Executive Officers must be employed by
the Company at the time the restricted stock units and/or restricted stock vest in order to receive the shares of Common Stock underlying each award, except in the case of certain terminations of employment as discussed under the heading
EXECUTIVE COMPENSATION
Potential Payments Upon Termination or Change in Control under the Employment Agreements.
32
The 2018 annual awards of performance vesting restricted stock units reflect the changes
described above and include the following TSR modifier:
|
|
|
|
|
Relative TSR Achieved
(compared to TSR Peer Group)
|
|
% of Target Awarded
(1)
(2)
|
|
75
th
percentile or greater
|
|
|
125
|
%
|
55
th
percentile
|
|
|
100
|
%
|
30
th
percentile or less
|
|
|
75
|
%
|
|
|
|
|
|
(1)
|
Interpolated for performance between percentiles.
|
(2)
|
TSR modifier capped at 100% if the Companys TSR is negative, regardless of applicable Adjusted EPS
amount.
|
Restricted Stock Units
. The restricted stock units granted effective March 2, 2018 are earned in
three equal annual installments based upon the achievement of specified performance levels of Adjusted EPS for 2018, 2019 and 2020, and adjusted before vesting at the end of the full three-year period in accordance with the three-year TSR modifier.
The Compensation Committee established, on the grant date, the performance objectives for 2018 for purposes of the vesting of restricted stock units. The performance objectives for 2019 and 2020 are determined by the Compensation Committee
subsequent to December 31, 2018 and December 31, 2019, respectively. The Compensation Committee believes that Adjusted EPS provides the best incentive to senior management and is the appropriate financial measure for determining vesting of
restricted stock unit awards because it is an important measure of our performance and the performance of our management, it drives our success and growth and it is a key criterion by which management plans and analyzes our business.
The number of shares of Common Stock that may be issued upon vesting of the restricted stock units ranges from 0% to 200% of the total number
of units set forth above in accordance with a formula based on our Adjusted EPS, and adjusted in accordance with the TSR modifier. None of the performance vesting restricted stock units will vest for performance below 92.5% of the specified Adjusted
EPS. Unearned performance awards in each performance period are forfeited.
For 2018, the threshold award (as a percentage of the number
of restricted stock units eligible for vesting based on 2018 performance) for each applicable Named Executive Officer was 50%, the target award was 100% and the maximum award was 200%. Subject to remaining vesting and the three-year TSR
modifier, the actual number of shares of Common Stock earned each year is based on performance relative to the specified Adjusted EPS for the corresponding year.
For purposes of our 2018 awards of performance vesting restricted stock units, our target level Adjusted EPS was $2.45. The table below sets
forth the number of shares of Common Stock that each Named Executive Officer was eligible to earn for 2018 (as a percentage of the number of restricted stock units eligible for vesting based on 2018 performance), subject to continued employment
throughout the performance period, based upon the Companys actual Adjusted EPS for 2018. For example, if our actual Adjusted EPS for 2018 was $2.45, each Named Executive Officer would earn the number of shares of Common Stock equal to 100% of
the number of restricted stock units that may be earned based on 2018 performance, or
one-third
of the 2018 target grant. The remaining
two-thirds
remain subject to 2019
and 2020 performance standards. All shares earned are subject to adjustment at the end of the three-year term based on the TSR modifier.
|
|
|
|
|
Adjusted EPS of
$2.27 - $2.45
|
|
Adjusted EPS of
$2.45 - $2.63
|
|
Adjusted EPS of
$2.63 or Greater
|
50% - 100%
|
|
100% - 200%
|
|
200%
|
On March 7, 2019, the Compensation Committee met to determine whether and the extent to which the
performance goals for the 2018 restricted stock unit awards had been achieved. The Compensation Committee determined that actual Adjusted EPS for 2018 was $2.39, resulting in approximately 83.8% of the first tranche of the 2018 restricted stock unit
annual award being earned as reflected in the table below, subject to remaining vesting and the three-year TSR modifier:
33
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 Restricted Stock
Unit Grant
|
|
|
Target Shares
Subject to
2018 Performance
(1)
|
|
|
Shares Earned Under
2018 Restricted Stock
Unit Grant
(2)
|
|
Ronald M. Fincher
|
|
|
30,741
|
|
|
|
10,247
|
|
|
|
8,586
|
|
Brent Turner
|
|
|
28,377
|
|
|
|
9,459
|
|
|
|
7,926
|
|
Christopher L. Howard
|
|
|
24,443
|
|
|
|
8,147
|
|
|
|
6,827
|
|
David M. Duckworth
|
|
|
21,183
|
|
|
|
7,061
|
|
|
|
5,917
|
|
Joey A. Jacobs
|
|
|
128,241
|
|
|
|
42,747
|
|
|
|
35,819
|
|
(1)
|
Amounts reflect
one-third
of the grant.
|
(2)
|
Amounts reflect
one-third
of the grant multiplied by approximately
83.8%.
|
Restricted Stock
. The time vesting restricted stock granted in 2018 vests 25% per year on the four
successive anniversaries of the date of grant.
2018 Transition Awards
As a result of the 2018 change in the vesting schedule of performance vesting restricted stock units from annual vesting to three-year vesting,
there was a gap in vesting of equity awards of our Named Executive Officers prior to the completion of the initial three-year term of the 2018 awards. In order to mitigate that gap and to facilitate the transition to the new approach, the
Compensation Committee made an additional
one-time
special transition award of performance vesting restricted stock units to our Named Executive Officers, other than Ms. Osteen and Mr. Jacobs,
effective March
2, 2018. The Compensation Committee believes that the transition awards serve as a retention tool and provide motivation to the executive officers during this transition period.
The Compensation Committee approved transition grants of the following number of performance vesting restricted stock units (subject to the
achievement of certain performance goals and continued employment) under the Incentive Plan to our Named Executive Officers (other than Ms. Osteen and Mr. Jacobs):
|
|
|
|
|
Name
|
|
Performance
Restricted Stock Units
|
|
Ronald M. Fincher
|
|
|
15,371
|
|
Brent Turner
|
|
|
14,188
|
|
Christopher L. Howard
|
|
|
12,222
|
|
David M. Duckworth
|
|
|
10,592
|
|
The transition awards have the same general design as the 2018 annual awards but with a shorter term and
performance measurement period. The
one-time
special awards are equal to 50% of the grant date value of the 2018 annual performance vesting restricted stock unit awards. The methodology for establishing the
vesting criteria and other terms for the 2018 transition awards of performance vesting restricted stock units is consistent with that for the 2018 annual awards with the financial measure Adjusted EPS used for evaluating performance. However, the
transition awards will be earned over a
two-year
period instead of three years and the TSR modifier for the transition awards will be based on the
two-year
TSR for the
Company and the TSR Peer Group. See the section above entitled 2018 Annual Awards for more information about the general terms of the transition awards.
On March 7, 2019, the Compensation Committee met to determine whether and the extent to which the 2018 performance goals for the
transition awards had been achieved. The Compensation Committee determined that actual Adjusted EPS for 2018 was $2.39, resulting in approximately 83.8% of the first tranche of the transition awards being earned as reflected in the table below,
subject to remaining vesting and the
two-year
TSR modifier:
34
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 Restricted Stock
Unit Grant
|
|
|
Target Shares
Subject to
2018 Performance
(1)
|
|
|
Shares Earned Under
2018 Restricted Stock
Unit Grant
(2)
|
|
Ronald M. Fincher
|
|
|
15,371
|
|
|
|
7,685
|
|
|
|
6,440
|
|
Brent Turner
|
|
|
14,188
|
|
|
|
7,094
|
|
|
|
5,944
|
|
Christopher L. Howard
|
|
|
12,222
|
|
|
|
6,111
|
|
|
|
5,121
|
|
David M. Duckworth
|
|
|
10,592
|
|
|
|
5,296
|
|
|
|
4,438
|
|
(1)
|
Amounts reflect
one-half
of the grant.
|
(2)
|
Amounts reflect
one-half
of the grant multiplied by approximately
83.8%.
|
Vesting of 2017 and 2016 Restricted Stock Unit Awards
On March 29, 2017 and February 5, 2016, the Compensation Committee approved grants of the following number of performance vesting
restricted stock units under the Incentive Plan to our Named Executive Officers (other than Ms. Osteen):
|
|
|
|
|
|
|
|
|
Name
|
|
2017 Performance
Restricted Stock Units
|
|
|
2016 Performance
Restricted Stock Units
|
|
Ronald M. Fincher
|
|
|
26,170
|
|
|
|
18,367
|
|
Brent Turner
|
|
|
24,157
|
|
|
|
16,954
|
|
Christopher L. Howard
|
|
|
20,808
|
|
|
|
14,891
|
|
David M. Duckworth
|
|
|
18,033
|
|
|
|
11,648
|
|
Joey A. Jacobs
|
|
|
119,957
|
|
|
|
83,392
|
|
The restricted stock units granted in 2017 and 2016 are earned in three equal annual installments based upon
the achievement of specified performance levels of Adjusted EPS. The number of shares of Common Stock that may be issued upon vesting of the restricted stock units ranges from 0% to 200% of the total number of units set forth above in accordance
with a formula based on our Adjusted EPS. None of the performance vesting restricted stock units will vest for performance below 95% of the specified Adjusted EPS.
One-third
of each of the target amounts for the 2017 and 2016 awards are subject to 2018 Adjusted EPS
performance. For 2018 performance under the 2017 and 2016 restricted stock unit awards, the threshold award (as a percentage of the number of restricted stock units eligible for vesting based on 2018 performance) for each Named Executive Officer was
50%, the target award was 100% and the maximum award was 200%. The actual number of shares of Common Stock to be issued upon vesting of the restricted stock units each year is based on the Companys actual Adjusted EPS relative to the specified
Adjusted EPS for the corresponding year.
