UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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| ☐ | Soliciting Material Pursuant to Sections 240.14a-11(c) or Section 240.14a-12 | |
PATRICK INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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| PATRICK INDUSTRIES, INC. | ||||||
DEAR SHAREHOLDER, | Please review the proxy / notice card for instructions on how to vote over the Internet, by telephone or by mail in order to be certain that your shares of stock are represented at the Annual Meeting. It is important that all Patrick Industries, Inc. shareholders vote and participate in the affairs and governance of our Company. |
We are pleased to invite you to join us for our Annual Meeting of Shareholders, which will be conducted this year via live audio webcast on May 14, 2020 at 10:00 A.M. Eastern time. Based on the sensitivity to travel limitations given the Coronavirus(COVID-19), you will be able to attend the virtual meeting of shareholders online via the Internet atwww.meetingcenter.io/205000405. In the Notice of 2020 Annual Meeting and Proxy Statement, we describe the matters upon which you will be asked to vote at the meeting.
Fiscal 2019 was a year of adaptation to volatile conditions in our end markets as well as execution and positioning the organization for long-term strategic growth, solid financial stability and rewarding our long-term shareholders. We successfully executed on several opportunities, which resulted in a solid year of strategic achievements including:
In addition, we have significantly increased our focus on environmental, social and governance (“ESG”) responsibilities and best practices with the goal to better understand the issues that most significantly impact our Company, team members, partners, communities, and the core markets we serve. To this end, the Corporate Governance and Nominations Committee of our Board of Directors (the “Board”) was charged in 2019 with providing appropriate oversight on ESG matters that includes working with management to identify and define relevant ESG topics and enhancing our communications going forward to all of our stakeholders. We have highlighted several of the initiatives that took place in 2019 within this Proxy Statement.
As the very difficult and unprecedented circumstances surrounding the COVID-19 pandemic have taken hold of virtually all aspects of life over the last several months, we wish to extend all our team members, customers, investors and other stakeholders and their families our sincere wishes for continued health and safety as we all navigate through these uncertain and volatile times together.
While the long-term impacts from the pandemic are unclear at this time, we are committed to generating strong cash flows in 2020, and expect to continue to drive our business and execute off of our operational and financial platforms and capitalize on the tremendous benefits that the leisure and lifestyle markets and the housing and industrial markets we serve are expected to provide as we adjust to the new environment.
In closing, please review the proxy / notice card for instructions on how to vote over the Internet, by telephone or by mail in order to be certain that your shares of stock are represented at the Annual Meeting. It is important that all Patrick Industries, Inc., an Indiana corporation, will be held at The Studio-Patrick Design Center, 420 Roske Drive, Elkhart, Indiana, on Wednesday, May 16, 2018 at 10:00 A.M., Eastern Time, for shareholders vote and participate in the following purposes:affairs and governance of our Company.
Todd M. Cleveland
Executive Chairman of the Board
April 23, 2020
Notice of Annual Meeting
Date & Time: Thursday May 14, 2020 10:00 A.M., EDT | Location: Online at www.meetingcenter.io/205000405 Meeting Password: PATK2020 | Record Date: March 20, 2020 | ||||||
| Voting Matters | ||||||||
| Board Vote | Page Reference | |||||||
Proposal | Recommendation | (for more detail) | ||||||
PROPOSAL 1 | To elect 2021 Annual Meeting of | FOR EACH NOMINEE | 8 | |||||
PROPOSAL 2 | To ratify the appointment of independent registered public accounting firm for fiscal year | FOR | 16 | |||||
PROPOSAL 3 | To approve an amendment to the Omnibus Incentive Plan (the “Plan”) to increase the number of available for grant under the | FOR | 19 | |||||
PROPOSAL 4 | To approve, in an advisory andnon-binding vote, the compensation of the Company’s named executive officers for fiscal year 2019 as disclosed in the Proxy Statement (a“Say-on-Pay” vote) | FOR | 24 | |||||
To consider and transact such other business as may properly come before the meeting or any adjournment or postponement | ||||||||
The Board of Directors has fixed the close of business on March 23, 201820, 2020 as the record date for the determination of the holders of shares of our outstanding common stock entitled to notice of and to vote at the Annual Meeting of Shareholders. Each shareholder is entitled to one vote per share on all matters to be voted on at the meeting.
Your vote is important. Whether or not you expect to attend the virtual meeting, please vote your shares using the Internet, by telephone or by mail by signing, dating and returning the enclosed proxy in the enclosed envelope. Your shares will then be represented at the meeting,envelope, so that even if you are unable to attend. You may, of course, revokeattend, your proxy and vote in personshares will still be represented at the meeting, if you desire.meeting. If you hold shares through a broker or other custodian, please check the voting instructions used by that broker or custodian.
By Order of the Board of Directors, |
 | Joshua A. Boone Secretary, April 23, 2020 | |||||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held Onon May 16, 2018.
Our Proxy Statement and Annual Report to Shareholders for fiscal 20172019 are available on Patrick Industries, Inc.'s’s website atwww.patrickind.com under "Investor Relations".“Investor Relations-Investor Information.” You may also request hard copies of these documents free of charge by writing to us at the address above,following address: 107 West Franklin Street, Elkhart, Indiana 46515-0638. Attention: Office of the Secretary.
Proxy | ||
107 West Franklin Street | ||
Elkhart, Indiana 46515-0638 (574)294-7511 | ||
Statement ANNUAL MEETING OF SHAREHOLDERS | ||
This Proxy Statement and the accompanying Proxy Card are being mailed to shareholders of Patrick Industries, Inc. (the “Company” or “Patrick”) whose shares are held through an intermediary, such as a bank or broker, on the shareholder’s behalf (“street name”) on or about April 30, 2018,23, 2020, and are furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) for the Annual Meeting of Shareholders to be held online (virtual meeting) on May 16, 201814, 2020 (the “Annual Meeting”) for the purpose of considering and acting upon the matters specified in the Notice of Annual Meeting of Shareholders accompanying this Proxy Statement.
The Company has elected to use the “Notice and Access” method of providing to registered shareholders of record the proxy materials via the Internet due to mailing and distribution difficulties related toCOVID-19. This process provides you with a convenient way to access your proxy materials and vote your shares, while also allowing us to conserve natural resources and reduce the costs of printing and shipping the proxy materials to you. On or about April 23, 2020, we will mail to our registered shareholders a Notice of Internet Availability of Proxy Materials which includes instructions on how to access our Proxy Statement and our 2019 Annual Report online. The Notice also includes instructions on how to vote via the Internet and how to obtain a paper copy of the proxy materials.
If the form of proxy which accompanies this Proxy Statement is executed and returned, or is voted by Internet or by telephone, it may be revoked by the person giving it at any time prior to the voting thereof by (i) written notice to the Secretary of the Company, (ii) requesting to vote in person at the Annual Meeting, or (iii) submitting a later-dated proxy by mail, Internet, or telephone. To revoke a proxy by telephone or the Internet, you must do so by 11:59 p.m. Eastern Time, on May 15, 2018.
| (i) | changing your vote using the online voting method described under “Voting Information” on page 7, in which case only your latest Internet proxy submitted prior to the Annual Meeting will be counted; |
| (ii) | filing with the Secretary of the Company, during or before the Annual Meeting, a written notice of revocation bearing a date later than the date of the proxy; |
| (iii) | duly executing and dating a subsequent proxy relating to the common stock and delivering it to the Secretary of the Company during or before the Annual Meeting; or |
| (iv) | voting your shares electronically during the Annual Meeting. |
If the form of proxy is signed, dated and returned without specifying choices on one or more matters presented to the shareholders, the shares will be voted on the matter or matters listed on the proxy card as recommended by the Company’s Board.
Additional solicitations, in person or by telephone or otherwise, may be made by certain directors, officers and employees of the Company regarding the proposals without additional compensation. Expenses incurred in the solicitation of proxies, including postage, printing and handling, and actual expenses incurred by brokerage houses, custodians, nominees and fiduciaries in forwarding documents to beneficial owners, will be paid by the Company.
For certain beneficial holders of our common stock, Patrick’s Annual Report to Shareholders, which contains Patrick’s Annual
Report on Form10-K for the year ended December 31, 2017,2019, accompanies this Proxy Statement. Requests for additional copies of the Annual Report on Form10-K should be submitted to the Office of the Secretary, Patrick Industries, Inc., 107 West Franklin Street, P.O. Box 638, Elkhart, Indiana 46515-0638. Annual Meeting materials may also be viewed online through our website, www.patrickind.com.www.patrickind.com under“Investor Relations”.
Summary | This summary highlights certain information contained in our 2020 Proxy Statement. Although it does not contain all of the information in this Proxy Statement, it provides an overview of the information discussed herein. You should carefully review the entire Proxy Statement before voting. |
Voting Matters
PROPOSAL 1: ELECTION OF DIRECTORS
As of the date of this Proxy Statement, our Board of Directors (the “Board”) is comprised of nine members, each of whom has been nominated for election to the Board at the May 14, 2020 Annual Meeting: Joseph M. Cerulli, Todd M. Cleveland, John A. Forbes, Michael A. Kitson, Pamela R. Klyn, Derrick B. Mayes, Andy L. Nemeth, Denis G. Suggs and M. Scott Welch.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM FOR FISCAL YEAR 2020
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE 2009 OMNIBUS INCENTIVE PLAN
PROPOSAL 4: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Board recommends you vote “FOR” each of the nine nominees listed under Proposal 1 and “FOR” Proposals 2, 3 and 4.
Board Composition – Experience and Expertise
Corporate Governance Developments
The Board believes that fundamental corporate governance is important to ensure that we are managed for the long-term benefit of our shareholders per a (1) Board Diversity Policy and a (2) Social and Environmental Responsibility Policy.
In 2020, the Board provided additional disclosures, as summarized on pages 5 and 6, regarding the Company’s environmental, social and governance (“ESG”) practices. In alignment with the Company’s Code of Ethics and Business Conduct and Corporate Governance Guidelines, the Board aims to ensure that ESG matters are considered and supported in the Company’s operations and administrative matters and are consistent with Patrick shareholders’ best interests.
The Board Diversity and Social and Environmental Responsibility Policies are discussed in greater detail on pages 25 and 26 of this Proxy Statement and are also available on the Company’s website,www.patrickind.com, under“Investor Relations—Corporate Governance.”
| 2020 PROXY STATEMENT | 1 |
Fiscal Year 2019 Company Financial Performance Summary
7,500+ Team Members Helped Achieve Our Goals | 168% Cumulative Company TSR % Over a Five Year Period | 57% Cumulative S&P 500 Index TSR % Over Same Five Years | ||||||
Fiscal 2019 represented continued strategic execution and positioning for the future, despite headwinds and volatility in the markets we serve as a result of secular industry recalibration. We focused our efforts on continuing to drive a lean organization, maintaining a balanced and disciplined capital allocation strategy, and further solidifying our balance sheet to position our Company to provide strength, flexibility and the ability to manage through various economic cycles for long-term strategic growth in the four core markets we serve—recreational vehicle (“RV”), marine, manufactured housing (“MH”), and Industrial. The ultimate goal of this vision centers around rewarding our shareholders in balance with the interests all of our stakeholders and the communities in which we operate and live.
The Company continued to execute on a company-wide market and performance-based rewards platform designed to reward for differentiated performance that supported operating excellence and growth organically and through acquisitions in 2019.
The execution of our 2019 Organizational Strategic Agenda and the efforts of our more than 7,500 team members produced sales, net income, and net income per diluted share in 2019 that was below our targeted operating results (net of acquisitions) primarily as a result of market declines being materially greater than the assumptions that were built into our fiscal 2019 operating plan. Despite actual revenues being below our plan, the Company adapted and flexed its operating structure to appropriately align costs with the revenue stream, deliver organic market share gains, and position itself for anticipated market growth in both the leisure and housing and industrial markets in 2020, but also for various possible downside market scenarios should they occur.
The Company’s cumulative total shareholder return (“TSR”) over the five-year period from December 31, 2014 to December 31, 2019 was 168% compared to 57% for the S&P 500 Index over the same time period.
The charts below illustrate the Company’s performance related to net sales, net income and net income per diluted share since 2015. We believe these achievements are the result of balancing our autonomous business unit structure with the overarching strategies and initiatives of the Company while focusing on our ‘Customer 1st’ performance-oriented culture.
| 2 |  |
The Company’s performance is ultimately focused on meeting the needs of our large breadth of customers, generating returns for our shareholders, supporting our communities, and reinvesting in our team members. While we focus on achieving annual objectives and outcomes, the Company continues to emphasize our long-range strategic plan and the execution of that plan.
Executive Compensation Highlights
Aligning Pay to Differentiated Performance
The Company has embraced a long-time philosophy of rewarding its leadership team for differentiated performance in a given performance year. The architecture of the Executive Compensation Plan is specifically designed to support this philosophy by focusing on variable pay for the leadership team, an approach which is also pervasive throughout the levels of the organization. This philosophy is reflected in each element of compensation as the Compensation Committee recommends compensation decisions to the Board. Our leaders understand and are motivated to impact the key metrics that will drive growth, profitability and ultimately shareholder value in both the short and long term. The plan design is brought to life through understanding each compensation element and the impact of the individual’s and the team’s performance as outlined below:
Compensation Element | Percentile Positioning vs. Peer Proxy and General Industry Data | |
BASE SALARY | 25th – 50th | |
SHORT-TERM INCENTIVE | 50th – 75th | |
TOTAL TARGET CASH | 50th – 75th | |
LONG-TERM INCENTIVE | 25th – 50th | |
TOTAL TARGET DIRECT COMPENSATION | 50th – 75th | |
| 2020 PROXY STATEMENT | 3 |
The positioning of each compensation element relative to Peer Group and General Industry data supports our philosophy of rewarding differentiated performance by emphasizing each executive’s variable pay elements.
Base Salary incorporates a philosophy of a lower base than peers to reduce the importance of fixed pay and drive focus on performance-dependent variable pay.
