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

cabo20190405_def14a.htm

 

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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:

 

 

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210 E. Earll Drive

Phoenix, AZ 85012

 

April 15, 2019

 

 

 

Dear Fellow Stockholders:

 

I am pleased to invite you to attend the 2019 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 Friday, May 17, 2019, 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 voting instruction form 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 17, 2019

 

 

The 2019 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 Friday, May 17, 2019, at 8:00 a.m., local time, for the following purposes:

 

 

1.

To elect three Class I directors to hold office until the 2022 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, 2019.

 

 

3.

To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers for 2018.

 

 

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 25, 2019, 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 or voting instruction form 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 or voting instruction form. 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 by 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 15, 2019

 

 

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TABLE OF CONTENTS

 

 

PROXY SUMMARY

1

PROXY STATEMENT

5

PROPOSAL 1: ELECTION OF DIRECTORS

8

CORPORATE GOVERNANCE

12

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

18

EXECUTIVE COMPENSATION

20

PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION FOR 2018

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 2020 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 MEASURES

A-1

 

 

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CABLE ONE, INC.

210 E. Earll Dr.

Phoenix, Arizona 85012

 

PROXY SUMMARY

 

This Proxy Summary highlights information described in more detail elsewhere in this Proxy Statement. It does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

 

Cable One, Inc. 2019 Annual Meeting of Stockholders (the “Annual Meeting”)

Date and Time:

Friday, May 17, 2019, at 8:00 a.m., local time

Place:

Cable One, Inc. Headquarters, 210 East Earll Drive, Phoenix, Arizona, 85012

Record Date:

March 25, 2019

 

Voting Matters and Board Recommendations

 

The Board of Directors (the “Board”) of Cable One, Inc. (the “Company, “we,” “us,” “our” or “Cable One”) unanimously recommends you vote as follows:

 

Proposal

 

Board Recommendation

 

Page for Additional

Detail

 

Election of Directors:

 

The election of three Class I directors named in this Proxy Statement to hold office until the 2022 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”)

 

 

 

FOR

each nominated director 

 

8

 

Ratification of appointment of independent registered public accounting firm:

 

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, 2019

 

 

FOR ☑

 

18

 

Advisory Vote to Approve Executive Compensation for 2018:

 

The approval, on a nonbinding advisory basis, of the compensation of our named executive officers (“NEOs”) for 2018 (also referred to as the “say-on-pay” vote)

 

FOR ☑

 

44

 

 

Cable One, Inc.▪ 2019 Proxy Statement        

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Company Highlights

 

 

Strong operational and financial performance in 2018

     
 

Received the Cable FAX 2018 MSO of the Year Award and the top spot in J.D. Power’s 2018 residential internet service provider satisfaction study for the western region of the United States

     
 

Net income was $164.8 million in 2018, a decrease of 29.9% year-over-year, primarily as a result of the 2017 Federal tax reform legislation (the “2017 Tax Act”). Adjusted EBITDA was $500.8 million, an increase of 12.9% year-over-year. See Annex A of this Proxy Statement, entitled “Use of Non-GAAP Financial Measures,” for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable measure under GAAP

     
 

Net cash provided by operating activities was $407.8 million, an increase of 25.7% year-over-year. Adjusted EBITDA less capital expenditures was $283.1 million, an increase of 7.1% year-over-year. See Annex A of this Proxy Statement, entitled “Use of Non-GAAP Financial Measures,” 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

     
 

Total stockholder return as of December 31, 2018 grew 17.8% on a one-year basis and 25.0% on a compounded three-year basis

 

Governance Highlights

 

 

75% of the Board is independent with three female directors out of eight members

     
 

Robust executive and non-employee director stock ownership guidelines

     
 

Expanded Clawback Policy that allows for the forfeiture and recoupment in the event of financial restatements, legal or compliance violations or various forms of misconduct

     
 

Prohibition from hedging and pledging our securities by all executives and directors

 

Election of Directors (page 8)

 

The following tables presents certain information, as of March 25, 2019, concerning each nominee for election as a director at, and each director whose term of office will continue after, the Annual Meeting.

 

Class I Director Nominees

Name

  

Age

  

Director

Since

  

Principal Occupation

  

Independent

  

Committee

Memberships

  

Other Public

Company

Boards

Brad D. Brian

  

66

  

2015

  

Chair of the law firm Munger, Tolles & Olson LLP

  

  

Compensation;

Nominating and Governance

  

0

Julia M. Laulis

  

56

  

2017

  

Chair of the Board, President and Chief Executive Officer of Cable One

  

 

  

Executive

  

0

Katharine B. Weymouth

  

52

  

2015

  

Chief Operating Officer and President of dineXpert

  

  

Audit;

Compensation

  

2

 

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Class II and III Directors Continuing in Office

Name

  

Age

  

Director

Since

  

Principal Occupation

  

Independent

  

Committee

Memberships

  

Other Public

Company

Boards

Thomas S. Gayner

  

57

  

2015

  

Co-Chief Executive Officer of Markel Corporation

  

(Lead Independent Director)

  

Executive;

Nominating and Governance

  

4

Deborah J. Kissire

  

61

  

2015

  

Retired Ernst & Young LLP partner

  

  

Audit

  

2

Thomas O. Might

  

67

  

1995

  

Retired Executive Chairman of Cable One

  

 

  

  

0

Alan G. Spoon

  

67

  

2015

  

Retired partner at Polaris Partners

  

  

Audit;

Executive

  

4

Wallace R. Weitz

  

69

  

2015

  

Founder of Weitz Investment Management, Inc.

  

  

Compensation; Executive;

Nominating and Governance

  

1

 

Ratification of Appointment of Independent Registered Public Accounting Firm (page 18)

 

The following table provides summary information regarding the aggregate fees billed to the Company for professional services rendered by PricewaterhouseCoopers LLP for 2018 and 2017.

 

   

2018

   

2017

 

Audit Fees

  $ 2,017,035     $ 2,623,605  

Audit-Related Fees

    120,969       104,299  

Tax Fees

    -       72,000  

All Other Fees

    3,000       2,771  

Total

  $ 2,141,004     $ 2,802,675  

 

Executive Compensation (page 20)

 

We have a performance-based compensation philosophy, and the 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 our short- and long-term business strategies, with an emphasis on the long-term.

 

 

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

 

 

Reflect our pay-for-performance philosophy.

 

 

Ensure that compensation opportunities are competitive.

 

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The following charts show an overview of the 2018 executive compensation components for our CEO and our other NEOs (except newly hired NEOs) and the percentage of target annual compensation that is at-risk.

 

 

 

Advisory Vote to Approve Executive Compensation for 2018 (page 44)

 

We are asking stockholders to approve an advisory resolution on the compensation of our NEOs as reported in this Proxy Statement. Although the say-on-pay vote is advisory and therefore non-binding on us, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. At our 2018 Annual Meeting of Stockholders, nearly 99% of the votes cast voted in favor of our say-on-pay proposal.

 

Who Can Vote

 

Stockholders of record as of the close of business on March 25, 2019 (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. 

 

How to Cast Your Vote

 

You can vote using any of the following methods:

 

Over the internet at www.proxyvote.com or scan the QR code on your proxy card or voting instruction form 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 voting instruction form.

 

By attending the Annual Meeting and voting in person. Stockholders of record (that is, if your shares are registered in your name and not in “street name”) 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.

