This excerpt taken from the NAFC DEF 14A filed Apr 14, 2009.
RSU Grants to the Senior Management Team
As described more fully above, in order to recruit the talent needed to successfully lead the Company, we issued restricted stock unit awards to the members of the senior management team when we recruited them into their positions. Including the net grants to Mr. Covington, a total of 566,198 RSUs were granted to the team. While these grants were critical to our ability to recruit key executives, the grants have skewed our burn rate, masking our historical grant rate.
The combination of the cancelled grants and the issuance of the RSUs to the senior management team inflates our burn rate, thus masking the mindful way that the Committee has awarded equity. When the cancelled grants and the initial RSU grants are deducted from the total grants issued, our three year average burn rate is 2.92%. Had we not utilized excess cash to repurchase shares in 2007 and 2008, our three year average burn rate would have been 2.87%. We urge you to keep the 2.92% burn rate in mind when deciding whether to support Proposal 4.
We are mindful of the balance between the need to deliver competitive compensation and excessive dilution. We will seek an appropriate balance between meeting employee hiring, retention, and compensation goals and avoiding excessive stockholder dilution. We believe in purchasing back the companys stock on an opportunistic basis to, among other things, reduce and/or eliminate the dilutive effects of equity grants. Between November 19, 2007 and January 3, 2009, the Company utilized $29.3 million in excess cash to repurchase 842,038 shares of our common stock. The share repurchase program has been well received by stockholders and accretive to earnings although it has negatively impacted the calculation of total potential dilution and burn rate. We anticipate approving stock repurchase plans in the future as appropriate to offset the dilutive effect of equity grants.
Cash Compensation Expense Increase. If our ability to provide equity compensation is impaired, the Companys cash compensation costs could increase substantially to offset equity compensation typically provided
in the marketplace. It is important that we use our cash resources to operate and expand our business, rather than unnecessarily divert cash to pay compensation.