The annual Short-term cash compensation plan is highlighted through enhanced payouts for performance above plan up to a maximum of 200% of target compensation and incorporates a threshold payout of 50% of target compensation at 75% of plan.
Long-term incentive compensation is designed to drive the executive’s focus on long-term profitability through both organic and inorganic growth over the three-year award performance period. This equity plan is also designed to motivate leadership to perform above plan with a maximum payout of 200% of target compensation and a threshold payout of 50% of target compensation at 80% of plan.
Our focus on variable pay to motivate performance has been core to our compensation plan over the past decade and has proven to be successful in aligning our team’s compensation to shareholder returns.
Our focus on variable compensation is highlighted through the charts below for variable vs. fixed compensation at target performance for our Chief Executive Officer (“CEO”) and for our other Named Executive Officers (“NEOs”) combined:
Key Compensation Actions Taken in Fiscal 2019
Modified both the Short-term and the Long-term Incentive Plans to better align the payout percentages for performance above plan with market benchmarks;
Increased compensation for the NEOs to align with the Company’s performance in 2019, year-over-year revenue growth, and size scoping of our Peer Group and General Industry data; and
Continued to utilize external consultant, Willis Towers Watson, for data and consultation as requested by the Compensation Committee.
For additional information regarding the compensation of our NEOs, please refer to the Compensation Discussion and Analysis (“CD&A”) beginning on page 33.
| 4 | |
Information
Each shareholder is entitled to one vote for each share of our common stock held as of the record date. For purposes of the meeting, a quorum means a majority of the outstanding shares.shares “present” in person or by proxy at the meeting. If a quorum is not present at the time the Annual Meeting is convened, the Company may adjourn or postpone the Annual Meeting. Shares that are represented at the Annual Meeting but abstain from voting on any or all matters will be counted as shares present and entitled to vote in determining the presence of a quorum.
Shareholders participating in the virtual meeting are considered to be attending the meeting “in person.” Abstentions and withheld votes are counted as shares representedpresent at the meeting for purposes of determining a quorum. As of the close of business on March 23, 2018,20, 2020, the record date for shareholders entitled to vote at the Annual Meeting, there were outstanding 25,324,15423,594,223 shares of common stock entitled to one vote each. In determining whether a quorum exists at the meeting, all shares represented in person or by proxy will be counted. Proxies properly executed and received by us prior to the meeting and not revoked will be voted as directed therein on all matters presented at the meeting.
With respect to Proposal 1 (Election of Directors), a shareholder may with respect to the election of directors, (i) vote for the election of each named director nominee, or (ii) withhold authority to vote for each named director nominee. With respect to Proposal 2 (Ratification of Independent Registered Public Accounting Firm) and, Proposal 3 (Amendment to Articles of Incorporation)2009 Omnibus Incentive Plan) and Proposal 4 (Advisory Vote on Executive Compensation), a shareholder may vote for, against or abstain.
If a shareholder’s shares are held by a broker or other financial institution (the “broker”) on the shareholder’s behalf (that is, in “street name”) and the shareholder does not instruct the broker as to how to vote the shareholder’s shares, the broker may vote the shares in its discretion on matters designated as routine. However, a broker cannot vote shares held in street name on matters designated asnon-routine unless the broker receives
voting instructions from the beneficial owner. If a shareholder’s shares are held in street name and the shareholder does not provide voting instructions to the broker, the broker will have discretion to vote those shares only on Proposal 2 and Proposal 3 because these proposals arethis proposal is considered a routine matters.matter. “Brokernon-votes” occur when brokerage firms return proxies for which no voting instructions have been received from beneficial owners and the broker does not have discretionary authority to vote on the proposal. Brokernon-votes and abstentions will be included in the determination of the number of shares of common stock present at our Annual Meeting for quorum purposes, but will not be counted as votes cast on any matter presented at our Annual Meeting that is anon-routine matter.
Under Proposal 1, the directors are elected by a plurality of the votes cast by shares present in person or by proxy at the Annual Meeting and entitled to vote. Therefore, brokernon-votes and abstentions will have no effect on Proposal 1, except to the extent that they will count as votes not cast. Proposals 2, 3 and 34 in this Proxy Statement require the affirmative vote of a majority of the votes cast, assuming a quorum is present.
If you hold your shares through a broker, for your vote to be counted, you will need to communicate your voting decisions to your broker before the date of the Annual Meeting. A street name shareholder who wishesAs the beneficial owner, you have the right to direct your broker on how to vote atand are also invited to participate “in person” via the webcast of the Annual Meeting. However, since you are not the shareholder of record, you may not vote these shares “in person” via the webcast during the Annual Meeting, will needand you may instead receive a notice with instructions on how to obtain a legalaccess proxy from hismaterials as well as how you may instruct your bank or her broker or other nominee and present that proxy and proof of identification at the Annual Meetingbrokerage firm how to hand in with his or her ballot.
The Board knows of no other matter which may come up for action at the Annual Meeting. However, if any other matter properly comes before the Annual Meeting, the persons named in the proxy form enclosed will vote in accordance with their judgment upon such matter.
| 2020 PROXY STATEMENT | 7 |
Election of |
The Board of Directors |
There are eightnine nominees for election to the Board, all of which are current members of our Board. The individuals elected as directors at the 20182020 Annual Meeting will be elected to hold office until the 20192021 Annual Meeting or until their successors are duly elected and qualified.
It is intended that the proxies will be voted for the nominees listed below, unless otherwise indicated on the proxy form. It is expected that these nominees will serve, but, if for any unforeseen cause any such nominee should decline or be unable to serve, the proxies will be voted to fill any vacancy so arising in accordance with the discretionary authority of the persons named in the proxies. The Board does not anticipate that any nominee will be unable or unwilling to serve.
The information provided below has been furnished by the director nominees,nominee, and sets forth (as of March 31, 2018)2020) the names, ages, principal occupations, recent professional experience, certain specific qualifications identified as part of the Board’s determination that each such individual should serve on the Board and other directorships at other public companies for at least the past five years, if any. Each of the following nominees was elected to his or her present term of office at the Annual Meeting of Shareholders held on May 17, 2017.15, 2019.
Board Composition
| Average Tenure | Gender & Ethnic Diversity | Audit Committee Expertise | Board Independence | Average Age | ||||
| 6.9 years | 33% | 67% | 78% | 55 years | ||||
| 8 | |
PROPOSAL 1: ELECTION OF DIRECTORS
Paul E. HasslerNominees for Election
The Board of Directors unanimously recommends a vote, age 70, has been our Chairman of FORthe Board since May 2008. Mr. Hassler was Chief Executive Officer of the Company from April 2004 to January 2009 (retired) and President from April 2004 to May 2008. Mr. Hassler held the position of Vice President Operations and Distribution - West of the Company from December 2003 through the first quarter of 2004; Executive Director of West Coast Operations from 1994 to 2003; and General Manager of California Operations from 1986 to 1994. Mr. Hassler has over 44 years of recreational vehicle, manufactured housing and industrial experience in various capacities and has demonstrated leadership as Non-Executive Chairman of the Board. He has served as a director of the Company since 2005.nominated directors.
Joseph M. AGE:60 DIRECTOR SINCE:2008 COMMITTEES: • Corporate Governance | BIOGRAPHY: Joseph M. Cerulli, age 60, has been employed by Tontine Associates, LLC, an investment management firm (together with its affiliates, “Tontine”), since January 2007. QUALIFICATIONS: Mr. Cerulli has particular knowledge of our Company and the industries in which we operate based on Tontine’s long-standing investment in the Company and possesses extensive knowledge with respect to financial and investment matters. |
Todd M. AGE:52 DIRECTOR SINCE:2008 COMMITTEES: • None | BIOGRAPHY: Todd M. Cleveland, age 52, has been our Executive Chairman of the Board since January 1, 2020. Prior to that, Mr. Cleveland was Chairman of Board from May 2018 to December 2019 and our Chief Executive Officer from February 2009 to December 31, 2019. Mr. Cleveland was President of the Company from May 2008 to December 2015 and Chief Operating Officer of the Company from May 2008 to March 2013. Prior to that, he served as Executive Vice President of Operations and Sales and Chief Operating Officer of the Company from August 2007 to May 2008 following the acquisition of Adorn Holdings, Inc. by Patrick in May 2007. Mr. Cleveland has served as a director of IES Holdings, Inc. (“IES”) from 2017 to present, and he has been the chairman of IES’ Human Resources and Compensation Committee since February 2019. QUALIFICATIONS: Mr. Cleveland has over 29 years of RV, MH and industrial experience in various operating capacities. He also has extensive knowledge of our Company and the industries to which we sell our products and experience with management development and leadership, acquisitions, strategic planning, manufacturing and sales of our products. OTHER PUBLIC BOARD DIRECTORSHIPS: • IES Holdings, Inc. |
| 2020 PROXY STATEMENT | 9 |
John A. Forbes AGE:60 DIRECTOR SINCE:2011 COMMITTEES: • Corporate Governance • Audit • Compensation | BIOGRAPHY: John A. Forbes, age 60, has been a partner with Outcomes LLC and Full Sails LLC, two firms engaged in new product development and strategic business consulting, since June 2017. Previously, Mr. Forbes was the President of Utilimaster, a business unit of Spartan Motors USA, Inc., from July 2010 to June 2017. Prior to that, he was the Chief Financial Officer of Utilimaster from May 2009 to July 2010, the Chief Financial Officer of Nautic Global Group LLC from 2007 to 2009 and the Chief Financial Officer of Adorn LLC from 2003 to 2007. Mr. Forbes has served as a director of Chase Packaging Corporation since March 2019. QUALIFICATIONS: Mr. Forbes has over 33 years of experience in serving various manufacturing industries, having held senior financial leadership roles. Mr. Forbes also has extensive experience with operations management, acquisitions, strategic planning, risk management and banking relations. He has been determined to be an “audit committee financial expert” under the rules and regulations of the Securities and Exchange Commission (the “SEC”) by our Board. |
Michael A. Kitson AGE:61 DIRECTOR SINCE:2013 COMMITTEES: • Audit (Chair) • Compensation • Corporate Governance | BIOGRAPHY: Michael A. Kitson, age 61, has been the Chief Financial Officer of oVertone Haircare, Inc., a manufacturer of haircare products, since July 2018. Previously, Mr. Kitson was a principal with AVL Growth Partners, a firm that provides chief financial officer and other financial advisory services, from March 2017 to July 2018. Prior to that, Mr. Kitson was the Chief Financial Officer of MikaTek, Ltd. from January 2016 until July 2016, the Chief Executive Officer of SharpShooter Imaging from March 2015 to January 2016, the Chief Executive Officer of Nautic Global Group (“Nautic”) from March 2011 to October 2013 and the Chief Financial Officer of Nautic from August 2010 to March 2011. QUALIFICATIONS: Mr. Kitson has over 33 years of experience in serving various manufacturing industries, having also held senior financial leadership roles with Lilly Industries, Inc. Mr. Kitson also has extensive experience with corporate and operations management, strategic planning and risk management. He has been determined to be an “audit committee financial expert” under the SEC’s rules and regulations by our Board. |
| 10 | |
PROPOSAL 1: ELECTION OF DIRECTORS
Pamela R. Klyn AGE:49 DIRECTOR SINCE:2019 COMMITTEES: • Audit • Compensation • Corporate Governance | BIOGRAPHY: Pamela R. Klyn, age 49, has been the Senior Vice President in the Global Product Organization at Whirlpool Corporation, the world’s leading major home appliance company, since 2016 and has held various leadership positions in marketing and engineering within Whirlpool since 1993. QUALIFICATIONS: Ms. Klyn has over 27 years of experience in the home appliance industry and has extensive experience in marketing, engineering, strategic planning and new product development. |
Derrick B. Mayes AGE:46 DIRECTOR SINCE:2019 COMMITTEES: • Audit • Compensation • Corporate Governance | BIOGRAPHY: Derrick B. Mayes, age 46, has been the Vice President of WME/IMG, a strategic advisory firm to the sports and entertainment industry, since 2015. Prior to that, Mr. Mayes was the Chief Executive Officer of ExecutiveAction Sports & Entertainment, serving as a strategic adviser to high profile individuals, groups and organizations in the sports and entertainment industry, from 2007 to 2015. QUALIFICATIONS: Mr. Mayes has over 19 years of experience in strategic planning, with extensive experience in the digital communications space, and has been a leadership and diversity speaker to numerous public companies and private organizations, particularly in the sports and entertainment markets. |
| 2020 PROXY STATEMENT | 11 |
Andy L. Nemeth AGE:51 DIRECTOR SINCE:2006 COMMITTEES: • None | BIOGRAPHY: Andy L. Nemeth, age 51, has been the Company’s Chief Executive Officer since January 1, 2020 and President since January 2016. Prior to that, Mr. Nemeth was the Executive Vice President of Finance and Chief Financial Officer from May 2004 to December 2015 and Secretary-Treasurer from 2002 to 2015. He was also the Vice President of Finance and Chief Financial Officer from 2003 to 2004. QUALIFICATIONS: Mr. Nemeth has over 28 years of RV, MH and industrial experience in various financial and management capacities. Mr. Nemeth also has particular knowledge of our Company and the industries to which we sell our products and has extensive experience with corporate management, development and leadership, acquisitions, strategic planning, risk management and banking and finance relations. |
Denis G. Suggs AGE:51 DIRECTOR SINCE:2019 COMMITTEES: • Audit • Compensation • Corporate Governance | BIOGRAPHY: Denis G. Suggs, age 54, has been the Chief Executive Officer of LCP Transportation, LLC, anon-emergency medical transportation company, since February 2020. Prior to that, Mr. Suggs was the President and Chief Executive Officer of Strategic Materials Corp. from March 2014 to January 2020 and also served as Chairman from 2017 to 2020. Prior to that, Mr. Suggs was the Global Executive Vice President of Belden, Inc. from 2009 to 2013 and the President of the Americas Division / Vice President of Belden, Inc. from 2007 to 2009. QUALIFICATIONS: Mr. Suggs has over 21 years of experience in leading complex global businesses, having also held senior financial executive leadership roles with Danaher Corporation and Public Storage Corporation. Mr. Suggs also has extensive experience with corporate and operations management, strategic planning, mergers and acquisitions and risk management. Mr. Suggs has served as a director of the Education Corporation of America from 2015 to 2018 and of Strategic Materials, Inc. and the Glass Packaging Institute from 2014 to 2020. He has been determined to be an “audit committee financial expert” under the SEC’s rules and regulations by our Board. |
| 12 | |
PROPOSAL 1: ELECTION OF DIRECTORS
M. Scott Welch AGE:60 DIRECTOR SINCE:2015 LEAD INDEPENDENT COMMITTEES: • Compensation (Chair) • Audit • Corporate Governance | BIOGRAPHY: M. Scott Welch, age 60, has been the President and Chief Executive Officer of Welch Packaging Group, a large independently owned corrugated packaging company, since 1985. Prior to establishing Welch Packaging, he worked at Northern Box, Performance Packaging and Elkhart Container. Mr. Welch has served as a director of Lakeland Financial Corporation (“Lakeland”) from 1998 to present, and he has been the lead independent director from 2012 to 2019 and a member of Lakeland’s compensation committee since 2012. He has also served as a trustee of DePauw University since 2005. QUALIFICATIONS: Mr. Welch has over 38 years of experience in the packaging industry and has extensive experience in sales, marketing and strategy. He has been determined to be an “audit committee financial expert” under the SEC’s rules and regulations by our Board. OTHER PUBLIC BOARD DIRECTORSHIPS: • Lakeland Financial Corporation |
The Board of Directors unanimously recommends a voteFORthe nominated directors.
