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Section 1: DEF 14A (FORM DEF 14A)

cabo20180328_def14a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

 

Check the appropriate box:

 

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under § 240.14a-12

 

Cable One, 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):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

(1)

 Title of each class of securities to which the transaction applies:

 

(2)

 Aggregate number of securities to which the transaction applies:

 

(3)

 Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

 Proposed maximum aggregate value of the transaction:

 

(5)

 Total fee paid:

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 Amount Previously Paid:

 

(2)

 Form, Schedule or Registration Statement No.:

 

(3)

 Filing Party:

 

(4)

 Date Filed:

 

 

Table of Contents

 

210 E. Earll Drive

Phoenix, AZ 85012

 

April 3, 2018

 

 

 

Dear Fellow Stockholders:

 

I am pleased to invite you to attend the 2018 Annual Meeting of Stockholders (the “Annual Meeting”) of Cable One, Inc. (the “Company”). The Annual Meeting will be held at the Company’s headquarters, 210 East Earll Drive, Phoenix, Arizona, 85012, on Tuesday, May 8, 2018, at 8:00 a.m., local time.

 

Included with this letter are a Notice of Annual Meeting of Stockholders and Proxy Statement, which describe the business to be conducted at the Annual Meeting.

 

Your vote is important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the internet, as well as by telephone, or, if you requested to receive printed proxy materials, by returning a proxy card or voting instruction form in the envelope provided. If you plan to attend the Annual Meeting, kindly so indicate in the space provided on the proxy card or when prompted if voting over the internet or by telephone.

 

 

Sincerely,

 

/s/ Julia M. Laulis

 

Julia M. Laulis

Chair of the Board, President and

Chief Executive Officer

 

 

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CABLE ONE, INC.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

May 8, 2018

 

 

The 2018 Annual Meeting of Stockholders of Cable One, Inc. (the “Company”) will be held at the Company’s headquarters, 210 East Earll Drive, Phoenix, Arizona, 85012, on Tuesday, May 8, 2018, at 8:00 a.m., local time, for the following purposes:

 

 

1.

To elect three Class III directors to hold office until the 2021 annual meeting of stockholders and until their respective successors are elected and qualified, as more fully described in the accompanying Proxy Statement.

 

 

2.

To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018.

 

 

3.

To approve the compensation of the Company’s named executive officers for 2017 on an advisory basis.

 

 

4.

To transact such other business as may properly come before the meeting or any adjournment thereof.

 

The Board of Directors of the Company has fixed the close of business on March 16, 2018, as the record date for the determination of stockholders entitled to notice of and to vote at the meeting.

 

It is important that your shares be represented and voted at the meeting. Please sign and return your proxy card at your earliest convenience. You may also vote your shares by telephone or over the internet. If you choose to vote your shares by telephone or over the internet, please follow the instructions in the enclosed Proxy Statement and proxy card. You may revoke your proxy at any time before it has been voted at the meeting. You may vote in person at the meeting even if you have previously given your proxy. For shares held through a broker, bank or other nominee, you may vote submitting voting instructions as provided by your broker, bank or other nominee; however, you may not vote such shares in person at the meeting unless you have a proxy executed in your favor by your broker, bank or other nominee.

 

 

By Order of the Board of Directors,

 

/s/ Peter N. Witty

 

Peter N. Witty

Secretary

 

 

Phoenix, Arizona

April 3, 2018

 

 

Table of Contents

 

TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS

1

PROPOSAL 1: ELECTION OF DIRECTORS

5

CORPORATE GOVERNANCE

10

PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

16

EXECUTIVE COMPENSATION

18

PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION FOR 2017

44

DIRECTOR COMPENSATION

45

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

47

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

49

EQUITY COMPENSATION PLAN INFORMATION

49

REPORT OF THE AUDIT COMMITTEE

50

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

51

STOCKHOLDER PROPOSALS FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS

52

HOUSEHOLDING OF PROXY MATERIALS

52

OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING

52

ANNEX A: USE OF NON-GAAP FINANCIAL METRICS

A-1

 

 

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CABLE ONE, INC.

210 E. Earll Dr.

Phoenix, Arizona 85012

 


 

 

PROXY STATEMENT

FOR THE 2018 ANNUAL MEETING OF STOCKHOLDERS

May 8, 2018

 

 


 

This Proxy Statement contains information relating to the 2018 Annual Meeting of Stockholders (the “Annual Meeting”) of Cable One, Inc. (the “Company, “we,” “us,” “our,” or “Cable One”) to be held at the Company’s headquarters, 210 East Earll Drive, Phoenix, Arizona, 85012, on Tuesday, May 8, 2018, at 8:00 a.m., local time, or any adjournments thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The Board of Directors (the “Board”) of the Company is making this proxy solicitation.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders

to Be Held on May 8, 2018

 

Our Proxy Statement and Annual Report to Stockholders are available at

www.proxyvote.com

 

These proxy solicitation materials, including this Proxy Statement and the accompanying proxy card or voting instruction form, were first distributed and made available on or about April 3, 2018 to all stockholders entitled to vote at the Annual Meeting.

 

QUESTIONS AND ANSWERS

 

Q:

What am I voting on?

A:

There are three proposals scheduled to be voted on at the Annual Meeting:

 

 

The election of three Class III directors to hold office until the 2021 annual meeting of stockholders and until their respective successors are elected and qualified or as otherwise provided in our Amended and Restated By-laws (“By-laws”);

 

 

The ratification of the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of our Company for the year ending December 31, 2018; and

 

 

The approval of the compensation of our named executive officers for 2017 on an advisory basis (also referred to as the “say-on-pay” vote).

 

In the event that any nominee for election withdraws or for any reason is not able to serve as a director, Julia M. Laulis, Kevin P. Coyle and Peter N. Witty, acting as your proxies, may vote for such other person as the Board may nominate.

 

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Q:

What are the voting recommendations of the Board?

A:

The Board unanimously recommends you vote as follows:

 

 

 

Board Vote Recommendation

 

 

Page Reference

for Additional

Detail

 

Election of Directors

 

“FOR” each nominated director

 

 

5

 

Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018

 

“FOR”

 

 

16

 

Advisory Vote on the Approval of Executive Compensation for 2017

 

“FOR”

 

 

44

 

 

The Board knows of no reason that would cause any director nominee to be unable to act or to refuse to accept his or her nomination or election.

 

Q:

Will any other matters be voted on?

A:

We are not aware of any matters to be voted on other than those referred to in this Proxy Statement. If any other matter is properly brought before the Annual Meeting, Julia M. Laulis, Kevin P. Coyle and Peter N. Witty, acting as your proxies, will vote for you at their discretion.

 

Q:

How do I vote?

A:

If you are a stockholder of record (that is, if your shares are registered in your name and not in “street name”), there are four ways to vote:

 

 

Over the internet at www.proxyvote.com or scan the QR code on your proxy card with your mobile device. We encourage you to vote this way;

 

 

By toll-free telephone at 1-800-690-6903;

 

 

By completing and mailing your proxy card; or

 

 

By attending the Annual Meeting and voting in person.

 

If you hold shares in “street name” (that is, your shares are held in a brokerage account by a broker, bank or other nominee, also known as “beneficial owners”), you should follow the voting instructions provided by your broker, bank or other nominee.

 

If you wish to vote over the internet or by telephone, your vote must be received by 11:59 p.m., Eastern Time, on the day before the Annual Meeting. After that time, internet and telephone voting will not be permitted, and a stockholder of record wishing to vote who has not previously submitted a signed proxy card must vote in person at the Annual Meeting. Stockholders of record will be on a list held by the inspector of elections. Street name stockholders must obtain a proxy executed in their favor from the institution that holds their shares, whether it is their brokerage firm, bank or other nominee, and present it to the inspector of elections in order to vote at the Annual Meeting. Voting in person by a stockholder at the Annual Meeting will replace any previous votes submitted by proxy.

 

Your shares will be voted as you indicate. If you do not indicate your voting preferences, Julia M. Laulis, Kevin P. Coyle and Peter N. Witty, acting as your proxies, will vote your shares in accordance with the Board’s recommendations specified above under “What are the voting recommendations of the Board?

 

Q:

Who can vote?

A:

You can vote if you were a stockholder as of the close of business on March 16, 2018 (the “Record Date”). Each of your shares—whether held (i) directly in your name as stockholder of record or (ii) in street name—entitles you to one vote with respect to each proposal to be voted on at the Annual Meeting. However, street name stockholders generally cannot vote their shares directly and instead must instruct the broker, bank or nominee how to vote their shares.

 

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Q:

Can I change my vote?

A:

Yes. If you are a stockholder of record, you can change your vote or revoke your proxy at any time before the Annual Meeting:

 

 

By entering a new vote over the internet or by telephone by 11:59 p.m., Eastern Time, on the day before the Annual Meeting;

 

 

By returning a properly signed proxy card with a later date that is received at or prior to the Annual Meeting; or

 

 

By voting in person at the Annual Meeting.

 

If you hold shares in street name, you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your voting instructions in person at the Annual Meeting if you obtain a signed proxy from the record holder (bank, broker or other nominee) giving you the right to vote the shares. Only the latest validly executed proxy that you submit will be counted.

 

Q:

What vote is required to approve a proposal?

A:

Each proposal requires the affirmative vote of majority of the votes cast at the Annual Meeting in order to be approved. “Abstentions” and “broker non-votes” will not be counted as votes cast with respect to that proposal, although they will have the practical effect of reducing the number of affirmative votes required to achieve a majority by reducing the total number of shares from which the majority is calculated.

 

Regarding Proposal 1 (election of the Company’s directors), in accordance with our By-laws, any incumbent director who fails to receive a majority of the votes cast must submit an offer to resign from the Board no later than two weeks after the Company certifies the voting results. In that case, the remaining members of the Board would consider the resignation offer and may either (i) accept the offer or (ii) reject the offer and seek to address the underlying cause(s) of the majority-withheld vote. The Board must decide whether to accept or reject the resignation offer within 90 days following the certification of the stockholder vote, and, once the Board makes its decision, the Company must promptly make a public announcement of the Board’s decision (including a statement regarding the reasons for its decision in the event the Board rejects the offer of resignation).

 

Q:

Who will count the vote?

A:

A representative of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspector of elections.

 

Q:

Who can attend the Annual Meeting?

A:

All stockholders of record as of the close of business on March 16, 2018 can attend. Street name stockholders must show proof of ownership in order to be admitted to the Annual Meeting.

 

Q:

What do I need to do to attend the Annual Meeting?

A:

In order to be admitted to the Annual Meeting, you must present proof of ownership of our common stock as of the Record Date. This can be a brokerage statement or letter from a broker, bank or other nominee indicating your ownership as of the Record Date, a proxy card, or a legal proxy or voting instruction card provided by your broker, bank or nominee. Any holder of a proxy from a stockholder must present the proxy card, properly executed, and a copy of the proof of ownership. Stockholders and proxyholders may also be asked to present a form of photo identification such as a driver’s license or passport.

 

In addition, please follow these instructions:

 

 

If you vote by using the enclosed proxy card, check the appropriate box on the card to indicate that you plan to attend the Annual Meeting.

 

 

If you vote over the internet or by telephone, follow the instructions provided to indicate that you plan to attend the Annual Meeting.

 

Seating at the Annual Meeting will be on a first-come, first-served basis upon arrival at the Annual Meeting.

 

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Backpacks, cameras, cell phones with cameras, recording equipment and other electronic recording devices will not be permitted inside the Annual Meeting. Failure to follow the Annual Meeting rules or permit inspection will be grounds for exclusion from the Annual Meeting.

 

Q:

Can I bring a guest?

A:

No. The Annual Meeting is for stockholders only.

 

Q:

What is the quorum requirement of the Annual Meeting?

A:

A majority of the votes entitled to be cast by the outstanding shares of common stock entitled to vote generally on the business properly brought before the Annual Meeting must be present in person or by proxy to constitute a quorum for the Annual Meeting. If you vote, your shares will be part of the quorum. Abstentions and “broker non-votes” will be counted for purposes of determining whether a quorum is present at the Annual Meeting. As of the Record Date, there were 5,733,130 shares of our common stock outstanding and entitled to vote.

 

If you hold your shares in street name and do not provide voting instructions to your broker, New York Stock Exchange (“NYSE”) rules grant your broker discretionary authority to vote your shares on “routine matters” at the Annual Meeting, including for the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018 in Proposal 2. However, the proposals regarding the election of directors and the say-on-pay vote are not considered “routine matters.” As a result, if you do not provide voting instructions to your broker, your shares will be voted on Proposal 2 but will not be voted on Proposals 1 and 3 (resulting in a “broker non-vote” with respect to each of Proposals 1 and 3). Although “broker non-votes” will be counted as present for purposes of determining a quorum, we urge you to promptly provide voting instructions to your broker or other nominee so that your shares are voted on all proposals.

 

Q:

Who is soliciting proxies?