For purposes of our 2017 and 2016 awards of performance vesting restricted stock units, our
target level Adjusted EPS was $2.78 for 2017 and $2.98 for 2016, respectively. The tables below set forth the number of shares of Common Stock that each Named Executive Officer was eligible to earn for 2018 performance under the 2017 and 2016
restricted stock unit awards (as a percentage of the number of restricted stock units eligible for vesting based on 2018 performance), subject to continued employment throughout the performance period, based upon the Companys actual Adjusted
EPS for 2018. For example, for the 2017 restricted stock unit awards, if our Adjusted EPS for 2018 was $2.78, each Named Executive Officer would earn the number of shares of Common Stock equal to 100% of the number of restricted stock units that may
vest based on 2018 performance, or
one-third
of the 2017 target grant. The remaining
one-third
remains subject to 2019 performance standards.
|
|
|
|
|
2017 Restricted Stock
Units
|
Adjusted EPS of
$2.64 - $2.78
|
|
Adjusted EPS of
$2.78 - $2.92
|
|
Adjusted EPS of
$2.92 or Greater
|
50% - 100%
|
|
100% - 200%
|
|
200%
|
35
For the 2016 restricted stock unit awards, if our Adjusted EPS for 2018 was $2.98, each Named
Executive Officer would earn the number of shares of Common Stock equal to 100% of the number of restricted stock units that may vest based on 2018 performance, or
one-third
of the 2016 target grant.
|
|
|
|
|
2016 Restricted Stock
Units
|
Adjusted EPS of
$2.83 - $2.98
|
|
Adjusted EPS of
$2.98 - $3.13
|
|
Adjusted EPS of
$3.13 or Greater
|
50% - 100%
|
|
100% - 200%
|
|
200%
|
On March 7, 2019, the Compensation Committee met to determine whether and the extent to which the 2018
performance goals for the 2017 and 2016 restricted stock unit awards had been achieved. The Compensation Committee determined that actual Adjusted EPS for 2018 was $2.39. As a result, the restricted stock units issued in 2017 and 2016 did not vest.
2019 Annual Awards
For 2019, the
Compensation Committee expects to approve grants of performance vesting restricted stock units (subject to the achievement of certain performance goals and continued employment) and shares of time vesting restricted stock under the Incentive Plan to
our Named Executive Officers (other than Mr. Jacobs), substantially consistent with past annual equity awards, including the allocation among performance vesting restricted stock units (75% of the total equity award) and restricted stock (25%
of the total equity award).
The 2019 annual awards of performance vesting restricted stock units are expected to include the following
TSR modifier:
|
|
|
|
|
Relative TSR Achieved
(compared to TSR Peer Group)
|
|
% of Target Awarded
(1)(2)
|
|
75
th
percentile or greater
|
|
|
125
|
%
|
55
th
percentile
|
|
|
100
|
%
|
30
th
percentile or less
|
|
|
75
|
%
|
(1) Interpolated for performance between percentiles.
(2) TSR modifier capped at 100% if the Companys TSR is negative, regardless of applicable Adjusted EPS amount.
Restricted Stock Units.
The methodology for establishing the vesting criteria and other terms for the 2019 awards of performance
vesting restricted stock units are expected to be consistent with that for the 2018 annual awards with the financial measure Adjusted EPS used for evaluating performance.
Restricted Stock
. The time vesting restricted stock granted in 2019 are expected to vest 25% per year on the four successive
anniversaries of the date of grant.
See the section above entitled Components of Executive Compensation Equity-Based
Compensation 2018 Annual Awards for more information about restricted stock units, restricted stock and how 2019 awards are expected to vest based on future performance.
Perquisites and other Benefits
We
provide our Named Executive Officers with modest perquisites (less than $10,000 on an annual basis) that our Compensation Committee believes are reasonable and consistent with our overall executive compensation program. Our Compensation Committee
believes that such perquisites help us to retain our executive personnel and allows them to operate more effectively.
36
Our Named Executive Officers are eligible for health and welfare benefits available to eligible
Company employees during active employment under the same terms and conditions. These benefits include medical, dental, vision, short-term and long-term disability and group-term life insurance coverage. The Named Executive Officers also participate
in a separate insurance plan that provides long term care benefits to the executives and their spouses.
Our general policies applicable to all employees govern paid vacation and other time off for our Named Executive Officers.
Compensation Clawback Policy
If the Company is required to restate its financial statements as a result of misconduct, Section 304 of the Sarbanes-Oxley Act requires
the Chief Executive Officer and the Chief Financial Officer to reimburse the Company for: (i) any bonus or other incentive-based or equity-based compensation received during the 12 months following the public issuance of the financial
statements; and (ii) any profits realized from the sale of Company securities during those 12 months. On February 26, 2015, the Compensation Committee
adopted and approved a compensation clawback policy applicable to
performance-based equity awards issued to executive officers during and after 2015. Under the clawback policy, if a Named Executive Officer is determined by the Board to have engaged in fraud or misconduct contributing to restatement of the
Companys financial statements, the Board shall take appropriate action to address such events, including requiring (i) reimbursement of any equity securities that vested during the preceding three year period, including any proceeds from
the sale of such securities, and (ii) cancellation of all unvested equity securities during such three-year period.
Section 954
of the Dodd-Frank Act directs the SEC to promulgate additional rules requiring companies listed on stock exchanges to adopt policies regarding the recovery of executive compensation from executive officers for accounting restatements resulting from
material noncompliance with any financial reporting requirement under the securities laws. In accordance with Section 954 of the Dodd-Frank Act, the SEC issued proposed rules in 2015 regarding the adoption of clawback policies. Upon the
SECs adoption and publication of final rules implementing these requirements, the Compensation Committee will review and, if necessary, revise the Companys clawback policy to conform with such rules.
Deferred Compensation Plan
On February 28, 2013, our Board adopted and approved the Acadia Healthcare Company, Inc. Deferred Compensation Plan, effective
February 1, 2013 (the Deferred Compensation Plan). The Deferred Compensation Plan is designed to provide
tax-deferred
compensation for our eligible employees, including executive officers.
Deferred compensation plans are common in our industry, and help in the recruitment and retention of top executive talent.
Under the
Deferred Compensation Plan, participants may defer up to 50% of their annual base compensation and up to 100% of any performance-based compensation. Participants are fully vested in their deferral accounts as to amounts they elect to defer. No
employer matching contributions are made to the Deferred Compensation Plan. Participants will be able to select from several fund choices and their deferred compensation account will increase or decrease in value in accordance with the performance
of the funds selected. Participants may receive a distribution from the Deferred Compensation Plan upon a qualifying distribution event such as separation from service, disability, death, change in control or an unforeseeable emergency. Following a
participants separation from the Company for any reason, the participants vested interest in the account is paid to the participant (or the participants beneficiary in the event of the participants death) either in a lump sum
or up to ten annual installments, as elected by the participant. The Deferred Compensation Plan is intended to be an unfunded plan administered and maintained by the Company primarily for the purpose of providing deferred compensation benefits to
participants.
Risk Assessment
In addition to overseeing the Companys executive compensation program, the Compensation Committee considers the risk profile of the
Companys compensation policies and practices for all employees. The Compensation Committee has concluded that the Companys compensation program does not encourage excessive or inappropriate risk taking and determined that such program is
not reasonably likely to have a material adverse impact on the Company. See CORPORATE GOVERNANCE Risk Oversight for more information about the Boards role in our risk management process.
37
Internal Revenue Code Section 162(m)
Code Section 162(m) limits the deductibility of compensation in excess of $1 million paid to certain covered employees of
a publicly held corporation. For taxable years ending December 31, 2017 and earlier, covered employees generally referred to the companys Chief Executive Officer and its next three most highly compensated executive officers
(excluding the Chief Financial Officer) in the year that the compensation is paid. This limitation does not apply to compensation that is considered qualified performance-based compensation under the rules of Section 162(m). The
exemption from Section 162(m)s deduction limitation for qualified performance-based compensation was repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered
executive officers in excess of $1 million is not deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017 (the scope of which is uncertain under the legislation). In addition,
beginning with taxable years beginning after December 31, 2017, covered employees generally was expanded to include the Companys chief financial officer; also, each individual who is a covered employee for any taxable year
beginning after December 31, 2016 will remain a covered employee for all future years.
Stock Ownership Guidelines,
Insider Trading Policy, Hedging and Pledging
In March 2012, the Board of Directors adopted stock ownership guidelines for
non-management
directors. The guidelines require that each
non-management
director hold an investment position in our Common Stock equal in value to five times the annual cash
retainer (exclusive of any Board committee retainers) paid to
non-management
directors. The guidelines provide for a five-year transition period during which directors can attain the required ownership. As of
December 31, 2018, all of our
non-management
directors not in a transition period satisfied the applicable stock ownership guidelines.
In December 2014, the Board of Directors adopted stock ownership guidelines for certain designated officers. The guidelines require that the
Named Executive Officers hold an investment position in our Common Stock equal to the following multiples of annual base salary:
|
|
|
|
|
Position
|
|
Fair Market Value of Stock Holdings
as a Multiple of Base Salary
|
|
Chief Executive Officer
|
|
|
5x
|
|
Other Named Executive Officers
|
|
|
3x
|
|
The guidelines provide for a five-year transition period during which executive officers can attain the
required ownership. If an executive officer becomes subject to a greater ownership threshold due to an increase in the amount of his or her annual base salary, the executive officer must satisfy the greater ownership threshold within the later of
the original five-year transition period or two years from the effective date of the increase in annual base salary. As of December 31, 2018, all of our Named Executive Officers not in a transition period satisfied the applicable stock
ownership guidelines.
Pursuant to the stock ownership guidelines applicable to
non-management
directors and executive officers, ownership of the following shares of Common Stock (Qualified Shares) are counted toward the satisfaction of the applicable ownership requirements: (i) shares owned directly by the
non-management
director or the executive officer; (ii) shares owned indirectly (e.g. by a spouse or in trust); (iii) restricted shares, including restricted shares that have been granted but that have not
vested; (iv) shares issuable upon the settlement of vested restricted stock units; and (v) shares obtained through stock option exercises. For the avoidance of doubt, shares that underlie unexercised options, whether or not vested, will
not be deemed to be Qualified Shares.
We maintain an insider trading policy that governs transactions in our securities by directors,
officers and other employees. Among other provisions, the policy prohibits short-selling of any equity security of the Company and any hedging transactions. Directors and officers are also prohibited from holding our securities in a
margin account or otherwise pledging our securities as collateral for a loan.
38
Termination and
Change-in-Control
Arrangements
Under the terms of the
compensation plans and employment agreements with the Named Executive Officers, the Named Executive Officers are entitled to payments and benefits upon the occurrence of specified events including termination of employment. The specific terms of
these arrangements are discussed under the heading EXECUTIVE COMPENSATION
Potential Payments Upon Termination or Change in Control under the Employment Agreements. The Compensation Committee believes that these arrangements
are appropriate and necessary to attract and retain talented senior executives. The Compensation Committee believes that the potential payments and benefits provide security and encourage retention in the event of an actual or potential change in
control, such as a sale or hostile takeover. The absence of such arrangements could impact our ability to hire talented executives and an executives willingness to work through a merger or sale transaction which could be beneficial
to our stockholders.