| 2020 PROXY STATEMENT | 13 |
While the structure of the 2017 2019Non-Employee Director Compensation Plan was unchanged from the 20162018 plan, the Corporate Governance and Nominations Committee revised the amounts of the compensation components in May 2017.2019. The plan structure and compensation composition, as approved by the Board, are detailed below:
| 1/1/19 -6/30/19 | 7/1/19 -12/31/19 | |||||||||||||||||||
ANNUAL RETAINER | $ | 65,000 | $ | 75,000 | ||||||||||||||||
COMMITTEE CHAIRPERSONS ANNUAL RETAINER | ||||||||||||||||||||
Audit | 8,000 | 10,000 | ||||||||||||||||||
Compensation | 4,000 | 6,000 | ||||||||||||||||||
Corporate Governance and Nominations | 4,000 | 6,000 | ||||||||||||||||||
LEAD INDEPENDENT DIRECTOR ANNUAL RETAINER | 4,000 | 6,000 | ||||||||||||||||||
ANNUAL RESTRICTED STOCK GRANT(1) | 100,000 | 100,000 | ||||||||||||||||||
| (1) | |
Non-employee directors receive an annual restricted stock grant |
Employee directors receive no compensation as such. In addition to total directthe compensation described above, the Company reimburses thenon-employee directors’ expenses, including travel, accommodations and meals, for attending Board and Board Committee meetings, our Annual Meeting of Shareholders Meeting, and any other activities related to our business.
| 14 | |
2019 NON-EMPLOYEE DIRECTOR COMPENSATION
The following table sets forth a summary of the compensation paid tonon-employee directors in the year ended December 31, 2017:
| Name | Fees Earned or Paid in Cash | Stock Awards (1) | Payments under the Company’s Executive Retirement Plan and Deferred Compensation Plan (2) | Total | ||||||||||||
| Joseph M. Cerulli | $ | 58,000 | $ | 90,046 | $ | — | $ | 148,046 | ||||||||
| John A. Forbes | 62,000 | 90,046 | — | 152,046 | ||||||||||||
| Paul E. Hassler | 62,000 | 90,046 | 125,996 | 278,042 | ||||||||||||
| Michael A. Kitson | 63,000 | 90,046 | — | 153,046 | ||||||||||||
| M. Scott Welch | 58,000 | 90,046 | — | 148,046 | ||||||||||||
| Walter E. Wells | 62,000 | 90,046 | — | 152,046 | ||||||||||||
Name | Fees Earned or Paid in Cash | Stock Awards (1) | Payments under the Company’s Executive Retirement Plan and Deferred Compensation Plan (2) | Total | |||||||||||||||||||||
JOSEPH M. CERULLI | $ | 70,000 | $ | 100,016 | — | $ | 170,016 | ||||||||||||||||||
JOHN A. FORBES | 75,000 | 100,016 | — | 175,016 | |||||||||||||||||||||
PAUL E. HASSLER(3) | 24,375 | 100,016 | $ | 33,922 | 158,313 | ||||||||||||||||||||
MICHAEL A. KITSON | 79,000 | 100,016 | — | 179,016 | |||||||||||||||||||||
PAMELA R. KLYN(4) | 57,555 | 115,079 | — | 172,634 | |||||||||||||||||||||
DERRICK B. MAYES(4) | 57,555 | 115,079 | — | 172,634 | |||||||||||||||||||||
DENIS G. SUGGS(4) | 57,555 | 115,079 | — | 172,634 | |||||||||||||||||||||
M. SCOTT WELCH(5) | 78,000 | 100,016 | — | 178,016 | |||||||||||||||||||||
WALTER E. WELLS(6) | 25,875 | 100,016 | — | 125,891 | |||||||||||||||||||||
| (1) | Amounts shown do not represent compensation actually received. Such amounts reflect the aggregate grant date fair value of |
| (2) | Represents payments under the Company’s Executive Retirement Plan and Deferred Compensation Plan based on prior employment with the Company. |
| (3) | Mr. Hassler retired from the Board effective May 15, 2019 and was 100% vested on the date of the annual share grant of 2,241 shares as discussed in footnote (1) above. |
| (4) | Ms. Klyn and Messrs. Mayes and Suggs began receiving compensation for their service on the Board upon their appointment on March 21, 2019. In addition to the annual share grant of 2,241 shares as discussed in footnote (1) above, Ms. Klyn and Messrs. Mayes and Suggs were awarded apro-rated portion of the $100,000 May 2018 restricted stock award consisting of 347 shares of the Company’s common stock based on a closing stock price of $43.41 on March 21, 2019. The shares became fully vested on the first anniversary of the grant date or March 21, 2020. |
| (5) | Mr. Welch was elected to serve as the Chairman of the Compensation Committee of the Board effective May 15, 2019. |
| (6) | Mr. Wells retired from the Board effective May 15, 2019 and was 100% vested on the date of the annual share grant of 2,241 shares as discussed in footnote (1) above. |
| 2020 PROXY STATEMENT | 15 |
Ratification of the |
The Board of | |||||
| Accounting Firm |
The Audit Committee has appointed Crowe HorwathDeloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates (collectively, “Deloitte”) as our independent registered public accounting firm for the fiscal year ending December 31, 2018. Crowe Horwath LLP2020. Deloitte has been the Company’s independent registered public accounting firm since June 2009.2019. The Board and the Audit Committee recommend that shareholders ratify the appointment of Crowe Horwath LLPDeloitte as our independent registered public accounting firm for our fiscal year 2018.2020. Although we are not required to do so, we believe that it is appropriate to request that shareholders ratify this appointment. If shareholders do not ratify the appointment, the Audit Committee will investigate the reasons for the shareholders’ rejection and reconsider the appointment. Representatives of Crowe Horwath LLPDeloitte will be present at the Annual Meeting, will be givenhave the opportunity to make a statement if they desire to do so, and will be available to respond to questions.
Unless otherwise instructed, the proxy holders will vote the proxies received by them
| 16 | ||||
|
On June 3, 2019, the Audit Committee Effective June 3, 2019, the Audit Committee approved the dismissal of Crowe LLP as our independent registered public accounting firm. The During the fiscal years ended December 31, 2018 and 2017 and INDEPENDENT PUBLIC ACCOUNTANTSAs noted above in Proposal 2,Independent Public Accountantshas appointed Crowe Horwath LLPDeloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2019. As noted above in Proposal 2, the Audit FeesCommittee has appointed Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2020.following table presents fees for professional auditreports of Crowe LLP on our financial statements as of and tax services rendered by Crowe Horwath LLP for the years ended December 31, 2018 and 2017 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.2016: the subsequent interim period through June 3, 2019, there were no disagreements with Crowe LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Crowe LLP, would have caused Crowe LLP to make reference thereto in its reports on our financial statements for such years and interim period. 2017 2016 Audit Fees (1) $ 948,600 $ 679,500 Audit-Related Fees (2) 62,700 14,000 Tax Fees (3) — 19,700 All Other Fees — — Total Fees $ 1,011,300 $ 713,200
During the subsequent interim period through the date of the Company’s appointment of Deloitte on June 3, 2019, neither the Company nor anyone on its behalf consulted with Deloitte regarding any of the matters or events set forth in Item 304(a)(2)(i) or (ii) of RegulationS-K.
Audit Fees
The following table presents fees andout-of-pocket expenses for professional audit services rendered by Deloitte during the fiscal year ended December 31, 2019:
| 2019 | ||||||||||
AUDIT FEES(1) | $1,314,500 | |||||||||
AUDIT-RELATED FEES | — | |||||||||
TAX FEES(2) | 328,800 | |||||||||
TOTAL FEES | $ | 1,643,300 | ||||||||
| (1) | Audit fees consist of fees for professional services rendered for the annual audit of the Company’s financial statements, |
| (2) | Tax fees include fees related to |
The Audit Committee has advised us that it has determined that thenon-audit services rendered by our independent auditors during our most recent fiscal year are compatible with maintaining the independence of such auditors.
The Audit Committee has adopted aPre-Approval Policy for Audit and Non-Audit Services pursuant to which itpre-approves all audit andnon-audit services provided by the independent auditors prior to each particular engagement. The Audit Committee has delegated authority to its Chairman to approve certain proposed services other than the annual audit, tax and quarterly review services, and the Chairman must report any approvals to the balance of the Committee at the next scheduled meeting.
| 2020 PROXY STATEMENT | 17 |
Report
The responsibilities of the Audit Committee, which are set forth in the Audit Committee Charter adopted by the Board, include providing oversight of our financial reporting process through periodic meetings with our independent auditors, principal accounting officer and management to review accounting, auditing, internal controls and financial reporting matters. Our management is responsible for the preparation and integrity of the financial reporting information and related systems of internal controls. The Audit Committee, in carrying out its role, relies on senior management, including senior financial management, and the independent auditors.
The Audit Committee has met and held discussions with management and Crowe Horwath LLPDeloitte with respect to the
We have received from Crowe Horwath LLPDeloitte a letter providing the disclosures required by Independence Standardsthe applicable requirements of the Public Company Accounting Oversight Board Standard No. 1 (Independence Discussionsregarding Deloitte’s communications with the Audit Committees)Committee concerning independence with respect to any relationships between us and Crowe Horwath LLPDeloitte that in their professional judgment may reasonably be thought to bear on independence. Crowe Horwath LLPDeloitte has discussed its independence with us, and has confirmed in such letter that, in its professional judgment, it is independent from us within the meaning of the federal securities laws. The Audit Committee concluded thatnon-audit services provided by Crowe Horwath LLPDeloitte during the year ended December 31, 2017,2019, which consisted of tax planning and compliance and other accounting and audit-relatedconsulting services, were compatible with Crowe Horwath LLP’sDeloitte’s independence.
Based on the review and discussions described above, with respect to our audited financial statements included in our
Annual Report to Shareholders, we have recommended to the Board of Directors that such financial statements be included in our Annual Report on Form10-K for filing with the SEC.
As specified in the Audit Committee Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that our financial statements are complete and accurate and in accordance with generally accepted accounting principles. That is the responsibility of management and our independent auditors. In giving our recommendation to the Board of Directors, we have relied on (i) management’s representation that such financial statements have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles and (ii) the report of our independent auditors with respect to such financial statements. This report was adopted by the Audit Committee on February 28, 2018.
The Audit Committee:
Michael A. Kitson (Chairman)
John A. Forbes
Pamela R. Klyn
Derrick B. Mayes
Denis G. Suggs
M. Scott Welch
The foregoing report of the Audit Committee does
not constitute soliciting material and shall not be
deemed incorporated by reference by any general
statement incorporating by reference the proxy
statement into any filing by us under the Securities
Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that we specifically incorporate
this information by reference, and shall not
otherwise be deemed filed under such acts.
| 18 | |
Approval of an
Amendment to the 2009
Omnibus Incentive Plan
to Increase the Number
of Shares of Common
Stock Available for Grant
Purpose and Background
The Board has unanimouslyamended the Patrick Industries, Inc. 2009 Omnibus Incentive Plan (the “Plan”), subject to shareholder approval, to increase the number of shares available for grants under the program by an additional 1,000,000 shares. The proposed amendment is intended to allow the Company to continue to keep pace with trends in management compensation and make the Company competitive with companies that offer stock incentives to attract and retain management employees andnon-employee directors.
The Plan was originally adopted on August 13, 2009 (the “Effective Date”), and approved at a special meeting of shareholders in November 2009. The purposes of the Plan are (i) to attract and retain highly competent persons as employees, directors and consultants of the Company and its affiliates (“Service Providers”); (ii) to provide additional incentives to such Service Providers by aligning their interests with those of the Company’s shareholders; and (iii) to promote the success and business of the Company and its affiliates.
Patrick currently may grant equity awards under the terms of the Plan including incentive stock options,non-qualified stock options, stock appreciation rights (“SARs”), restricted stock and restricted stock units (“RSUs”) and stock awards. An aggregate of 461,220 net shares were available for future awards under the Plan as of March 20, 2020 (the record date for the Annual Meeting), prior to the approval by shareholders of this Proposal 3. In the event that the required votes to approve the amendment to the Plan are not obtained, then Patrick’s ability to make future grants under the Plan will be limited to the 461,220 net shares currently available.
The Board of Directors recommends that our shareholdersyou vote to approve anthe amendment to our Articlesthe Plan. The affirmative vote of Incorporation (“Articles”)a majority of the votes cast is required for approval of the amendment to provide our shareholders with the ability to amend our Bylaws.