A:

Solicitation of proxies is being made by our management through the mail, in person, over the internet or by telephone, without any additional compensation being paid to such members of management. The cost of such solicitation will be borne by us. In addition, we have requested brokers and other custodians, nominees and fiduciaries to forward proxy cards and proxy soliciting material to stockholders, and we will pay their fees and reimburse them for their expenses in so doing.

 

Q:

What other information about Cable One is available?

A:

The following information is available:

 

 

We maintain on our website, http://ir.cableone.net, copies of our Annual Report on Form 10-K; Annual Report to Stockholders; Corporate Governance Guidelines; Statement of Ethical Principles; Code of Business Conduct; charters of the Audit, Compensation, Executive and Nominating and Governance Committees; Policy Statement Regarding Director Nominations and Stockholder Communications (the “Policy Statement”); and other information about the Company.

 

 

In addition, printed copies of these documents will be furnished without charge (except exhibits) to any stockholder upon written request addressed to our Secretary at 210 E. Earll Drive, Phoenix, Arizona 85012.

 

 

Amendments to, or waivers granted to our directors and executive officers under, the Code of Business Conduct, if any, will be posted on our website. 

 

Q:

Can I receive materials relating to the Annual Meeting electronically?

A:

To assist us in reducing costs related to the Annual Meeting, stockholders who vote over the internet may consent to electronic delivery of mailings related to future annual stockholder meetings. We also make our Proxy Statements and Annual Reports available online and may eliminate mailing hard copies of these documents to those stockholders who consent in advance to electronic distribution. If you are voting over the internet, you may consent online at www.proxyvote.com when you vote. If you hold shares in street name, please also refer to information provided by the broker, bank or other nominee for instructions on how to consent to electronic distribution.

 

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PROPOSAL 1: ELECTION OF DIRECTORS

 

The Board is divided into three classes, designated Class I, Class II and Class III. Directors are elected by class for three-year terms, which continue until the third annual meeting of stockholders following the director’s election and until the director’s successor is elected and qualified. Our Amended and Restated Certificate of Incorporation (“Charter”) and By-laws provide that the number of the directors of the Company will be fixed from time to time by the Board.

 

There are three Class III directors whose term of office expires in 2018. The nominees for election as Class III directors, to serve for a three-year term until the 2021 annual meeting of stockholders and until his or her successor is elected and qualified, are Thomas S. Gayner, Deborah J. Kissire and Thomas O. Might. All nominees are currently directors of the Company. Messrs. Gayner and Might were previously elected by the then-sole stockholder of the Company, Graham Holdings Company (“GHC”), prior to the effective time of our spin-off from GHC (the “spin-off”). Ms. Kissire was recommended by representatives of GHC and elected by the Board in July 2015.

 

The candidates for election have been nominated by the Board based on the recommendation of the Nominating and Governance Committee. In choosing directors and nominees, the Company seeks individuals of the highest personal and professional ethics, integrity, business acumen and commitment to representing the long-term interests of our stockholders. In respect of its composition, the Board considers the diversity, skills and experience of prospective nominees in the context of the needs of the Board and seeks directors who are “independent” under applicable law and listing standards. Although our Corporate Governance Guidelines and the Policy Statement do not prescribe specific standards regarding Board diversity, the Board considers, as a matter of practice, the diversity of prospective nominees (including incumbent directors), both culturally and in terms of the variety of viewpoints on the Board, which may be enhanced by a mix of different professional and personal backgrounds and experiences.

 

Directors are elected by the affirmative vote of majority of the votes cast at the Annual Meeting. The Board knows of no reason that would cause any nominee to be unable to act or to refuse to accept his or her nomination or election. In the event that any nominee withdraws or for any reason is not able to serve as a director, the individuals acting as your proxies may vote for such other person as the Board may nominate.

 

The following table presents certain information, as of March 16, 2018, concerning each nominee for election as a director and each director whose term of office will continue after the Annual Meeting.

 

Name

  

Age

  

Director

Since

  

Position

  

Expiration of

Term as

Director

Ms. Julia M. Laulis

  

55

  

2017

  

Chair of the Board, President and Chief Executive Officer

  

2019

Mr. Brad D. Brian*

  

65

  

2015

  

Director

  

2019

Mr. Thomas S. Gayner*

  

56

  

2015

  

Lead Independent Director

  

2018

Ms. Deborah J. Kissire*

  

60

  

2015

  

Director

  

2018

Mr. Thomas O. Might

  

66

  

1995

  

Director

  

2018

Mr. Alan G. Spoon*

  

66

  

2015

  

Director

  

2020

Mr. Wallace R. Weitz*

  

68

  

2015

  

Director

  

2020

Ms. Katharine B. Weymouth*

  

51

  

2015

  

Director

  

2019

                       

 * Independent Director

 

In addition to the information presented below regarding each nominee’s specific qualifications, skills, attributes and experience that led the Board to conclude that he or she should serve as a director, the Board believes that each nominee has demonstrated established records of accomplishment in areas relevant to our strategy and operations and share characteristics identified in our Corporate Governance Guidelines, Statement of Ethical Principles and the Policy Statement as essential to a well-functioning deliberative body, including honesty, integrity, judgment, acumen, ethics, financial literacy, independence, competence, diligence and commitment to the interests of all stockholders to build long-term stockholder value.

 

All of the directors and nominees have held senior positions as leaders of complex organizations and gained expertise in core management skills, such as strategy and business development, innovation, line operations, brand management, finance, compensation and leadership development, compliance and risk management. They have significant experience in corporate governance and oversight through their positions as senior executives and as directors of public companies and other institutions. These skills and experience are pertinent to our current and evolving business strategies, as well as to the Board’s oversight role, and enable the directors to provide diverse perspectives about the complex issues facing the Company.

 

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The following matrix and biographies highlight specific qualifications, skills, attributes and experience of each of our directors who is a nominee for election as a director or whose term of office will continue after the Annual Meeting. The matrix is a summary only; therefore, it does not include all of the qualifications, skills, attributes and experience that each director offers, and the fact that a particular qualification, skill, attribute or experience is not listed does not mean that a director does not possess it.

 

  

  

Cable /

Communications /

Media Industry

Experience

  

Leadership

Experience

  

Governance /

Board

Experience

  

Financial /

Accounting

Expertise

  

Legal

Expertise

  

Diversity

Brad D. Brian

  

  

  

  

  

  

  

  

  

  

Thomas S. Gayner

  

  

  

  

  

  

  

  

Deborah J. Kissire

  

  

  

  

  

  

  

  

Julia M. Laulis                  

Thomas O. Might

  

  

  

  

  

  

  

  

  

Alan G. Spoon

  

  

  

  

  

  

  

  

Wallace R. Weitz

  

  

  

  

  

  

  

  

  

Katharine B. Weymouth

  

  

  

  

  

  

  

 

Nominees for Election for a Term Expiring at the 2021 Annual Meeting of Stockholders

 

Thomas S. Gayner

 

Mr. Gayner has served as Co-Chief Executive Officer of Markel Corporation, a publicly traded financial holding company headquartered in Glen Allen, Virginia, since January 2016 and as a director since August 2016. He also served as President and Chief Investment Officer of Markel Corporation from May 2010 until December 2015 and as a director of Markel Corporation from 1998 to 2003. Since 1990, he has served as President of Markel-Gayner Asset Management Corporation. Previously, he was a certified public accountant at PricewaterhouseCoopers LLP and a Vice President of Davenport & Company LLC in Virginia. Mr. Gayner serves on the boards of GHC, Colfax Corporation and The Davis Series Mutual Funds. He also serves on the board of the Community Foundation of Richmond, a non-profit entity.

 

Mr. Gayner brings to the Board the leadership, management oversight and financial skills gained in his role as a senior manager and director of Markel Corporation as well as other public company boards.

 

In considering the nomination of Mr. Gayner to serve an additional term as a director, the other members of the Nominating and Governance Committee (on which Mr. Gayner serves as Chair) and the Board examined and purposefully evaluated Mr. Gayner’s roles with and obligations to entities other than the Company, including his position as an executive officer of Markel Corporation and his services as a board member of other public companies, including our former parent, GHC. His service as a director of GHC prior to the spin-off aligns with our long-term focus and offers stability as we have undertaken a strategic shift to become a residential high-speed data and business services-centric company. The Nominating and Governance Committee and the Board also took note of Mr. Gayner’s perfect attendance record in 2017 at meetings of the Board and of the Committees on which he served, as well as his exceptional attendance record in his nearly three years of service on our Board (Mr. Gayner has attended all but one of his Board and Committee meetings during that time). Furthermore, Mr. Gayner has vigorously discharged his leadership roles as our Lead Independent Director and as Chair of the Executive Committee and the Nominating and Governance Committee, both in preparedness and active participation, and he continues to be a valuable member of the Board with sufficient capacity to devote the necessary time and attention to matters concerning the Board. After a thorough evaluation of all of these considerations, as well as the leadership, management oversight and financial skills brought to the Board by Mr. Gayner, the Nominating and Corporate Governance Committee unanimously recommended and the Board unanimously re-nominated Mr. Gayner for election to the Board.

 

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Deborah J. Kissire

 

Ms. Kissire retired as a partner of Ernst & Young LLP, an independent registered public accounting firm, in July 2015 after a 36-year career. At the time of her retirement, Ms. Kissire served as Ernst & Young’s Vice Chair and East Central Managing Partner as well as a member of the Americas Executive Board. Ms. Kissire serves on the boards of Axalta Coating Systems Ltd. and Omnicom Group Inc., and she has served on the boards of Goodwill Industries of Greater Washington and Junior Achievement USA.

 

Ms. Kissire brings to the Board her significant experience in public company financial reporting, accounting and financial control matters.

 

Thomas O. Might

 

Mr. Might retired as Executive Chairman of Cable One in December 2017. He has been a member of the Board of Cable One since 1995. Prior to his retirement from Cable One, Mr. Might served as Executive Chairman in 2017, as Chairman of the Board from 2015 to 2017, as Chief Executive Officer from 1994 to 2016 and as President from 1994 to 2014.

 

Mr. Might joined The Washington Post Company in 1978 as assistant to publisher Donald E. Graham after serving a summer internship at the newspaper in 1977. He was promoted to Vice President-Production in 1982 and served in that position until 1987, when he became Vice President-Production and Marketing. In 1991, Mr. Might was named Vice President-Advertising Sales.

 

In 1993, Mr. Might was promoted to President and Chief Operating Officer of Cable One. He became President and Chief Executive Officer of Cable One in 1994 and was elected to the Board in 1995.

 

Mr. Might was a Combat Engineer Officer in the U.S. Army from 1972 to 1976.

 

Mr. Might brings to the Board leadership and management oversight skills as well as intimate knowledge and perspective about the strategic and operational opportunities and challenges, economic and industry trends, and competitive and financial positioning of the Company based on his various executive roles at Cable One.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINATED DIRECTORS.

 

Directors Continuing in Office

 

Brad D. Brian

 

Mr. Brian is a Co-Managing Partner at the California law firm Munger, Tolles & Olson LLP, having been with the firm for over 36 years. A complex civil and criminal litigator, Mr. Brian is a Fellow in the American College of Trial Lawyers and the International Academy of Trial Lawyers. Mr. Brian has represented numerous Fortune 500 corporations in lawsuits and government investigations. This work has included trials, regulatory investigations and internal corporate investigations. He also has defended companies against more than 40 lawsuits filed under the qui tam provisions of the False Claims Act. Mr. Brian is the co-editor of Internal Corporate Investigations (ABA 4th Ed. 2017). Mr. Brian was named a “Litigator of the Year” by The American Lawyer in 2016.

 

Mr. Brian brings to the Board his experience as a litigator and corporate advisor and his understanding of legal matters that may arise at Cable One.

 

Julia M. Laulis

 

Ms. Laulis has been Chair of the Board since January 2018, Chief Executive Officer and a member of the Board since January 2017 and President of Cable One since January 2015.

 

Ms. Laulis joined Cable One in 1999 as Director of Marketing – Northwest Division. In 2001, she was named Vice President of Operations for the Southwest Division. In 2004, she accepted the additional responsibility for starting up Cable One’s Phoenix Customer Care Center. In 2008, she was named Chief Operations Officer, and in 2012, she was named Chief Operating Officer of Cable One. In January 2015, she was promoted to President and Chief Operating Officer of Cable One.

 

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Prior to joining Cable One, Ms. Laulis served in various senior marketing positions with Jones Communications. Ms. Laulis began her 30-plus-year career in the cable industry with Hauser Communications.

 

Ms. Laulis serves on the boards of CableLabs and C-SPAN.

 

Ms. Laulis brings to the Board her significant operational and leadership experience as well as intimate knowledge and perspective about the strategic and operational opportunities and challenges, economic and industry trends, and competitive and financial positioning of the Company based on her various executive roles at Cable One.

 

Alan G. Spoon

 

Mr. Spoon is currently Partner Emeritus at Polaris Partners, a private investment firm that provides venture capital to development-stage companies. He has been with Polaris Partners since May 2000, previously serving as Managing General Partner and General Partner. Mr. Spoon was Chief Operating Officer and a director of The Washington Post Company from March 1991 through May 2000 and served as President of The Washington Post Company from September 1993 through May 2000. Prior to that, he held a wide variety of positions at The Washington Post Company, including President of Newsweek from September 1989 to May 1991. Mr. Spoon began his career at, and later became a partner of, The Boston Consulting Group.