39
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by SEC Regulation
S-K,
Item 402(b) with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy
Statement.
|
COMPENSATION COMMITTEE:
|
|
Wade D. Miquelon, Chairman
|
Christopher R. Gordon
|
Vicky B. Gregg
|
William M. Petrie, M.D.
|
40
EXECUTIVE COMPENSATION
Summary Compensation Table
The following
summary compensation table reflects the compensation paid or accrued by us with respect to each of the Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
(1)
|
|
|
Non-Equity
Incentive Plan
Compensation
(2)
|
|
|
All Other
Compensation
(3)
|
|
|
Total
|
|
Debra K. Osteen
Chief Executive Officer
(4)
|
|
|
2018
|
|
|
$
|
37,500
|
|
|
$
|
350,000
|
(5)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
387,500
|
|
Ronald M. Fincher
Chief Operating Officer
|
|
|
2018
2017
2016
|
|
|
|
689,520
676,000
650,000
|
|
|
|
|
|
|
|
1,144,780
1,520,986
1,462,483
|
|
|
|
413,314
209,340
653,425
|
|
|
|
6,415
4,099
4,272
|
|
|
|
2,254,029
2,410,425
2,770,180
|
|
Brent Turner
President
|
|
|
2018
2017
2016
|
|
|
|
636,480
624,000
600,000
|
|
|
|
|
|
|
|
1,056,725
1,403,990
1,349,971
|
|
|
|
381,520
193,237
778,076
|
|
|
|
5,502
2,946
3,037
|
|
|
|
2,080,227
2,224,173
2,556,170
|
|
Christopher L. Howard
Executive Vice President, General Counsel and Secretary
|
|
|
2018
2017
2016
|
|
|
|
548,250
537,500
527,000
|
|
|
|
|
|
|
|
910,260
1,209,361
1,185,741
|
|
|
|
328,633
166,450
529,777
|
|
|
|
5,502
2,946
3,037
|
|
|
|
1,792,645
1,916,257
2,245,555
|
|
David M. Duckworth
Chief Financial Office
r
|
|
|
2018
2017
2016
|
|
|
|
610,878
598,900
530,000
|
|
|
|
|
|
|
|
788,848
1,048,078
927,511
|
|
|
|
323,095
163,645
470,111
|
|
|
|
16,241
13,512
13,563
|
|
|
|
1,739,062
1,824,135
1,941,185
|
|
Joey A. Jacobs
Former Chief Executive Officer
|
|
|
2018
2017
2016
|
|
|
|
1,124,500
1,124,500
1,071,000
|
|
|
|
|
|
|
|
3,426,172
6,971,915
6,640,207
|
|
|
|
988,535
532,586
1,646,632
|
|
|
|
8,170,247
4,099
4,272
|
|
|
|
13,709,454
8,633,100
9,362,111
|
|
(1)
|
Reflects the aggregate grant date fair value of restricted stock and restricted stock units granted to each
Named Executive Officer (other than Ms. Osteen) pursuant to the Incentive Plan, determined using a Monte-Carlo simulation value and computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718,
Stock Compensation, or ASC 718. The awards are described in more detail in the Grants of Plan-Based Awards section below. See Note 8 to the Consolidated Financial Statements contained in the Companys 2018 Annual Report on Form
10-K
for assumptions relevant to the valuation of stock awards. With respect to annual grants of restricted stock units, the units vest over three years and the amounts assume that the performance goals are attained
during the initial year of the performance period in accordance with ASC 718. With respect to the transition award of restricted stock units granted in 2018, the units vest over two years and assume that the performance goals are attained during the
initial year of the performance period in accordance with ASC 718. The stock awards amounts for 2017 and 2016 assume that target performance goals for performance vesting restricted stock units are attained in all three years of the performance
period given the different structure of the performance vesting restricted stock units issued in years prior to 2018 as described in COMPENSATION DISCUSSION AND ANALYSIS.
|
Assuming that the maximum performance goals are attained during the initial year of the performance period in accordance with ASC 718 for the
restricted stock units granted in 2018, and during all three years for the restricted stock units granted in 2017 and 2016, the aggregate grant date fair value of the annual grants of restricted stock unit awards would have been:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 RSU Awards
|
|
|
2017 RSU Awards
|
|
|
2016 RSU Awards
|
|
Ronald M. Fincher
|
|
$
|
866,896
|
|
|
$
|
2,281,501
|
|
|
$
|
2,193,754
|
|
Brent Turner
|
|
|
800,231
|
|
|
|
2,106,007
|
|
|
|
2,024,986
|
|
Christopher L. Howard
|
|
|
689,293
|
|
|
|
1,814,041
|
|
|
|
1,778,581
|
|
David M. Duckworth
|
|
|
597,361
|
|
|
|
1,572,117
|
|
|
|
1,391,237
|
|
Joey A. Jacobs
|
|
|
3,616,396
|
|
|
|
10,457,851
|
|
|
|
9,960,340
|
|
Therefore, assuming the maximum performance goals are attained during the initial year of the performance
period in accordance with ASC 718 for the restricted stock units granted in 2018, and during all three years for the restricted stock units granted in 2017 and 2016, the aggregate grant date fair value of the total stock awards (including awards of
both restricted stock and restricted stock units) would have been:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 Stock Awards
|
|
|
2017 Stock Awards
|
|
|
2016 Stock Awards
|
|
Ronald M. Fincher
|
|
$
|
1,901,711
|
|
|
$
|
2,661,736
|
|
|
$
|
2,559,360
|
|
Brent Turner
|
|
|
1,755,427
|
|
|
|
2,456,994
|
|
|
|
2,362,463
|
|
Christopher L. Howard
|
|
|
1,512,118
|
|
|
|
2,116,382
|
|
|
|
2,075,031
|
|
David M. Duckworth
|
|
|
1,310,437
|
|
|
|
1,834,136
|
|
|
|
1,623,130
|
|
Joey A. Jacobs
|
|
|
5,234,370
|
|
|
|
12,200,841
|
|
|
|
11,620,377
|
|
See the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive
Compensation Equity-Based Compensation for more information about the restricted stock and restricted stock units.
41
(2)
|
Reflects cash awards earned during the years indicated under the Incentive Plan. See the section above entitled
COMPENSATION DISCUSSION AND ANALYSIS
Components of Executive Compensation Annual Non
-
Equity Incentive Compensation for more information.
|
(3)
|
Represents certain long term care insurance benefits and, for 2018, 401(k) plan matching contributions by the
Company to each Named Executive Officer (other than Ms. Osteen and Mr. Jacobs). Ms. Osteen was not enrolled in the Companys benefit plans in 2018. For Mr. Jacobs, amounts shown in this column for 2018 also include the
following amounts related to the termination of his employment with the Company:
|
|
|
|
|
|
Three times base salary
|
|
$
|
3,373,500.00
|
|
Three times target annual cash award
|
|
|
4,385,550.00
|
|
Unpaid base salary through the termination date
|
|
|
21,625.00
|
|
Unreimbursed expenses through the termination date
|
|
|
2,409.13
|
|
Unused paid time off and sick pay accrued through the termination date
|
|
|
383,497.75
|
|
|
|
|
|
|
Total
|
|
$
|
8,166,581.88
|
|
(4)
|
Ms. Osteen was appointed Chief Executive Officer effective December 16, 2018.
|
(5)
|
Reflects Ms. Osteens
one-time
cash
sign-on
bonus.
|
Grants of Plan-Based Awards
The following table sets forth certain information regarding plan-based awards granted to the Named Executive Officers during 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
Estimated Possible Payouts Under
Non-Equity
Incentive Plan
Awards
(1)
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
(2)
|
|
|
All Other
Stock
Awards:
Number
of Shares
of
Stock
or Units
(3)
|
|
|
Grant Date
Fair Value of
Stock and
Option
Awards
(4)
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Debra K. Osteen
|
|
N/A
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
Ronald M. Fincher
|
|
N/A
|
|
|
146,523
|
|
|
|
586,092
|
|
|
|
1,172,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,247
|
|
|
|
387,849
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,371
|
|
|
|
30,741
|
|
|
|
61,482
|
|
|
|
|
|
|
|
756,931
|
(5)
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,685
|
|
|
|
15,371
|
|
|
|
30,742
|
|
|
|
|
|
|
|
323,483
|
(6)
|
Brent Turner
|
|
N/A
|
|
|
135,252
|
|
|
|
541,008
|
|
|
|
1,082,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,549
|
|
|
|
358,023
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,189
|
|
|
|
28,377
|
|
|
|
56,754
|
|
|
|
|
|
|
|
698,702
|
(5)
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,094
|
|
|
|
14,188
|
|
|
|
28,376
|
|
|
|
|
|
|
|
298,586
|
(6)
|
Christopher L. Howard
|
|
N/A
|
|
|
116,503
|
|
|
|
466,013
|
|
|
|
932,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,148
|
|
|
|
308,402
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,222
|
|
|
|
24,443
|
|
|
|
48,886
|
|
|
|
|
|
|
|
601,858
|
(5)
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,111
|
|
|
|
12,222
|
|
|
|
24,444
|
|
|
|
|
|
|
|
257,212
|
(6)
|
David M. Duckworth
|
|
N/A
|
|
|
114,540
|
|
|
|
458,159
|
|
|
|
916,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,061
|
|
|
|
267,259
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,592
|
|
|
|
21,183
|
|
|
|
42,366
|
|
|
|
|
|
|
|
521,589
|
(5)
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,296
|
|
|
|
10,592
|
|
|
|
21,184
|
|
|
|
|
|
|
|
222,909
|
(6)
|
Joey A. Jacobs
|
|
N/A
|
|
|
365,463
|
|
|
|
1,461,850
|
|
|
|
2,923,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,747
|
|
|
|
1,617,974
|
|
|
|
3/2/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,121
|
|
|
|
128,241
|
|
|
|
256,482
|
|
|
|
|
|
|
|
1,808,198
|
(5)
|
(1)
|
The estimated payouts shown reflect non equity incentive awards granted under the Incentive Plan, where
receipt is contingent upon the achievement of specified performance goals. The amounts in the Threshold column assume threshold performance for all of the specified performance goals. See the section above entitled COMPENSATION
DISCUSSION AND ANALYSIS Components of Executive Compensation Annual Non Equity Incentive Compensation for more information about the awards.