A summary of the proposed amendment to the ArticlesPlan follows, which summary is qualified in its entirety by reference to Appendixthe full text of the Plan itself, on file with the Securities and Exchange Commission. A copy of the Plan is available from the Corporation’s Secretary at the address on the cover of this Proxy Statement.
| 2020 PROXY STATEMENT | 19 |
Administration
Eligibility
Share Limits
Individual Award Limits
Awards under the Plan are subject to individual limits that were adopted for purposes of the “performance-based compensation” exemption under Section 162(m) of the Code, which is described below. The performance-based compensation exemption was repealed, however, effective for tax years beginning after
December 31, 2017. The following individual annual grant limitations apply per calendar year to all employees participating in the Plan and are subject to adjustment as described in the Plan.
500,000 shares
500,000 shares
500,000 shares.
500,000 shares
$1 million determined as of the payout date
$1 million determined as of the payout date
500,000 shares
Awards granted to a Service Provider that are canceled shall continue to count toward the individual share limit applicable to that Service Provider as set forth in the Plan.
Adjustments and Substitution of Awards
| 20 | |
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE 2009 OMNIBUS INCENTIVE PLAN
Awards
The following types of awards may be granted under the Plan (which may be in lieu of other amounts owed to a Participant), subject to such terms as the Compensation Committee may prescribe in an award agreement:
Performance Criteria
Performance measures are objectives established by the Compensation Committee for Participants to be eligible to receive certain awards under the Plan. Performance objectives may be based onCompany-wide, affiliate, divisional, project team and/or individual performance and may be expressed in terms of attaining a specified level or a percentage or absolute increase or decrease in the particular objective and may involve comparisons to historical results. The performance objectives may be applied to the performance of the Company relative to a market index, a peer group of other companies or a combination thereof. The Compensation Committee may further specify a minimum acceptable level of achievement below which no award payment will be made or vesting will occur.
| 2020 PROXY STATEMENT | 21 |
Other Provisions
Amendment or Termination of the Plan
Effective Date
Federal Income Tax Consequences
The following is a brief summary of some of the federal income tax consequences of certain transactions under the Plan based on federal income tax laws in effect on April 23, 2020. This summary is not intended to be complete and Nominations Committee again considereddoes not describe state or local tax consequences. It is not intended as tax guidance to Participants in the various positionsPlan.
Tax Consequences to Participants
Nonqualified Stock Options. In general, no income will be recognized by an optionee at the time a nonqualified stock option is granted. At the time of exercise of a nonqualified stock option, ordinary income will be recognized by the optionee in an amount equal to the difference between the exercise price paid for the shares and against allowing shareholdersthe fair market value of the shares, if unrestricted, on the date of exercise. At the time of the sale of shares acquired pursuant to amend our Bylaws. After weighing these considerations, andthe exercise of a nonqualified stock option, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term or long- term capital gain (or loss) depending on how long the shares have been heldpost-exercise.
Incentive Stock Options. No income generally will be recognized by an optionee upon the recommendationgrant or exercise of our Corporate Governancean ISO. The exercise of an ISO, however, may result in alternative minimum tax liability. If shares are issued to the optionee pursuant to the exercise of an ISO, and Nominations Committee, our Board has concluded that amending our Articles to allow shareholders to amend our Bylaws will enhance our corporate governance practicesif no disqualifying disposition of such shares is made by giving shareholders a say in important governance principles.such optionee within two years after the date of grant or within one year after the date of
| Name and Address of Beneficial Owner | Aggregate Number of Shares of Common Stock Beneficially Owned | Percent of Class | ||||||
| Five Percent Shareholders: | ||||||||
Blackrock, Inc. 55 East 52nd St. New York, NY 10055 | 2,975,758 | (1) | 11.8 | % | ||||
RBC Global Asset Management (U.S.) Inc. 50 South Sixth Street Suite 2350 Minneapolis, MN 55402 | 2,166,886 | (2) | 8.6 | % | ||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 1,296,946 | (3) | 5.1 | % | ||||
| Directors: | ||||||||
M. Scott Welch (4) | 66,747 | * | ||||||
| Walter E. Wells | 66,360 | * | ||||||
| Paul E. Hassler | 49,186 | * | ||||||
| Joseph M. Cerulli | 37,600 | * | ||||||
| John A. Forbes | 27,851 | * | ||||||
| Michael A. Kitson | 16,941 | * | ||||||
| Named Executive Officers: | ||||||||
Todd M. Cleveland (5) | 768,459 | 3.0 | % | |||||
Andy L. Nemeth (6) | 168,359 | * | ||||||
Jeffrey M. Rodino (7) | 124,636 | * | ||||||
Kip B. Ellis (8) | 34,710 | * | ||||||
Joshua A. Boone (9) | 22,593 | * | ||||||
All Directors and Executive Officers as a group (12 persons) (10) | 1,428,498 | 5.6 | % | |||||
|
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE 2009 OMNIBUS INCENTIVE PLAN
exercise, then upon sale of such shares, any amount realized in excess of the exercise price will be taxed to the optionee as a long-term capital gain and any loss sustained will be a long-term capital loss. If shares acquired upon the exercise of an ISO are disposed of prior to the expiration of either holding period described above, the optionee generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time of exercise (or, if less, the amount realized on the disposition of such shares in a sale or exchange) over the exercise price paid for such shares. Any further gain (or loss) realized by the Participant generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period.
SARs. No income will be recognized by a Participant in connection with the grant or vesting of a SAR. When the SAR is exercised, the Participant normally will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair market value of any unrestricted shares received on the exercise.
Restricted Stock. The recipient of restricted stock generally will be subject to tax at ordinary income rates on the fair market value of the restricted stock (reduced by any amount paid by the Participant for such restricted stock) at such time as the shares are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (“Restrictions”). However, a recipient who so elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted stock. If a Section 83(b) election has not been made, any dividends received with respect to restricted stock that is subject to the Restrictions generally will be treated as compensation that is taxable as ordinary (compensation) income to the Participant.
Restricted Stock Units. No income generally will be recognized upon the award or vesting of RSUs. The recipient of an award of RSUs generally will be subject to tax at ordinary income rates on the amount of cash received or the fair market value of unrestricted shares received, measured as of the date that such shares are transferred to the Participant under the award (reduced by any amount paid by the Participant for such restricted stock units), and the capital gain/loss holding period for such shares will also commence on such date.
Performance Shares and Performance Units. No income generally will be recognized upon the grant of performance shares or performance units. Upon payment in respect of the
earn-out of performance shares or performance units, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted shares received.
Other Stock Awards. No income generally will be recognized upon the grant of other stock awards. Upon payment of other awards, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted shares received.
Tax Consequences to the Company
To the extent that a Participant recognizes ordinary income in the circumstances described above, the Company will generally be entitled to a corresponding compensation expense deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the $1 million limitation on certain “covered employees” under Section 162(m) of the Code.
Prior to the adoption of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) compensation that constituted qualified “performance- based compensation” was exempt from the deduction limitations of Section 162(m). The exemption from Section 162(m)’s deduction limit for performance-based compensation was repealed by the TCJA, however, effective for tax years beginning after December 31, 2017, such that compensation paid to certain “covered employees” of the Company in excess of $1 million is not deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Also, under the TCJA, beginning in 2018, a Section 162(m) “covered employee” includes any individual who served as the CEO or CFO at any time during the taxable year and the next three highest paid officers (other than the CEO and CFO) for the taxable year, as determined for Section 162(m) purposes, and once an individual becomes a covered employee for any taxable year beginning after December 31, 2016, that individual will remain a covered employee for all future years, including following any termination of employment.
Vote Required
Proposal 3 requires the affirmative vote of a majority of the votes cast, provided a quorum (50% of the outstanding shares of common stock) is present.
The Board of Directors unanimously recommends a voteFORapproval of the amendment to increase by 1,000,000shares the number of shares available for grant under the Patrick Industries, Inc. 2009 Omnibus Incentive Plan.
| 2020 PROXY STATEMENT | 23 |
Advisory Vote on Executive Compensation The Dodd-Frank Act requires that the Company seek anon-binding advisory vote from its shareholders to approve the compensation of its named executive officers as disclosed under the “Executive Compensation” section in this Proxy Statement in accordance with SEC rules. Our executive compensation policy is designed to enable the Company to attract, motivate and retain highly-qualified senior executives by providing a competitive compensation opportunity based on performance. Our intent is to provide fair and equitable compensation in a way that rewards executives for achieving specified financial andnon-financial performance goals. Our performance-related awards are structured to link a substantial portion of our executives’ total potential compensation to the |
For the reasons stated, the Board of Directors recommends a voteFORthe followingnon-binding resolution: “RESOLVED, that the compensation paid to the Company’s named executive officers for fiscal year 2019, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and related information and discussion, is herebyAPPROVED.” |
We are requesting shareholder approval of the compensation of our named executive officers as disclosed in this Proxy Statement, including the disclosures under “Executive Compensation - Compensation Discussion and Analysis for Executive Officers,” the compensation tables and the related information and discussion.
The vote is advisory and therefore not binding on the Company or the Compensation Committee or the Board. However, we value the opinions of our shareholders, and we will carefully consider the outcome of the advisory vote on executive compensation when making future compensation decisions.
The affirmative vote of a majority of the votes cast is required for advisory approval of the foregoingnon-binding resolution. See “Voting Information” on page 7.
| ||
The Board believes that fundamental corporate governance is important to ensure that we are managed for the long-term benefit of our shareholders. During fiscal 2017,Recent actions taken by the Board underwent a comprehensive review of its corporate governance, and as a result of this review, adopted two new policies and has approved an amendment to its Articles of Incorporation, for which it seeks shareholder approval, as noted below:
Board Diversity Policy
Environmental, Health and Safety / Social Responsibility and Environmental Responsibility Policy
The Board adopted a formal policy in 2018 for managing its commitment to social and environmental matters. The newThis policy is available on the Company'sCompany’s website atwww.patrickind.com under "Investor“Investor Relations - Corporate Governance".Governance” under the heading “Social and Environmental Responsibility Policy.”
In 2019, the Board provided disclosures regarding the Company’s ESG practices as noted below. The ESG disclosures are also available on the Company’s website atwww.patrickind.com under“Investor Relations - Corporate Governance” under the heading “Environmental, Social and Governance Disclosures.”
In 2019, the Corporate Governance and Nominations Committee was charged with providing appropriate oversight on ESG matters that includes working with management to Amend Bylaws.identify and define relevant ESG topics and enhancing our communications with our employees, customers, communities and shareholders.
Environmental, Health and Safety / Social Responsibility
We are conscious of our environmental impact and the health and safety (“EHS”) of all of our team members, contractors, and communities in which we operate. We will actively seek sound practices and safe behaviors to protect the environment and the health and safety of our employees insofar as they are affected by our facilities, products and services. In particular, we will:
Meet or exceed applicable environmental, health, safety and legal requirements;
Continuously improve our processes to reduce pollution and eliminate workplace injuries;
Require individual accountability and provide regular training and development of all team members;
Identify, consider and minimize potential EHS impacts of new and modified products and production processes, acquisitions, and capital project review and approval activities; and
Promote health and wellness of our employees;
Our Board, Executive Management team, Business Unit directors, EHS team, and Human Resources teams have the shared responsibility to develop, implement, and manage safety and health programs in the interest of a safe work environment that also promotes a work/life balance. In addition, we will seek to contribute positively to the communities in which we operate.
| 2020 PROXY STATEMENT | 25 |
In conjunction with Board oversight related to climate related risks and opportunities, our goal is to comply with all applicable environmental and local, state, and federal safety and health regulations, and conduct our operations in a manner that safeguards the environment and minimizes waste, emissions, and energy consumption. We look forward to developing new processes and technologies to recycle more material, manage energy consumption, and engineer products for each of the markets we serve.
We continually aim to upgrade our assurance processes to detect, communicate and correct defects to monitor the delivery of products and services so that they meet or exceed contractual quality and legal and regulatory requirements.
We require everyone in the Patrick organization to assume the responsibility of individual and organizational safety. It is each team member’s responsibility that all work tasks be conducted in a safe and efficient manner. An extensive array of metrics has been established and communicated to team members to ensure an understanding of our current level of performance and to continually identify opportunities for improvement.
The Board has approved an amendmentbelieves that fundamental corporate governance is important to ensure that we are managed for the Company's Articleslong-term benefit of Incorporation to permit shareholders to amendour shareholders. Commensurate with the Bylawssize and nature of each of Patrick’s businesses, the Company utilizes management systems, tools and has submitted such amendmentprocesses to shareholdershelp (1) ensure compliance with applicable laws, regulations and the requirements set forth in its Code of Ethics and Business Conduct (the “Code”); (2) promote an awareness and commitment to ethical business practices, including, without limitation, the expectations set forth in the Code; (3) facilitate the timely discovery, investigation, disclosure and implementation of corrective actions for their approval atviolations of law, regulations or the annual meeting. See Proposal 3expectations set forth in the Code; and (4) provide training to all employees on pages 8compliance requirements, as necessary and 9 for additional details.
The Board expects to continue to review its corporate governance practices and policies as set forth in its Corporate Governance Guidelines, Code of Ethics and Business Conduct, Diversity Policy, Social and Environmental Responsibility Policy, and various Committee Charters, all of which were updated in accordance with the listing standards of the NASDAQ Stock Market and the SEC rules, at least every two yearsannually or as it deems appropriate.
Board Membership and Leadership
As of the date of this Proxy Statement, our Board has eightnine (9) members. Mr. HasslerCleveland serves as Executive Chairman of the Board.Board and Mr. Welch serves as lead independent director. Except for Mr. Cleveland our Chief Executive Officer, and Mr. Nemeth, our President and Chief Executive Officer, no director is an employee.
Election of Directors and Length of Board Term
Directors are currently elected for aone-year term at the Annual Meeting of Shareholders.