 

Mr. Spoon serves on the boards of Danaher Corporation, Fortive Corporation, IAC/InterActiveCorp and Match Group, Inc. and previously served as a director of Cable One from 1991 to 2000. Additionally, he has served on the boards of Getty Images, TechTarget, Inc., Human Genome Sciences, Ticketmaster and American Management Systems. Previously, Mr. Spoon was a member of the Board of Regents at the Smithsonian Institution (formerly Vice Chairman). He is a member of the MIT Corporation (member of the Executive Committee), where he also serves on the board of edX (an online education platform).

 

Mr. Spoon’s public company leadership experience gives him insight into business strategy, leadership and executive compensation, and his public company and private equity experience give him insight into technology trends, acquisition strategy and financing. With more than 18 years of experience with The Washington Post Company, including nine years as a director of Cable One, he also has knowledge of Cable One’s business.

 

Wallace R. Weitz

 

Mr. Weitz founded the investment management firm Weitz Investment Management, Inc. in 1983 as Wallace R. Weitz & Company and has since served in various roles at Weitz Investment Management, including Chief Investment Officer, President and Portfolio Manager. Mr. Weitz manages the Partners III Opportunity Fund and co-manages the Partners Value Fund and Hickory Fund, each of which is managed by Weitz Investment Management. Mr. Weitz has served as a Trustee of the Weitz Funds since 1986. Mr. Weitz began his career in New York as a securities analyst before joining Chiles, Heider & Co. in Omaha, Nebraska in 1973. There, he spent 10 years as an analyst and portfolio manager. Mr. Weitz is on the Board of Trustees for Carleton College and serves on various other non-profit boards.

 

Mr. Weitz brings to the Board his substantial finance experience as an investor in public companies.

 

Katharine B. Weymouth

 

Ms. Weymouth was the Chief Executive Officer of Washington Post Media and Publisher of The Washington Post newspaper from February 2008 until October 2014. She joined The Washington Post Company in 1996 as Assistant General Counsel of The Washington Post newspaper and held various positions within that organization over the course of 18 years. Ms. Weymouth held several positions within The Washington Post’s advertising department, including Director of the department’s jobs unit, Director of Advertising Sales and Vice President of Advertising. She also served as Associate Counsel of Washingtonpost.Newsweek Interactive, then the online publishing subsidiary of The Washington Post Company. Ms. Weymouth has been a director of GHC, from which Cable One was spun-off in July 2015, since September 2010. She serves as a Trustee of the Philip L. Graham Fund and as a director of The Economic Club of Washington, D.C. and the Community Foundation for the Greater Capital Region.

 

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Ms. Weymouth brings to the Board public company leadership, management oversight and operational expertise gained through her various senior roles with and directorship of GHC.

 

There are no family relationships among any of our directors and executive officers.

 

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CORPORATE GOVERNANCE

 

Board Committees and Meeting Attendance

 

The standing committees of the Board include the Audit Committee, Compensation Committee, Executive Committee, and Nominating and Governance Committee. As discussed in more detail below, each of the Audit, Compensation and Nominating and Governance Committees is comprised entirely of independent directors, consistent with the definition of “independent” under NYSE listing standards applicable to boards of directors generally and board committees in particular.

 

Each committee of the Board operates under a written charter that is maintained on our website, http://ir.cableone.net/govdocs, and has the authority to hire at the expense of the Company independent legal, accounting, financial or other advisors as it deems necessary or appropriate.

 

The following table summarizes the current membership of the Board and each of its committees, as well as the number of times the Board and each committee met during 2017.

 

Director

  

Board

  

Audit

Committee

  

Compensation Committee

  

Executive Committee

  

Nominating

and

Governance Committee

Brad D. Brian*

  

  

  

  

  

  

  

Thomas S. Gayner*

  

Lead Independent Director

  

  

  

  

  

Chair

  

Chair

Deborah J. Kissire*

  

  

Chair

  

  

  

  

  

  

Julia M. Laulis

  

Chair

  

  

  

  

  

  

  

Thomas O. Might

  

  

  

  

  

  

 

  

  

Alan G. Spoon*

  

  

  

 

  

  

  

Wallace R. Weitz*

  

  

  

  

Chair

  

  

  

Katharine B. Weymouth*

  

  

  

  

  

  

  

Number of Meetings

  

5

  

6

  

6

  

4

  

4

 * Independent Director

 

Each director attended at least 75% of the meetings of the Board and the committees of the Board on which the director served in 2017.

 

Audit Committee

 

The functions of the Audit Committee include, among other duties, overseeing:

 

 

management’s conduct of our financial reporting process (including the development and maintenance of systems of internal accounting and financial controls);

 

 

the integrity of our financial statements;

 

 

our compliance with legal and regulatory requirements;

 

 

the qualifications and independence of our outside auditor;

 

 

the performance of our internal audit function;

 

 

the outside auditor’s annual audit of our financial statements; and

 

 

the preparation of certain reports required by the rules and regulations of the Securities and Exchange Commission (the “SEC”).

 

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The Board has determined that all members of the Audit Committee are non-employee, “financially literate,” “independent” directors within the meaning of the listing standards of the NYSE. None of the members of the Audit Committee has accepted, other than in such person’s capacity as a committee or Board member, any consulting, advisory or other compensatory fee from the Company or its affiliates.

 

The Board has determined that each of Ms. Kissire and Mr. Spoon has the requisite background and experience to be (and is) designated an “audit committee financial expert” within the meaning of Item 407(d)(5)(ii) of Regulation S-K due to his or her extensive experience, as discussed under “Proposal 1: Election of Directors.” In addition, the Board has determined that all of the members of the Audit Committee are well grounded in financial matters and are familiar with U.S. generally accepted accounting principles (“GAAP”). All of the members of the Audit Committee have a general understanding of internal controls and procedures for financial reporting, as well as an understanding of audit committee functions. To the extent that matters come before the Audit Committee that involve accounting issues, the members of the Audit Committee consult with and rely on management, in addition to consulting with external experts, such as the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP. In addition, the Audit Committee has authority to obtain advice from internal or external legal or other advisors.

 

Compensation Committee

 

The functions of the Compensation Committee include, among other duties:

 

 

determining and approving the compensation of our Chief Executive Officer;

 

 

reviewing and approving the compensation of other members of our senior management;

 

 

overseeing the administration and determination of awards under our compensation plans; and

 

 

preparing any report on executive compensation required by the rules and regulations of the SEC.

 

All members of the Compensation Committee are non-employee directors and have been determined to be “independent” within the meaning of the listing standards of the NYSE applicable to service on compensation committees.

 

Executive Committee

 

The functions of the Executive Committee include, among other duties:

 

 

reviewing and providing guidance to the Board and to senior management of the Company regarding the Company’s strategy, operating plans and operating performance; and

 

 

performing such other duties or responsibilities as may be delegated to the Committee from time to time by the Board.

 

Nominating and Governance Committee

 

The functions of the Nominating and Governance Committee include, among other duties:

 

 

overseeing our corporate governance practices;

 

 

reviewing and recommending to our Board amendments to our By-laws, Charter, committee charters and other governance policies;

 

 

reviewing and making recommendations to our Board regarding the structure of our various board committees;

 

 

identifying, reviewing and recommending to our Board individuals for election to the Board;

 

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adopting and reviewing policies regarding the consideration of candidates for our Board proposed by stockholders and other criteria for membership on our Board;

 

 

overseeing the Chief Executive Officer succession planning process, including an emergency succession plan;

 

 

reviewing the leadership structure for our Board;

 

 

overseeing our Board’s annual self-evaluation; and

 

 

overseeing and monitoring general governance matters, including communications with stockholders and regulatory developments relating to corporate governance.

 

All members of the Nominating and Governance Committee are non-employee directors and have been determined to be “independent” within the meaning of the listing standards of the NYSE.

 

Corporate Governance Guidelines and Codes of Conduct

 

In order to help assure the highest levels of business ethics at Cable One, our Board has adopted the following Corporate Governance Guidelines and codes of conduct, which are maintained on our website, http://ir.cableone.net/govdocs.

 

Corporate Governance Guidelines

 

Our Corporate Governance Guidelines provide a framework for the governance of the Company. Among other things, our Corporate Governance Guidelines address director qualifications, Board operations, director compensation, management review and succession and director orientation and continuing education. The Corporate Governance Guidelines also provide for annual self-evaluations by the Board and its committees.

 

The Board has not established limits on the number of terms a director may serve prior to his or her 75th birthday; however, no director may be nominated to a new term if he or she would be age 75 or older at the time of the election.

 

Code of Business Conduct

 

Our Code of Business Conduct applies to our employees, including any employee directors. The Code of Business Conduct contains policies pertaining to, among other things, employee conduct in the workplace; electronic communications and information security; accuracy of books, records and financial statements; securities trading; confidentiality; conflicts of interest; fairness in business practices; anti-bribery and anti-corruption laws; antitrust laws; and political activities and solicitations.

 

Statement of Ethical Principles 

 

Our Statement of Ethical Principles applies to our directors, officers and employees and is designed to deter wrongdoing and to promote, among other things:

 

 

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

 

the protection of the confidentiality of our non-public information;

 

 

the responsible use of and control over our assets and resources;

 

 

full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and other regulators and in our other public communications;

 

 

compliance with applicable laws, rules and regulations; and

 

 

accountability for adherence to the Statement of Ethical Principles and prompt internal reporting of any possible violation of the Statement of Ethical Principles.

 

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Director Nomination Process

 

Under our By-laws, stockholders of record are able to nominate persons for election to our Board only by providing proper notice to our Secretary. Proper notice must be timely, generally between 90 and 120 days prior to the relevant meeting (or, in the case of annual meetings, prior to the first anniversary of the prior year’s annual meeting), and must include, among other information, the name and address of the stockholder giving the notice, a representation that such stockholder is a holder of record of our common stock as of the date of the notice, certain information regarding such stockholder’s beneficial ownership of our securities and any derivative instruments based on or linked to the value of or return on our securities as of the date of the notice, certain information relating to each person whom such stockholder proposes to nominate for election as a director, a brief description of any other business such stockholder proposes to bring before the meeting and the reason for conducting such business and a representation as to whether such stockholder intends to solicit proxies.

 

The Nominating and Governance Committee will consider director candidates recommended by stockholders. Our By-laws provide that any stockholder of record entitled to vote for the election of directors at the applicable meeting of stockholders may nominate persons for election to our Board, if such stockholder complies with the applicable notice procedures.

 

Our Corporate Governance Guidelines and the Policy Statement contain information concerning the responsibilities of the Nominating and Governance Committee with respect to identifying and evaluating future director candidates. The Policy Statement sets forth our Nominating and Governance Committee’s general policy regarding the consideration of candidates proposed by stockholders; a description of the minimum criteria used by the Nominating and Governance Committee in evaluating candidates for the Board; a description of the Nominating and Governance Committee’s process for identifying and evaluating director nominees (including candidates recommended by stockholders); and the general process for communications between stockholders and the Board.

 

Majority Voting for Directors

 

Our By-laws provide for majority voting in uncontested director elections, and any incumbent director who fails to receive a majority of the votes cast must submit an offer to resign from the Board no later than two weeks after the Company certifies the voting results. In that case, the remaining members of the Board would consider the resignation offer and may either (i) accept the offer or (ii) reject the offer and seek to address the underlying cause(s) of the majority-withheld vote. The Board must decide whether to accept or reject the resignation offer within 90 days following the certification of the stockholder vote, and, once the Board makes its decision, the Company must promptly make a public announcement of the Board’s decision (including a statement regarding the reasons for its decision in the event the Board rejects the offer of resignation).

 

Director Independence

 

As set forth in our Corporate Governance Guidelines, the majority of directors must be “independent” according to the criteria for independence established by the NYSE. Our Corporate Governance Guidelines also require that all the members of each of the standing committees (other than the Executive Committee) must be independent and may not directly or indirectly accept any consulting, advisory or other compensatory fee (other than pension or other forms of deferred compensation for prior service which is not contingent in any way on continued service) from the Company or its subsidiaries and none of the members of the standing committees may have a material relationship with the Company. In order to determine that a director is independent, the Board must make an affirmative determination that the director satisfies applicable regulatory and NYSE listing requirements to be an independent director of the Company and that the director is free of any other relationship that would interfere with the exercise of independent judgment by such director. The Board has determined that the following directors are independent: Naomi M. Bergman (who did not stand for re-election at the conclusion of her term of office in 2017), Brad D. Brian, Thomas S. Gayner, Deborah J. Kissire, Alan G. Spoon, Wallace R. Weitz and Katharine B. Weymouth.

 

Executive Sessions of the Non-Management Directors

 

The listing standards of the NYSE call for the non-management directors of the Company to meet at regularly scheduled executive sessions without management. Mr. Gayner serves as Lead Independent Director of the Board, and he presides at the executive sessions of the Board. In 2017, the non-management directors regularly met in executive sessions outside the presence of any employee director or management, and the non-management directors expect to meet in executive session in 2018 as appropriate.