 

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PROXY STATEMENT

FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS

MAY 17, 2019

 

 


 

This Proxy Statement contains information relating to the Annual Meeting of Cable One, or any adjournments thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The Board is making this proxy solicitation.

 

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

to Be Held on May 17, 2019

 

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 15, 2019 to all stockholders entitled to vote at the Annual Meeting.

 

Other Questions and Answers

 

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 and Steven S. Cochran, acting as your proxies, will vote your shares at their discretion.

 

Q:

What else should I know about voting?

A:

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 or voting instruction form 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 are a stockholder of record and you sign and return a proxy card but do not indicate your voting preferences, Julia M. Laulis and Steven S. Cochran, acting as your proxies, will vote your shares in accordance with the Board’s recommendations specified in the Proxy Summary under “Voting Matters and Board Recommendations.”

 

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.

 

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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-against 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:

Votes cast in person or by proxy at the meeting will be tabulated by the inspector of elections appointed for the meeting, who will determine whether a quorum is present. The inspector of elections need not be a stockholder, and no director or nominee for the election as a director may be appointed the inspector of elections.

 

Q:

Who can attend the Annual Meeting?

A:

All stockholders of record as of the close of business on March 25, 2019 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 form 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 or voting instruction form, 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.

 

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 5,699,364 shares of our common stock outstanding and entitled to vote.

 

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Q:

What is a broker non-vote?

A:

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 2019 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 on behalf of the Board 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 I directors whose term of office expires in 2019. The nominees for election as Class I directors, to serve for a three-year term until the 2022 Annual Meeting of Stockholders and until his or her successor is elected and qualified, are Brad D. Brian, Julia M. Laulis and Katharine B. Weymouth. All nominees are currently directors of the Company. Ms. Laulis was elected by the Board in January 2017 at the same time she was appointed Chief Executive Officer of the Company.

 

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 for election 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 25, 2019, concerning each nominee for election as a director at, and each director whose term of office will continue after, the Annual Meeting.

 

Name

  

Age

  

Director

Since

  

Position

  

Expiration of

Term as

Director

Julia M. Laulis

  

56

  

2017

  

Chair of the Board, President and Chief Executive Officer

  

2019

Brad D. Brian*

  

66

  

2015

  

Director

  

2019

Thomas S. Gayner*

  

57

  

2015

  

Lead Independent Director

  

2021

Deborah J. Kissire*

  

61

  

2015

  

Director

  

2021

Thomas O. Might

  

67

  

1995

  

Director

  

2021

Alan G. Spoon*

  

67

  

2015

  

Director

  

2020

Wallace R. Weitz*

  

69

  

2015

  

Director

  

2020

Katharine B. Weymouth*

  

52

  

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, legal, 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 significant 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.

 

  

  

Data, Video, Voice /

Communications /

Media Industry

Experience

  

Leadership

Experience

  

Governance /

Outside 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 2022 Annual Meeting of Stockholders

 

Brad D. Brian

 

Mr. Brian is a national trial lawyer and Chair of the law firm Munger, Tolles & Olson LLP, having practiced there for more than 37 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. He serves on several non-profit boards, including the board of trustees of the UC Berkeley Foundation.

 

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.

 

Prior to joining Cable One, Ms. Laulis served in various senior marketing positions with Jones Communications. Ms. Laulis began her 35-plus-year career in the cable industry with Hauser Communications.

 

Ms. Laulis serves on the boards of C-SPAN, CableLabs and The Cable Center, and she is a trustee of the C-SPAN Education Foundation.

 

In addition to being the Company’s President and Chief Executive Officer, 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.

 

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Katharine B. Weymouth

 

Ms. Weymouth is the Chief Operating Officer and President of dineXpert, a group buying service for independent restaurants that launched in 2018. She was the Chief Executive Officer of Washington Post Media and Publisher of The Washington Post newspaper from February 2008 until October 2014. Ms. Weymouth 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. She 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 serves on the boards of Graham Holdings Company (formerly named The Washington Post Company and our former corporate parent) (“GHC”) and Republic Services, Inc. She also 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.

 

Ms. Weymouth brings to the Board public company leadership, management oversight and operational expertise gained through her various senior roles with and directorships at public and private companies as well as historical knowledge of our business from her time as a director of GHC.

 

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

 

Directors Continuing in Office

 

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 Colfax Corporation, GHC 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.

 

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 internal 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.

 

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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 Company’s history, strategic and operational opportunities and challenges, economic and industry trends, and the competitive and financial positioning of the Company based on his various executive roles at Cable One.

 

Alan G. Spoon

 

Mr. Spoon served as a partner at Polaris Partners, a private investment firm that provides venture capital to development-stage companies, between May 2000 and December 2018, including as Partner Emeritus from 2015 to 2018 and Managing General Partner from 2000 to 2010. 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 extensive knowledge of our 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.

 

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, compensation, 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 2018.

 

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

  

5

  

5

  

3

  

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 2018.

 

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 independent registered public accounting firm;

 

 

the performance of our internal audit function;

 

 

the independent registered public accounting firm’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 and, to the extent still applicable, “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

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;

 

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

 

 

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, structure and leadership; 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, unless the Board, upon recommendation of the Nominating and Governance Committee, determines that it is in the best interests of the Company and its stockholders for the director to continue to serve on the Board for an additional term.

 

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; 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;

 

 

fairness in business practices;

 

 

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

 

 

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

 

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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.

 

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 and a representation as to whether such stockholder intends to solicit proxies. In addition, in the event a stockholder of record desires to bring any other business before the meeting, proper notice must include a brief description of such other business the stockholder proposes to bring before the meeting and the reason for conducting such business.

 

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. In 2018, we retained Spencer Stuart, a national outside director search firm, to assist in identifying and evaluating potential director candidates.

 

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-against 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 members of each of the standing committees (other than the Executive Committee) must be independent, including any enhanced independence standards applicable to a particular committee, and none of the members of the standing committees (other than the Executive Committee) 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: Brad D. Brian, Thomas S. Gayner, Deborah J. Kissire, Alan G. Spoon, Wallace R. Weitz and Katharine B. Weymouth.

 

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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 2018, 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 2019 as appropriate.

 

Board Leadership Structure

 

As set forth in our Corporate Governance Guidelines, the Board supports flexibility in determining its leadership structure by not requiring the separation of the roles of Chair 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.

 

We currently do not separate the roles of Chair of the Board and Chief Executive Officer as Ms. Laulis serves in both roles. 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 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.

 

As provided in our Corporate Governance Guidelines, to ensure the Board’s independence and proper functioning, the Board also appoints a Lead Independent Director who must be independent according to the criteria for independence established by the NYSE. 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 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 providers of data, video and voice services, 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, which is a departure from more conventional strategies in our industry, but is well suited to the markets in which we operate and enables us to take advantage of our strengths. 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 industry-wide trends of declining profitability of residential video services and declining revenues from residential voice services. Beginning in 2013, we shifted our focus away from maximizing customer PSUs and towards growing our higher margin businesses, namely residential data and business services. Separately, we have also focused on retaining customers with a high expected lifetime value, who are less attracted by discounting, require less support and churn less. This strategy focuses on increasing Adjusted EBITDA, Adjusted EBITDA less capital expenditures and margins.

 

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 four years since our spin-off from GHC (the “spin-off”) and only Messrs. Might and Spoon having served as directors for more than four 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 directors, except for Mr. Spoon, attended our 2018 Annual Meeting of Stockholders.