Board Meetings and Attendance
The Board and Board Committees hold regular meetings on a set schedule and may hold special meetings and act by written consent from time to time as necessary or appropriate. The Board hadfour five regular meetings in 2017.2019. Additionally, the Board participated in 14had 12 special meetings in 20172019 which included periodic update calls with
| 26 | |
CORPORATE GOVERNANCE AND RELATED MATTERS
Access to Corporate Governance Documents
The charters of our Audit, Compensation, and Corporate Governance and Nominations Committees, our Corporate Governance Guidelines and our Code of Ethics and Business Conduct are all available on our website atwww.patrickind.com, or by writing to:
Patrick Industries, Inc.
Attn: Joshua A. Boone, Secretary
107 West Franklin Street
Elkhart, Indiana 46515-0638
Shareholder Communications
Shareholders may send communications to members of the Board by sending a communication to the Board and/or a particular member c/o Joshua A. Boone-Secretary, Patrick Industries, Inc., 107 West Franklin Street, P.O. Box 638, Elkhart, Indiana 46515-0638. Communications intended for independent directors should be directed to the Chairman of the Corporate Governance and Nominations Committee.
Executive Sessions of Independent Directors
The Board and Board committeesCommittees regularly meet in executive session without the presence of any non-employeeemployee directors or representatives. There was no lead independent director designated to preside over theThe executive sessions of the Board in 2017.were presided over by Mr. Welch, the lead independent director. Any independent director can request additional executive sessions. The independent directors met in executive sessions fourfive times in 2017.
Seven of the eightnine members of the Board (as of the date of this Proxy) have been designated by the Board as independent directors. In general, the Board determines whether a director is independent by following the guidelines of the NASDAQ Stock Market and the SEC rules and regulations. The Board has determined that the independent directors arein 2019 were Joseph M. Cerulli, John A. Forbes, Michael A. Kitson, Pamela R. Klyn, Derrick B. Mayes, Denis G. Suggs and M. Scott Welch and Walter E. Wells.
Board Risk Oversight
The Board has delegated its risk oversight responsibilities to the Audit Committee, as described below under the heading “Audit Committee.” In accordance with the Audit Committee’s Charter, each of our senior financial and accounting officers reports directly to the Audit Committee regarding material risks to our business, among other matters, and the Audit Committee meets in executive sessions with the senior financial and accounting officers and with representatives of our independent registered public accounting firm. The Audit Committee Chairman reports to the full Board regarding material risks as deemed appropriate.
Director Qualifications and Board Diversity Policy
The Board seeks a diverse group of candidates who possess the background, skills and expertise and the highest level of personal and professional ethics, integrity, judgment and values to represent the long-term interests
Breadth of knowledge about issues affecting the Company and the industries/markets in which it operates;
Significant experience in leadership positions or at senior policy-making levels and an established reputation in the business community;
Expertise in key areas of corporate management and in strategic planning;
Financial literacy and financial and accounting expertise; and
Independence and a willingness to devote sufficient time to carry out his or her duties and responsibilities effectively and assume broad fiduciary responsibility.
The new Board Diversity Policy, as noted below,which the Board adopted in 2018, is available on the Company'sCompany’s website atwww.patrickind.com under "Investor“Investor Relations - Corporate Governance".Governance.”
| 2020 PROXY STATEMENT | 27 |
The Board believes that a board made up of highly qualified directors with diverse backgrounds, skills and experiences and who reflect the changing population demographics of the markets in which the Company operates, the talent available with the required expertise and the Company’s evolving customer and employee base, promotes better corporate governance. To support this, the Corporate Governance and Nominations Committee will, when identifying candidates to recommend for appointment/election to the Board:
Consider only candidates who are highly qualified based on their experience, functional expertise, and personal skills and qualities;
Consider diversity criteria including gender, age, ethnicity and geographic background; and
In addition to its own search, engage qualified independent external advisors, if it deems necessary, to conduct a search for candidates who meet the Board’s skills and diversity criteria to help achieve its diversity aspirations.
Board appointments will be based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender.Board. In furtherance of this commitment, the Corporate Governance and Nominations Committee shall require that the list of candidates to be considered by the Corporate Governance and Nominations Committee and/or the Board for nomination to our Board include candidates with diversity of race, ethnicity and gender.
The Committee will consider a candidate’s qualifications and background, including responsibility for operating a public company or a division of a public company, international business experience, a candidate’s technical and financial background or professional qualification, diversity of background and personal experience, and any other public company boards on which the candidate is a director. The Committee will also consider whether the candidate would be “independent” for purposes of the NASDAQ Stock Market and the SEC rules and regulations by our Board. The Committee may, from time to time, engage the services of a professional search firm to identify and evaluate potential nominees.
Process for Consideration of Director Candidates - Corporate Governance and Nominations Committee Processes
The Corporate Governance and Nominations Committee will consider board nominees recommended by shareholders. Those recommendations should be sent to the Chairman of the Corporate Governance and Nominations Committee, c/o of the Secretary of Patrick Industries, Inc., 107 West Franklin Street, P.O. Box 638, Elkhart, Indiana 46515-0638. In order for a shareholder to nominate a candidate for director, under ourBy-laws, timely notice of the nomination must be given in writing to the Secretary of the Company. To be timely, such notice must be received at our principal executive office not less than 20 days or more than 50 days prior to the next Annual Meeting of Shareholders. Notice of nomination must include the name, address and number of shares owned by the person submitting the nomination; the name, age, business address, residence address and principal occupation of the nominee; and the number of shares beneficially owned by the nominee. It must also include the information that would be required to be disclosed in the solicitation of proxies for election of directors under the federal securities laws, as well as whether the individual can understand basic financial statements and the candidate’s other board memberships (if any). The nominee’s consent to be elected and serve must be submitted. The Corporate Governance and Nominations Committee may require any nominee to furnish any other information, within reason, that may be needed to determine the eligibility of the nominee.
As provided in its Charter, the Corporate Governance and Nominations Committee will follow procedures which the committee deems reasonable and appropriate in the identification of candidates for election to the Board and evaluating the background and qualification of those candidates. Those processes include consideration of nominees suggested by an outside search firm, by incumbent board members, and by shareholders. The Committee
Board Committee Responsibilities and Related Matters
The Company has three standing committees of the Board: the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominations Committee. All members of each Committee are independent directors who meet the independence and experience standards of Nasdaq.NASDAQ. The Board annually selects the directors who serve on each of the Board Committees. Each Board Committee functions pursuant to a written charter. The Board has delegated certain responsibilities and authority to each Board Committee as described below. At each regularly scheduled Board meeting, each Board Committee Chairman (or other designated Board Committee member) reports to the full Board on hishis/her Board Committee’s activities.
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CORPORATE GOVERNANCE AND RELATED MATTERS
The following table reflects the current membership of each Board Committee:
Name | Audit Committee | Compensation Committee | Corporate Governance and Nominations Committee | |||||||||||||||||||||||||||
JOSEPH M. CERULLI | X | |||||||||||||||||||||||||||||
JOHN A. FORBES | X | X | Chair | |||||||||||||||||||||||||||
MICHAEL A. KITSON | Chair | X | X | |||||||||||||||||||||||||||
PAMELA R. KLYN | X | X | X | |||||||||||||||||||||||||||
DERRICK B. MAYES | X | X | X | |||||||||||||||||||||||||||
DENIS G. SUGGS | X | X | X | |||||||||||||||||||||||||||
M. SCOTT WELCH | X | Chair | X | |||||||||||||||||||||||||||
Audit Committee The Audit Committee’s report is provided on page 18 of this Proxy Statement. For a more detailed list of the roles and responsibilities of the Audit Committee, please see the Audit Committee Charter located in the “Corporate Governance” section of our website atwww.patrickind.com. | The Board has an Audit Committee for which Michael A. Kitson serves as the Chairman. Ms. Klyn and Messrs. Mayes and Suggs were appointed to the Board on March 21, 2019 and to the Audit Committee on May 15, 2019. The Audit Committee met 13 times in 2019. These meetings included conference calls with management to review quarterly earnings releases and SEC filings prior to their issuance. The primary responsibilities of the Audit Committee include: • Oversight responsibilities related to potential material risks to the business including, but not limited to, credit, liquidity and operational risks; • Recommending to the Board the independent auditors to be employed for the purpose of conducting the annual audit of our financial statements; • Discussing with the independent auditors the scope of their examination; • Reviewing our financial statements and the independent auditors’ report thereon with our personnel and the independent auditors; • Inviting the recommendations of the independent auditors regarding internal controls and other matters; and • Approving allnon-audit services provided by the independent auditors and reviewing these engagements on a per occurrence basis. The Board has determined that each of the current members of the Audit Committee is independent, as defined in the NASDAQ listing standards and relevant SEC rules. In addition, the Board has determined that four of these members also meet both the qualifications required to be an audit committee financial expert and the financial sophistication requirements contained in the NASDAQ listing standards (Messrs. Forbes, Kitson, Suggs and Welch). |
| 2020 PROXY STATEMENT | 29 |
Compensation Committee The Compensation Committee’s report is provided on page 56 of this Proxy Statement. For a more detailed list of the roles and responsibilities of the Compensation Committee, please see the Compensation Committee Charter located in the “Corporate Governance” section of our website atwww.patrickind.com. | The Board has a Compensation Committee for which Walter E. Wells served as Chairman from January 1, 2019 through May 14, 2019. On May 15, 2019, M. Scott Welch assumed the role of Chairman of the Compensation Committee upon the retirement of Mr. Wells from the Board effective May 15, 2019. Ms. Klyn and Messrs. Mayes and Suggs were appointed to the Board on March 21, 2019 and to the Compensation Committee on May 15, 2019. The Compensation Committee met four times in 2019. The primary responsibilities of the Compensation Committee include: • Reviewing and recommending to the independent members of the Board the overall compensation programs for the officers of the Company; • Oversight authority to attract, develop, promote and retain qualified senior executive management; and • Oversight authority for the stock-based compensation programs. In its oversight of executive officer compensation, the Compensation Committee seeks assistance from our management and our independent compensation consultant, Willis Towers Watson, as further described below under the heading “Compensation Discussion and Analysis for Executive Officers.” Willis Towers Watson’s fees are approved by the Compensation Committee. Willis Towers Watson provides the Compensation Committee with data about the compensation paid by our peer group and industry benchmark groups, updates the Compensation Committee on new developments in areas that fall within the Compensation Committee’s jurisdiction and is available to advise the Compensation Committee regarding all of its responsibilities, including best practices and market trends in executive compensation. Our Compensation Committee has assessed the independence of Willis Towers Watson pursuant to SEC and NASDAQ listing rules and determined that their work did not give rise to any conflicts of interest. The Board has determined that each of the current members of the Compensation Committee is independent as defined in the NASDAQ listing standards and our Corporate Governance Guidelines. Compensation Committee Interlocks and Director Participation During 2019, no executive officer served on the board or compensation committee of any other corporation with respect to which any member of the Compensation Committee was engaged as an executive officer. No member of the Compensation Committee was an officer or employee of the Company during 2019. |
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CORPORATE GOVERNANCE AND RELATED MATTERS
Corporate Governance and Nominations Committee | ||||||
For a more detailed list of the roles and responsibilities of the Corporate Governance and Nominations Committee, please see the Corporate Governance and Nominations Committee Charter located in the “Corporate Governance” section of our website atwww.patrickind.com. | ||||||
The Board has a Corporate Governance and Nominations Committee for which John A. Forbes serves as the Chairman. Ms. Klyn and Messrs. Mayes and Suggs were appointed to the Board on March 21, 2019 and to the Corporate Governance and Nominations Committee on May 15, 2019. The Corporate Governance and Nominations Committee met five times in 2019. The primary responsibilities of the Corporate Governance and Nominations committee include: • Assist the Board in identifying, screening and recommending qualified candidates to serve as directors; • Recommend nominees to the Board to fill new positions or vacancies as they occur; • Review and recommend to the Board the compensation of directors; • Recommend to the Board nominees for election by shareholders at the Annual Meeting; and • Review and monitor corporate governance compliance as well as recommend appropriate changes. The Board has determined that each of the current members of the Corporate Governance and Nominations Committee is independent as defined in the listing standards of the NASDAQ Stock Market and our Corporate Governance Guidelines. Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act of 1934 requires that certain of our officers, directors and 10% shareholders file with the SEC an initial statement of beneficial ownership and certain statements of changes in beneficial ownership of our common stock. Based solely on our review of such forms and written representation from the directors and officers that no other reports were required, we are unaware of any instances of noncompliance or late compliance with such filings during the fiscal year ended December 31, 2019, except with respect to the late filing of one Form 4 on October 21, 2019 for Andy L. Nemeth, a named executive officer and director. |
The Board has an Audit Committee for which Michael A. Kitson serves as the Chairman. The Audit Committee met 12 times in 2017. These meetings included conference calls with management to review quarterly earnings releases and SEC filings prior to their issuance.The primary responsibilities of the Audit Committee include:
The following Compensation Discussion and Analysis (“CD&A”) should be read in conjunction with the executive compensation tables and corresponding footnotes that follow. The discussion focuses on the compensation program approved by the Board for the 20172019 fiscal year for the Named Executive Officers (“NEOs”).
Named Executive Officers included in the 2019 CD&A
Effective January 1, 2020, Andy L. Nemeth assumed the role of CEO of the Company and will continue in his role as President. Todd M. Cleveland previously held the role of CEO from February 2009 through December 31, 2019. In addition, Mr. Cleveland assumed the role of Executive Chairman of the Company effective January 1, 2020. A brief biography of each of the NEOs is as follows:
TODD M. CLEVELAND
Todd M. Cleveland was appointed Executive Chairman of the Board of the Company in January 2020. Prior to that, Mr. Cleveland was Chairman of the Board from May 2018 to December 2019 and Chief Executive Officer from February 2009 until December 2019. Mr. Cleveland was President of the Company from May 2008 to December 2015 and Chief Operating Officer from May 2008 to March 2013. Prior to that, Mr. Cleveland served as Executive Vice President of Operations and Sales and Chief Operating Officer from August 2007 to May 2008 following the acquisition of Adorn Holdings, Inc. by Patrick in May 2007. Mr. Cleveland has over 29 years of manufactured housing, recreational vehicle and industrial experience in various leadership capacities.