 

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Board Leadership Structure

 

The Board supports flexibility in determining its leadership structure by not requiring the separation of the roles of Chairman of the Board and Chief Executive Officer. The Board believes that the Company and its stockholders are best served by maintaining this flexibility rather than mandating a particular leadership structure.

 

In 2017, Mr. Might served as Chairman of the Board as well as Executive Chairman of the Company, while Ms. Laulis served as President and Chief Executive Officer. Effective January 1, 2018, Ms. Laulis was appointed Chair of the Board upon Mr. Might’s retirement as an employee of the Company. During 2017, we maintained separate roles between Chairman of the Board and Chief Executive Officer in recognition of the differences between the two responsibilities and because we believed that, at that time and given Ms. Laulis’ recent promotion to the role of Chief Executive Officer, the separation of the roles was in the best interests of the Company.

 

We currently do not separate the roles of Chair of the Board and Chief Executive Officer. The Board believes that Ms. Laulis’ service as both Chair of the Board and Chief Executive Officer is in the best interests of the Company and that this structure is appropriate because Ms. Laulis possesses in-depth strategic and operational knowledge of the opportunities and challenges facing the Company and has played a critical role in the growth of the Company during her nearly 20-year career at Cable One through her experiences as an employee, executive and director of Cable One. Her dual role promotes decisive leadership, accountability and clarity in the overall direction of the Company’s business strategy as well as effective decision-making and strategic alignment between the Board and the Company’s senior management. The Board also believes that this approach facilitates clear and consistent communication of the Company’s strategy to all stakeholders and that, in consultation with our Lead Independent Director, Ms. Laulis is best positioned to develop agendas that focus on matters that merit Board attention.

 

To ensure the Board’s independence and proper functioning, the Board also appoints a Lead Independent Director. Mr. Gayner currently serves in this capacity. The Lead Independent Director typically chairs executive sessions of Board meetings and consults with Ms. Laulis and senior management regarding issues to be included in Board meeting agendas. The Lead Independent Director is also expected to collaborate with Ms. Laulis, along with the other members of the Executive Committee, in reviewing key operational and other matters and to act as a liaison between Ms. Laulis and the non-management directors. The role of the Lead Independent Director is able to provide strong leadership of the non-management directors and help the Board provide effective independent oversight of the Chair of the Board and Chief Executive Officer.

 

Classified Board Structure

 

We have a classified Board that we believe is important to and congruent with our philosophy of managing for the long term. While we are smaller than the nation’s biggest cable companies, we have a record of consistent, long-term financial and operational success driven by our differentiated operating philosophy. We emphasize focus as opposed to scale, and we have a multi-faceted strategy that builds upon our long track record of focusing on the right markets, the right products and the right customers, as well as controlling our operating and capital costs. Prior to 2012, we were focused on growing revenues through subscriber retention and growth in overall primary service units (“PSUs”). Since 2012, we have adapted our strategy to face the trend, which has affected the entire cable industry, of declining profitability of residential video and declining revenues from residential voice services. Beginning in 2013, we shifted our focus away from maximizing customer PSUs and towards growing and maintaining our higher margin businesses, namely residential data and business services. While this is a departure from more conventional strategies in the cable industry, we believe it is well suited to the markets in which we operate and enables us to take advantage of our strengths as a cable operator.

 

Because of the long-term nature of our strategy, it can take an extended period of time before financial and operational success fully manifest themselves. We are also a relatively new public company, with all of our directors having served less than three years since the spin-off and only Messrs. Might and Spoon having served as directors for more than three years (counting Mr. Spoon’s service as a director of our Company between 1991 and 2000 when we were a subsidiary of GHC where Mr. Spoon was an officer). We believe that standing for election every three years enables our directors to develop a robust understanding of our business and strategy while maintaining a long-term perspective that will enable us to drive continued growth and success of our business. In addition, as part of our stockholder outreach efforts, a number of our largest stockholders indicated that they have no concerns with our classified Board.

 

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Board’s Role in Risk Oversight

 

The Board as a whole actively considers strategic decisions proposed by management, including matters affecting the business strategy and competitive and financial positions of the Company, and monitors the Company’s risk profile. Board meetings are focused on strategic matters affecting major areas of the Company’s business, including operational, execution and competitive risks and risk management initiatives. The Board fulfills certain risk oversight functions through its standing committees. For example, the Audit Committee plays a key role in risk oversight, particularly with respect to financial reporting, accounting and compliance matters; the Compensation Committee addresses the risk profile of the Company’s compensation program and arrangements; and the Nominating and Governance Committee oversees corporate governance-related risk associated with our governance practices and profile.

 

Risk oversight activities are supported by internal reporting structures that aim to surface directly to the Board key matters that can affect the Company’s risk exposures as well as by our leadership structure as described above. The Company has established a Disclosure Controls Committee that reports directly to the Audit Committee on certain matters relating to the Company’s public disclosures. The Board believes that its role in risk oversight does not affect the Board’s leadership structure.

 

Communicating with Directors

 

In accordance with the Policy Statement, stockholders and other interested persons seeking to communicate with the Board may submit any communications in writing to the Company’s Secretary, at the address of the Company’s headquarters: 210 E. Earll Drive, Phoenix, Arizona 85012. Any such communication must state the number of shares beneficially owned by the stockholder making the communication. The Secretary will review all incoming stockholder communications, except for solicitations, junk mail and obviously frivolous or inappropriate communications, and forward such communications, as appropriate, to the full Board or to any individual director or directors to whom the communication is directed.

 

Annual Meeting Attendance

 

The Board does not have a policy of requiring directors to attend annual meetings of stockholders; however, the Company generally schedules a Board meeting in conjunction with its annual meeting of stockholders and encourages directors and nominees for director to attend each annual meeting of stockholders. All of our current directors attended our 2017 annual meeting of stockholders.

 

Compensation Committee Interlocks and Insider Participation

 

Messrs. Brian, Spoon and Weitz and Ms. Weymouth served as members of the Compensation Committee in 2017. None of these individuals has ever been an employee of the Company. During 2017, none of our executive officers served on the board of directors or compensation committee of any other entity for which a member of our Board or Compensation Committee served as an executive officer.

 

Corporate Governance Policies Related to Compensation and Equity

 

Please refer to “Compensation Discussion and Analysis—Corporate Governance Policies” beginning on page 29 of this Proxy Statement for discussion of our stock ownership guidelines, and our policies with respect to prohibiting derivative trading, hedging and pledging; clawbacks; and the tax deductibility of compensation. 

 

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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The firm of PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the financial statements of our Company for the fiscal year ended December 31, 2017. Our Audit Committee has appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2018 and recommends that stockholders vote in favor of the ratification of such appointment. Although ratification is not required by our By-laws or otherwise, the Board is submitting the selection of PricewaterhouseCoopers LLP to our stockholders for ratification as a matter of good corporate governance. If the appointment is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

 

We anticipate that representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so with respect to our financial statements for the fiscal year ended December 31, 2017 and the firm’s relationship with the Company and will be available to respond to appropriate questions from stockholders.

 

Audit Committee Pre-Approval Policies and Procedures

 

The Audit Committee’s charter provides that the duties and responsibilities of the Audit Committee include the pre-approval of audit and non-audit services performed by the independent registered public accounting firm in order to assure that the provision of such services does not impair our auditor’s independence. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee. The term of any pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will periodically review and pre-approve the services that may be provided by the independent registered public accounting firm as well as revise the list of pre-approved services from time to time, based on subsequent determinations.

 

The Audit Committee will not delegate to management responsibilities to pre-approve services performed by the independent registered public accounting firm. The Audit Committee may delegate pre-approval authority to one or more of its members. The annual audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Company structure or other matters. In addition to the annual audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant pre-approval for other audit services, which are those services that only the independent auditor reasonably can provide. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent registered public accounting firm, the purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations.

 

Audit-related services are assurance and other services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the independent registered public accounting firm. The Audit Committee believes that the provision of audit-related services does not impair the independence of the independent registered public accounting firm.

 

The Audit Committee believes that the independent registered public accounting firm can provide tax services to the Company, such as tax compliance, tax planning and tax advice, without impairing such auditor’s independence. However, the Audit Committee will not permit the retention of the independent registered public accounting firm in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Code and related regulations.

 

The Audit Committee may grant pre-approval of those permissible non-audit services classified as “All Other” services that it believes are routine and recurring services and would not impair the independence of the auditor.

 

Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by the Chief Financial Officer (or other designated officer) and must include a statement from that individual as to whether, in his or her view, the request or application is consistent with the SEC’s rules on auditor independence.

 

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Audit and Other Fees

 

The following table provides information regarding the aggregate fees billed to the Company for professional services rendered by PricewaterhouseCoopers LLP for 2017 and 2016.

 

   

2017

   

2016

 

Audit Fees (1)

  $ 2,623,605     $ 1,858,000  

Audit-Related Fees (2)

    104,299       681,068  

Tax Fees (3)

    72,000       36,504  

All Other Fees (4)

    2,771       1,800  

Total

  $ 2,802,675     $ 2,577,372  

 

                              

 

(1)

Audit fees for 2017 and 2016 related to the annual audit and reviews of financial statements included in the Company’s quarterly filings, including reimbursable expenses. Audit fees for 2017 also related to the review of financial statements and other financial information of RBI Holding LLC (“NewWave”). Audit fees for 2016 also related to the initial annual audit of our internal control over financial reporting.

 

 

(2)

Audit-related fees for 2017 and 2016 related to assurance and other services reasonably related to the performance of the audit or reviews of financial statements and not included under “Audit Fees” above, including reimbursable expenses. Audit-related fees for 2016 also related to due diligence services related to mergers and acquisitions.

 

 

(3)

Tax fees for 2017 and 2016 related to tax compliance, tax advice and tax planning, including reimbursable expenses. These fees were primarily for mergers and acquisitions in 2017 and state and local tax consulting in 2016.

 

 

 

 

(4)

All other fees for 2017 and 2016 related to software licensing for finance and accounting research tools provided by PricewaterhouseCoopers LLP.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF OUR COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018.

 

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Executive Summary

 

Named Executive Officers (“NEOs”)

 

This Compensation Discussion and Analysis describes the compensation of our NEOs named in the 2017 Summary Compensation Table:

 

Name

 

Position

Thomas O. Might (1)

 

Executive Chairman (through December 31, 2017)

Julia M. Laulis (2)

 

Chair of the Board, President and Chief Executive Officer (“CEO”)

Michael E. Bowker (3)

 

Chief Operating Officer (“COO”)

Kevin P. Coyle

 

Senior Vice President and Chief Financial Officer (“CFO”)

Charles B. McDonald

 

Senior Vice President, Operations

Alan H. Silverman (4)

 

Former Senior Vice President, General Counsel and Secretary

                  

 

(1)

Effective December 31, 2017, Mr. Might retired as Executive Chairman. He continues to serve as a non-employee director.

 

(2)

Effective January 1, 2018, Ms. Laulis was appointed Chair of the Board.

 

(3)

Effective May 2, 2017, Mr. Bowker was appointed COO. He previously served as Senior Vice President and Chief Sales and Marketing Officer.

 

(4)

Effective December 29, 2017, Mr. Silverman ceased serving as Senior Vice President, General Counsel and Secretary.

 

2017 Highlights

 

In 2017, Cable One delivered strong results demonstrated by increased profitability, building stockholder value and completing key initiatives, including the acquisition of NewWave, which was the 19th largest cable operator in the United States. Since closing the NewWave acquisition in May 2017, we have been focused on integration not only from an operational and financial perspective, but on combining the culture and best practices of both organizations. Below are highlights of our performance in 2017, including Adjusted EBITDA, which was a performance metric used for our 2017 Annual Executive Bonus Plan (the “2017 Bonus Plan”):

 

 

Net income was $234.0 million in 2017, an increase of 131.5% compared to net income of $101.1 million in 2016. Net income included a $113.0 million income tax benefit as a result of the 2017 Federal tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Excluding both the contribution from NewWave operations and the change in accounting for capitalized labor costs effective since the first quarter of 2017, as previously disclosed beginning with our 2016 Annual Report on Form 10-K, filed on March 1, 2017, net income would have increased 113.8% to $216.2 million.

 

 

Adjusted EBITDA was $443.1 million, an increase of 24.0% compared to Adjusted EBITDA of $357.4 million in 2016. See Annex A of this Proxy Statement, entitled “Use of Non-GAAP Financial Metrics,” for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable measure under GAAP. Excluding both the contribution from NewWave operations and the capitalized labor change, Adjusted EBITDA would have increased 6.1% to $379.2 million.

 

 

Net cash provided by operating activities was $324.5 million, an increase of 26.2% compared to net cash provided by operating activities of $257.1 million in 2016.