 

Compensation Committee Interlocks and Insider Participation

 

Messrs. Brian and Weitz and Ms. Weymouth served as members of the Compensation Committee in 2018. None of these individuals has ever been an employee of the Company. During 2018, 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 30 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, 2018, and has served as our independent auditor since 2014. Our Audit Committee has appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019 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, 2018 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 requires 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 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 has determined that the provision of audit-related services reflected in the table below 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 2018 and 2017.

 

   

2018

   

2017

 

Audit Fees (1)

  $ 2,017,035     $ 2,623,605  

Audit-Related Fees (2)

    120,969       104,299  

Tax Fees (3)

    -       72,000  

All Other Fees (4)

    3,000       2,771  

Total

  $ 2,141,004     $ 2,802,675  

                              

 

(1)

Audit fees for 2018 and 2017 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”).

 

 

(2)

Audit-related fees for 2018 and 2017 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.

 

 

(3)

Tax fees for 2017 related to tax compliance, tax advice and tax planning, including reimbursable expenses. These fees were primarily related to tax matters for mergers and acquisitions.

 

 

(4)

All other fees for 2018 and 2017 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, 2019.

 

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Executive Summary

 

NEOs

 

This Compensation Discussion and Analysis describes the compensation of our NEOs named in the 2018 Summary Compensation Table:

 

Name

 

Position

Julia M. Laulis

 

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

Michael E. Bowker

 

Chief Operating Officer (“COO”)

Steven S. Cochran (1)

 

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

Eric M. Lardy

 

Senior Vice President

Peter N. Witty (2)

 

Senior Vice President, General Counsel and Secretary

Kevin P. Coyle (3)

 

Former Senior Vice President and CFO

                  

(1) 

Effective August 6, 2018, Mr. Cochran was appointed Senior Vice President and effective August 13, 2018, he was appointed Chief Financial Officer.

(2) 

Effective April 2, 2018, Mr. Witty was appointed Senior Vice President, General Counsel and Secretary.

(3) 

Effective August 12, 2018, Mr. Coyle ceased serving as CFO.

 

2018 Highlights

 

We delivered strong operational and financial performance in 2018 while announcing, continuing or completing a series of key initiatives, including the integration of legacy NewWave operations, revealing of our intention to rebrand as Sparklight™ beginning in the summer of 2019 and executing the now-completed acquisition of Clearwave Communications, which expanded our fiber footprint and enterprise business segment. These are among the reasons that we were recognized multiple times in 2018, most notably by receiving the Cable FAX 2018 MSO of the Year Award and the top spot in J.D. Power’s 2018 residential internet service provider satisfaction study for the western region of the United States. Below are highlights of our performance in 2018, including Adjusted EBITDA, which was a performance metric used for our 2018 Annual Executive Bonus Plan (the “2018 Bonus Plan”):

 

 

Net income was $164.8 million in 2018, a decrease of 29.9% year-over-year primarily as a result of the 2017 Tax Act.

 

 

Adjusted EBITDA was $500.8 million, an increase of 12.9% year-over-year.

 

 

Net cash provided by operating activities was $407.8 million, an increase of 25.7% year-over-year.

 

 

Adjusted EBITDA less capital expenditures was $283.1 million, an increase of 7.1% year-over-year.

 

 

Total stockholder return as of December 31, 2018 grew 17.8% on a one-year basis and 25.0% on a compounded three-year basis.

 

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.

 

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Both annual bonuses and the majority of annual equity incentive awards for existing executives are based on financial operating performance against pre-defined objective goals (with no discretion to increase payouts) or the appreciation of our common stock.

 

 

The Compensation Committee engages an independent compensation consultant.

 

 

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

 

 

In 2019, the Board adopted a more expansive Clawback Policy that allows for the forfeiture and recoupment in the event of financial restatements, legal or compliance violations or various forms of misconduct.

 

 

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

 

 

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.

 

 

The Cable One, Inc. 2015 Omnibus Incentive Compensation Plan, as amended and restated (the “2015 Plan”) does not allow for the repricing of options or SARs without stockholder approval.

 

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 2018 Annual Meeting of Stockholders, nearly 99% of the votes cast were in favor of our say-on-pay proposal. After evaluating the outcome of the 2018 say-on-pay vote and based upon input from the Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), the Compensation Committee determined that our executive compensation program is aligned with our compensation philosophy and our business strategy.

 

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 the majority of long-term equity incentives to achievement against pre-established long-term operating goals (through performance-based restricted stock awards (“PSAs”)) or the appreciation of our common stock (through stock appreciation rights (“SARs”)). Newly hired or promoted executives typically receive an initial long-term equity incentive in the form of time-based restricted stock awards (“RSAs”), which are intended to support direct alignment with the interests of our long-term stockholders.

 

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Other Benefits — Provide other benefits that are competitive and consistent with the market, including health and welfare benefits that are broadly uniform with those offered to all full-time employees; minimal perquisites, such as relocation and temporary housing assistance for newly hired executives; and limited severance benefits in the event of involuntary termination, which generally provide for partial vesting of outstanding equity awards.

 

Under our executive compensation program, performance-based incentive compensation comprises a substantial portion of target annual 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.

 

The following charts show an overview of the 2018 executive compensation components for our CEO and our other NEOs (except newly hired NEOs) and the percentage of target annual compensation that is at-risk.

 

 

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 our short- and long-term business strategies, with an emphasis on the long-term.

 

 

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

 

 

Reflect our pay-for-performance philosophy.

 

 

Ensure that compensation opportunities are competitive.

 

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Role of the Compensation Committee and the CEO

 

The Board has delegated to the Compensation Committee the responsibility of overseeing the administration of our compensation plans and the preparation of all related 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 our stockholders for approval.

 

The Compensation Committee generally meets at least quarterly throughout the year and may meet more often, as required, to address ongoing events. In 2018, the Compensation Committee met five times. Meeting agendas are determined by the Chair of the Compensation Committee with the assistance of our CEO. Our CEO attended all five Compensation Committee meetings and representatives from the Compensation Committee’s independent compensation consultant, FW Cook, attended four Compensation Committee meetings in 2018. 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 Committee meetings.

 

Compensation Setting Process

 

The Compensation Committee determined the compensation of each of our NEOs for 2018. For 2018, the Compensation Committee made determinations for our CEO 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), the Compensation Committee’s determination of compensation for 2018 was based on the recommendations of our 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 2018, 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 2018. 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 it provided to the Compensation Committee.

 

Use of Peer Companies

 

In determining our NEOs’ 2018 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. At the time of the FW Cook compensation study, across key size metrics, we were generally in a median-to-75th percentile range versus our peers. Our annual revenues and employee headcount approximated the peer median, EBITDA was near the 65th percentile and market capitalization value (current and 12-month average) approximated the 75th percentile.

 

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.

 

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We regularly monitor the composition of our peer group and make changes when appropriate. Our peer group remained largely unchanged in 2018, except for the removal of Inteliquent and Rackspace Holdings, both of which were acquired. The following chart shows the peer group developed by us for determining our NEOs’ 2018 compensation.

 

2018 NEO Compensation Peer Group

Akamai Technologies

Consolidated Communications

Shenandoah Telecommunications

ATN International

General Communication

Telephone and Data Systems

Cincinnati Bell

Gogo

ViaSat

COGECO

NII Holdings

Vonage Holdings

Cogent Communications

SBA Communications

Zayo Group Holdings

 

In determining the structure of our 2018 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.