|
(2)
|
Reflects the number of shares of Common Stock issuable upon vesting of restricted stock units granted under the
Incentive Plan, subject to adjustment based on the TSR modifier. The first tranche of restricted stock units granted effective March 2, 2018 is earned based upon the achievement of certain performance goals in 2018 and continued employment. See
the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation Equity Based Compensation
2018 Annual Awards for more information about the restricted stock units.
The other restricted stock units granted effective March 2, 2018 vest in two annual installments based upon the achievement of certain performance goals and continued employment. See the section above entitled COMPENSATION DISCUSSION AND
ANALYSIS Components of Executive Compensation
Equity Based Compensation
2018 Transition Awards for more information about the transition award of restricted stock units.
|
42
(3)
|
Reflects shares of restricted stock granted under the Incentive Plan, which will vest in four equal annual
installments commencing one year after the date of grant.
|
(4)
|
Reflects the aggregate grant date fair value computed in accordance with ASC 718.
|
(5)
|
With respect to restricted stock units granted under the Incentive Plan, the amounts shown were determined
using a Monte-Carlo simulation value and assume that target performance goals are attained during the initial year of the performance period in accordance with ASC 718, continued employment throughout the performance period, and no adjustment as a
result of the TSR modifier. For additional information, see the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation Equity-Based Compensation
2018 Annual Awards.
|
(6)
|
With respect to the transition restricted stock units granted under the Incentive Plan, the amounts shown were
determined using a Monte-Carlo simulation value and assume that the performance goals are attained during the initial year of the performance period in accordance with ASC 718, continued employment throughout the performance period, and no
adjustment as a result of the TSR modifier. For additional information, see the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation Equity-Based Compensation
2018
Transition Awards.
|
Outstanding Equity Awards at Fiscal
Year-End
The following table provides certain information with respect to the Named Executive Officers regarding outstanding equity awards as of
December 31, 2018 that represent potential amounts that may be realized in the future:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Number of Securities Underlying
Unexercised Options
(1)
|
|
|
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 Held
that
Have
Not Vested
(2)
|
|
|
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
(2)
|
|
|
(Exercisable)
|
|
|
(Unexercisable)
|
|
Debra K. Osteen
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Ronald M. Fincher
|
|
|
7,159
|
|
|
|
|
|
|
|
50.75
|
|
|
|
2/27/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,066
|
(3)
|
|
|
27,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,062
|
(4)
|
|
|
78,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,062
|
(7)
|
|
|
78,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,543
|
(5)
|
|
|
168,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,724
|
(8)
|
|
|
224,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,247
|
(6)
|
|
|
263,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,741
|
(9)
|
|
|
790,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,371
|
(10)
|
|
|
395,188
|
|
Brent Turner
|
|
|
7,591
|
|
|
|
|
|
|
|
15.96
|
|
|
|
3/19/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,350
|
|
|
|
|
|
|
|
29.39
|
|
|
|
3/29/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,819
|
|
|
|
|
|
|
|
50.75
|
|
|
|
2/27/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
978
|
(3)
|
|
|
25,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,827
|
(4)
|
|
|
72,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,826
|
(7)
|
|
|
72,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,039
|
(5)
|
|
|
155,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,053
|
(8)
|
|
|
207,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,459
|
(6)
|
|
|
243,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,377
|
(9)
|
|
|
729,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,188
|
(10)
|
|
|
364,773
|
|
Christopher L. Howard
|
|
|
6,466
|
|
|
|
|
|
|
|
15.96
|
|
|
|
3/19/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,500
|
|
|
|
|
|
|
|
29.39
|
|
|
|
3/29/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,138
|
|
|
|
|
|
|
|
50.75
|
|
|
|
2/27/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
887
|
(3)
|
|
|
22,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,482
|
(4)
|
|
|
63,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,483
|
(7)
|
|
|
63,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,202
|
(5)
|
|
|
133,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,936
|
(8)
|
|
|
178,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,148
|
(6)
|
|
|
209,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,443
|
(9)
|
|
|
628,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,222
|
(10)
|
|
|
314,228
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Number of Securities Underlying
Unexercised Options
(1)
|
|
|
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 Held
that
Have
Not Vested
(2)
|
|
|
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
(2)
|
|
|
(Exercisable)
|
|
|
(Unexercisable)
|
|
David M. Duckworth
|
|
|
875
|
|
|
|
|
|
|
$
|
9.40
|
|
|
|
11/16/21
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
814
|
|
|
|
|
|
|
|
15.96
|
|
|
|
3/19/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,591
|
|
|
|
|
|
|
|
16.60
|
|
|
|
8/2/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,500
|
|
|
|
|
|
|
|
29.39
|
|
|
|
3/29/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,897
|
|
|
|
|
|
|
|
50.75
|
|
|
|
2/27/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
609
|
(3)
|
|
|
15,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,967
|
(4)
|
|
|
50,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,942
|
(7)
|
|
|
49,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,509
|
(5)
|
|
|
115,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,011
|
(8)
|
|
|
154,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,061
|
(6)
|
|
|
181,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,183
|
(9)
|
|
|
544,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,592
|
(10)
|
|
|
272,320
|
|
Joey A. Jacobs
|
|
|
18,315
|
|
|
|
|
|
|
|
15.96
|
|
|
|
3/19/22
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,000
|
|
|
|
|
|
|
|
29.39
|
|
|
|
3/29/23
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,494
|
|
|
|
|
|
|
|
50.75
|
|
|
|
2/27/24
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,899
|
(7)
|
|
|
357,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,986
|
(8)
|
|
|
1,028,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,241
|
(9)
|
|
|
3,297,076
|
|
(1)
|
The amounts shown reflect stock options granted under the Incentive Plan.
|
(2)
|
Based on the closing sales price of our Common Stock of $25.71 on The NASDAQ Global Select Market on
December 31, 2018.
|
(3)
|
These shares of restricted stock vest on February 24, 2019.
|
(4)
|
One-half
of these shares of restricted stock vest on each of
February 5, 2019 and February 24, 2020.
|
(5)
|
One-third
of these shares of restricted stock vest on each of
March 29, 2019, March 29, 2020 and March 29, 2021.
|
(6)
|
One-fourth
of these shares of restricted stock vest on each of
March 2, 2019, March 2, 2020, March 2, 2021 and March 2, 2022.
|
(7)
|
Reflects the aggregate threshold number of shares that will vest upon the achievement of certain performance
goals established for the restricted stock units granted in 2016 under the Incentive Plan and continued employment. See the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation
Equity-Based Compensation
Vesting of 2017 and 2016 Restricted Stock Unit Awards for more information about the restricted stock units.
|
(8)
|
Reflects the aggregate threshold number of shares that will vest upon the achievement of certain performance
goals established for the restricted stock units granted in 2017 under the Incentive Plan and continued employment. See the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation
Equity-Based Compensation
Vesting of 2017 and 2016 Restricted Stock Unit Awards for more information about the restricted stock units.
|
(9)
|
Reflects the aggregate target number of shares that will vest upon the achievement of certain performance goals
established for the annual award of restricted stock units granted in 2018 under the Incentive Plan and continued employment. See the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation
Equity-Based Compensation
2018 Annual Awards for more information about the restricted stock units.
|
(10)
|
Reflects the aggregate target number of shares that will vest upon the achievement of certain performance goals
established for the transition award of restricted stock units granted in 2018 under the Incentive Plan and continued employment. See the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation
Equity-Based Compensation
2018 Transition Awards for more information about the restricted stock units.
|
(11)
|
In connection with Mr. Jacobs termination as an employee of the Company in December 2018 and per the
terms of the Incentive Plan, such options must be exercised prior to March 16, 2019.
|
44
Option Exercises and Stock Vested
The following table shows the amounts received by the Named Executive Officers upon the exercise of stock options or the vesting of restricted
stock and restricted stock units during 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Number of Shares
Acquired on Exercise
|
|
|
Value Realized
on Exercise
|
|
|
Number of Shares
Acquired on Vesting
|
|
|
Value Realized
on Vesting
|
|
Debra K. Osteen
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Ronald M. Fincher
|
|
|
|
|
|
|
|
|
|
|
8,550
|
|
|
|
325,755
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
2,180
|
|
|
|
85,151
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,530
|
|
|
|
52,953
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
1,064
|
|
|
|
41,017
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
1,360
|
|
|
|
52,455
|
(5)
|
Brent Turner
|
|
|
|
|
|
|
|
|
|
|
7,875
|
|
|
|
300,038
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
2,013
|
|
|
|
78,628
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,412
|
|
|
|
48,969
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
975
|
|
|
|
37,586
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
1,293
|
|
|
|
49,871
|
(5)
|
Christopher L. Howard
|
|
|
|
|
|
|
|
|
|
|
6,905
|
|
|
|
263,081
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
1,734
|
|
|
|
67,730
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
1,241
|
|
|
|
42,951
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
887
|
|
|
|
34,194
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
1,166
|
|
|
|
44,973
|
(5)
|
David M. Duckworth
|
|
|
|
|
|
|
|
|
|
|
5,561
|
|
|
|
211,874
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
1,502
|
|
|
|
58,668
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
970
|
|
|
|
33,572
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
608
|
|
|
|
23,438
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
739
|
|
|
|
38,503
|
(5)
|
Joey A. Jacobs
|
|
|
|
|
|
|
|
|
|
|
39,956
|
|
|
|
1,522,324
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
9,996
|
|
|
|
390,444
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
6,949
|
|
|
|
240,505
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
5,170
|
|
|
|
199,304
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
5,027
|
|
|
|
193,891
|
(5)
|
(1)
|
Based on the closing sales price of our Common Stock of $38.10 on The NASDAQ Global Select Market on
February 28, 2018, the date that the restricted stock units vested. See the section above entitled COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation Equity-Based Compensation for more
information about the restricted stock units.
|
(2)
|
Based on the closing sales price of our Common Stock of $39.06 on The NASDAQ Global Select Market on
March 28, 2018, the first business day immediately prior to the date that the shares of restricted stock vested.
|
(3)
|
Based on the closing sales price of our Common Stock of $34.61 on The NASDAQ Global Select Market on
February 2, 2018, the first business day immediately prior to the date that the shares of restricted stock vested.
|
(4)
|
Based on the closing sales price of our Common Stock of $38.55 on The NASDAQ Global Select Market on
February 23, 2018, the first business day immediately prior to the date that the shares of restricted stock vested.
|
(5)
|
Based on the closing sales price of our Common Stock of $38.57 on The NASDAQ Global Select Market on
February 26, 2018, the first business day immediately prior to the date that the shares of restricted stock vested.