 

 

Adjusted EBITDA less capital expenditures was $263.7 million, an increase of 16.4% compared to Adjusted EBITDA less capital expenditures of $226.5 million in 2016. See Annex A of this Proxy Statement, entitled “Use of Non-GAAP Financial Metrics,” for the definition of Adjusted EBITDA less capital expenditures and reconciliations to net income, which is the most directly comparable measure under GAAP when this metric is used as a performance measure, and to net cash provided by operating activities, which is the most directly comparable measure under GAAP when this metric is used as a liquidity measure.

 

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Total stockholder return as of December 31, 2017 grew 14.2% on a one-year basis and 26.8% on a compounded two-year basis.

 

Noteworthy Changes to Our Compensation Program for 2017

 

 

Redesigned performance-based equity awards for 2017. The annual grant of performance-based restricted stock awards (“PSAs”) for 2017 was based on three-year cumulative Adjusted EBITDA less capital expenditures, which, as compared with the 2016 annual grant of PSAs, extended the performance period from one year to three years. For additional details, please see “2017 Compensation Actions” below.

 

 

Management changes. Effective as of January 1, 2017, Mr. Might was appointed Executive Chairman and Ms. Laulis was appointed President and CEO. In connection with Mr. Might’s appointment, his annual base salary was reduced, he was not eligible to receive an annual bonus under our annual executive bonus plan for 2017 and he received a grant of PSAs. In connection with Ms. Laulis’ appointment, her annual base salary and target annual bonus were increased and she received a one-time promotional stock appreciation right (“SAR”) grant in addition to her annual PSA grant. Effective as of December 31, 2017, Mr. Might retired as Executive Chairman, although he continues to serve as a non-employee director of the Company. Effective May 2, 2017, Mr. Bowker was appointed COO. He previously served as Senior Vice President and Chief Sales and Marketing Officer. In addition, on December 29, 2017, Mr. Silverman ceased serving as Senior Vice President, General Counsel and Secretary. For additional details regarding the 2017 compensation terms for Mr. Might, Ms. Laulis, Mr. Bowker and Mr. Silverman, please see “Elements of our Compensation Program” below.

 

 

Amended stock ownership guidelines in 2017. In 2017, the Board amended our stock ownership guidelines, which, among other things, increased the required stock ownership level for our CEO from a multiple of five times base salary to six times base salary and adopted the same six times base salary multiple for the position of Executive Chairman. The required stock ownership levels for the President and Senior Vice Presidents were also increased from multiples of 2.5 and 2.0 times base salary to 3.5 and 3.0 times base salary, respectively. The stock ownership guidelines were also clarified such that PSAs are not counted toward achievement of the applicable guideline multiple until all performance contingencies have been satisfied and require that if, following the initial five-year compliance period, an executive falls below the required ownership level, the executive retain net after-tax shares from SAR exercises or when PSAs or time-based restricted stock awards (“RSAs”) vest until the applicable guideline has been met. For additional details regarding the amended stock ownership guidelines, please see “Corporate Governance Policies—Stock Ownership Guidelines” below.

 

Executive Compensation and Governance “Best Practices”

 

Below is a summary of best practices that we have implemented with respect to the compensation of our NEOs because we believe they support our compensation philosophy and are in the best interests of our Company and our stockholders.

 

 

Our compensation is aligned with a pay-for-performance philosophy where a substantial portion of executive officer compensation is at-risk and tied to objective performance goals.

 

 

Both annual bonuses and, with limited exceptions, annual equity incentive awards are 100% based on financial operating performance against pre-defined objective goals with no discretion to increase payouts.

 

 

The Compensation Committee engages an independent compensation consultant.

 

 

We maintain robust executive and non-employee director stock ownership guidelines.

 

 

We maintain clawback provisions in our equity award agreements, and our long-term incentive plan permits recoupment of cash awards granted thereunder under various circumstances.

 

 

We prohibit all executives and directors from hedging and pledging our securities.

 

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The Compensation Committee conducts an annual risk assessment of our compensation program.

 

 

We do not provide any “single trigger” acceleration of payments or benefits upon a change of control of the Company.

 

 

We do not provide gross-up payments on excise taxes under Section 280G of the Code.

 

 

We provide only limited perquisites to our NEOs.

 

Our Board and the Compensation Committee greatly value the benefits of maintaining a dialogue with our stockholders to understand their views on our executive compensation program and practices. The Compensation Committee considers the outcome of say-on-pay votes and is devoted to consistently reviewing and enhancing our compensation programs. At our 2017 Annual Meeting of Stockholders, nearly 99% of the votes cast were in favor of our say-on-pay proposal.

 

Our Executive Compensation Program and Practices

 

The Compensation Committee believes that our executive compensation program is appropriately designed to advance stockholder interests through effective performance-based incentives with retention features. The primary components and associated purposes of our compensation program are as follows:

 

 

Base Salary — Provide the security of a competitive fixed cash payment for services rendered.

 

 

Annual Cash Incentives — Motivate superior annual performance and support our objectives by tying any payout to achievement against pre-established operating goals.

 

 

Long-Term Equity Incentives — Support the retention of executives and align their interests with those of our long-term stockholders by motivating them to build stockholder value over the life of the grants and beyond. We generally tie long-term equity incentives to achievement against pre-established long-term operating goals (through PSAs) or the appreciation of our common stock (through SARs).

 

 

Other Benefits — Provide other benefits that are competitive and consistent with the market, including health and welfare benefits that are broadly consistent with those offer to all full-time employees, limited perquisites and severance benefits in the event of involuntary termination, which are generally limited to partial vesting of outstanding equity awards.

 

Under our executive compensation program, performance-based incentive compensation comprises a substantial portion of target compensation, and our NEOs have a larger percentage of total compensation at-risk than is fixed. The Compensation Committee considers each component of compensation collectively with other components when establishing the various forms and levels of compensation for our NEOs. In determining the appropriate mix of compensation elements for each NEO, our compensation program seeks to provide a balance between rewarding performance through annual performance-based cash incentive compensation that encourages achieving and exceeding annual goals and milestones and through long-term equity incentive compensation that is designed to advance our long-term growth strategy and align our NEOs interests with those of our stockholders.

 

Objectives of our Executive Compensation Program

 

Our performance-based compensation philosophy for executive officers aims to provide incentives to achieve both short- and long-term business objectives, align the interests of our executive officers and long-term stockholders, and ensure that we can hire and retain talented individuals in a competitive marketplace.

 

Key objectives of our executive compensation program are as follows:

 

 

Attract and retain highly qualified and productive executives.

 

 

Motivate executives to enhance our overall performance and profitability through the successful execution of the Company’s short- and long-term business strategies, with an emphasis on the long-term.

 

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Align the long-term interests of our executives and stockholders through ownership of Cable One stock by executives and by rewarding stockholder value creation.

 

 

Reflect our pay-for-performance philosophy.

 

 

Ensure that compensation opportunities are competitive.

 

Role of the Compensation Committee and the CEO

 

The Board has delegated to the Compensation Committee the responsibility of overseeing the administration of the Company’s compensation plans and the preparation of all reports and documents required by the rules and regulations of the SEC. The Compensation Committee annually reviews and approves the corporate goals and objectives upon which the executive compensation program is based. The Compensation Committee evaluates the CEO’s performance in light of these goals and objectives. Furthermore, the Compensation Committee reviews and makes recommendations to the Board with respect to any incentive compensation plans, including equity-based plans, to be adopted or submitted to the Company’s stockholders for approval.

 

The Compensation Committee meets at least quarterly throughout the year and may meet more often, as required, to address ongoing events. In 2017, the Compensation Committee met six times. Meeting agendas are determined by the Chair of the Compensation Committee with the assistance of our CEO. Our CEO attended five Compensation Committee meetings and representatives from the Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”) attended five Compensation Committee meetings in 2017. At the Compensation Committee meetings, our CEO made recommendations to the Compensation Committee regarding the annual base salary, annual cash incentive compensation and equity compensation of our NEOs (other than our CEO). If needed, legal counsel also attends Compensation Commitee meetings.

 

Compensation Setting Process

 

The Compensation Committee determined the compensation of each of our NEOs for 2017. For 2017, the Compensation Committee made determinations for our CEO and our Executive Chairman after consideration of individual and Company performance for the year, along with an examination of external market data of our industry peer group. For our NEOs (other than our CEO and our Executive Chairman), the Compensation Committee’s determination of compensation for 2017 was based on the recommendations of our Executive Chairman (who served as CEO in 2016) and our current CEO, which reflected consideration of individual and Company performance as well as industry peer group practice. In making its executive compensation decisions, the Compensation Committee does not target a specific percentile for pay, but instead examines external market data of our industry peer group (described below under “Use of Peer Companies”) as a guide for making its pay decisions with respect to all pay elements. The factors that influence the amount of compensation awarded include market competition for a particular position; an individual’s experience and past performance inside or outside the Company; compensation history, role and responsibilities within the Company; past and future performance objectives; value of the position within the Company; succession planning; the Company’s financial performance; and the relative cost of living in the Phoenix, Arizona market.

 

Independent Compensation Consultant

 

The Compensation Committee has the sole authority to retain and dismiss an independent compensation consultant. In 2017, the Compensation Committee engaged FW Cook, a national executive compensation consulting firm, as its independent consultant. FW Cook reviewed and provided recommendations concerning all of the elements of the Company’s executive compensation programs for 2017, except for the special one-time bonuses awarded to certain NEOs. FW Cook performs services solely on behalf of the Compensation Committee and has no relationship with the Company or management except as it may relate to performing such services. The Compensation Committee assessed the independence of FW Cook pursuant to the rules of the SEC and the NYSE and concluded that FW Cook is independent and no conflict of interest exists with respect to the services they provided to the Compensation Committee.

 

Use of Peer Companies

 

In determining our NEOs’ 2017 compensation, the Compensation Committee, with the help of FW Cook, compared each element of compensation to that of a related industry peer group. The peer group was primarily comprised of publicly traded cable, internet and telecommunications companies of similar size and was supplemented by technology companies with broadly comparable gross margins and capital expenditures as a percentage of revenues. Across key size metrics, we approximated the peer median. Our annual revenues were slightly below the peer median, but this was counter-balanced by our above-median market capitalization value.

 

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In assessing the competitiveness of compensation provided to our NEOs, FW Cook utilized comparative data disclosed in peer companies’ publicly available proxy statements along with other documents filed with the SEC.

 

The following chart shows the peer group developed by us in 2016 for determining our NEOs’ 2017 compensation, along with relevant size and performance data.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12 Mo. Avg.

 

 

 

 

 

 

Capex as

 

 

 

Revenue

 

 

EBITDA

 

 

Total

 

 

Market Cap

 

 

Gross

 

 

a Percent

 

Company

 

(in millions)

 

 

(in millions)

 

 

Employees

 

 

(in millions)

 

 

Margin

 

 

of Revenue

 

Akamai Technologies

 

$

2,303

 

 

$

714

 

 

 

6,084

 

 

$

9,905

 

 

 

65

%

 

 

8

%

ATN International

 

$

411

 

 

$

140

 

 

 

1,200

 

 

$

1,172

 

 

 

71

%

 

 

24

%

Cincinnati Bell

 

$

1,190

 

 

$

284

 

 

 

3,250

 

 

$

853

 

 

 

43

%

 

 

22

%

COGECO

 

$

2,308

 

 

$

1,025

 

 

 

4,740

 

 

$

893

 

 

 

44

%

 

 

17

%

Cogent Communications

 

$

433

 

 

$

130

 

 

 

828

 

 

$

1,697

 

 

 

57

%

 

 

10

%

Consolidated Communications

 

$

755

 

 

$

269

 

 

 

1,783

 

 

$

1,271

 

 

 

57

%

 

 

17

%

General Communication

 

$

943

 

 

$

286

 

 

 

2,370

 

 

$

628

 

 

 

67

%

 

 

20

%

Gogo

 

$

574

 

 

$

62

 

 

 

1,073

 

 

$

911

 

 

 

54

%

 

 

24

%

Inteliquent

 

$

349

 

 

$

71

 

 

 

177

 

 

$

624

 

 

 

27

%

 

 

7

%

NII Holdings

 

$

981

 

 

$

22

 

 

 

2,875

 

 

$

359

 

 

 

58

%

 

 

7

%

Range Resources

 

$

1,142

 

 

$

178

 

 

 

744

 

 

$

6,727

 

 

 

31

%

 

 

45

%

SBA Communications

 

$

1,624

 

 

$

1,060

 

 

 

1,310

 

 

$

13,136

 

 

 

74

%

 

 

9

%

Shenandoah Telecommunications

 

$

467

 

 

$

202

 

 

 

696

 

 

$

1,420

 

 

 

64

%

 

 

28

%

Telephone and Data Systems

 

$

5,100

 

 

$

950

 

 

 

10,400

 

 

$

3,060

 

 

 

52

%

 

 

13

%

ViaSat

 

$

1,482

 

 

$

255

 

 

 

3,800

 

 

$

3,595

 

 

 

31

%

 

 

34

%

Vonage Holdings

 

$

939

 

 

$

106

 

 

 

1,752

 

 

$

1,250

 

 

 

64

%

 

 

3

%

Zayo Group Holdings

 

$

1,860

 

 

$

837

 

 

 

3,224

 

 

$

6,910

 

 

 

66

%

 

 

40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peer Median

 

$

981

 

 

$

255

 

 

 

1,783

 

 

$

1,271

 

 

 

57

%

 

 

17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cable One

 

$

816

 

 

$

334

 

 

 

1,972

 

 

$

2,968

 

 

 

63

%

 

 

18

%

Percentile

 

 

35

%

 

 

67

%

 

 

52

%

 

 

66

%

 

 

60

%

 

 

52

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Standard & Poor's Capital IQ

 

 

In determining the structure of our 2017 executive compensation program, as well as the individual pay levels of our NEOs, the Compensation Committee reviewed competitive market data provided by FW Cook, which compared the various elements of compensation provided to our NEOs, relative to compensation paid to individuals holding similar positions at companies in our executive compensation peer group. FW Cook worked with management to assess the data and review our compensation practices.