 

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.

 

As part of the annual review process, Ms. Laulis and Messrs. Bowker, Coyle and Lardy received base salary increases for 2018 based on individual performance and to more closely align each of them with competitive market salary levels. The table below reflects the 2018 base salary amounts as reported in the 2018 Summary Compensation Table for all NEOs, the annualized 2018 base salary amounts for newly hired NEOs and the percent change from 2017 base salary amounts for existing executives (including the annualized 2017 base salary for Mr. Bowker of $350,000).

 

Name

 

2018 Base Salary

 

Annualized 2018

Base Salary

 

Percent Change from 2017

Julia M. Laulis

 

$575,000

 

 

4.5%

Michael E. Bowker

 

$360,000

 

 

2.9%

Steven S. Cochran

 

$131,781

 

$325,000

 

Eric M. Lardy

 

$220,000

 

 

10.0%

Peter N. Witty

 

$236,466

 

$315,000

 

Kevin P. Coyle

 

$325,000

 

 

3.2%

 

Annual Cash Incentive Program

 

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 was awarded a cash incentive opportunity at the beginning of 2018 (for existing executives) or in connection with their appointment (for newly hired executives) pursuant to the 2018 Bonus Plan. The 2018 Bonus Plan provided for payouts based on our financial performance compared to goals set immediately prior to the beginning of 2018, 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 2018 and 2017 are reflected in the table below.

 

Name

 

2018 Year-End Target

Bonus Percentage

 

2017 Year-End Target

Bonus Percentage

Julia M. Laulis

 

100%

 

100%

Michael E. Bowker

 

75%

 

75%

Steven S. Cochran

 

70%

 

Eric M. Lardy

 

50%

 

50%

Peter N. Witty

 

50%

 

Kevin P. Coyle

 

70%

 

50%

 

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For Mr. Coyle, the target bonus percentage increased to more closely align him with competitive market salary levels. 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. In accordance with the terms of the 2018 Bonus Plan, Mr. Coyle received his bonus payment at the same time as other executives of the Company as he was an employee of the Company through the end of 2018.

 

Bonus payouts under the 2018 Bonus Plan were subject to the attainment of goals related to Adjusted EBITDA growth and adjusted 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 2018 Annual Report on Form 10-K, filed on February 27, 2019 (the “2018 Form 10-K”)) and adjust for the items as defined and calculated in Annex A of this Proxy Statement. Furthermore, for purposes of the 2018 Bonus Plan calculations, 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 unusual or infrequently occurring events, including incremental capital expenditures related to upgrading acquired businesses or assets, including the legacy NewWave operations we acquired in 2017; EBITDA and capital expenditures related to designated fiber expansion projects; and other expenses or losses that were disclosed as special, one-time or unusual in nature or infrequently occurring, or both, in accordance with GAAP. For purposes of calculating the Adjusted EBITDA growth measure, our publicly reported Adjusted EBITDA amount for the year ended December 31, 2017 included only eight months of legacy NewWave operations, as NewWave was not acquired until May 1, 2017.

 

We believe that the combination of Adjusted EBITDA growth and adjusted 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 2018 Bonus Plan, using the following table (with any values between points on the table determined based on linear interpolation):

 

 

2018 Adjusted EBITDA growth over 2017 Adjusted EBITDA (subject to adjustment as provided above, to the extent applicable); and

 

 

2018 capital expenditures as a percentage of 2018 total revenues (subject to adjustment as provided above, to the extent applicable).

 

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Adjusted EBITDA Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thresh.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Target

 

 

 

 

 

 

 

 

 

 

 

 

 

Max.

 

 

 

 

 

 

 

<0%

 

 

1%

 

 

2%

 

 

3%

 

 

4%

 

 

5%

 

 

6%

 

 

7%

 

 

8%

 

 

9%

 

 

10%

 

 

11%

 

 

Thresh.

24

%

 

 

0%

 

 

25%

 

 

30%

 

 

35%

 

 

40%

 

 

45%

 

 

50%

 

 

60%

 

 

70%

 

 

80%

 

 

90%

 

 

100%

 

 

 

23

%

 

 

0%

 

 

30%

 

 

36%

 

 

42%

 

 

48%

 

 

54%

 

 

60%

 

 

72%

 

 

84%

 

 

96%

 

 

108%

 

 

120%

 

Adjusted

 

22

%

 

 

0%

 

 

35%

 

 

42%

 

 

49%

 

 

56%

 

 

63%

 

 

70%

 

 

84%

 

 

98%

 

 

112%

 

 

126%

 

 

140%

 

Capital

 

21

%

 

 

0%

 

 

40%

 

 

48%

 

 

56%

 

 

64%

 

 

72%

 

 

80%

 

 

96%

 

 

112%

 

 

128%

 

 

144%

 

 

160%

 

Expenditures

 

20

%

 

 

0%

 

 

45%

 

 

54%

 

 

63%

 

 

72%

 

 

81%

 

 

90%

 

 

108%

 

 

126%

 

 

144%

 

 

162%

 

 

180%

 

as a

Target

19

%

 

 

0%

 

 

50%

 

 

60%

 

 

70%

 

 

80%

 

 

90%

 

 

100%

 

 

120%

 

 

140%

 

 

160%

 

 

180%

 

 

200%

 

% of Total

 

18

%

 

 

0%

 

 

58%

 

 

69%

 

 

81%

 

 

92%

 

 

104%

 

 

115%

 

 

138%

 

 

161%

 

 

184%

 

 

200%

 

 

200%

 

Revenues

 

17

%

 

 

0%

 

 

65%

 

 

78%

 

 

91%

 

 

104%

 

 

117%

 

 

130%

 

 

156%

 

 

182%

 

 

200%

 

 

200%

 

 

200%

 

 

 

16

%

 

 

0%

 

 

73%

 

 

87%

 

 

102%

 

 

116%

 

 

131%

 

 

145%

 

 

174%

 

 

200%

 

 

200%

 

 

200%

 

 

200%

 

 

Max.

15

%

 

 

0%

 

 

80%

 

 

96%

 

 

112%

 

 

128%

 

 

144%

 

 

160%

 

 

192%

 

 

200%

 

 

200%

 

 

200%

 

 

200%

 

  

 

 

= Range including actual 2018 performance factor.