|
45
Nonqualified Deferred Compensation
The following table shows the activity during 2018 and the aggregate balances held by each of our Named Executive Officers at December 31,
2018 under the Deferred Compensation Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in 2018($)
(1)
|
|
|
Company
Contributions
in 2018($)
|
|
|
Aggregate
Earnings in
2018($)
|
|
|
Aggregate
Withdrawals /
Distributions($)
|
|
|
Aggregate
Balance at
December 31,
2018($)
(2)
|
|
Debra K. Osteen
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Ronald M. Fincher
|
|
|
47,668
|
|
|
|
|
|
|
|
(8,730
|
)
|
|
|
(44,445
|
)
|
|
|
112,827
|
|
Brent Turner
|
|
|
67,430
|
|
|
|
|
|
|
|
(80,512
|
)
|
|
|
|
|
|
|
1,258,127
|
|
Christopher L. Howard
|
|
|
91,522
|
|
|
|
|
|
|
|
(40,768
|
)
|
|
|
|
|
|
|
1,180,473
|
|
David M. Duckworth
|
|
|
198,365
|
|
|
|
|
|
|
|
(73,275
|
)
|
|
|
(87,889
|
)
|
|
|
866,131
|
|
Joey A. Jacobs
|
|
|
|
|
|
|
|
|
|
|
(3,191
|
)
|
|
|
|
|
|
|
25,517
|
|
(1)
|
These amounts are included in the Summary Compensation Table above.
|
(2)
|
All amounts other than 2018 earnings are included in the Summary Compensation Table above.
|
Under the plan, participants may defer up to 50% of their annual base compensation and up to 100% of any
performance-based compensation. Participants are fully vested in their deferral accounts as to amounts they elect to defer. No employer matching contributions are made to the Deferred Compensation Plan. Participants will be able to select from
several fund choices and their deferred compensation account will increase or decrease in value in accordance with the performance of the funds selected. Participants may receive a distribution from the Deferred Compensation Plan upon a qualifying
distribution event such as separation from service, disability, death, change in control or an unforeseeable emergency or on a specified date selected by a participant. Following a participants separation from the Company for any reason, the
participants vested interest in the account is paid to the participant (or the participants beneficiary in the event of the participants death) either in a lump sum or up to ten annual installments, as elected by the participant.
The Deferred Compensation Plan is intended to be an unfunded plan administered and maintained by the Company primarily for the purpose of providing deferred compensation benefits to participants.
Potential Payments Upon Termination or Change in Control under the Employment Agreements
In December 2018, we entered into an employment agreement with Ms. Osteen (the Osteen Agreement). In April 2014, we entered
into amended and restated employment agreements with each of Messrs. Jacobs, Fincher, Turner and Howard, and an employment agreement with Mr. Duckworth (collectively with the Osteen Agreement, the Employment Agreements). A summary
of the Employment Agreements is provided below.
Compensation and Benefits
The base salaries under the Employment Agreements are subject to an annual increase in the sole discretion of our Board. In addition to base
salary, under the Employment Agreements the executives are entitled to participate, in their sole discretion, in all of our employee benefit programs for which senior executive employees are generally eligible. Each executive is also reimbursed for
reasonable expenses incurred in connection with services performed under each executives Employment Agreement.
Non-Competition
and
Non-Solicitation
During the term of each Employment Agreement and for 12 months thereafter (in the case of Ms. Osteen and Mr. Duckworth), 24 months
thereafter (in the case of Messrs. Fincher, Turner and Howard) or 36 months thereafter (in the case of Mr. Jacobs), each such executive is prohibited from (i) directly or indirectly managing, controlling, consulting, rendering services for
or participating, engaging or owning an interest in any business which derives 25% of its gross revenue from the business of providing behavioral healthcare and/or related services and (ii) directly or indirectly managing, controlling,
rendering services for or participating or consulting with any unit,
46
division, segment or subsidiary of any other business that engages in or otherwise competes with (or was organized for the purpose of engaging in or competing with) the business of providing
behavioral healthcare and/or related services (subject to certain exceptions), in each case within any geographical area in which we engage in such businesses. During the term of each Employment Agreement and for 12 months thereafter (in the case of
Ms. Osteen and Mr. Duckworth), 24 months thereafter (in the case of Messrs. Fincher, Turner and Howard) or 36 months thereafter (in the case of Mr. Jacobs), each such executive is prohibited from directly or indirectly soliciting or
hiring any employee or independent contractor of ours or directly or indirectly soliciting any customer, supplier, licensee, licensor or other business relation of ours. In addition, the executives are subject to customary confidentiality and
non-disparagement
obligations both during and following their employment with the Company.
Severance
Under each Employment Agreement (other than the Osteen Agreement), if the executive is terminated without Cause or resigns with
Good Reason, such executive is generally entitled to receive (subject to the satisfaction of certain conditions):
|
|
|
Such executives base salary through the termination date;
|
|
|
|
A prorated bonus amount for the calendar year in which the termination occurs;
|
|
|
|
An amount equal to a multiple of the target annual cash bonus amount to which such executive would be entitled
with respect to the calendar year in which the termination date occurs, determined as if all of the performance objectives for such year have been achieved at the target level;
|
|
|
|
An amount equal to a multiple of such executives base salary as in effect on the termination date;
|
|
|
|
Any unused and unpaid time off and sick pay accrued through the termination date and any incurred but
unreimbursed business expenses as of the termination date;
|
|
|
|
An amount equal to the cost of the premiums for continued health and dental insurance for the executive and/or
his dependents in accordance with COBRA for a specified period;
|
|
|
|
Full and immediate vesting of such executives stock options, restricted stock and other equity-based awards
that are not intended to be performance-based compensation under Code Section 162(m); and
|
|
|
|
Delay of vesting and forfeiture of such executives restricted stock and other equity-based awards that are
intended to be performance-based compensation under Code Section 162(m) until the Company certifies the applicable performance goals have been met (collectively, the Termination Payments).
|
Under the Osteen Agreement, if she is terminated without Cause or resigns with Good Reason, Ms. Osteen is
generally entitled to receive (subject to the satisfaction of certain conditions):
|
|
|
Her base salary through the termination date;
|
|
|
|
Any accrued but unpaid cash bonus with respect to a completed performance period;
|
|
|
|
Any unused and unpaid time off and sick pay accrued through the termination date, any incurred but unreimbursed
business expenses as of the termination date, and all other payments, benefits or fringe benefits pursuant to any applicable compensation arrangement as of the termination date;
|
|
|
|
An amount equal to two (2) times her base salary as in effect on the termination date
|
|
|
|
A prorated cash bonus amount for the calendar year in which the termination occurs, determined as if all of the
subjective performance objectives for such year have been achieved at the target level;
|
47
|
|
|
An amount equal to the
after-tax
cost of the premiums for continued
health and dental insurance for Ms. Osteen and/or her dependents in accordance with COBRA for a specified period;
|
|
|
|
Full and immediate vesting of the time-vesting components of Ms. Osteens annual equity and
equity-based awards granted in 2019 and 2020 (the 2019 and 2020 Awards), and delay of vesting and forfeiture of the 2019 and 2020 Awards that are subject to performance-based vesting (collectively, the Osteen Termination
Payments).
|
Cause (as defined in the Employment Agreements, other than the Osteen Agreement) means the
occurrence of one or more of the following with respect to the applicable executive:
|
|
|
The conviction of or plea of nolo contendere to a felony or other crime involving moral turpitude or the
conviction of any crime involving misappropriation, embezzlement or fraud with respect to the Company or any of its subsidiaries or any of their customers, suppliers or other business relations;
|
|
|
|
Conduct outside the scope of such executives duties and responsibilities under his Employment Agreement
that causes the Company or any of its subsidiaries substantial public disgrace or disrepute or economic harm;
|
|
|
|
Repeated failure to perform duties consistent with such Employment Agreement as reasonably directed by our Board;
|
|
|
|
Any act or knowing omission aiding or abetting a competitor, supplier or customer of ours to our disadvantage or
detriment;
|
|
|
|
Breach of fiduciary duty, gross negligence or willful misconduct with respect to us;
|
|
|
|
An administrative or other proceeding resulting in the suspension or debarment of such executive from
participation in any contracts with, or programs of, the United States or any individual state or any agency or department thereof; or
|
|
|
|
Any other material breach by such executive of his Employment Agreement or any other agreement between such
executive and us, which is not cured to the reasonable satisfaction of our Board within 30 days after written notice thereof to such executive.
|
Cause (as defined in the Osteen Agreement) means the occurrence of one or more of the following with respect to Ms. Osteen;
provided that no determination of Cause may be made until Ms. Osteen has been given written notice detailing the specific Cause event and a period of fifteen (15) business days following receipt of such notice to cure such
event:
|
|
|
The conviction of or plea of nolo contendere to a felony or the conviction of any crime involving
misappropriation, embezzlement or fraud with respect to the Company or any of its subsidiaries or any of their customers, suppliers or other business relations;
|
|
|
|
Willful conduct outside the scope of Ms. Osteens duties and responsibilities under her Employment
Agreement that causes the Company or any of its subsidiaries substantial public disgrace or disrepute or demonstrable economic harm;
|
|
|
|
Repeated failure to perform duties consistent with such Employment Agreement as reasonably directed by our Board;
|
|
|
|
Any willful act or knowing omission of aiding or abetting a competitor of ours to our disadvantage or detriment;
|
|
|
|
Material breach of fiduciary duty, gross negligence or willful misconduct with respect to us;
|
48
|
|
|
An administrative or other proceeding arising as a result of Ms. Osteens actions that results in the
suspension or debarment of Ms. Osteen from participation in any contracts with, or programs of, the United States or any individual state or any agency or department thereof, or any finding of a governmental agency that Ms. Osteen
personally has engaged in misconduct in connection with her employment by the Company or any predecessor employer; or
|
|
|
|
Any other material breach by Ms. Osteen of her Employment Agreement or any other agreement between
Ms. Osteen and us.
|
Good Reason (as defined in the Employment Agreements) means if the applicable
executive resigns his or her employment with the Company as a result of one or more of the following actions (in each case taken without the executives written consent): (i) a reduction in such executives base salary (other than
(for the executives other than Ms. Osteen) as part of an
across-the-board
reduction that (A) results in a 10% or less reduction of such executives base
salary as in effect on the date of any such reduction or (B) is approved by our Chief Executive Officer); (ii) a material diminution of such executives job duties or responsibilities inconsistent with the executives position;
(iii) any other material breach by us of such Employment Agreement; or (iv) a relocation of our principal executive offices and corporate headquarters outside of a
30-mile
radius of Nashville,
Tennessee following relocation thereto in accordance with such Employment Agreement; provided that, none of the events described in clauses (i) through (iv) shall constitute Good Reason unless such executive shall have notified us in
writing describing the event which constitutes Good Reason within 90 days after the occurrence of such event and then only if we shall have failed to cure such event within 30 days after our receipt of such written notice and such
executive elects to terminate his or her employment as a result at the end of such 30 day period.