 

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Table of Contents

 

Elements of our Compensation Program

 

Base Salary

 

The Compensation Committee reviews executive officer base salaries each year (or otherwise at the time of a new hire or promotion) and makes any adjustments it deems necessary. In setting annual base salary levels, the Compensation Committee takes into account competitive considerations, changes in responsibilities, individual performance, tenure in position, internal pay equity, Company performance, market data for individuals in similar positions, retention and advice from our independent compensation consultant. The Compensation Committee gives no specific weighting to any one factor in setting the level of base salary and the process ultimately relies on the subjective exercise of the Compensation Committee’s judgment.

 

Effective January 1, 2017, Mr. Might’s base salary was reduced in connection with his transition from the role of CEO to Executive Chairman, and Ms. Laulis’ base salary was increased in connection with her promotion to President and CEO. Effective May 8, 2017, Mr. Bowker’s base salary was increased 27% to $350,000 on an annualized basis in connection with his promotion to COO. As part of the annual review process, Mr. McDonald received a base salary increase for 2017 to bring him in line with market standards, and Messrs. Coyle’s and Silverman’s base salaries remained the same compared to 2016 because the Compensation Committee determined that market conditions did not warrant any other adjustments. The 2017 base salary amounts as reported in the 2017 Summary Compensation Table and the percent change from 2016 are reflected in the table below.

 

Name

 

2017 Base Salary

 

Percent Change from 2016

Thomas O. Might

 

$450,000

 

(50%)

Julia M. Laulis

 

$550,000

 

22%

Michael E. Bowker

 

$323,904

 

18%

Kevin P. Coyle

 

$315,000

 

No change

Charles B. McDonald

 

$210,000

 

11%

Alan H. Silverman

 

$315,000

 

No change

 

Annual Cash Incentive Plan

 

Our annual cash incentive program is intended to motivate and reward our NEOs to achieve and exceed annual goals and milestones that are expected to advance our long-term growth strategy.

 

Each of our NEOs, except our Executive Chairman, was awarded a cash incentive opportunity at the beginning of 2017 pursuant to the 2017 Bonus Plan. As a result of his appointment as Executive Chairman, Mr. Might was not eligible to receive an annual bonus under the 2017 Bonus Plan. The 2017 Bonus Plan provided for payouts based on our financial performance compared to goals set immediately prior to the beginning of 2017, with a target bonus for each NEO expressed as a percentage of such executive’s base salary. The target bonus as a percentage of base salary for each of our NEOs at the end of 2017 and 2016 are reflected in the table below.

 

Name

 

2017 Year-End Target

Bonus Percentage

 

2016 Year-End Target

Bonus Percentage

Thomas O. Might

 

 

100%

Julia M. Laulis

 

100%

 

50%

Michael E. Bowker (1)

 

75%

 

40%

Kevin P. Coyle

 

50%

 

40%

Charles B. McDonald

 

50%

 

40%

Alan H. Silverman

 

50%

 

40%

                  

(1)

Mr. Bowker’s target bonus percentage was increased from 40% to 50% of his annual base salary effective January 2, 2017 and from 50% to 75% of his annual base salary effective May 8, 2017 in connection with his promotion to COO.

 

For Ms. Laulis, the target bonus percentage increased to reflect her appointment as President and CEO and her increased duties and responsibilities. For Messrs. Coyle, McDonald and Silverman (and for Mr. Bowker until his promotion to COO in May 2017), the target bonus percentage increased to bring them in line with market standards. For Mr. Bowker, the additional target bonus percentage increase from 50% to 75% reflected his promotion to COO and his increased duties and responsibilities, subject to pro-ration based on the effective date of his appointment, resulting in an overall target bonus percentage for 2017 of approximately 66%. Payouts are capped at 200% of target, and the Compensation Committee retains negative discretion to further reduce any payouts based on its subjective assessment of Company and/or individual performance results. An executive must generally be employed on the payment date in order to be eligible to receive a bonus payment under the plan.

 

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Table of Contents

 

Bonus payouts under the 2017 Bonus Plan were subject to the attainment of goals related to Adjusted EBITDA growth and capital expenditures as a percentage of revenues. In order to determine Adjusted EBITDA, we begin with our net income (as defined under GAAP and described in our 2017 Annual Report on Form 10-K, filed on March 1, 2018) and adjust for interest expense; income taxes; depreciation and amortization; equity-based incentive compensation expense; severance expense; gain/loss on deferred compensation; acquisition-related costs, gain/loss on disposal of assets; other income/expense, net; and other unusual operating expenses. Furthermore, the Compensation Committee adjusted the calculation of Adjusted EBITDA growth and capital expenditures as a percentage of revenues pursuant to a pre-established list of adjustments in the event of any of the following unusual or infrequently occurring events having an impact greater than $1.0 million: unplanned share repurchases; gains/losses on the disposition or acquisition of a business; gains/losses associated with changes in accounting principles, practices or interpretations; losses on discontinued operations; third-party legal fees or any payments associated with litigation; the impact of mergers, acquisitions, divestitures or dispositions, including (1) third-party legal, audit, consulting or banking costs associated with capital raising, (2) the allocation attributable to overhead that increased or decreased our expenses but were not directly attributable to an acquired company’s financial statements (such as additional accounting, legal or other costs), (3) EBITDA and post-purchase capital expenditures related to an acquired company and (4) the portion of our Adjusted EBITDA growth performance goal and any budgeted capital expenditures related to a business sold by us; certain potential fiber expansion projects; and other expenses or losses that were disclosed as a special, one-time or unusual in nature or infrequently occurring, or both in accordance with GAAP.

 

We believe that the combination of Adjusted EBITDA growth and capital expenditures as a percentage of revenues reflect our performance across several key dimensions, including profitability, cash outflows for capital expenditures, and our ability to fund operations and make additional investments with internally-generated funds. As such, performance on these measures was the basis for determining earned bonuses under the 2017 Bonus Plan, using the following table (with any values between points on the table determined based on linear interpolation):

 

 

2017 Adjusted EBITDA growth over 2016 Adjusted EBITDA as reported in our financial statements (subject to adjustment as provided above, to the extent applicable); and

 

 

2017 capital expenditures (subject to adjustment as provided above, to the extent applicable) as a percentage of 2017 total revenues (as reported in accordance with GAAP).

 

             

Adjusted EBITDA Growth

 
                                                                                                           
             

Thresh.

                                           

Target

                                   

Max.

 
             

<99%

     100%      101%      102%      103%      104%      105%      106%      107%      108%      109%      110%  
 

Thresh.

    22

%

    0 %     25 %     30 %     35 %     40 %     45 %     50 %     60 %     70 %     80 %     90 %     100 %
        21

%

    0 %     30 %     36 %     42 %     48 %     54 %     60 %     72 %     84 %     96 %     108 %     120 %
        20

%

    0 %     35 %     42 %     49 %     56 %     63 %     70 %     84 %     98 %     112 %     126 %     140 %
Capital       19

%

    0 %     40 %     48 %     56 %     64 %     72 %     80 %     96 %     112 %     128 %     144 %     160 %
Expenditures       18

%

    0 %     45 %     54 %     63 %     72 %     81 %     90 %     108 %     126 %     144 %     162 %     180 %
as a

Target

    17

%

    0 %     50 %     60 %     70 %     80 %     90 %     100 %     120 %     140 %     160 %     180 %     200 %
% of Total       16

%

    0 %     58 %     69 %     81 %     92 %     104 %     115 %     138 %     161 %     184 %     200 %     200 %
Revenues       15

%

    0 %     65 %     78 %     91 %     104 %     117 %     130 %     156 %     182 %     200 %     200 %     200 %
        14

%

    0 %     73 %     87 %     102 %     116 %     131 %     145 %     174 %     200 %     200 %     200 %     200 %
 

Max.

    13

%

    0 %     80 %     96 %     112 %     128 %     144 %     160 %     192 %     200 %     200 %     200 %     200 %

 

   = range including actual 2017 performance factor

 

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Table of Contents

 

On March 8, 2018, the Compensation Committee certified the results of the performance goals. The Compensation Committee approved a performance factor of 164.2% based on Adjusted EBITDA growth of 6.3% and capital expenditures as a percentage of total revenues of 14.9%. The Compensation Committee applied the following adjustments to the performance results under the 2017 Bonus Plan, pursuant to the pre-established list of adjustments described above:

 

Adjusted EBITDA Growth (in millions)

   

Capital Expenditures as a % of Total Revenues (in millions)

 

2017 Publicly Reported Adjusted EBITDA

  $ 443.1    

2017 Publicly Reported Capital Expenditures

  $ 179.4  

Impact of M&A (EBITDA of NewWave)

  $ (47.6 )  

Impact of M&A (Capex related to NewWave)

  $ (32.7 )

Gains/losses associated with changes in accounting principles, practices or interpretations

  $ (15.8 )  

Gains/losses associated with changes in accounting principles, practices or interpretations

  $ (22.3 )

Total Adjustments

  $ (63.3 )  

Total Adjustments

  $ (55.0 )

2017 Adjusted EBITDA, as Adjusted

  $ 379.8    

2017 Capital Expenditures, as Adjusted

  $ 124.3  

2016 Publicly Reported Adjusted EBITDA

  $ 357.4    

2017 Publicly Reported Legacy Cable One (excluding NewWave) Total Revenues

  $ 832.8  

Adjusted EBITDA Growth

    6.3 %  

2017 Publicly Reported Legacy Cable One (excluding NewWave) Capital Expenditures as a Percentage of Total Revenues

    14.9 %

 

The Compensation Committee approved the following bonus payments under the 2017 Bonus Plan for our NEOs:

 

2017 Bonus Plan Payouts

 

Name

 

Target Bonus

Percentage

   

Target

Bonus

   

Performance Results

(as a Percentage of Target)

   

Bonus Payout

 

Julia M. Laulis

    100%       $550,000       164.2%       $903,174  

Michael E. Bowker (1)

    66%       $219,007       164.2%       $359,639  

Kevin P. Coyle

    50%       $157,500       164.2%       $258,636  

Charles B. McDonald

    50%       $105,000       164.2%       $172,424  

                  

 

(1)

Effective May 8, 2017, in connection with his promotion to COO, Mr. Bowker’s target bonus was increased to 75% of his annual base salary, or $262,500, subject to pro-ration based on the effective date of his appointment.

 

As a result of his appointment as Executive Chairman, Mr. Might was not eligible to receive an annual bonus under our 2017 Bonus Plan. As a result of his separation before the payment date of the annual bonus, Mr. Silverman was not eligible for a payout under the terms of the 2017 Bonus Plan.

 

Special One-Time Bonuses

 

In March 2018, the Compensation Committee approved modest one-time discretionary bonuses for our NEOs, except Messrs. Might and Silverman, that were paid at the same time as 2017 cash bonuses were paid to our executives in recognition of the strong financial and operational performance of the Company in 2017, including, but not limited to, the successful acquisition and integration of NewWave and the response to the effects of Hurricane Harvey, as reflected in the table below.

 

Name

 

2017 One-Time Discretionary Bonus

Thomas O. Might

 

Julia M. Laulis

 

$60,000

Michael E. Bowker

 

$50,000

Kevin P. Coyle

 

$50,000

Charles B. McDonald

 

$20,000

Alan H. Silverman

 

 

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Table of Contents

 

Long-Term Annual Equity Incentive

 

The Compensation Committee considers its long-term equity incentive program to be a critical component of the executive officer compensation program as it motivates and rewards executive officers over the long-term and further aligns the interests of our executives with those of our stockholders. Our typical practice is to grant our annual equity awards in the form of PSAs in early January each year. In addition, on a case-by-case basis, the Compensation Committee approves grants of equity awards, typically in the form of RSAs and SARs, for new hires, promotions and other special circumstances, to among other things, promote the retention of management and key employees. Equity grants to our NEOs are described in greater detail in the 2017 Grants of Plan-Based Awards and the Outstanding Equity Awards at Fiscal Year-End tables on pages 33 and 35, respectively, of this Proxy Statement.