 

On February 28, 2019, the Compensation Committee certified the results of the performance goals. The Compensation Committee approved a performance factor of approximately 144.8% based on Adjusted EBITDA growth of 7.6% and adjusted capital expenditures as a percentage of total revenues of 18.4%. The Compensation Committee applied the following pre-established adjustments described above to the performance results under the 2018 Bonus Plan:

 

Adjusted EBITDA Growth (in millions)

 

 

Adjusted Capital Expenditures (“Capex”) as a % of Total Revenues (in millions)

 

2018 Publicly Reported Adjusted EBITDA

$500.8

 

 

2018 Publicly Reported Capex

$217.8

 

Designated Fiber Expansion Project EBITDA Impact

$0.5

 

 

Designated Fiber Expansion Project Capex

$(0.6

)
     

 

Capex related to Acquisitions

$(19.9

)

Total Adjustments

$0.5

 

 

Total Adjustments

$(20.5

)

2018 Adjusted EBITDA, as Adjusted

$501.3

 

 

2018 Capex, as Adjusted

$197.3

 

2017 Adjusted EBITDA, as Adjusted

$465.7

 

 

2018 Publicly Reported Total Revenues

$1,072.3

 

Adjusted EBITDA Growth

7.6

%

 

Adjusted Capital Expenditures as a Percentage of Total Revenues

18.4

%

 

The Compensation Committee approved the following bonus payments under the 2018 Bonus Plan for our NEOs:

 

2018 Bonus Plan Payouts

 

Name

 

Target Bonus

Percentage

 

Target

Bonus

 

Performance Results

(as a Percentage of Target)

 

Bonus Payout

Julia M. Laulis

 

100%

 

$575,000

 

144.8%

 

$832,841

Michael E. Bowker

 

75%

 

$270,000

 

144.8%

 

$391,073

Steven S. Cochran (1)

 

70%

 

$92,247

 

144.8%

 

$133,612

Eric M. Lardy

 

50%

 

$110,000

 

144.8%

 

$159,326

Peter N. Witty (1)

 

50%

 

$118,233

 

144.8%

 

$171,251

Kevin P. Coyle

 

70%

 

$227,500

 

144.8%

 

$329,515

                  

(1)

Target bonus amount was pro-rated based on the NEO’s start date.

 

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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 2018 Grants of Plan-Based Awards and the Outstanding Equity Awards at Fiscal Year-End tables beginning on pages 35 and 37, respectively, of this Proxy Statement.

 

2018 PSA Grants

 

For 2018, the Compensation Committee granted our NEOs PSAs under the 2015 Plan. The PSAs granted in 2018 were subject to the attainment of the same goals and performance targets related to Adjusted EBITDA growth and adjusted capital expenditures as a percentage of revenues as bonuses under the 2018 Bonus Plan because the Compensation Committee viewed these metrics as key indicators of our performance, as further described under the section “Annual Cash Incentive Program” above. The decision to use the same performance measures for the annual cash bonus plan and PSAs was based on: (1) the belief that these metrics are the best measures of performance and are principle drivers of stockholder value; and (2) challenges encountered and expected in setting and tracking meaningful multi-year performance goals given the company’s organic and inorganic growth and strategy. While earned over a one-year performance period, the PSAs cliff-vest on the third anniversary of the grant date, which supports retention, discourages executive officers from taking excessive risks for short-term gains and fosters alignment with long-term stockholders as the value delivered ultimately is contingent on longer-term three-year stock price performance.

 

Consistent with the approach for the 2017 PSA grants, Ms. Laulis received a 2018 PSA grant with a target grant date fair value of approximately 100% of her base salary ($575,000) and Messrs. Bowker, Lardy and Coyle, who were employees on the January 3, 2019 grant date (the “continuing NEOs”), received 2018 PSA grants with a target grant date fair value of approximately 50% of their base salaries. The target number of PSAs was calculated by taking the applicable percentage of each continuing NEO’s starting base salary for 2018 and dividing it by the closing price of our common stock on the trading day immediately prior to the grant date, January 2, 2018, of $707.81 (rounded down to the nearest full share). The PSAs are subject to the terms and conditions of the 2015 Plan as well as an award agreement between the Company and each NEO. The PSAs are scheduled to cliff-vest on January 3, 2021, generally subject to continued service with the Company through such date and achievement of the performance goals described above with respect to fiscal 2018.

 

On February 28, 2019, the Compensation Committee certified the results of the performance goals for our 2018 PSA grants. The Compensation Committee approved a performance factor of approximately 144.8% based on Adjusted EBITDA growth of 7.6% and adjusted capital expenditures as a percentage of total revenues of 14.4%. The Compensation Committee applied the pre-established adjustments described under the section “Annual Cash Incentive Program” above to the performance results for the 2018 PSAs. The Compensation Committee approved the following 2018 PSA grants and performance results for our continuing NEOs:

 

2018 PSA Grants

 

Name

 

Target Grant Date

Fair Value of PSAs (1)

 

Target Number of PSAs

 

Maximum Number of PSAs

 

Performance Results (as a % of Target)

 

Earned PSAs (2)

Julia M. Laulis

 

$573,515

 

811

 

1,622

 

144.8%

 

1,174

Michael E. Bowker

 

$179,621

 

254

 

508

 

144.8%

 

367

Eric M. Lardy

 

$109,611

 

155

 

310

 

144.8%

 

224

Kevin P. Coyle (3)

 

$161,942

 

229

 

458

 

144.8%

 

331

                

 

(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)

Earned PSAs are subject to service-based vesting conditions through January 3, 2021.

 

(3)

All of the 2018 PSAs granted to Mr. Coyle were forfeited without payment upon his separation from service with the Company on January 4, 2019.

 

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2018 RSA Grants

 

For 2018, the Compensation Committee approved annual RSA grants of 500 shares for Ms. Laulis and 200 shares each for Messrs. Lardy and Coyle, which vest in equal annual installments over four years. The grant date fair value of each RSA grant (computed in accordance with Topic 718) was as follows: Ms. Laulis, $353,585, and Messrs. Coyle and Lardy, $141,434. These grants were awarded in order to recognize strong individual performance and encourage retention. Three-fourths of the 2018 RSAs granted to Mr. Coyle were forfeited without payment upon his separation from service with the Company on January 4, 2019.

 

The Compensation Committee also approved RSA grants in connection with the hiring of Messrs. Cochran and Witty, each with a targeted value equal to approximately 3.0 times their respective base salaries ($975,000 and $945,000, respectively). Mr. Cochran’s grant was for an aggregate of 1,119 shares with a grant date fair value (computed in accordance with Topic 718) of $974,727. For Mr. Cochran 1,065 RSAs are scheduled to vest on January 3, 2021 and 54 RSAs are scheduled to vest on October 1, 2021 (in each case, generally subject to his continued employment with us through the vesting date). Mr. Witty’s grant, which was issued in two parts, was for an aggregate of 1,378 shares with a total grant date fair value (computed in accordance with Topic 718) of $944,679. For Mr. Witty 1,288 RSAs are scheduled to vest on January 3, 2021 and 90 RSAs are scheduled to vest on October 1, 2021 (in each case, generally subject to his continued employment with us through the vesting date).

 

2018 SAR Grants

 

For 2018, the Compensation Committee approved grants of 2,000 SARs to each of Ms. Laulis and Messrs. Bowker and Lardy in order to recognize strong individual performance, encourage retention and support alignment with long-term stockholder interests. The Compensation Committee also approved grants of 2,000 SARs to each of Messrs. Cochran and Witty in connection with their hiring and appointment. The 2018 SAR awards were granted at fair market value on the date of grant, 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, $339,080; Mr. Bowker, $339,080; Mr. Cochran, $434,720; Mr. Lardy, $339,080; and Mr. Witty, $328,980.

 

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 Benefits.”

 

Perquisites

 

We provide our NEOs with limited perquisites. In 2018, we provided relocation and temporary housing assistance for newly hired NEOs, for which we do not provide any gross-up payments, and 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. We also reimbursed Ms. Laulis 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 2018 Summary Compensation Table on page 33 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. Coyle in connection with his announced retirement in January 2019, 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 the Cable One, Inc. Supplemental Executive Retirement Plan (the “Cable One SERP”) described below in the “Retirement Benefits” section beginning on page 38 of this Proxy Statement as well as Mr. Coyle’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 41 of this Proxy Statement.