ANDY L. NEMETH
Andy L. Nemeth was appointed Chief Executive Officer of the Company in January 2020. In addition to this role, Mr. Nemeth serves as President of the Company, a position he has held since January 2016. Mr. Nemeth was the Executive Vice President of Finance and Chief Financial Officer from May 2004 to December 2015 and Secretary-Treasurer from 2002 to 2015. Mr. Nemeth has over 28 years of manufactured housing, recreational vehicle and industrial experience in various financial and managerial capacities.
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EXECUTIVE COMPENSATION
JEFFREY M. RODINO
Jeffrey M. Rodino was appointed Chief Sales Officer of the Company in September 2016. In addition to this role, Mr. Rodino serves as the Executive Vice President of Sales, a position he has held since December 2011. Prior to that, he was the Chief Operating Officer of the Company from March 2013 to September 2016 and Vice President of Sales for the Midwest from August 2009 to December 2011. Mr. Rodino has over 26 2016,years of experience in serving the recreational vehicle, manufactured housing and industrial markets.
KIP B. ELLIS
Kip B. Ellis was appointed Executive Vice President of Operations and Chief Operating Officer of the Company in September 2016. He was elected an officer in September 2016. Mr. Ellis joined the previous Vice-PresidentCompany as Vice President of Market Development assumedin April 2016. Prior to his role at Patrick, Mr. Ellis served as Vice President of Aftermarket Sales for the positionDometic Group from 2015 to 2016. Prior to his tenure at Dometic, Mr. Ellis served as Vice President of COO. This positionGlobal Sales and Marketing from 2007 to 2015 at Atwood Mobile Products. Mr. Ellis has over 23 years of experience serving the recreational vehicle, manufactured housing, industrial and automotive markets.
JOSHUA A. BOONE
Joshua A. Boone was created to align leadership spanappointed Vice President of control with the growthFinance, Chief Financial Officer and Secretary-Treasurer of the Company. For additional details, see footnote 11Company in January 2016. He was elected an officer in May 2016. Mr. Boone joined the Company as its Director of Corporate Finance in July 2014. Prior to his role at Patrick, Mr. Boone served as Chief Financial Officer for Pretzels, Inc. from 2012 to 2014 and served in several leadership positions in finance and accounting at Brunswick Corporation from 2007 to 2012. Mr. Boone has over 15 years of experience serving the “Summary Compensation Table” on page 29.
2019 Executive Compensation Plan Highlights:Highlights
Increase to CEO base pay; no increase to short-term incentive (“STI”) or long-term incentive (“LTI”) target payyear-over-year. Base compensation was adjusted in alignment with Company scope and to assure a competitive position with the market for total target direct compensation.
Increases to each of the other NEOs’ compensation in one or more compensation components. Adjustments were made in alignment with Company and role scope increases and to assure a competitive position with the market for total target direct compensation.
Changes to the STI Plan performance targets and corresponding payout when performing above plan.
Change to the LTI Plan performance targets and corresponding payout when performing above plan. In addition, the maximum payout increasing in competitive alignment with the market.
No other changes year-over-year to the Executive Compensation Plan.
We believe that our compensation plan as it relates to the NEOs and other executives should be aligned with the Company’s short-term and long-term organizational strategic agenda and its operating performance and cash flows and assureensure appropriate management ownership in the Company. Messrs. Cleveland, Nemeth, Rodino, Ellis and Boone comprise our “Named Executive Officers” or “NEOs”NEOs for fiscal 2017,2019, as such term is used under SEC rules. Our philosophy and objectives are to provide a comprehensive market competitive compensation program designed to attract, retain and motivate the best qualified talents from inside and outside the industry and to align the interests of our senior management team with the interests of our shareholders, both short-term and long-term.long- term. The Company utilizes a "pay-for-differentiated performance"“pay-for-differentiated performance” compensation philosophy that establishes base salaries that are generally low relative to its peer group companies while offering the opportunity for greater upside potential by establishing performance-based short-term and long-term incentives that are generally high relative to its peer group.
| 2020 PROXY STATEMENT | 33 |
2019 Executive Compensation Plan:Pay-at-Risk
The 2019 executive compensation plan for the NEOs was designed to compensate and reward the plan participants with “pay-for-differentiated-performance.” The plan design is specifically designated through each compensation component to incrementally reward the NEO as the performance against established key financial metrics is achieved. This plan design places a high degree of emphasis and reward based on variable compensation or“pay-at-risk.” Each element of compensation is outlined below in demonstration of the philosophy and architecture of the plan design.
Base Pay (Salary)
To implement our variablepay-at-risk philosophy in 2019, we intentionally set the NEOs’ base salaries so that they are lower than market-based salaries.
The CEO’s and each of the other NEOs’ base compensation for 2019 was aligned to the 25th to 50th percentile range of their respective established peer group and general industry data.
Executive | 2019 Base Pay | Fixed or Variable Pay | ||||||||||||||||||
CEO | $750,000 | Fixed Pay | ||||||||||||||||||
ALL OTHER NEOS COMBINED | 1,775,000 | Fixed Pay | ||||||||||||||||||
Non-Equity Incentive Compensation (Short-Term Incentive)
The 2019 Short-Term Incentive Plan (“STIP”) was designed to reward the CEO and each of the other NEOs for differentiated incremental performance against the net income of the plan year (net of 2019 acquisitions) and individual performance goals of each NEO. The STIP is designed to be 100% variable, performance dependent,pay-at-risk. Assuming target performance, the net income metric performance accounts for 70% of the performance payout and each NEO’s personal strategic objectives account for 30% of the performance payout, allowing for differentiation of each individual NEO’s contributions to the performance of the Company. STIP compensation may range from 0 to 200% of target and is 100% variable compensation.
If an individual’s performance rating is below the threshold performance rating, such individual is not eligible for a STIP award regardless of Company performance. If the Company’s net income (net of acquisitions) performance is below the threshold Company performance, no individual is eligible for that performance plan year’s annual STIP award regardless of individual performance.
The STIP threshold, target, stretch and maximum performance levels for both net income (net of 2019 acquisitions) and personal performance and related payouts are noted below for reference.
| Company Performance (70% of target performance payout) | ||||||||||
Net Income Performance | Performance to Plan (%) | Payout (%) | ||||||||
LESS THAN THRESHOLD | <75 | 0 | ||||||||
THRESHOLD | 75 | 50 | ||||||||
TARGET (PLAN) | 100 | 100 | ||||||||
STRETCH | 110 | 175 | ||||||||
MAXIMUM | 115 | 200 | ||||||||
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EXECUTIVE COMPENSATION
| NEO Individual Performance (30% of target performance payout) | |||||||||||||||||||||||||
Personal Performance | Performance Rating (0-5 Scale) | Payout (%) | |||||||||||||||||||||||
LESS THAN THRESHOLD | <2.5 | 0 | |||||||||||||||||||||||
THRESHOLD | 2.5 | 50 | |||||||||||||||||||||||
TARGET (PLAN) | 3.5 | 100 | |||||||||||||||||||||||
STRETCH | 4.4 | 175 | |||||||||||||||||||||||
MAXIMUM | 5.0 | 200 | |||||||||||||||||||||||
The STIP target amount for the CEO and each of the other NEOs is designed to align to the 75th percentile range of established peer group and general industry pay percentiles.
Executive | 2019 Target STIP | Fixed or Variable Pay | ||||||||||||||||||
CEO | $1,800,000 | Variable Pay | ||||||||||||||||||
ALL OTHER NEOS COMBINED | 2,275,000 | Variable Pay | ||||||||||||||||||
Long-Term Incentive Plan Compensation (Long-Term Incentive Plan)
The 2019 Long-Term Incentive Plan (“LTIP”) was designed to reward the CEO and each of the other NEOs for sustained, long-range performance while ensuring incremental reward for differentiated performance against the Company’s three-year cumulative earnings before interest, taxes, depreciation and amortization (“EBITDA”) plan. The design of the LTIP creates 80% of the target value of the award in the form of this performance-dependent variable pay and 20% in the form of retentive, time-based fixed compensation with three-year cliff vesting.
The LTIP threshold, target, stretch and maximum performance levels for three-year cumulative EBITDA and related payouts are noted below for reference.
3-Year Cumulative EBITDA | Performance to Plan (%) | Payout (%) | ||||||||||||||||||
LESS THAN THRESHOLD | <80 | 0 | ||||||||||||||||||
THRESHOLD | 80 | 50 | ||||||||||||||||||
TARGET | 100 | 100 | ||||||||||||||||||
STRETCH | 110 | 150 | ||||||||||||||||||
MAXIMUM | 120 | 200 | ||||||||||||||||||
The LTIP target amount for the CEO and each of the other NEOs is designed to align to the 50th percentile range of peer and general industry pay percentiles. The target value of the LTIP is awarded in Restricted Stock Units (“RSUs”). The table below outlines the target LTIP amount for the CEO and all the other NEOs combined.
Executive | 2019 Target LTIP | Variable Pay (80%) | Fixed Pay (20%) | |||||||||||||||||||||||||||
CEO | $3,000,000 | $2,400,000 | $600,000 | |||||||||||||||||||||||||||
ALL OTHER NEOS COMBINED | 3,450,000 | 2,760,000 | 690,000 | |||||||||||||||||||||||||||
| 2020 PROXY STATEMENT | 35 |
Total Target Compensation: Fixed vs. Variable Pay Summary
Upon combining all pay elements of the 2019 Executive Compensation Plan, the philosophy of paying for differentiated performance is realized through the high percentages of variablepay-at-risk verses fixed pay as depicted in the table and graph below.
| Total Target Fixed Pay | Total Target Variable Pay | |||||||||||||||||||||||||||||||||||||||||||||||||
Executive | Total Target Compensation | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||||||
CEO | $5,550,000 | $1,350,000 | 24.3% | $4,200,000 | 75.7% | |||||||||||||||||||||||||||||||||||||||||||||
ALL OTHER NEOS COMBINED | 7,500,000 | 2,465,000 | 32.9% | 5,035,000 | 67.1% | |||||||||||||||||||||||||||||||||||||||||||||
Total Fixed vs. Variable Pay at Target
| 36 | |
EXECUTIVE COMPENSATION
Executive Compensation Decisions
Participants and Roles
COMPENSATION COMMITTEE | • Reviews and approves, with input from our management team and external advisors, the | |||||
• Provides annual and ongoing review, discussion, analysis and recommendations regarding the evaluation of the execution of the performance plan for the NEOs against defined business objectives. | ||||||
INDEPENDENT COMMITTEE CONSULTANT | • Provides published survey data, peer group proxy data and analysis and consultation to the Compensation Committee on executive andnon-employee director compensation. | |||||
• Establishes and maintains an independent perspective to avoid any conflicts of interests while working directly for the Compensation Committee unless the Committee has | ||||||
CHIEF EXECUTIVE OFFICER AND CHIEF HUMAN RESOURCES OFFICER | • When requested by the Compensation Committee, provides executive compensation and benefit plan input related to the performance management structure and provides support on compensation and benefit program design and implementation, | |||||
• The CEO evaluates the performance plans of the President, CSO, COO and CFO and other executives in accordance with the Board approved plan. |
Plan Factors
There are several key factors the Compensation Committee considers when recommendingplan-year executive compensation decisions:
NEOs’ roles, position scope, experience, skill set and performance history;
The external market for comparable roles;
The current and expected business climate; and
The Company’s financial position and operating results.
Plan Components
The Compensation Committee utilizes its own judgment in approving the components of compensation, benefits, and plan targets for the NEOs. The Compensation Committee further reviews and approves compensation including base compensation, targets, thresholds, and maximums of short-term and long-term incentive compensation. In addition, the Compensation Committee utilizes a third partythird-party compensation consulting firm, Willis Towers Watson, to provide relevant compensation benchmarks for the NEOs and other key leadership roles as well
| 2020 PROXY STATEMENT | 37 |
Benchmark Sources and policies.
As described under “Plan Components,” an important factor in establishing executive compensation for 2019 is the external market for comparable roles. In addition, based on the data utilized from an index of General Industry companies provided by the Central Data Base Survey of Willis Towers Watson, our independent compensation committee consultant's Central Data Base Survey,consultant, the Compensation Committee updated its benchmark peer group for the period ended December 31, 20172019 to include the following companies, which we believe represents a goodan effective comparator group: group with similar scope of revenue and market capitalization. Ply Gem Holdings, Inc. was deleted from the 2019 peer group due to the acquisition of the entity.
Fiscal Year 20172019 Executive Compensation
Compensation and Benefits Components | Description and Purpose | |
BASE SALARY | Cash payments reflecting a market competitive position for performance of functional role. | |
SHORT-TERM INCENTIVES | Lump sum cash payments reflective of approvedpay-for-performance plan and the relative achievements of the business and individual performance objectives. The Board reserves the right at any time to award discretionary bonuses to senior management based on outstanding performance or other factors. | |
LONG—TERM INCENTIVES | Stock vehicle grants reflecting approvedpay-for-performance plan and the relative long-term achievement of the business performance plans as well as the Company’s desire to retain | |
EXECUTIVE HEALTH AND WELFARE BENEFITS | Health and welfare benefits | |
VOLUNTARY DEFERRED COMPENSATION PLAN | Highly compensated individuals can elect to voluntarily defer all or a portion of their wages in any given year subject to applicable laws and restrictions. Designed to supplement market competitive position and further drive retention of key executives. | |
OTHER COMPENSATION | Other compensation | |
SEVERANCE BENEFITS | Reasonable and customary transition support aligned to market benchmark data. | |
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EXECUTIVE COMPENSATION
Base Salary
The Compensation Committee reviews and approves the base salaries of the NEOs each year, as well as at the time of promotion, change in job responsibilities or any other change deemed to be a material event. Base salaries are set during the first quarter of each year. The Compensation Committee sets the salary for the CEO and approves the base salaries for the other NEOs based on recommendations by the CEO.