If an executive that is party to
an Employment Agreement dies or becomes disabled, such executive is entitled to the applicable Termination Payments (other than the amount equal to a multiple of the target annual cash bonus amount and the amount equal to a multiple of such
executives base salary as in effect on the termination date) and, in the case of Ms. Osteen, the Osteen Termination Payments. In the event that an executive becomes disabled not due to death, such executive is entitled to receive
continued installment payments of such executives base salary as in effect on the termination date for a specified period of time.
If we terminate an executive under an Employment Agreement for Cause or if any such executive resigns without Good Reason, such executive is
only entitled to receive his or her unpaid base salary through the termination date and any bonus amount to which such executive is entitled by reference to the calendar year that ended on or prior to the termination date, and in the case of
Ms. Osteen, all other payments, benefits or fringe benefits pursuant to any applicable compensation arrangement as of the termination date. Upon any termination of employment under an Employment Agreement, whether voluntary or otherwise, such
executive has the option to elect to continue health insurance coverage until the earlier of (A) such time as the executive is eligible to participate in another health plan or (B) the executive becomes eligible for Medicare.
The tables below show the amounts that each Named Executive Officer (other than Mr. Jacobs) would have received assuming that the Named
Executive Officers employment was terminated or he or she died or became disabled effective December 31, 2018. As of December 31, 2018 and except as noted below, none of the Named Executive Officers were entitled to any compensation
or benefits for resignation or retirement. Furthermore, the Employment Agreements do not distinguish a termination following a change in control from a termination in another context. Therefore, a termination following a change in control will
entitle a Named Executive Officer to severance benefits only if the Named Executive Officers employment is otherwise terminated without Cause by the Company or by the Named Executive Officer for Good Reason. Mr. Jacobs was terminated as
Chief Executive Officer and Chairman of the Board effective December 16, 2018 and a description of amounts paid or payable to him upon termination can be found at Compensation Discussion and Analysis Chief Executive Officer
Transition Mr. Jacobs Payments Upon Termination.
49
Ms. Osteen
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments upon Termination
|
|
Involuntary
Termination
without Cause
(1)
|
|
|
Death or
Disability
|
|
Base Salary
(9)
|
|
$
|
3,400,000
|
(2)
|
|
$
|
2,950,000
|
(3)
|
Non-Equity
Incentive Plan Compensation
(4)
|
|
|
900,000
|
|
|
|
900,000
|
|
Restricted Stock (unvested)
(5)
|
|
|
6,194,619
|
|
|
|
6,194,619
|
|
Insurance Benefits
|
|
|
|
(6)
|
|
|
|
(7)
|
Accrued Vacation
(8)
|
|
|
|
|
|
|
|
|
Mr. Fincher
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments upon Termination
|
|
Involuntary
Termination
without Cause
(1)
|
|
|
Death or
Disability
|
|
Base Salary
|
|
$
|
1,379,040
|
(2)
|
|
$
|
344,760
|
(3)
|
Non-Equity
Incentive Plan Compensation
(4)
|
|
|
1,172,184
|
|
|
|
1,172,184
|
|
Restricted Stock (unvested)
(5)
|
|
|
537,802
|
|
|
|
537,802
|
|
Insurance Benefits
|
|
|
54,453
|
(6)
|
|
|
13,613
|
(7)
|
Accrued Vacation
(8)
|
|
|
50,441
|
|
|
|
50,441
|
|
Mr. Turner
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments upon Termination
|
|
Involuntary
Termination
without Cause
(1)
|
|
|
Death or
Disability
|
|
Base Salary
|
|
$
|
1,272,960
|
(2)
|
|
$
|
318,240
|
(3)
|
Non-Equity
Incentive Plan Compensation
(4)
|
|
|
1,082,016
|
|
|
|
1,082,016
|
|
Restricted Stock (unvested)
(5)
|
|
|
496,280
|
|
|
|
496,280
|
|
Insurance Benefits
|
|
|
51,010
|
(6)
|
|
|
12,753
|
(7)
|
Accrued Vacation
(8)
|
|
|
48,960
|
|
|
|
48,960
|
|
Mr. Howard
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments upon Termination
|
|
Involuntary
Termination
without Cause
(1)
|
|
|
Death or
Disability
|
|
Base Salary
|
|
$
|
1,096,500
|
(2)
|
|
$
|
274,125
|
(3)
|
Non-Equity
Incentive Plan Compensation
(4)
|
|
|
932,025
|
|
|
|
932,025
|
|
Restricted Stock (unvested)
(5)
|
|
|
429,845
|
|
|
|
429,845
|
|
Insurance Benefits
|
|
|
49,323
|
(6)
|
|
|
12,331
|
(7)
|
Accrued Vacation
(8)
|
|
|
42,173
|
|
|
|
42,173
|
|
Mr. Duckworth
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments upon Termination
|
|
Involuntary
Termination
without Cause
|
|
|
Death or
Disability
|
|
Base Salary
|
|
$
|
610,878
|
(2)
|
|
$
|
305,439
|
(3)
|
Non-Equity
Incentive Plan Compensation
(4)
|
|
|
458,159
|
|
|
|
458,159
|
|
Restricted Stock (unvested)
(5)
|
|
|
363,694
|
|
|
|
363,694
|
|
Insurance Benefits
|
|
|
25,234
|
(6)
|
|
|
12,617
|
(7)
|
Accrued Vacation
(8)
|
|
|
46,990
|
|
|
|
46,990
|
|
(1)
|
The amounts shown would have been payable if we terminated the Named Executive Officers employment
without Cause (as defined in his or her Employment Agreement) or if the Named Executive Officer resigned his or her employment for Good Reason (as defined in his or her Employment Agreement), provided that the Named Executive Officer had not
breached the
non-competition,
non-solicitation,
confidentiality and proprietary information provisions of his or her Employment Agreement.
|
(2)
|
The amount shown reflects the product of two times the Named Executive Officers base salary (except for
Mr. Duckworth, which amount reflects twelve months of his base salary) as in effect on December 31, 2018 pursuant to the terms of his or her Employment Agreement (assuming that he or she is not in violation of the restrictive covenants set
forth in his or her Employment Agreement or his or her General Release, if applicable). Pursuant to the Employment Agreements, base salary amounts are payable in regular installments over the course of the applicable severance period.
|
50
(3)
|
The amount shown reflects the Named Executive Officers base salary as in effect on December 31, 2018
payable for a period of six months in the event of disability pursuant to the terms of his or her Employment Agreement.
|
(4)
|
The amount shown reflects the cash incentive award for 2018 of 100% of the base salary for Ms. Osteen, two
times 85% of the base salary for Messrs. Fincher, Howard and Turner, 75% of the base salary for Mr. Duckworth, assuming achievement of the performance goals at the target level, pursuant to the terms of the Employment Agreements.
|
(5)
|
The amount shown reflects the value of all unvested restricted stock not intended to qualify as
performance-based compensation under Code Section 162(m) for each Named Executive Officer, which will immediately vest pursuant to the terms of his or her Employment Agreement, based on a market value of $25.71 per share as of December 31,
2018. See EXECUTIVE COMPENSATION Outstanding Equity Awards at Fiscal
Year-End.
Pursuant to each Named Executive Officers Employment Agreement, unvested restricted stock unit awards
intended to qualify as performance-based compensation under Code Section 162(m) are not immediately forfeited at termination but remain subject to forfeiture restrictions related to
pre-established
performance goals until the results of the related goals have been satisfied. As of December 31, 2018, all unvested restricted stock units of each Named Executive Officer would remain subject to
pre-established
performance goals and would vest in future years based on future performance. See EXECUTIVE COMPENSATION Outstanding Equity Awards at Fiscal
Year-End
for potential amounts that may be realized in the future with respect to each Named Executive Officers unvested restricted stock units as of December 31, 2018.
|
(6)
|
The amount shown reflects the cost of the premiums for continued health and dental insurance for the Named
Executive Officer or his or her dependents, in accordance with COBRA, for a period of 24 months for Messrs. Fincher, Howard and Turner, 12 months for Mr. Duckworth, pursuant to the terms of the Employment Agreements. Ms. Osteen was not
enrolled in the Companys health insurance plans in 2018.
|
(7)
|
The amount shown reflects the cost of the premiums for continued health and dental insurance for the Named
Executive Officer or his or her dependents, in accordance with COBRA, for a period of six months pursuant to the terms of his or her Employment Agreement. Ms. Osteen was not enrolled in the Companys health insurance plans in 2018.
|
(8)
|
The amount shown reflects unused paid time off, pursuant to the terms of the Named Executive Officers
Employment Agreement and our paid time off policies.
|
(9)
|
Includes a cash lump sum of $2.5 million, pursuant to the terms of the Osteen Agreement.
|
2018 and 2019 Performance Vesting Equity Awards
As described in COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation Equity-Based Compensation,
shares earned annually under performance vesting restricted stock unit awards made in 2018 and 2019 are accumulated and released at the end of the three-year term of the award (or
two-year
term in the case of
the 2018 transition awards), subject to adjustment based on the new relative TSR modifier. Given the longer payout for such awards, awards of an executive whose employment is terminated during the performance period due to death, disability,
retirement, or without cause or for good reason will vest at the end of the performance period, subject to the Companys achievement of the performance goals.
51
Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation
S-K,
we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Ms. Osteen, our Chief Executive Officer:
|
|
|
the median of the annual total compensation of all employees of the Company (other than our Chief Executive
Officer) was $27,199; and
|
|
|
|
the annual total compensation of our Chief Executive Officer was $1,250,000.
|
Since Ms. Osteen did not serve as our principal executive officer for the entire year, her 2018 annual total compensation is presented
above on an annualized basis. To determine such amount, we added (i) the total base salary she would have earned had she served as our Chief Executive Officer for all of 2018 ($900,000) and (ii) the
one-time
cash
sign-on
bonus ($350,000).
Based on this
information, for 2018, the ratio of the annual total compensation of Ms. Osteen, our Chief Executive Officer, to the median of the annual total compensation of all employees was 46 to 1. Given Ms. Osteen was appointed as our Chief
Executive Officer in December 2018, and as such, did not receive an annual long-term equity grant or annual
non-equity
incentive award in 2018 or participate in our health insurance and other benefit plans, we
anticipate the ratio of her compensation to that of our median employee will increase in the future.