 

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Coyle Separation

 

In connection with Mr. Coyle’s separation from service with the Company on January 4, 2019, and in consideration of his assistance on transition matters and his agreement to certain restrictive covenants (including execution of standard irrevocable releases and his acknowledgement of and continued compliance with covenants regarding non-competition, non-solicitation, no-hire and confidentiality), Mr. Coyle entered into a separation agreement with the Company dated July 2, 2018 that provided for payment in two roughly equal installments in the first quarters of 2019 and 2020 of (a) one year’s base salary, or $325,000, plus an amount of $1,265,800 and (b) an amount equal to the estimated cost of Mr. Coyle’s health insurance premiums for a one-year period, or $24,000. In accordance with the terms of the applicable award agreements, Mr. Coyle vested as of January 4, 2019 in a pro-rated portion of his unvested equity awards granted prior to 2018 based on the percentage of the vesting period that had elapsed as of such date. The remaining unvested portion of these awards were forfeited for no consideration immediately upon his separation date. As described above, in accordance with the terms of the 2018 Bonus Plan, Mr. Coyle received a performance-based 2018 annual cash bonus at the same time as other executives of the Company of $329,515.

 

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 ($275,000 in 2018). 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 and Nonqualified Deferred Compensation Plans

 

We maintain a nonqualified supplemental executive retirement plan and a nonqualified deferred compensation plan. Contributions or deferral to these plans were no longer permitted after December 31, 2015.

 

Explanation and discussion of these frozen retirement plans can be found in connection with the Pension Benefits Table and Nonqualified Deferred Compensation Table beginning on pages 39 and 40, respectively, of this Proxy Statement.

 

2019 Compensation Actions

 

2019 Base Salaries

 

As part of the annual review process, effective January 1, 2019, Mr. Lardy received a base salary increase of 15.0% based on individual performance and to more closely align him with competitive market salary levels. No other NEO received a base salary increase for 2019.

 

2019 Annual Executive Bonus Plan

 

At the end of 2018, the Compensation Committee approved the 2019 Annual Executive Bonus Plan (the “2019 Bonus Plan”). Consistent with the 2018 Bonus Plan, each of our NEOs (except Mr. Coyle) was awarded a cash incentive opportunity at the beginning of 2019 that provides for payouts based on our financial performance compared to goals set immediately prior to the beginning of 2019, with the target bonus percentage for each NEO set at the same level as the 2018 year-end target bonus percentage indicated above. Bonus payouts under the 2019 Bonus Plan remain subject to the attainment of goals related to year-over-year Adjusted EBITDA growth and adjusted capital expenditures as a percentage of revenues for 2019, each subject to adjustment as provided in the 2019 Bonus Plan.

 

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2019 PSA Grants

 

Consistent with the PSAs granted in 2017 and 2018, effective January 3, 2019, the Compensation Committee approved PSA grants with a target grant date fair value of approximately 100% of 2019 base salary for Ms. Laulis and approximately 50% of 2019 base salary for each of Messrs. Bowker, Cochran, Lardy and Witty. This resulted in grants of a target number of PSAs to such NEOs as follows: Ms. Laulis, 715 shares; Mr. Bowker, 224 shares; Mr. Cochran, 202 shares; Mr. Lardy, 157 shares; and Mr. Witty, 196 shares. The PSAs are scheduled to cliff-vest on January 3, 2022, generally subject to continued service with the Company through such date and achievement of the performance goals described above with respect to the 2019 Bonus Plan.

 

2019 RSA and SAR Grants

 

Effective January 3, 2019, the Compensation Committee approved RSA grants to Ms. Laulis of 500 shares and to Messrs. Bowker, Cochran, Lardy and Witty of 200 shares each, which vest in equal annual installments over four years. The Compensation Committee also approved grants of 2,000 SARs to Ms. Laulis and 1,500 SARs to each of Messrs. Bowker, Cochran, Lardy and Witty, which were granted at fair market value on the date of grant, 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 RSA and SAR grants were awarded to recognize strong individual performance, encourage retention and support alignment with long-term stockholder interests.

 

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 fully owned 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, 2018. 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 Chair or CEO

 

6.0

President or 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 a PSA, RSA or RSU vests or a 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.

 

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Prohibition on Derivative Trading, Hedging and Pledging

 

Our Insider Trading Policy provides that it is inappropriate for any executive officer or director, as well as any other employee who is a member of our restricted trading population, 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.

 

Clawback Policy

 

Effective January 1, 2019, the Board adopted a Clawback Policy that provides for the ability to recoup incentive compensation granted, paid or or otherwise provided to executives and certain other employees. Below is a summary of events that may trigger action under the policy.

 

 

Restatement of Financial Results — in the event of a restatement within the preceding three completed fiscal years (other than due to a change in or retrospective application of applicable accounting principles, methods, rules or interpretations) where the impact would have lowered the incentive compensation amount.

 

 

Legal or Compliance Violations / Misconduct — in the event of fraud or dishonesty by an employee; a willful act (or failure to act) in bad faith to the material detriment of the Company; material noncompliance with Company policies and guidelines, including misconduct, or the grossly negligent failure to supervise an employee who engaged in misconduct, that had a significant negative impact on the Company; intentional manipulation or attempted manipulation of any performance metric, financial indicator or other goal for personal gain; violation of applicable restrictive covenants; and violation of the policy or any other 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).

  

The Board may seek recoupment in any manner it chooses to the extent permitted by law, including reducing current or future incentive compensation awards (except in violation of Section 409A of the Code); requiring reimbursement or repayment of cash-based incentive compensation awards paid (within the previous three-year period); cancelling all or a portion of unvested equity awards, vested equity awards (within the previous three-year period) and any dividends accrued or paid in respect of such equity awards; requiring the return of certain net shares and dividends paid from vested, exercised, settled and sold equity awards (within the previous three-year period); and any other method of reducing the total compensation granted, paid or otherwise provided (within the previous three-year period or any current or future period). For purposes of the policy, incentive compensation includes but is not limited to annual and discretionary bonuses, PSAs, RSAs and SARs.

 

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 prior to 2018, 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 NEOs, the Compensation Committee’s historical practice was 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 NEO (and any person who was a named executive for any year beginning with 2017) will be nondeductible under Section 162(m).

 

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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, the Clawback Policy 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 and incorporated by reference into the 2018 Form 10-K.

 

 

Wallace R. Weitz, Chairman

Brad D. Brian

Katharine B. Weymouth

 

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2018 Summary Compensation Table

 

The following table shows the compensation paid by the Company during 2018, 2017 and 2016 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, 2018 and our former principal financial officer who was no longer serving as an executive officer as of December 31, 2018 based on 2018 compensation (except in the cases of Mr. Bowker, who was an NEO in 2018 and 2017 only, and Messrs. Cochran, Lardy and Witty, who were NEOs in 2018 only).