When determining base salary adjustments for its NEOs, the Compensation Committee considers a combination of (1) peer group data, (2) market data, including industry norms and benchmarking data from companies of similar size and scope and (3) outstanding Company and individual performance. In general, the Compensation Committee targets the 25
The Board increased the CEO salary in 20172019 as a result of Mr. Cleveland’s individual performance and increased role in developing and executing the Company’s growth strategy. Mr. Cleveland had not received an increase to his base salary in the three years prior to fiscal 2017.strategy and peer comparator group market data alignment. The other NEOs’ base salariessalary increases were based on peer group data market alignment and individual performance contributions except for Mr. Ellis whose increase in base salary was due to his promotion to COO on September 26, 2016.
| Name | 2016 Base Salary - 2/29/16 | 2017 Base Salary - 1/23/17 | % Increase - 1/23/17 | |||||
| Todd M. Cleveland | $ | 550,000 | $ | 600,000 | 9.1 | % | ||
| Andy L. Nemeth | 425,000 | 450,000 | 5.9 | % | ||||
| Jeffrey M. Rodino | 350,000 | 375,000 | 7.1 | % | ||||
| Kip B. Ellis | 200,000 | 325,000 | 62.5 | % | ||||
| Joshua A. Boone | 245,000 | 275,000 | 12.2 | % | ||||
Name / Benefit | 2018 Base Salary - 1/29/18 | 2019 Base Salary - 1/28/19 | % Increase | |||||||||||||||||||||||||||
TODD M. CLEVELAND | $700,000 | $750,000 | 7.1 | % | ||||||||||||||||||||||||||
ANDY L. NEMETH | 475,000 | 500,000 | 5.2 | % | ||||||||||||||||||||||||||
JEFFREY M. RODINO | 400,000 | 425,000 | 6.3 | % | ||||||||||||||||||||||||||
KIP B. ELLIS | 400,000 | 450,000 | 12.5 | % | ||||||||||||||||||||||||||
JOSHUA A. BOONE | 335,000 | 400,000 | 19.4 | % | ||||||||||||||||||||||||||
Non-Equity Incentive Plan Awards
The Annual Non-Equity Incentive Plan Awards (“Short-Term Incentives” or “STIs”)short-term incentive portion of the 2019 compensation plan consists of annualnon-equity incentive plan awards, which are reviewed and approved each year and are based on the Company’s financial results and the individual’s performance against defined objectives. Several key components were considered in the development of the 2017 STI plan2019 STIP to align the STIs with shareholder interest by measuring the Company’s financial performance and the individual’s performance in support of the Company’s short- and long-term strategies. These components include:
Below are the STI award that is tied to individual performance is based on the Compensation Committee’s assessment of an individual’s performance against defined objectives (30% weighting), with the NEOs each receiving an individual performance rating ranging from 0.0 to 5.0. The Company performance component of the STI award is based upon the Company’s Net Income achieved relative to target Net Income (70% weighting), with the actual results correlated to established performance targets and corresponding payout thresholds. The threshold Company Net Income performance is 75% of target Net Income and the maximum Company Net Income performance is capped at 120% of target Net Income. The threshold, target and maximum performance metricsmetric components for the 2017 STI plan are outlined below:2019:
2019 STIP Award Component | Threshold Performance | Target Performance | Maximum Performance | ||||||||||||
COMPANY PERFORMANCE (NET INCOME)(1) | $81.69MM | $108.92MM | $125.26MM | ||||||||||||
INDIVIDUAL RATING | 2.5 | 3.5 | 5.0 | ||||||||||||
PAYOUT AS A PERCENTAGE OF TARGET AWARD | 50% | 100% | 200% | ||||||||||||
| (1) | All net income targets are net of the contributions of 2019 acquisitions. |
| 2020 PROXY STATEMENT | 39 |
| 2017 STI Award Component | Threshold Performance | Target Performance | Maximum Performance |
Company Performance (Net Income) (1) | $48.540MM | $64.720MM | $77.664MM |
| Individual Rating | 2.5 | 3.5 | 5.0 |
| Payout as a Percentage of Target Award | 50% | 100% | 200% |
The Company achieved adjusted fiscal 2017 Net Income2019 net income of $69.552$85.9 million (net of 2019 acquisitions) which equated to 107.5%78.9% of the target Company performance. When combined with the individual performance rating for each NEO, the actual STISTIP award payouts for 20172019 were as follows:
| Name | 2017 Base Salary ($) | Target Award as a % of Base Salary (1) | Target STI Award ($) | Actual Award Amount as a % of Target Award | Actual 2017 STI Award Payout ($) | ||||||
| Todd M. Cleveland | $ | 600,000 | 200.0% | $ | 1,200,000 | 159.4% | $ | 1,912,800 | |||
| Andy L. Nemeth | 450,000 | 166.7% | 750,000 | 161.9% | 1,214,250 | ||||||
| Jeffrey M. Rodino | 375,000 | 160.0% | 600,000 | 154.4% | 926,400 | ||||||
| Kip B. Ellis | 325,000 | 107.7% | 350,000 | 156.9% | 549,150 | ||||||
| Joshua A. Boone | 275,000 | 103.6% | 285,000 | 156.9% | 447,165 | ||||||
Name / Benefit | 2019 Base Salary | Target Award as a % of Base Salary (1) | Target STI Award | Actual Award Amount as a % of Target Award | Actual 2019 STI Award Payout | ||||||||||||||||||||
TODD M. CLEVELAND | $750,000 | 240.0 | % | $1,800,000 | 69 | % | $1,243,800 | ||||||||||||||||||
ANDY L. NEMETH | 500,000 | 155.0 | % | 775,000 | 81 | % | 624,650 | ||||||||||||||||||
JEFFREY M. RODINO | 425,000 | 141.1 | % | 600,000 | 71 | % | 423,600 | ||||||||||||||||||
KIP B. ELLIS | 450,000 | 111.1 | % | 500,000 | 88 | % | 440,500 | ||||||||||||||||||
JOSHUA A. BOONE | 400,000 | 100.0 | % | 400,000 | 81 | % | 322,400 | ||||||||||||||||||
| (1) | The target award as a percentage of base salary for the NEOs was determined by the Compensation Committee and applied to the base salary in effect as of January |
While these targets were used in fiscal year 2017,2019, the Compensation Committee reserves the right to modify, cancel, change or reallocate any components of this calculation or criteria at any time.
Each NEO’s individual performance rating takes into account four strategic performance objectives in assessing the personal performance of the NEOs named in the Summary Compensation Table for 2017.2019. The four strategic objectives are specific for each NEO and are linked to the Company’s strategic plan and that year’s organizational strategic agenda and include, among others: (1) improving the revenue and profitability of business units under the leadership and control of the NEO; (2) the introduction of new product
lines and product line extensions to achieve target revenue growth levels and market share; (3) the ongoing evaluation of strategic opportunities related to our capital allocation strategy and the execution of those opportunities, as appropriate; and (4) objectives linked to developing and managing talent consistent with the Company’s values and enhancing and developing the leadership capabilities of the Company’s future leaders.
The individual objectives for the NEOseach NEO are initially developed for each NEO by the Compensation Committee to guide their planned respective contribution toward the Company’s strategic and financial goals for the plan year and are reviewed and approved by either the CEO or by the Board, in the CEO’s case.
In assessing the NEOs’ individual performance, the Compensation Committee is provided with detailed quantitative and qualitative documentation substantiating individual performance against each individual objective. The Compensation Committee looks to the CEO’s performance assessments of the other NEOs and his recommendations regarding a performance rating for each, as well as input from thenon-management Board members. These recommendations may be adjusted by the Compensation Committee prior to finalization. The personal performance assessment of our CEO is determined by the Compensation Committee with input from members of the Board.
While the achievement of corporate objectives is quantified with an individual rating, each NEO’s relative contribution to those objectives is only one qualitative component against which the individual’s performance is assessed by the Compensation Committee. Based upon their individual achievements, as evaluated by the Compensation Committee, and by the CEO for Messrs. Nemeth, Rodino, Ellis and Boone, the individual performance rating achieved by each of these four NEOs exceeded the target performance rating of 3.5 set by the Compensation Committee.
| 40 | |
| Name | 2017 Discretionary Bonus Award ($) | ||
| Todd M. Cleveland | $ | 150,000 | |
| Andy L. Nemeth | 75,000 | ||
| Jeffrey M. Rodino | 50,000 | ||
| Kip B. Ellis | 50,000 | ||
| Joshua A. Boone | 50,000 | ||
EXECUTIVE COMPENSATION
Long-Term Incentive Plan
We believe that long-term incentive compensation represents an important and appropriate motivational tool to achieve certain long-termlong- term Company goals and closely align the interests of our management team with those of our shareholders. Our Executiveexecutive officers participate in our long-term incentive plan (“LTIP”) as a result of their ability to make a significant contribution to the Company’s financial performance, their level of responsibility, their ability to meet performance objectives and their leadership potential and execution.
In 2017,2019, the Compensation Committee implementedadopted a Board approved pay-for-performance“pay-for-differentiated-performance” based Long-Term Incentive Plan (“20172019 LTIP”) for the NEOs.NEOs as noted on page 35. The 20172019 LTIP utilizes a long-term incentive target award, which is established as a percentage of base compensation for each of the NEOs. The target award is comprised of a restricted share award (80% of which is performance-contingent and 20% of which is time-based). In determining the number of shares comprising the restricted share award,
the target value of the restricted share component is divided by the stock price per share as established by the Board for the particular plan year, reflecting the trading price range of the common stock preceding the grant date ($46.6736.00 for the 20172019 LTIP award). The awarded target shares vest over a three-year time/performance period. Time-based shares cliff vest at the conclusion of the three-year period from the grant date. The performance-contingent shares are earned based on the achievement of three-year cumulative Company EBITDA performance (2017-2019)(2019 to 2021) against target from 0% up to a maximum payout of 150%200% of target. The 20172019 LTIP further reflectedreflects the Company’s “pay-for-differentiated-performance”“pay-for-differentiated-performance” philosophy through the
The table below shows a sample calculation of 20172019 LTIP award components:
| Base Salary ($) | Target Award as a % of Base Salary | Target Award ($) (964 Restricted Shares @ $46.67 per share) | Restricted Shares Target Award - Performance-Contingent (80%) (Shares @ $46.67 per share) | Restricted Shares Target Award - Time-Based (20%) (Shares @ $46.67 per share) |
| $150,000 | 30% | $45,000 | 771 | 193 |
| Base Salary | Target Award as a % of Base Salary | Target Award (1,250 Restricted Shares @ $36.00 per share) | Restricted Shares Target Award: Performance-Contingent (80%) (Shares @ $36.00 per share) | Restricted Shares Target Award: Time-Based (20%) (Shares @ $36.00 per share) | ||||||||||||||||
| $150,000 | 30 | % | $45,000 | 1,000 | 250 | |||||||||||||||
The restricted share award is divided into (1) restricted shares with time-based vesting (“Time-Based Shares”) and (2) restricted shares with performance-based vesting (“Performance-Contingent Shares”). The Compensation Committee believes that the use of Time-Based Shares and Performance-Contingent Shares aligns the NEOs’ focus with the Company’s long-term financial performance objectives and assures that significant retention value of the granted equity is maintained for each NEO. The 2017 LTIP restricted share component is further defined below:
The threshold, target, stretch and maximum performance metrics for the 20172019 LTIP are outlined below:
Plan Component | Threshold EBITDA Payout as % of Target | Target EBITDA Payout as % of Target | Stretch EBITDA Payout as % of Target | Maximum EBITDA Payout as % of Target | ||||||||||||||||
TIME-BASED SHARES | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
PERFORMANCE-CONTINGENT SHARES | 50 | % | 100 | % | 150 | % | 200 | % | ||||||||||||
| (1) | The Company EBITDA performance is measured as the cumulative EBITDA achieved in 2019, 2020 and 2021. |
| 2020 PROXY STATEMENT | 41 |
| Plan Component | Threshold EBITDA Performance (1) (2.0 Rating) Payout as % of target | Target EBITDA Performance (1) (3.0 Rating) Payout as % of target | Maximum EBITDA Performance (1) (5.0 Rating) Payout as % of target |
| Time-Based Shares | 100% | 100% | 100% |
| Performance-Contingent Shares | 50% | 100% | 150% |
The target 20172019 LTIP award components for the NEOs in 20172019 were as follows:
| Name | Total Target Award as a % of Base Salary | Total Target Award ($) | Target Time-Based Share Award (Shares) | Target Performance- Contingent Share Award (Shares) | ||||
| Todd M. Cleveland | 250.0% | $ | 1,500,000 | 6,429 | 25,715 | |||
| Andy L. Nemeth | 166.7% | 750,000 | 3,215 | 12,858 | ||||
| Jeffrey M. Rodino | 133.3% | 500,000 | 2,143 | 8,571 | ||||
| Kip B. Ellis | 107.7% | 350,000 | 1,500 | 6,000 | ||||
| Joshua A. Boone | 72.7% | 200,000 | 858 | 3,429 | ||||
Name / Benefit | Total Target Award as % of Base Salary | Total Target Award | Total Target Award (Shares) | Target Time-Based Share Award (Shares) | Target Performance-Contingent Share Award (Shares) | ||||||||||||||||||||
TODD M. CLEVELAND | 400.0 | % | $3,000,000 | 83,334 | 16,667 | 66,667 | |||||||||||||||||||
ANDY L. NEMETH | 320.0 | % | 1,600,000 | 44,445 | 8,889 | 35,556 | |||||||||||||||||||
JEFFREY M. RODINO | 129.4 | % | 550,000 | 15,278 | 3,056 | 12,222 | |||||||||||||||||||
KIP B. ELLIS | 166.7 | % | 750,000 | 20,834 | 4,167 | 16,667 | |||||||||||||||||||
JOSHUA A. BOONE | 137.5 | % | 550,000 | 15,278 | 3,056 | 12,222 | |||||||||||||||||||
Individual NEO threshold, target, stretch and maximum payouts in shares for each long-term incentive component of the 20172019 LTIP are outlined below:
| Name | Threshold EBITDA Performance (2.0 Rating) Component Award (Shares) | Target EBITDA Performance (3.0 Rating) Component Award (Shares) | Maximum EBITDA Performance (5.0 Rating) Component Award (Shares) | |||
Time-Based Shares (1) | ||||||
| Todd M. Cleveland | 6,429 | 6,429 | 6,429 | |||
| Andy L. Nemeth | 3,215 | 3,215 | 3,215 | |||
| Jeffrey M. Rodino | 2,143 | 2,143 | 2,143 | |||
| Kip B. Ellis | 1,500 | 1,500 | 1,500 | |||
| Joshua A. Boone | 858 | 858 | 858 | |||
Performance-Contingent Shares (1) | ||||||
| Todd M. Cleveland | 12,858 | 25,715 | 38,573 | |||
| Andy L. Nemeth | 6,429 | 12,858 | 19,287 | |||
| Jeffrey M. Rodino | 4,286 | 8,571 | 12,857 | |||
| Kip B. Ellis | 3,000 | 6,000 | 9,000 | |||
| Joshua A. Boone | 1,715 | 3,429 | 5,144 | |||
Name / Benefit | Threshold EBITDA Performance Component Award (Shares) | Target EBITDA Performance Component Award (Shares) | Stretch EBITDA Performance Component Award (Shares) | Maximum EBITDA Performance Component Award (Shares) | ||||||||||||||||
TIME-BASED SHARES(1) (2)
Todd M. Cleveland | 16,667 | 16,667 | 16,667 | 16,667 | ||||||||||||||||
Andy L. Nemeth | 8,889 | 8,889 | 8,889 | 8,889 | ||||||||||||||||
Jeffrey M. Rodino | 3,056 | 3,056 | 3,056 | 3,056 | ||||||||||||||||
Kip B. Ellis | 4,167 | 4,167 | 4,167 | 4,167 | ||||||||||||||||
Joshua A. Boone | 3,056 | 3,056 | 3,056 | 3,056 | ||||||||||||||||
PERFORMANCE-CONTINGENT SHARES(1)
Todd M. Cleveland | 33,334 | 66,667 | 100,001 | 133,334 | ||||||||||||||||
Andy L. Nemeth | 17,778 | 35,556 | 53,334 | 71,112 | ||||||||||||||||
Jeffrey M. Rodino | 6,111 | 12,222 | 18,333 | 24,444 | ||||||||||||||||
Kip B. Ellis | 8,334 | 16,667 | 25,001 | 33,334 | ||||||||||||||||
Joshua A. Boone | 6,111 | 12,222 | 18,333 | 24,444 | ||||||||||||||||
| (1) | Represents the number of shares for the threshold, target, stretch and maximum payouts for the Time-Based |
| (2) | The Time-Based shares cliff vest at the conclusion of the requiredthree-year service period. |
The Company records the estimated compensation expense over the life of the LTIP Plan Performance Periodperformance period assuming the maximumstretch payout (150%) and adjusts its estimates on a periodic basis, if required. The NEOs have voting rights with respect to all of the shares as of the date of grant and the shares will be returned to the Company in the event that performance targets or time-based vesting requirements are not achieved. The actual payout under the 20172019 LTIP will be determined at the conclusion of the three-year performance period ending on December 31, 20192021 (the third year in the cumulative EBITDA performance measurement period) and payment of the award will be settled in stock.