For purposes of the foregoing pay
ratio disclosure, we were required to identify the median employee of all employees of the Company, without regard to their location, compensation arrangements or employment status (full-time versus part-time) and then determine the annual total
compensation that median employee earned during 2018. To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee in 2018, we took the
following steps:
We determined that, as of December 31, 2018, our employee population consisted of approximately 42,100 individuals
working at the Company and its consolidated subsidiaries, with approximately 20,800 of these individuals located in the United States and Puerto Rico and approximately 21,300 located in the United Kingdom (as reported in Item 1,
Business
, in
our Annual Report on Form
10-K
for the year ended December 31, 2018). This population consisted of our full-time, part-time and temporary employees. The inclusion of part-time and temporary employees
substantially reduces the median of the annual total compensation of all of our employees.
We prepared a list of employees at
December 31, 2018 from our payroll records and evaluated total compensation. Total compensation includes salary, stock awards and
non-equity
incentive plan compensation. Compensation for full-time and
part-time employees who commenced employment after January 1, 2018 was annualized. Compensation for temporary employees was not annualized. We used the exchange rate for the year ended December 31, 2018 of 1.33
British pounds to
U.S. dollars to calculate total compensation for our employees located in the United Kingdom.
The SEC rules for identifying the median
employee and calculating the pay ratio allow companies to apply various methodologies and assumptions and, as a result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies, including those within our peer
group and industry.
52
DIRECTOR COMPENSATION
The table below sets forth the 2018 compensation earned by or paid to our
non-management
directors.
Ms. Osteen and Mr. Jacobs do not receive any additional compensation for their services as directors. Mr. Jacobs term as a member of the Board will expire at the Annual Meeting.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash
(1)
|
|
|
Stock
Awards
(2)
|
|
|
Total
|
|
E. Perot Bissell
|
|
$
|
124,000
|
|
|
$
|
160,009
|
|
|
$
|
284,009
|
|
Christopher R. Gordon
(3)
|
|
|
114,500
|
|
|
|
160,009
|
|
|
|
274,509
|
|
Vicky B. Gregg
|
|
|
109,500
|
|
|
|
160,009
|
|
|
|
269,509
|
|
William F. Grieco
|
|
|
127,000
|
|
|
|
160,009
|
|
|
|
287,009
|
|
Wade D. Miquelon
|
|
|
114,500
|
|
|
|
160,009
|
|
|
|
274,509
|
|
William M. Petrie, M.D.
|
|
|
109,500
|
|
|
|
160,009
|
|
|
|
269,509
|
|
Hartley R. Rogers
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Reeve B. Waud
|
|
|
132,000
|
|
|
|
160,009
|
|
|
|
292,009
|
|
(1)
|
Includes annual retainers and fees associated with chairing a Board committee.
|
(2)
|
This column reflects the grant date fair value of restricted stock awards granted to directors calculated in
accordance with ASC 718. On May 3, 2018, each
non-management
director elected or continuing to serve as a member of the Board received an award of 4,125 shares of restricted stock. The fair value of
restricted stock awards is computed by multiplying the total number of shares subject to the award by the closing market price of the Common Stock on the date immediately preceding the date of grant ($38.79).
|
As of December 31, 2018, each of the
non-management
directors held 7,575 shares of restricted
stock.
(3)
|
Mr. Gordon provided notice of his intention to resign as a member of the Board effective May 28,
2019.
|
(4)
|
Mr. Rogerss term as a member of the Board expired on May 3, 2018.
|
Our Board of Directors adopted a compensation plan for
non-management
directors effective
January 1, 2013, as amended May 19, 2016 (the Directors Plan), which provides:
|
|
|
An annual cash retainer of $87,000;
|
|
|
|
An annual cash retainer of $15,000 for each member of the Audit Committee and $30,000 for the chair of the Audit
Committee;
|
|
|
|
An annual cash retainer of $12,500 for each member of the Compensation Committee and $27,500 for the chair of the
Compensation Committee;
|
|
|
|
An annual cash retainer of $10,000 for each member of the Nominating Committee and $22,000 for the chair of the
Nominating Committee;
|
|
|
|
An annual cash retainer of $45,000 for the Lead Director;
|
|
|
|
An initial grant of restricted stock having a value equal to $160,000; and
|
|
|
|
Following the year in which the initial grant of restricted stock was awarded, an annual grant of restricted
stock having a value equal to $160,000.
|
In addition to the compensation described above, we also reimburse our
directors for travel and
out-of-pocket
expenses in connection with their attendance at meetings of our Board of Directors.
53
Under the Directors Plan, all annual retainers shall be paid on the date of our annual meeting of
stockholders (the Annual Meeting Date). Each year as of the Annual Meeting Date, each
non-management
member of our Board who is
re-elected
or who otherwise
continues to be a member of the Board immediately thereafter is automatically granted under the Directors Plan, without further action by us, our Board of Directors, the Compensation Committee or our stockholders, shares of our restricted stock
having a value equal to $160,000. The value of the restricted shares shall be based on the closing trading price of our Common Stock on the trading day immediately preceding the Annual Meeting Date. All restricted shares issued to
non-management
directors shall vest over three years with such shares to vest 33
1
⁄
3
% per year on the three successive anniversary
dates of the grant of restricted stock beginning on the first anniversary of the grant date.
Each of our directors is a party to an
Indemnification Agreement with the Company pursuant to which we have agreed to indemnify and advance expenses to such director in connection with his or her service as our director, officer or agent to the fullest extent permitted by law and as set
forth in each such agreement and, to the extent applicable, to maintain insurance coverage for each such director under our policies of directors and officers liability insurance.
54
AUDIT COMMITTEE REPORT
Our management has primary responsibility for preparing our financial statements and implementing internal controls over financial reporting.
Our independent registered public accounting firm, Ernst & Young LLP, is responsible for expressing an opinion on the conformity of our audited financial statements with accounting principles generally accepted in the United States and the
effectiveness of our internal control over financial reporting.
The role and responsibilities of the Audit Committee are set forth in a
written charter adopted by our Board of Directors.
The charter is available on our website,
www.acadiahealthcare.com
, under the webpage Investors Corporate Governance. The Audit Committee reviews and reassesses the
adequacy of the charter annually or more often as necessary and recommends any proposed changes to the Board. The Audit Committee acted in accordance with its charter in 2018. In fulfilling its responsibilities for fiscal year 2018, the Audit
Committee:
|
|
|
Pre-approved
all auditing and
non-auditing
services of Ernst & Young LLP;
|
|
|
|
Reviewed and discussed with management our unaudited quarterly financial statements during 2018 and our audited
financial statements for the fiscal year ended December 31, 2018, including a discussion of critical accounting policies used in such financial statements;
|
|
|
|
Reviewed and discussed with the internal auditor the quality and appropriateness of our internal controls and
reporting procedures;
|
|
|
|
Discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standards
No. 1301, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T, both with and without management present; and
|
|
|
|
Received the written disclosures and the letter from Ernst & Young LLP as required by the applicable
requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLPs communications with the Audit Committee concerning independence and discussed with Ernst & Young LLP their independence from us and
management.
|
Based on the Audit Committees review of the audited financial statements and discussions with
management and Ernst & Young LLP as described above, and in reliance thereon, the Audit Committee recommended to our Board of Directors that the audited financial statements for the fiscal year ended December 31, 2018 be included in
our Annual Report on Form
10-K
for filing with the SEC.
|
AUDIT COMMITTEE:
|
|
William F. Grieco, Chairman
|
E. Perot Bissell
|
Christopher R. Gordon
|
55
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Registration Rights Agreement
Effective
December 31, 2015, concurrently with the execution of the sale and purchase deed related to our acquisition of Priory Group No. 1 Limited, we entered into a third amended and restated registration rights agreement (the Registration
Rights Agreement), with certain members of our current and former management (the Management Investors), WCP, investment funds affiliated with Bain Capital Partners, LLC (collectively, Bain Capital) and investment funds
affiliated with Advent International Corporation (Advent). The Registration Rights Agreement grants certain stockholders demand registration rights for registered offerings and piggyback registration rights with
respect to our securities. Such rights expired for Bain Capital and Advent in connection with their prior sales of Acadia stock. All expenses incident to registrations are required to be borne by us.
Stockholders Agreement
Concurrently with
the execution of the merger agreement related to our acquisition of CRC Health Group, Inc. (CRC), we entered into an amended and restated stockholders agreement (the Stockholders Agreement) with the Management Investors, WCP
and Bain Capital. The Stockholders Agreement became effective on February 11, 2015 in connection with the closing of our acquisition of CRC.
The Stockholders Agreement granted WCP certain rights to designate a nominee for election to our board of directors which WCP exercised to
designate Mr. Waud for election at the annual meeting of stockholders held in 2016 and certain consent rights over the transfer of shares by Management Investors that have expired.
The Stockholders Agreement provides that no Management Investor will take any of the following actions from the date the Company gives notice
to the Management Investors that a preliminary or final prospectus has been circulated for a public offering and during the 60 days following the date of the final prospectus for such public offering: (i) offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any of the Companys or its subsidiaries equity securities or any securities convertible into or exchangeable or exercisable for such securities; (ii) enter into any transaction
which would have the same effect as described in clause (i); (iii) enter into any swap, hedge or other arrangement that transfers, in whole or part, any of the economic consequences or ownership of any of the securities described in clause (i);
or (iv) publicly disclose the intention to enter into any transaction described in clauses (i), (ii) or (iii). The foregoing restrictions do not apply to transactions made in the subject public offering and those to which the underwriters
managing such public offering agree in writing. As used in this Stockholders Agreement section, public offering refers to any offering by the Company of the Companys or its subsidiaries capital stock or
other equity securities to the public pursuant to an effective registration statement under the Securities Act or any comparable statement under any similar federal statute then in force.
56
GENERAL INFORMATION
Stockholder Proposals for 2020 Annual Meeting
Pursuant to Rule
14a-8
under the Exchange Act, proper stockholder proposals intended to be presented at
our 2020 annual meeting of stockholders must be received by us at our principal executive offices at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067 no later than
November 22, 2019 for the proposals to be included in the Proxy
Statement and form of proxy card for that meeting.