 

Name and Principal Position

 

Year

 

Salary

   

Bonus

   

Stock Awards (1)

   

Option Awards (1)

   

Non-Equity

Incentive Plan Compensation (2)

   

Change in Pension Value and Nonqualified Deferred Compensation Earnings (3)

   

All Other

Compensation (4)

   

Total

 

Julia M. Laulis

 

2018

  $ 575,000           $ 927,100     $ 339,080     $ 832,841           $ 26,009     $ 2,700,030  

Chair of the Board, President

 

2017

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

2016

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

Michael E. Bowker

 

2018

  $ 360,000           $ 179,621     $ 339,080     $ 391,073           $ 21,867     $ 1,291,641  

Chief Operating Officer

 

2017

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

Steven S. Cochran

 

2018

  $ 131,781           $ 974,727     $ 434,720     $ 133,612           $ 140,000     $ 1,814,840  

Senior Vice President and Chief Financial Officer

                                                                   

Eric M. Lardy

 

2018

  $ 220,000           $ 251,045     $ 339,080     $ 159,326           $ 11,611     $ 981,062  

Senior Vice President

                                                                   

Peter N. Witty

 

2018

  $ 236,466           $ 944,679     $ 328,980     $ 171,251           $ 120,000     $ 1,801,376  

Senior Vice President, General Counsel & Secretary

                                                                   

Kevin P. Coyle

 

2018

  $ 325,000           $ 303,376  (5)         $ 329,515           $ 19,143     $ 977,034  

Former Senior Vice President

 

2017

  $ 315,000     $ 50,000     $ 466,604           $ 258,636           $ 23,087     $ 1,113,327  
and Chief Financial Officer  

2016

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

                         

(1)

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 during 2018, rather than amounts paid to or realized by our NEOs. 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 13 of the Notes to the Consolidated Financial Statements contained in our 2018 Form 10-K for a discussion of the assumptions used in the valuation of the awards.

 

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Amounts in the “Stock Awards” column represent the grant date fair value of the PSA and RSA awards granted in 2018 as follows:

 

Name

 

Stock Awards –

Grant Date Fair Value

of PSAs

   

Stock Awards –

Grant Date Fair Value

of RSAs

   

Total

 

Julia M. Laulis

  $ 573,515     $ 353,585     $ 927,100  

Michael E. Bowker

  $ 179,621           $ 179,621  

Steven S. Cochran

        $ 974,727     $ 974,727  

Eric M. Lardy

  $ 109,611     $ 141,434     $ 251,045  

Peter N. Witty

        $ 944,679     $ 944,679  

Kevin P. Coyle

  $ 161,942     $ 141,434     $ 303,376  

 

 

Set forth below is the maximum value for the PSAs granted to the NEOs during 2018 (i.e., 200% of the target award value).

 

Name

 

Stock Awards –

Maximum Value

of PSAs

 

Julia M. Laulis

  $ 1,147,030  

Michael E. Bowker

  $ 359,242  

Steven S. Cochran

     

Eric M. Lardy

  $ 219,223  

Peter N. Witty

     

Kevin P. Coyle

  $ 323,884  

 

(2)

Amounts in this column for 2018, 2017 and 2016 represent payments under our bonus plan for each year. The 2018 Bonus Plan is described in further detail in the section entitled “Compensation Discussion and Analysis—Elements of Our Compensation Program—Annual Cash Incentive Program” above.

 

(3)

The amounts shown in this column represent increases, if any, in the present value of Cable One SERP benefits. For 2019, the present value of Cable One SERP benefits for Ms. Laulis decreased $8,076. The Company sponsors 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 4.27% at December 31, 2018, 3.56% at December 31, 2017 and 3.95% at December 31, 2016 and using RP-2018 fully generational mortality table for males and females using Scale MP-2017 at December 31, 2018, RP-2017 fully generational mortality table for males and females using Scale MP-2017 at December 31, 2017 and RP-2016 fully generational mortality table for males and females using Scale MP-2016 at December 31, 2016.

 

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

 

(4)

For 2018, the amounts presented include the information in the following table: 

 

All Other Compensation

 

Name

 

Perquisites (4a)

   

401(k) Company Contributions (4b)

   

PSA Dividends (4c)

   

Relocation and Temporary Housing Allowance (4d)

   

Total

 

Julia M. Laulis

  $ 6,790     $ 5,981     $ 13,238           $ 26,009  

Michael E. Bowker

  $ 5,942     $ 11,035     $ 4,890           $ 21,867  

Steven S. Cochran

                    $ 140,000     $ 140,000  

Eric M. Lardy

        $ 8,423     $ 3,188           $ 11,611  

Peter N. Witty

                    $ 120,000     $ 120,000  

Kevin P. Coyle

        $ 13,750     $ 5,393           $ 19,143  

                          

(4a)

Amounts in this column represent (i) for Ms. Laulis and Mr. Bowker, (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 NEO and such NEO’s spouse or other family member on such trips; and (ii) for Ms. Laulis, 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.

 

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(4b)

The NEOs are immediately 100% vested in the 401(k) Company contributions.

 

(4c)

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 2018 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 and service conditions applicable to the award have been achieved.

 

(4d)

The amounts in this column represent the value of one-time relocation and temporary housing allowances provided pursuant to Messrs. Cochran’s and Witty’s offer letters with the Company.

 

(5)

All of the 2018 PSAs and three-fourths of the 2017 RSAs granted to Mr. Coyle were forfeited without payment upon his separation from service with the Company on January 4, 2019.

 

2018 Grants of Plan-Based Awards

 

The following table shows information with respect to each plan-based award granted to our NEOs during 2018.

 

           

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

 

Name

 

Grant

Date

 

Approval

Date (1)

 

Threshold
($)

 

Target
($)

 

Maximum
($)

 

Threshold
(#)

 

Target
(#)

 

Maximum
(#)

 

or Units (4)
(#)

 

Options (5)
(#)

 

Awards
($/Sh)

 

Option

Awards (6)

 

Julia M.

          $ 575,000   $ 1,150,000                              

Laulis

 

01/03/2018

 

12/29/2017

                    811     1,622               $ 573,515  
   

01/03/2018

 

12/29/2017

                            500           $ 353,585  
   

01/03/2018

 

12/29/2017

                                479   $ 707.17   $ 339,080  

Michael E.

          $ 270,000   $ 540,000                              

Bowker

 

01/03/2018

 

12/29/2017

                    254     508               $ 179,621  
   

01/03/2018

 

12/29/2017

                                479   $ 707.17   $ 339,080  

Steven S.

          $ 92,247   $ 184,493                              

Cochran

 

10/01/2018

 

07/02/2018

                            1,065           $ 927,690  
   

10/01/2018

 

07/02/2018

                                499   $ 871.07   $ 434,720  
   

10/01/2018

 

09/30/2018

                            54           $ 47,038  

Eric M.

          $ 110,000   $ 220,000                              

Lardy

 

01/03/2018

 

12/29/2017

                    155     310               $ 109,611  
   

01/03/2018

 

12/29/2017

                            200           $ 141,434  
   

01/03/2018

 

12/29/2017

                                479   $ 707.17   $ 339,080  

Peter N.

          $ 118,233   $ 236,466                              

Witty

 

04/02/2018

 

03/08/2018

                            1,288           $ 866,283  
   

04/02/2018

 

03/08/2018

                                489   $ 672.58   $ 328,980  
   

10/01/2018

 

09/30/2018

                            90           $ 78,396  

Kevin P.

          $ 227,500   $ 455,000                              

Coyle

 

01/03/2018

 

12/29/2017

                    229     458               $ 161,942  
   

01/03/2018

 

12/29/2017

                            200           $ 141,434  

                          

(1)

The date in this column is the date the Compensation Committee took action to approve the equity-based award.

 

Cable One, Inc.▪ 2019 Proxy Statement        

35

 

 

Table of Contents

 

(2)

Amounts in these columns represent the target and maximum payouts for the NEOs under the 2018 Bonus Plan. There is no threshold payout with respect to these awards under the 2018 Bonus Plan.

