Business Context and Reporting Period
Company: Community Health Systems, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: February 22, 2019 (Earliest event reported: February 20, 2019)
Subject: Approval of 2019 compensation arrangements for Named Executive Officers (NEOs) and the 2019 Employee Performance Incentive Plan.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. It focuses exclusively on executive compensation structures.
Material Changes and Compensation Details
On February 20, 2019, the Board of Directors approved the following compensation elements for fiscal year 2019:
2019 Base Salaries
| Executive | Position | 2019 Base Salary |
|---|---|---|
| Wayne T. Smith | Chairman and CEO | $1,600,000 |
| Thomas J. Aaron | EVP and CFO | $700,000 |
| Tim L. Hingtgen | President and COO | $935,000 |
| Lynn T. Simon, M.D. | President of Clinical Ops / CMO | $566,522 |
| Benjamin C. Fordham | EVP, General Counsel | $583,440 |
| P. Paul Smith | Division President | $636,540 |
2019 Cash Incentive Targets
Targets are expressed as a percentage of base salary under the 2019 Employee Performance Incentive Plan:
- Wayne T. Smith: 225% target opportunity.
- Tim L. Hingtgen: 140% target opportunity.
- Thomas J. Aaron: 125% target opportunity.
- Lynn T. Simon, Benjamin C. Fordham, P. Paul Smith: 115% target opportunity each.
Additional Opportunities:
- Non-financial improvements: Up to an additional 40% for Mr. Smith; 25% for Messrs. Aaron and Hingtgen; 10% for others.
- Company-level overachievement: Up to an additional 35% for Messrs. Smith and Hingtgen; 25% for others.
Long-Term Equity Awards (Effective March 1, 2019)
Awards vest ratably over three years. Performance-based restricted stock vests based on objectives from Jan 1, 2019, to Dec 31, 2021 (0% to 200% payout).
| Executive | Non-Qualified Stock Options | Time-Vesting Restricted Stock | Performance-Based Restricted Stock |
|---|---|---|---|
| Wayne T. Smith | 78,750 | 78,750 | 157,500 |
| Thomas J. Aaron | 37,500 | 37,500 | 75,000 |
| Tim L. Hingtgen | 56,250 | 56,250 | 112,500 |
| Lynn T. Simon | 26,250 | 26,250 | 52,500 |
| Benjamin C. Fordham | 26,250 | 26,250 | 52,500 |
| P. Paul Smith | 22,500 | 22,500 | 45,000 |
Guidance, Outlook, and Plan Updates
2019 Employee Performance Incentive Plan: The Board approved a new plan to replace the 2004 Plan. The new plan removes references to Section 162(m) of the Internal Revenue Code following the Tax Cuts and Jobs Act of 2017. The Compensation Committee will determine performance goals when outcomes are substantially uncertain and may adjust for events outside management's control.
Personnel Note: W. Larry Cash, former President of Financial Services and CFO, has retired and is excluded from these arrangements.
Investor Verification Checklist
- Verify the specific performance metrics and thresholds for the 2019 Cash Incentive Plan in the definitive proxy statement for the 2019 annual meeting.
- Review the 2019 Employee Performance Incentive Plan text (Exhibit 10.1) for details on qualitative criteria and adjustment mechanisms.
- Confirm the vesting schedule and performance objectives for the three-year equity awards (2019-2021).
- Monitor future filings for the actual payout of 2018 incentive compensation, which is not detailed in this report.