If a stockholder desires to bring a matter before our annual meeting of stockholders
and the matter is submitted outside the process of Rule
14a-8,
including with respect to nominations for election as directors, the stockholder must follow the procedures set forth in our Bylaws. Our Bylaws
provide generally that stockholder proposals and director nominations to be considered at an annual meeting of stockholders may be made by a stockholder only if (1) the stockholder is a stockholder of record and is entitled to vote at the
meeting, and (2) the stockholder gives timely written notice of the matter to our corporate secretary. To be timely, a stockholders notice must be received at our principal executive offices no later than the close of business on the 90th
day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding years annual meeting of stockholders. However, in the event that our annual meeting is more than 30 days before or more than 70 days
after the date of first anniversary of the preceding years annual meeting of stockholders, notice by the stockholder must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Company. Under our Bylaws, notice with respect to
the 2020 annual meeting of stockholders must be received at our principal executive offices between the close of business on January 3, 2020 and the close of business on February 2, 2020, unless the 2020 annual meeting is called for a date
that is more than 30 days before or more than 70 days after May 2, 2020. The notice must set forth the information required by the provisions of our Bylaws dealing with stockholder proposals and nominations of directors.
Annual Report on Form
10-K
As indicated in the Notice of Internet Availability
of Proxy Materials, a copy of this Proxy Statement and our 2018 Annual Report to
Stockholders has been posted on the website
www.proxyvote.com
.
Upon the written request of any stockholder entitled to vote at the Annual Meeting, we will furnish, without charge, a copy of our Annual Report on Form
10-K
for the year ended December
31, 2018, as filed with the SEC. Requests should be directed to Acadia Healthcare Company, Inc., 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067,
Attention: Christopher L. Howard, Esq., Executive Vice President, General Counsel and Secretary, (615)
851-6000.
Our Annual Report to Stockholders and Annual Report on Form
10-K
are not proxy soliciting materials.
Delivery of Documents to Stockholders Sharing an Address
Householding is a program adopted by the SEC that permits companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for
annual reports, proxy statements and the Notices of Internet Availability of proxy materials sent to multiple stockholders of record who have the same address by delivering a single annual report, proxy statement or Notice of Internet Availability
of Proxy Materials to that address. Householding is designed to reduce a companys printing costs and postage fees. Brokers with account holders who are stockholders of the Company may be householding the Companys proxy materials. If your
household participates in the householding program, you will receive one Notice of Internet Availability of Proxy Materials. If you are a beneficial holder, you can request information about householding from your broker, bank or other nominee.
If at any time you no longer wish to participate in householding and would prefer to receive a separate proxy statement, annual report or Notice of Internet Availability of Proxy Materials, please notify your broker if your shares are held in a
brokerage account or us if you are a stockholder of record. You can notify us by sending a written request to our General Counsel and Secretary at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, or by calling
(615) 861-6000.
In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the annual report, proxy statement and Notice of Internet
Availability of Proxy Materials to a stockholder at a shared address to which a single copy of the documents was delivered.
57
If you receive more than one Notice of Internet Availability of Proxy Materials, this means that
you have multiple accounts holding Common Stock with brokers and/or the Companys transfer agent. Please vote all of your shares by following the instructions included on each Notice of Internet Availability of Proxy Materials. Additionally, to
avoid receiving multiple sets of proxy materials in the future, the Company recommends that you contact Broadridge Financial Services, Inc. at
www.proxyvote.com
or (800)
579-1639
to consolidate as many
accounts as possible under the same name and address. If you are a beneficial holder, please call your broker for instructions.
Electronic Access to
Proxy Statement and Annual Report to Stockholders
We have elected to provide this Proxy Statement and our 2018 Annual Report to
Stockholders over the Internet through a notice and access model. The Notice of Internet Availability of Proxy Materials provides instructions on how you may access this Proxy Statement and our 2018 Annual Report to Stockholders on the
Internet at
www.proxyvote.com
or request a printed copy at no charge. In addition, the Notice of Internet Availability of Proxy Materials provides instructions on how you may request to receive, at no charge, all future proxy materials in
printed form by mail or electronically by email. Your election to receive proxy materials by mail or email will remain in effect until you revoke it. Choosing to receive future proxy materials by email will save us the cost of printing and mailing
documents to stockholders and will reduce the impact of our annual meetings on the environment.
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ACADIA HEALTHCARE COMPANY, INC.
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Debra K. Osteen
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Chief Executive Officer and Director
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March 21, 2019
58
Reconciliation of Adjusted EBITDA for Purposes of Compensation Plans
(Unaudited)
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(in thousands)
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2018
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2017
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Net income attributable to Acadia Healthcare Company, Inc.
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$
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(175,750
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)
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$
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199,835
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Net loss attributable to noncontrolling interests
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264
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(246
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)
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Provision for income taxes
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6,532
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37,209
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Interest expense, net
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185,410
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176,007
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Depreciation and amortization
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158,832
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143,010
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EBITDA
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175,288
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555,815
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Adjustments:
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Equity-based compensation expense (a)
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22,001
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23,467
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Transaction-related expenses (b)
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34,507
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24,267
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Debt extinguishment costs (c)
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1,815
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810
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Legal settlement expense (d)
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22,076
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Loss on impairment (e)
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337,889
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Adjusted EBITDA, as reported
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$
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593,576
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$
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604,359
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Severance and restructuring costs (f)
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3,256
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3,365
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Other
non-cash
charges (g)
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360
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398
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Foreign currency translation adjustment (j)
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(6,064
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)
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Adjusted EBITDA for purposes of compensation plans
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$
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597,192
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$
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602,058
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Reconciliation of Adjusted EPS for Purposes of Compensation Plans
(Unaudited)
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(in thousands)
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2018
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2017
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Net income attributable to Acadia Healthcare Company, Inc.
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$
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(175,750
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)
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$
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199,835
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Adjustments to income:
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Transaction related expenses (b)
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34,507
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24,267
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Debt extinguishment costs (c)
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1,815
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810
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Legal settlement expense (d)
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22,076
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Loss on impairment (e)
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337,889
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Severance and restructuring costs (f)
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3,256
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3,365
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Other
non-cash
charges (g)
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360
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398
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Adoption of ASU
2016-09
(h)
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1,740
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Tax reform adjustment (i)
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(10,000
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)
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Foreign currency translation adjustment (j)
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(3,895
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)
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Income tax effect of adjustments to income (k)
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(15,200
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)
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(6,304
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)
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Adjusted income from continuing operations attributable to Acadia Healthcare Company,
Inc.
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$
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208,953
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$
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210,216
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Weighted-average shares outstanding - diluted
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87,415
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87,060
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Adjusted EPS for purposes of compensation plans
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$
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2.39
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$
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2.41
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(a)
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Represents the equity-based compensation expense of Acadia.
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(b)
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Represents transaction-related expenses incurred by Acadia primarily related to acquisitions, integration
efforts and the CEO transition in December 2018
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(c)
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Represents debt extinguishment costs recorded in connection with the repricing amendments to the Amended and
Restated Credit Agreement in May 2017 and March 2018 and the repayment of the 9.0% and 9.5% Revenue Bonds in December 2018.
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(d)
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Represents $19.0 million related to the Companys billing for lab services in West Virginia and
$3.1 million related to the resolution of the shareholder class action lawsuit filed in 2011 in connection with our merger with PHC.
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(e)
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Represents a
non-cash
goodwill impairment charge of $325.9 million
and a
non-cash
long-lived asset impairment charge of $12.0 million related to our U.K. Facilities.
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(f)
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Represents severance and restructuring costs not included in transaction costs.
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(g)
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Represents
non-cash
charges such as loss on disposal of assets and
other
one-time
charges.
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(h)
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Represents the impact of adopting ASU
2016-09
Improvements to
Employee Share-Based Payment Accounting.
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59
(i)
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Represents an adjustment to the Companys income tax benefit from the enactment of the Tax Cut and Jobs
Act for the year ended December 31, 2017.
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(j)
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Represents the impact of foreign earnings translation based on the difference in the actual exchange rate for
the year ended December 31, 2017 and the exchange rate used to establish Adjusted EBITDA and Adjusted EPS targets.
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(k)
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Represents the income tax effect of adjustments to income based on tax rates of 7.0% and 19.9% for the three
months ended December 31, 2018 and 2017, respectively, and 14.0% and 23.6% for the year ended December 31, 2018 and 2017, respectively.
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60
ACADIA HEALTHCARE COMPANY, INC.
C/O BROADRIDGE CORPORATE ISSUER SOLUTIONS
PO BOX 1342
BRENTWOOD, NY 11717
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VOTE BY INTERNET - www.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
cut-off
date or 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.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would
like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via
e-mail
or the Internet.
To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
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
cut-off
date or 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.
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TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR
RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Directors recommends you vote FOR the following:
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1.
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Election of Directors
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01
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Nominees
William F. Grieco
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For
☐
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Against
☐
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Abstain
☐
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The Board of Directors recommends you vote FOR proposal 4.
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For
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Against
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Abstain
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02
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Reeve B. Waud
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☐
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☐
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☐
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4
Ratify the appointment of Ernst & Young LLP as
the Companys independent registered public accounting firm for the fiscal year ending December 31, 2019.
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☐
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☐
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☐
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The Board of Directors recommends you vote FOR proposals 2.
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For
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Against
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Abstain
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2
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Advisory vote on the compensation of the Companys named executive officers as presented in the Proxy Statement.
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☐
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☐
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☐
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NOTE:
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof.
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The Board of Directors recommends you vote 1 YEAR on proposal 3.
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1 year
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2 years
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3 years
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Abstain
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3
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Advisory vote on the frequency of the advisory vote on the compensation
of the Companys named executive officers.
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☐
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☐
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☐
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☐
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For address change/comments, mark here.
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☐
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(see reverse for instructions)
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Yes
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No
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Please indicate if you plan to attend this meeting
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☐
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☐
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Please sign exactly as your name(s) appear(s) hereon. When
signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by
authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement and Annual
Report are available at
www.proxyvote.com
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ACADIA HEALTHCARE COMPANY, INC.
REVOCABLE PROXY
2019 ANNUAL MEETING OF STOCKHOLDERS
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on May 2,
2019: The Notice & Proxy Statement and the Companys 2018 Annual Report to Stockholders are available at www.proxyvote.com.
The undersigned hereby appoints David M. Duckworth and Christopher L. Howard, and either of them, as proxies, with full power of substitution and
resubstitution, to vote all of the shares of Common Stock that the undersigned is entitled to vote at the annual meeting of stockholders of Acadia Healthcare Company, Inc., to be held at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, on
Thursday, May 2, 2019, at 9:30 a.m. (Central Time), and at any adjournment thereof.
This proxy is being solicited by the Board of Directors and will be voted as specified. If not otherwise specified, the above named proxies will vote
(a) FOR the election as directors of the nominees named on the reverse side (b) FOR each of proposals 2 and 4 and (c) for a frequency of 1 Year with respect to Proposal 3.
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Address change/comments:
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(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
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Continued and to be signed on reverse side
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