 

(3)

Amounts in these columns represent PSAs granted under the 2015 Plan as part of our long-term incentive compensation program. There is no threshold payout with respect to the PSAs. The PSAs granted in 2018 were earned at approximately 144.8% of target, based on the achievement of applicable performance metrics, but remain subject to service-based vesting requirements and are scheduled to cliff-vest on January 3, 2021, generally subject to continued service with the Company through such date. The terms of the PSAs are described in further detail in the section entitled “Compensation Discussion and Analysis—Elements of Our Compensation Program—Long-Term Annual Equity Incentive” above.

 

(4)

Amounts in this column represent RSAs granted under the 2015 Plan as part of our long-term incentive compensation program. The terms of the RSAs are described in further detail in the section entitled “Compensation Discussion and Analysis—Elements of Our Compensation Program—Long-Term Annual Equity Incentive” above.

 

(5)

Amounts in this column represent the number of shares of our common stock underlying SAR awards calculated based upon the value of the appreciation in the share subject to the SAR (based on the closing price of a share of our common stock as reported by the NYSE as of December 31, 2018, the last trading day of 2018 ($820.10)) over the exercise price. The SARs vest in four equal ratable installments beginning on the first anniversary of the grant date (generally subject to the holder’s continued employment with the Company through the applicable vesting date) and are otherwise subject to the terms and conditions of the applicable award agreement, a form of which was approved by the Compensation Committee.

 

(6)

Amounts in this column represent the grant date fair value of PSA, RSA and SAR awards computed in accordance with Topic 718. 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. See Note 13 of the Notes to the Consolidated Financial Statements contained in the 2018 Form 10-K for a discussion of the assumptions used in the valuation of the SAR awards.

 

Consistent with our policy, we have not entered into any employment agreements with, or guaranteed severance packages to, any of our NEOs. For additional information about the base salary and annual cash and equity incentive awards provided to our NEOs, see the sections entitled “Compensation Discussion and Analysis—Elements of Our Compensation Program—Base Salary,” “—Annual Cash Incentive Program” and “—Long-Term Annual Equity Incentive” above.

 

36         Cable One, Inc.▪ 2019 Proxy Statement

 

 

Table of Contents

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table shows the number of shares underlying exercisable and unexercisable SARs and unvested PSAs and RSAs held by our NEOs on December 31, 2018.

 

 

 

 

 

SAR Awards

 

 

Stock Awards

 

Name

 

Grant Date (1)

 

 Number of

Securities

Underlying

Unexercised

Options (#) Exercisable

 

Number of

Securities

Underlying

Unexercised

Options (#) Unexercisable

 

SAR Exercise

Price

 

SAR

Expiration

Date

 

 

Number of Shares or

Units of Stock That

Have Not Vested (2)

 

Market Value of

Shares or Units of

Stock That Have Not

Vested (3)

 

Equity Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights That Have Not Vested (4)

   

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested (3)

 

Julia M. Laulis

 

09/01/2015

 

 

3,224

 

 

1,612

 

$

422.31

 

09/01/2025

 

 

 

 

 

 

   

 

 

 

01/04/2016

 

 

 

 

 

 

 

 

 

 

1,036

 

$

849,624

 

   

 
   

01/03/2017

   

305

   

915

 

$

619.66

 

01/03/2027

     

   

 

1,768

 

$

1,449,937

 
   

01/03/2018

   

   

272

 

$

707.17

 

01/03/2028

     

1,674

 

$

1,372,847

 

   

 

Michael E. Bowker

 

09/01/2015

   

1,079

   

1,079

 

$

422.31

 

09/01/2025

     

   

       

 

 

 

01/04/2016

   

   

   

 

     

634

 

$

519,943

 

   

 
   

01/03/2017

   

122

   

366

 

$

619.66

 

01/03/2027

     

   

 

442

 

$

362,484

 
   

01/03/2018

   

   

272

 

$

707.17

 

01/03/2028

     

367

 

$

300,977

 

   

 

Steven S. Cochran

 

10/01/2018

 

 

 

 

 

$

871.07

 

10/01/2028

 

 

 

1,119

 

$

917,692

 

   

 

Eric M. Lardy

 

09/01/2015

 

 

1,114

   

557

 

$

422.31

 

09/01/2025

 

 

 

 

 

 

   

 

 

 

01/04/2016

 

 

 

 

 

 

 

 —

 

 

 

392

 

$

321,479

 

   

 
   

01/03/2017

   

244

   

732

 

$

619.66

 

01/03/2027

     

   

 

320

 

$

262,432

 
   

01/03/2018

   

   

272

 

$

707.17

 

01/03/2028

     

424

 

$

347,722

 

   

 

Peter N. Witty

 

04/02/2018

 

 

 

 

356

 

$

672.58

 

04/02/2028

 

 

 

1,288

 

$

1,056,289

 

   

 

 

 

10/01/2018

 

 

 

 

 

 

 

 

 

 

90

 

$

73,809

 

   

 

Kevin P. Coyle

 

09/01/2015

 

 

 

 

727

 

$

422.31

 

09/01/2025

 

 

 

 

 

 

   

 

 

 

01/04/2016

 

 

 

 

 

 

 

 —

 

 

 

726

 

$

595,393

 

   

 
   

01/03/2017

   

   

   

 

     

375

 

$

307,538

 

506

 

$

414,971

 
   

01/03/2018

   

   

   

 

     

532

 

$

435,473

 

   

 

                       

(1)

Generally, outstanding SARs granted under the 2015 Plan are scheduled to vest 25% per year over a four-year period from the date of grant; outstanding RSAs granted under the 2015 Plan are scheduled to either vest 25% per year over a four-year period from the date of grant or cliff-vest on the third anniversary of the grant date; and outstanding PSAs granted under the 2015 Plan are scheduled to cliff-vest on the third anniversary of the grant date.

 

The following table shows the grant date and remaining vesting dates of SARs and unvested PSAs and RSAs held by our NEOs on December 31, 2018:

 

Award Type

 

Grant Date

 

Remaining Vesting Date(s)

SAR

 

September 1, 2015

 

September 1, 2019

 

SAR

 

January 3, 2017

 

January 3, 2019, 2020 and 2021

 

SAR

 

January 3, 2018

 

January 3, 2019, 2020, 2021 and 2022

 

SAR

 

April 2, 2018

 

April 2, 2019, 2020, 2021 and 2022

 

SAR

 

October 1, 2018

 

October 1, 2019, 2020, 2021 and 2022

 

PSA

 

January 4, 2016

 

January 4, 2019

 

PSA

 

January 3, 2017

 

January 3, 2020

 

PSA

 

January 3, 2018

 

January 3, 2021

 

RSA

 

January 3, 2018

 

January 3, 2019, 2020, 2021 and 2022

 

RSA

 

April 2, 2018

 

January 3, 2021

 

RSA

 

October 1, 2018

 

January 3, 2021 (1a)

 

RSA

 

October 1, 2018

 

October 1, 2021 (1a)

 

                          

(1a)

For Mr. Cochran 1,065 RSAs are scheduled to cliff-vest on January 3, 2021 and 54 RSAs are scheduled to cliff-vest on October 1, 2021. For Mr. Witty, 90 RSAs are scheduled to cliff-vest on October 1, 2021.