 

2017 PSA Grants

 

For 2017, the Compensation Committee granted our NEOs equity awards entirely in the form of PSAs under the Cable One, Inc. 2015 Omnibus Incentive Compensation Plan, as amended and restated (the “2015 Plan”). The PSAs granted in 2017 are based on three-year cumulative Adjusted EBITDA less capital expenditures, which is meaningfully differentiated from our 2017 Bonus Plan metrics. See Annex A of this Proxy Statement, entitled “Use of Non-GAAP Financial Metrics,” for the definition of Adjusted EBITDA less capital expenditures, which is reconciled to net income (the most directly comparable measure under GAAP) when used as a performance measure. The Compensation Committee viewed this metric as a key indicator of our performance while taking into account cash outflows for capital expenditures.

 

In her role as President and CEO, Ms. Laulis received a 2017 PSA grant with a target grant date fair value of approximately 100% of her base salary ($550,000), which was increased from a target grant date fair value of 50% of her base salary for 2016 in recognition of her promotion effective January 1, 2017. In his role as Executive Chairman, Mr. Might received a 2017 PSA grant with a target grant date fair value of approximately $950,000. Consistent with the approach for the 2016 annual equity grant, our other NEOs received a target number of PSAs equal to 50% of each such NEO’s starting base salary for 2017, divided by the closing price of our common stock on the grant date, January 3, 2017, of $619.66. The PSAs are subject to the terms and conditions of the 2015 Plan as well as an award agreement. The PSAs are scheduled to cliff-vest on January 3, 2020, generally subject to continued service with the Company through such date and achievement of the performance goals described above with respect to the three-year performance period.

 

The Compensation Committee approved the following PSA grants for 2017 to our NEOs:

 

2017 PSA Grants

 

Name

 

Target Grant Date Fair

Value of PSAs (1)

   

Target Number of PSAs

   

Maximum Number of PSAs

 

Thomas O. Might

    $946,221       1,527       3,054  

Julia M. Laulis

    $547,779       884       1,768  

Michael E. Bowker

    $136,945       221       442  

Kevin P. Coyle

    $156,774       253       506  

Charles B. McDonald

    $104,103       168       336  

Alan H. Silverman (2)

    $156,774       253       506  

                

 

(1)

Amounts in this column represent the grant date fair value of the PSA awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“Topic 718”).

 

(2)

All of the 2017 PSAs granted to Mr. Silverman were forfeited without payment upon his separation because Mr. Silverman did not meet the minimum one-year vesting requirement provided in the PSA award agreement and the 2015 Plan.

 

2017 RSA Grants

 

In January 2017, the Compensation Committee approved RSA grants to Messrs. Coyle and Silverman, which were in respect of 500 shares each and vest in equal annual installments over four years. The grant date fair value of each RSA grant (computed in accordance with Topic 718) was $309,830. These grants were awarded in order to support retention. All of the 2017 RSAs granted to Mr. Silverman were forfeited without payment upon his separation because Mr. Silverman did not meet the minimum one-year vesting requirement provided in the RSA award agreement and the 2015 Plan.

 

2017 SAR Grants

 

In January 2017, the Compensation Committee approved grants of 5,000 SARs to Ms. Laulis; 2,000 SARs to Mr. Bowker; and 4,000 SARs to Mr. McDonald, which vest in equal annual installments over four years and have a ten-year term (generally subject to the NEO’s continued employment with us through the applicable vesting date). The grant date fair value of each SAR grant (computed in accordance with Topic 718) was as follows: Ms. Laulis, $690,050; Mr. Bowker, $276,020; and Mr. McDonald, $552,040. Ms. Laulis’ SAR grant was awarded in connection with her appointment as President and CEO effective January 1, 2017 and Messrs. Bowker’s and McDonald’s SAR grants were awarded in order to support retention.

 

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Other Benefits

 

Our NEOs are entitled to employee benefits generally available to all full-time employees of the Company, including health and welfare benefits. In designing these offerings, the Company seeks to provide an overall level of benefits that is competitive with the level of benefits offered by similar companies in the markets in which it operates. In addition, our NEOs are eligible to participate in certain retirement and deferred compensation plans as described in more detail below under “Retirement Plans.”

 

Perquisites

 

We provide our NEOs with limited perquisites. In 2017, we paid for certain costs in connection with certain of our NEOs’ and their spouses’ travel to and participation in sales or performance incentive trips and certain other business conferences. For Mr. McDonald, we paid the cost for study in an executive training program at the Stanford Graduate School of Business. We also reimbursed Ms. Laulis and Mr. McDonald an amount representing part of the cost of our data, video and voice service, a benefit that we provide at no cost to all of our employees who reside in one of our markets. For more information regarding these payments, please see the “All Other Compensation” column of the 2017 Summary Compensation Table on page 31 of this Proxy Statement. We did not provide any other perquisites to our NEOs.

 

Severance Benefits

 

Consistent with our policy, we have not entered into any employment or severance agreements that provide for payments or benefits in the event of involuntary termination with any of our NEOs. We entered into a separation agreement with Mr. Silverman when he retired in December 2017, as described below. As such, we do not have any agreements with any of our NEOs that provide cash payments upon a termination of employment or a change of control of the Company (except for Mr. Might’s 1999 special deferred compensation award, the GHC Retirement Plan and the Cable One, Inc. Supplemental Executive Retirement Plan (the “Cable One SERP”) described below in the “Retirement Benefits” section beginning on page 36 of this Proxy Statement as well as Mr. Silverman’s separation agreement).

 

We do not provide any “single trigger” change of control benefits nor any gross-up payments on excise taxes under Section 280G of the Code. In order to encourage continuity of the executive officers in the event of a change of control and promote the successful execution of the Company’s short- and long-term business strategies, our outstanding equity awards contain a “double trigger” provision, which means the awards only vest upon a qualifying termination of employment that occurs within 18 months following a change of control, as described below in the “Potential Payments Upon Termination or Change of Control” section beginning on page 40 of this Proxy Statement.

 

Silverman Separation

 

In connection with Mr. Silverman’s separation and his agreement to certain restrictive covenants (including execution of an irrevocable release and covenants regarding noncompetition, non-solicitation, no-hire and confidentiality), Mr. Silverman entered into a separation agreement with the Company dated November 17, 2017 that provided for payment in the first quarter of 2018 of (a) one year’s base salary, or $315,000, (b) an additional amount of $300,000 in respect of Mr. Silverman’s 2017 annual bonus and (c) an amount equal to the estimated cost of Mr. Silverman’s health insurance premiums for a period of two years, or $60,000. In accordance with the terms of the applicable award agreements, Mr. Silverman vested as of December 29, 2017 in a prorated portion of his unvested equity awards granted prior to 2017 based on the percentage of the vesting period that had elapsed as of such date. The remaining unvested portion of these awards was canceled, and Mr. Silverman received cash consideration of $1,540,390 in respect thereof. All equity awards that were granted to Mr. Silverman in 2017 were forfeited without payment upon his separation because Mr. Silverman did not meet the minimum one-year vesting requirement provided in the applicable award agreement and the 2015 Plan.

 

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Retirement Plans and Agreements

 

Qualified Defined Contribution Plan

 

We maintain the Cable One 401(k) Plan, which is a tax-qualified defined contribution plan. We provide matching contributions on up to 5% of an employee’s eligible compensation, up to the salary limit applicable to tax-qualified plans ($270,000 in 2017). Employees, including our NEOs, are eligible to receive matching contributions after one year of service, with matches fully vested when made.

 

Nonqualified Supplemental Executive Retirement Plan

 

Effective as of the spin-off, we established the defined contribution portion and defined benefit portion of the Cable One SERP, under which we assumed all obligations to current and former Cable One employees who participated in the defined contribution portion or the defined benefit portion of the GHC SERP, including Mr. Might and Ms. Laulis. In connection with the spin-off, on July 1, 2015, benefit accruals were frozen under the Cable One SERP, and the plan was closed to new participants. No employee contributions were permitted under the defined contribution portion of the Cable One SERP after December 31, 2015.

 

Nonqualified Deferred Compensation Plans

 

Effective as of the spin-off, we established the Cable One Deferred Compensation Plan with terms substantially similar to the GHC Deferred Compensation Plan, under which plan we remain responsible for any obligations to current and former Cable One employees who participated in the GHC Deferred Compensation Plan, including our NEOs other than Messrs. Bowker, Coyle and McDonald. In connection with the spin-off, on July 1, 2015, the Cable One Deferred Compensation Plan was closed to new participants, and no deferrals were permitted after December 31, 2015.

 

Additionally, in 1999, Mr. Might was granted a special deferred compensation award by GHC in recognition of his extraordinary efforts in growing our Company. Annual payouts under this arrangement commenced when Mr. Might separated service with our Company effective December 31, 2017. Since the award was deferred beyond Mr. Might’s 65th birthday due to his continued employment with us through December 31, 2017, the base amounts began accruing interest on May 1, 2016 at an annual rate corresponding to the applicable rate for 12-month U.S. Treasury bills (set at each anniversary and carried forward), credited and compounded on an annual basis. No amounts were paid to Mr. Might in 2017, 2016, or 2015 in respect of this arrangement.

 

Further explanation of the retirement plans can be found in connection with the Pension Benefits Table and Nonqualified Deferred Compensation Table beginning on pages 38 and 40, respectively, of this Proxy Statement.

 

2018 Compensation Actions

 

2018 PSA Grants

 

For 2018, we conformed the design of our PSA grants to the structure used in 2016. Consistent with the PSAs granted in 2017, in January 2018, the Compensation Committee approved PSA grants with a target grant date fair value of approximately 100% of 2018 base salary for Ms. Laulis and approximately 50% of 2018 base salary for each of our other NEOs (except Messrs. Might and Silverman). This resulted in grants of a target number of PSAs to such NEOs as follows: Ms. Laulis, 811 shares; Mr. Bowker, 254 shares; Mr. Coyle, 229 shares; and Mr. McDonald, 155 shares.

 

2018 RSA and SAR Grants

 

In January 2018, the Compensation Committee approved RSA grants to Ms. Laulis in respect of 500 shares and to Mr. Coyle in respect of 200 shares, which vest in equal annual installments over four years. These grants were awarded in order to recognize strong individual performance and support retention. In addition, the Compensation Committee approved grants of 2,000 SARs to Ms. Laulis and Messrs. Bowker and McDonald, which also vest in equal annual installments over four years and have a ten-year term (generally subject to the executive’s continued employment with us through the applicable vesting date). Ms. Laulis’ and Mr. McDonald’s SAR grants were awarded to recognize strong individual performance and support retention and Mr. Bowker’s SARs grant was awarded in connection with his promotion to COO in May 2017.

 

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Corporate Governance Policies

 

Stock Ownership Guidelines

 

The Board has adopted stock ownership guidelines applicable to our executives, including our NEOs, and our non-employee directors because we believe executives and directors will more effectively pursue the long-term interests of stockholders if they are stockholders themselves.

 

These guidelines generally require executives to hold shares of our common stock having a value equal to a multiple of the executives’ base salary and non-employee directors to hold shares of our common stock having a value equal to a multiple of the non-employee directors’ base cash retainer. RSAs, PSAs (only to the extent earned after the date the Compensation Committee certifies the achievement of the applicable performance goals), and unrestricted shares all count towards the guidelines for executives and unvested and deferred restricted stock units (“RSUs”) count towards the guidelines for non-employee directors. SARs are not counted toward compliance with the guidelines nor are unearned PSAs. An executive or non-employee director is expected to achieve the applicable multiple set forth in the guidelines within five years of the later of the date of initial adoption of the guidelines, which was August 4, 2015, or the date of the executive’s initial election to such position or the non-employee director’s initial election to the Board, except as otherwise approved by the Compensation Committee (the “Compliance Period”). Compliance with these stock ownership guidelines is reviewed annually, and all of our NEOs and non-employee directors were in compliance with the stock ownership guidelines as of December 31, 2017. The stock ownership guidelines applicable to our executives as a multiple of the executives’ base salary are as follows:

 

Position

 

Multiple of Base Salary

Executive Chairman

 

6.0

CEO

 

6.0

President

 

3.5

COO

 

3.5

Senior Vice President

 

3.0

Vice President

 

2.0

 

Our stock ownership guidelines also include the following provisions:

 

 

In the case of a promotion to a level with a higher ownership requirement, an additional two-year Compliance Period will be provided to acquire the incremental shares required.

 

 

In the case of an executive officer who holds a position at more than one level (e.g., CEO and President), the higher ownership requirement will apply.

 

 

Shares held in trust and by immediate family members (i.e., spouses and children) and in retirement accounts all count towards the guidelines.

 

 

During the Compliance Period, up to 50% of net after-tax shares can be sold at the time the PSA, RSA or RSU vests or the SAR is exercised, and the executive or non-employee director will be required to retain the remaining 50% of net after-tax shares until in compliance with the applicable guideline. Once outside of the Compliance Period, if an executive’s or a non-employee director’s ownership falls below the required ownership level, that person will be required to retain 100% of net after-tax shares at the time a PSA, RSA, or RSU vests or a SAR is exercised, until in compliance with the applicable guideline.

 

Prohibition on Derivative Trading, Hedging and Pledging

 

Our Insider Trading Policy provides that it is inappropriate for any executive officer or director, among others, to enter into speculative transactions in the Company’s securities and prohibits them from (1) trading derivative securities, such as puts, calls, options and similar instruments; (2) entering into hedging or monetization transactions or similar arrangements, such as collars and forward-sale contracts; (3) engaging in short sale transactions in the Company’s securities; and (4) buying the Company’s securities on margin or pledging any Company securities as collateral, including borrowing against any account in which such securities are held.

 

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Clawback Policy

 

Our 2015 Plan contains a recoupment provision, such that award agreements may require the repayment of cash and equity awards if (1) the participant has engaged in fraud or other willful misconduct that contributes to any financial restatements or irregularities or material loss to the Company or any of our affiliates; (2) the participant engages in conduct constituting “cause” (as defined in the award agreement); (3) the participant breaches the restrictive covenants that are applicable under the award agreement or (4) the participant otherwise violates any recoupment or clawback policy adopted by the Company to the extent necessary to address the requirements of applicable law (including the Dodd-Frank Wall Street Reform and Consumer Protection Act). All of our executive officers’, including our NEOs’, outstanding equity award agreements contain such a clawback requirement.

 

Policy with Respect to Tax Deductibility of Compensation

 

As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Code. Section 162(m), as in effect for 2017, provided that we could not deduct compensation of more than $1,000,000 paid in any year to the CEO or any of the three other most highly compensated officers (excluding the CFO), unless the compensation qualified as “performance-based compensation” under Section 162(m). In connection with granting incentive compensation to our named executive officers, the Compensation Committee’s historical practice has been to consider the implications under Section 162(m) and it was our preference to qualify our executives’ compensation for deductibility under Section 162(m), to the extent the Compensation Committee believed it to be consistent with the Company’s best interests, while retaining flexibility to grant compensation that may not have qualified for a deduction if the Compensation Committee determined that such compensation was otherwise in the best interests of the Company and its stockholders. The 2017 Tax Act, which was signed into law in December 2017, eliminated the exception for “performance-based” compensation with respect to 2018 and future years. As a result, we expect that, except to the extent that compensation is eligible for limited transition relief applicable to binding contracts in effect on November 2, 2017, compensation over $1 million per year paid to any named executive officer (and any person who was a named executive for any year beginning with 2017) will be nondeductible under Section 162(m).

 

Compensation Program Risk Assessment

 

As part of its oversight role, the Compensation Committee considers the impact of our compensation program, policies and practices (both at the executive and below-executive levels), on the Company’s overall risk profile. Specifically, the Compensation Committee, with assistance from our CEO, reviews the compensation plans, incentive plan design, incentive payouts and factors that may affect the likelihood of excessive risk taking to determine whether they present a significant risk to the Company. We believe that our pay program provides an effective balance in cash and equity mix and short- and longer-term performance periods, and also allows for the Compensation Committee’s discretion. The Company also maintains policies to mitigate compensation-related risk such as stock ownership guidelines, caps on incentive payouts, vesting periods on equity, and insider-trading prohibitions as well as independent Compensation Committee oversight. Based on this review, the Compensation Committee determined that the risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management. Based on its review and discussion with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Wallace R. Weitz, Chairman

Brad D. Brian

Katharine B. Weymouth

 

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2017 Summary Compensation Table

 

The following table shows the compensation paid by the Company during 2017, 2016 and 2015 to our principal executive officer, our principal financial officer, the three other most highly compensated executive officers of the Company who were serving as executive officers as of December 31, 2017 and one highly compensated former executive officer of the Company who was no longer serving as an executive officer as of December 31, 2017 based on 2017 compensation (except in the cases of Messrs. Coyle and Silverman, who were not NEOs in 2015, and Messrs. Bowker and McDonald, who were not NEOs in 2016 or 2015).

 

Name and Principal Position

 

Year

   

Salary(1)

   

Bonus(2)

   

Stock

Awards(3)

   

Option

Awards(3)

   

Non-Equity

Incentive Plan Compensation(4)

   

Change in

Pension Value

and Nonqualified Deferred Compensation Earnings(5)

   

All Other Compensation(6)

   

Total

 

Thomas O. Might

 

2017

    $ 450,000           $ 946,221                 $ 29,982     $ 22,724     $ 1,448,926  

Executive Chairman

 

2016

    $ 900,000           $ 447,642           $ 1,800,000           $ 74,967     $ 3,222,609  

 

 

2015

    $ 900,000           $ 3,906,594     $ 2,956,758     $ 2,215,500           $ 69,498     $ 10,048,350  

Julia M. Laulis

 

2017

    $ 550,000     $ 60,000     $ 547,779     $ 690,050     $ 903,174     $ 6,792     $ 32,096     $ 2,789,891  

President and 

 

2016

    $ 450,000           $ 223,605           $ 450,000     $ 8,676     $ 43,614     $ 1,175,895  

Chief Executive Officer

 

2015

    $ 450,000           $ 1,368,278     $ 1,160,026     $ 569,500           $ 27,200     $ 3,575,004  

Michael E. Bowker

 

2017

    $ 323,904     $ 50,000     $ 136,945     $ 276,020     $ 359,639           $ 26,384     $ 1,172,892  

Chief Operating Officer

                                                                       

Kevin P. Coyle

 

2017

    $ 315,000     $ 50,000     $ 466,604           $ 258,636           $ 23,087     $ 1,113,327  

Senior Vice President and Chief Financial Officer

 

2016

    $ 315,000     $ 37,999     $ 156,696           $ 252,000           $ 19,731     $ 781,426  

Charles B. McDonald

 

2017

    $ 210,000     $ 20,000     $ 104,103     $ 552,040     $ 172,424           $ 80,877     $ 1,139,444  

Senior Vice President, Operations 

                                                                       

Alan H. Silverman

 

2017

    $ 315,000           $ 466,604  (7)                     $ 2,233,706     $ 3,015,310  

Former Senior Vice President, General Counsel and Secretary

 

2016

    $ 315,000           $ 156,696           $ 252,000           $ 24,229     $ 747,925  

 

                         

(1)

Amounts in this column represent base salary earned by each NEO from Cable One and from GHC for the period prior to the spin-off in 2015.

 

(2)

Amounts in this column represent discretionary bonus payments in recognition of each NEO’s contributions to the Company as described in further detail in the section entitled “Compensation Discussion and Analysis—Elements of Our Compensation Program—Special One-Time Bonuses” above.

 

(3)

Amounts in these columns represent the grant date fair value of the PSA, RSA and SAR awards computed in accordance with Topic 718 and reflect an estimate of the grant date fair value of PSA, RSA and SAR grants made through the close of the 2017 fiscal year, rather than amounts paid to or realized by our NEOs. For our NEOs other than Messrs. Coyle and Silverman, the amounts in the “Stock Awards” column represent the grant date fair value of the PSA awards granted in 2017. For Messrs. Coyle and Silverman, the amounts in the “Stock Awards” column represent the grant date fair value of the PSA and RSA awards granted in 2017 of $156,774 and $309,830, respectively, for each NEO. The amounts included for the PSAs granted to each NEO are based on achievement of the underlying performance conditions at target (i.e., 100% of the target award value), which was determined to be the probable outcome at the time of grant. There can be no assurance that estimated amounts will be realized, and amounts could ultimately exceed the estimated amounts. See Note 12 of the Notes to the Consolidated Financial Statements contained in our 2017 Annual Report on Form 10-K, filed on March 1, 2018, for a discussion of the assumptions used in the valuation of the SAR awards.

 

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Set forth below is the maximum value for the PSAs granted to the NEOs during 2017 (i.e., 200% of the target award value).

 

Name

 

Stock Awards –

Maximum Value

of PSAs

 

Thomas O. Might

 

$

1,892,442

 

Julia M. Laulis

 

$

1,095,559

 

Michael E. Bowker

 

$

273,890

 

Kevin P. Coyle

 

$

313,548

 

Charles B. McDonald

 

$

208,206

 

Alan H. Silverman (3a)

 

$

313,548

 

                             

 

(3a)

Mr. Silverman’s separation was effective December 29, 2017. Accordingly, all of the 2017 PSAs granted to Mr. Silverman were forfeited without payment upon his separation because Mr. Silverman did not meet the minimum one-year vesting requirement provided in the award agreement and the 2015 Plan.

 

(4)

Amounts in this column for 2017 and 2016 represent payments under our 2017 Bonus Plan and our 2016 Bonus Plan, respectively. Amounts in this column for 2015 represent payments under the 2015 Executive Incentive Compensation Plan and prorated payments under the performance units granted under GHC’s 2012 Incentive Compensation Plan for the 2013-2016 award cycle for Mr. Might and Ms. Laulis, as follows: Mr. Might, $1,278,000 in annual bonus and $937,500 in performance units and Ms. Laulis, $319,500 in annual bonus and $250,000 in performance units. The 2017 Bonus Plan is described in further detail in the section entitled “Compensation Discussion and Analysis—Elements of Our Compensation Program—Annual Cash Incentive Plan” above.

 

(5)

The amounts shown in this column represent increases in the present value of Cable One SERP benefits. The Company does sponsor a qualified defined benefit pension plan. There were no above-market or preferential earnings on compensation that was deferred on a basis that is not tax-qualified. Thus, no such earnings are reflected in the amounts shown in this column.

 

The values of accumulated plan benefits were determined using a discount rate of 3.56% at December 31, 2017, 3.95% at December 31, 2016, and 4.22% at December 31, 2015 and using RP-2017 fully generational mortality table for males and females using Scale MP-2017 at December 31, 2017, RP-2016 fully generational mortality table for males and females using Scale MP-2016 at December 31, 2016 and RP-2015 fully generational mortality table for males and females using Scale MP-2015 at December 31, 2015.

 

See the Pension Benefits Table and the “Retirement Benefits” section below for additional information regarding these benefits.

 

(6)

For 2017, the amounts presented include the information in the following table: 

 

All Other Compensation

 

Name

 

Perquisites (6a)

   

401(k) Company

Contributions (6b)

   

PSA

Dividends (6c)

   

Separation (6d)

   

Total

 

Thomas O. Might

        $ 6,058     $ 16,666           $ 22,724  

Julia M. Laulis

  $ 10,483     $ 12,500     $ 9,113           $ 32,096  

Michael E. Bowker

  $ 11,166     $ 11,721     $ 3,497           $ 26,384  

Kevin P. Coyle

  $ 5,583     $ 13,500     $ 4,004           $ 23,087  

Charles B. McDonald

  $ 67,900     $ 10,462     $ 2,516           $ 80,877  

Alan H. Silverman

  $ 5,583     $ 12,733           $ 2,215,390     $ 2,233,706  

                          

(6a)

Amounts in this column represent (i) for our NEOs except Messrs. Might and McDonald, (A) travel and related expenses incurred by the NEO’s spouse or other family member in connection with attending industry conferences and/or a Company sales or performance incentive trip and (B) activity and entertainment expenses incurred by each of our NEOs and such NEO’s spouse or other family member on such trips; (ii) for Ms. Laulis and Mr. McDonald, reimbursement for an amount representing part of the cost of our data, video and voice service, a benefit that we provide at no cost to all of our employees who reside in one of our markets; and (iii) for Mr. McDonald, the cost for study in an executive training program at the Stanford Graduate School of Business ($67,000).

 

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(6b)

The NEOs are immediately 100% vested in the 401(k) Company contributions, which are described in further detail in the section entitled “Narrative Disclosure to Summary Compensation Table—Retirement Benefits—Defined Contribution Plans” below.

 

(6c)

Amounts in this column represent dividends attributable to PSAs granted under the 2015 Plan that are not included in the grant date fair value of such PSAs reported in the “Stock Awards” column of the 2017 Summary Compensation Table. PSAs are credited with cash dividends, which are subject to the same vesting terms as the underlying award. Dividends on PSAs will not vest unless and until the performance conditions applicable to the award have been achieved. All of the 2017 PSAs granted to Mr. Silverman were forfeited without payment upon his separation because Mr. Silverman did not meet the minimum one-year vesting requirement provided in the award agreement and the 2015 Plan.

 

(6d)

The amount in this column represents the value of separation payments under Mr. Silverman’s separation agreement with the Company. Refer to the section entitled “Compensation Discussion and Analysis—Elements of Our Compensation Program—Other Benefits—Silverman Separation” above for further details. 

   

(7)

Mr. Silverman’s separation was effective December 29, 2017. Accordingly, all of the 2017 PSAs and RSAs granted to Mr. Silverman were forfeited without payment upon his separation because Mr. Silverman did not meet the minimum one-year vesting requirement provided in the award agreement and the 2015 Plan. 

 

2017 Grants of Plan-Based Awards

 

The following table shows information with respect to each equity-based award granted to our NEOs during 2017.

 

               

Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards
(2)

   

Estimated Possible Payouts Under
Equity Incentive Plan Awards
(3)

 

All Other

Stock Awards:

Number

of Shares

of Stock

 

All Other

Option Awards:

Number of

Securities

Underlying

 

Exercise

or Base

Price of Option

 

Grant

Date Fair

Value of

Stock and