See “Potential Payments Upon Termination or Upon a Change inof Control” on pages 3652 to 3855 payable to each of the NEOs upon termination or a change in control.
| 42 | |
EXECUTIVE COMPENSATION
Stock Ownership Requirement
The NEOs are required to maintain apre-defined multiple of base salary in the form of ownership of the Company’s common stock based on the Board establishedBoard-established target price for a particular plan year that is to be achieved over a period of three years, in the event the condition is not met. Each of the NEO'sNEO’s total common stock ownership for the year ended December 31, 20172019 exceeded the stock ownership requirement. The following table sets forth information about the required share value of the common stock to be owned by each NEO for the year ended December 31, 2017:
| Name | 2017 Base Salary | 2017 Multiple of Base Salary | Required Total Share Value ($) (1) | ||||
| Todd M. Cleveland | $ | 600,000 | 4X | $ | 2,400,000 | ||
| Andy L. Nemeth | 450,000 | 2X | 900,000 | ||||
| Jeffrey M. Rodino | 375,000 | 2X | 750,000 | ||||
| Kip B. Ellis | 325,000 | 2X | 650,000 | ||||
| Joshua A. Boone | 275,000 | 2X | 550,000 | ||||
Name | 2019 Base Salary | 2019 Multiple of Base Salary | Required Total Share Value (1) | ||||||||||||
TODD M. CLEVELAND | $750,000 | 4X | $3,000,000 | ||||||||||||
ANDY L. NEMETH | 500,000 | 2X | 1,000,000 | ||||||||||||
JEFFREY M. RODINO | 425,000 | 2X | 850,000 | ||||||||||||
KIP B. ELLIS | 450,000 | 2X | 900,000 | ||||||||||||
JOSHUA A. BOONE | 400,000 | 2X | 800,000 | ||||||||||||
| (1) | Inclusive of the fair value of stock options, restricted stock and restricted stock units awarded by the Company and shares purchased by the NEO in the open market. |
The Company does not have a policy that prevents employees or directors from engaging in recognition of their leadership, execution and performance throughout the Company’s five-year strategic planning period ended 2013, in an efforthedging transactions that hedge or offset, or are designed to retain their employment with the Company and to provide an incentive to define, develop, drive, and establish a platform to execute the Company’s five-year strategic plan for the period from 2014 to 2018. At the start of each of the three year performance periods in fiscal 2014, 2015 and 2016, each grant holder received common stock as a portion of their total Supplemental Grant award. The remaining portion of each Supplemental Grant is comprised of Performance Share Units (“PSUs”) to align the Supplemental Grants with shareholder interests of performance, growth and shareholder return.
The SARs are divided into four tranches as noted in the table below, vest pro-rata within each of the four tranches over a four-year period, and have nine-year terms.
| Tranche 1 | Tranche 2 | Tranche 3 | Tranche 4 | Total SARS | ||||||||||
| Strike Price of SARS | $ | 53.83 | $ | 60.03 | $ | 66.93 | $ | 74.63 | ||||||
| SARs (shares) per tranche by NEO: | ||||||||||||||
| Todd M. Cleveland | 52,212 | 52,212 | 52,212 | 52,212 | 208,848 | |||||||||
| Andy L. Nemeth | 14,918 | 14,918 | 14,918 | 14,918 | 59,672 | |||||||||
| Jeffrey M. Rodino | 7,707 | 7,707 | 7,707 | 7,707 | 30,828 | |||||||||
| Kip B. Ellis | 3,728 | 3,728 | 3,728 | 3,728 | 14,912 | |||||||||
| Joshua A. Boone | 3,980 | 3,980 | 3,980 | 3,980 | 15,920 | |||||||||
Executive Retirement Plan
As part of a long termlong-term compensation program established prior to 2007, the Company maintains anon-qualified executive retirement plan (the “Executive Retirement Plan”) for Mr. Nemeth. According to the provisions of the Executive Retirement Plan, Mr. Nemeth is entitled to receive annually 40% of his respective highest annual base wages earned in the last three years prior to retirement or termination from the Company paid over ten years in 260 consecutivebi-weekly payments. No new employees have been invited to participate in the Executive Retirement Plan since January 1, 2007.
Non-Qualified Excess Plan
The Company maintains a voluntarynon-qualified deferred compensation plan (the “NQDC Plan”) for its key executives whereby individuals can elect at the beginning of any fiscal year to defer all or a portion of their base wages for that particular year, subject to applicable laws and restrictions. Participants are immediately vested in the plan. There were no material contributions made to the NQDC Plan in 2017.
Perquisites
The Company believes in a performance-based compensation and benefits package and therefore provideprovides very few perquisites to our NEOs. We provideThe Company provides a car allowance to our NEOs, other executives, corporate managers and general managers, all of which are included as taxable income.
Benefit Plans
The Company does not maintain separate benefit plans for our NEOs. They participate in the same health and welfare plans as all of our other general employees with the same deductibles andco-pays. The NEOs also participate in the same 401(k) retirement program as all of the other general employees.
| 2020 PROXY STATEMENT | 43 |
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation paid in excess of $1 million for any fiscal year to certain specified covered employees. Under the rules in effect before 2018, compensation that qualified as "performance-based compensation"“performance-based compensation” under Section 162(m) was deductible without regard to this $1 million limit. The recent2017 Tax Cuts and Jobs Act generally eliminated the performance-based compensation exception under Section 162(m), effective January 1, 2018, subject to a special rule that "grandfathers"“grandfathers” certain awards and arrangements that were in effect on or before November 2, 2017. To date, theThe Company will continue to monitor IRS has not issued guidance interpreting the Tax Cuts and Jobs Act. While the Compensation Committee intended that certain incentive awards granted to our NEOs on or prior to November 2, 2017 be deductible as "performance-based“performance-based compensation,"” it cannot assure that result.
We expense equity awards in accordance with Accounting Standards Codification 718 Compensation - Stock Compensation (“ASC 718”). See Note 1618 to the Consolidated Financial Statements in our 20172019 Annual Report on Form10-K for the assumptions used in determining the fair value of equity awards consisting of stock options and SARS.
The following Summary Compensation Table sets forth information about the compensation paid to our NEOs for the years ended December 31, 2017, 20162019, 2018 and 2015.2017. There were no stock options or SARS awarded to our NEOs for the yearyears ended December 31, 2015.
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non- Equity Incentive Plan Compen- sation ($)(5) | Change in Pension Value and Non- Qualified Deferred Compensa-tion Earnings ($)(6) | All Other Compen- sation ($)(7) | Total ($) | ||||||||||||||||
| Todd M. Cleveland | 2017 | $ | 596,154 | $ | 150,000 | $ | 2,422,638 | $ | 6,772,862 | $ | 1,912,800 | $ | — | $ | 14,235 | $ | 11,868,689 | ||||||||
| Chief Executive Officer (8) | 2016 | 541,539 | — | 1,863,575 | — | 982,800 | — | 15,164 | 3,403,078 | ||||||||||||||||
| 2015 | 539,424 | — | 1,889,201 | — | 1,350,090 | — | 14,708 | 3,793,423 | |||||||||||||||||
| Andy L. Nemeth | 2017 | 448,077 | 75,000 | 1,211,373 | 1,935,120 | 1,214,250 | 15,432 | 15,750 | 4,915,002 | ||||||||||||||||
| President (9) | 2016 | 422,475 | — | 1,409,072 | 1,590,208 | 773,575 | 14,768 | 16,335 | 4,226,433 | ||||||||||||||||
| 2015 | 265,000 | 70,029 | 707,312 | — | 489,971 | 14,132 | 15,583 | 1,562,027 | |||||||||||||||||
| Jeffrey M. Rodino | 2017 | 370,192 | 50,000 | 807,510 | 999,695 | 926,400 | — | 11,910 | 3,165,707 | ||||||||||||||||
| Chief Sales Officer | 2016 | 330,865 | — | 1,036,381 | 624,131 | 573,100 | — | 12,795 | 2,577,272 | ||||||||||||||||
| and Executive Vice | 2015 | 271,827 | 35,040 | 745,114 | — | 574,960 | — | 12,147 | 1,639,088 | ||||||||||||||||
| President of Sales (10) | |||||||||||||||||||||||||
| Kip B. Ellis | 2017 | 315,385 | 50,000 | 565,257 | 483,559 | 549,150 | — | 11,311 | 1,974,662 | ||||||||||||||||
| Chief Operating Officer | |||||||||||||||||||||||||
| and Executive Vice | |||||||||||||||||||||||||
| President of | |||||||||||||||||||||||||
| Operations (11) | |||||||||||||||||||||||||
Joshua A. Boone | 2017 | 270,692 | 50,000 | 323,112 | 516,195 | 447,165 | — | 7,756 | 1,614,920 | ||||||||||||||||
| Chief Financial Officer, | 2016 | 219,961 | — | 111,882 | — | 200,063 | — | 7,829 | 539,735 | ||||||||||||||||
| Vice President of | |||||||||||||||||||||||||
| Finance, and Secretary- | |||||||||||||||||||||||||
| Treasurer (12) | |||||||||||||||||||||||||
Name and Principal Position | Year | Salary (1) | Bonus (2) | Stock Awards(3) | Option Awards (4) | Non-Equity Incentive Plan Compensation (5) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings(6) | All Other Compensation (7) | Total | |||||||||||||||||||||||||||||||||||||||||
TODD M. CLEVELAND Executive Chairman of | 2019 | $731,154 | $ | — | $4,595,552 | $ | — | $1,243,800 | $ | — | $14,867 | $6,585,373 | ||||||||||||||||||||||||||||||||||||||
|
2018 |
| 690,383 | — | 4,174,587 | — | 1,980,000 | — | 14,836 | 6,859,806 | ||||||||||||||||||||||||||||||||||||||||
|
2017 |
| 596,154 | 150,000 | 2,422,638 | 6,772,862 | 1,912,800 | — | 14,235 | 11,868,689 | ||||||||||||||||||||||||||||||||||||||||
ANDY L. NEMETH Chief Executive Officer | 2019 | 493,942 | — | 2,450,964 | — | 624,650 | 30,953 | 14,690 | 3,615,199 | |||||||||||||||||||||||||||||||||||||||||
|
2018 |
| 472,596 | — | 1,391,573 | — | 871,875 | 29,621 | 14,365 | 2,780,030 | ||||||||||||||||||||||||||||||||||||||||
|
2017 |
| 448,077 | 75,000 | 1,211,373 | 1,935,120 | 1,214,250 | 15,432 | 15,750 | 4,915,002 | ||||||||||||||||||||||||||||||||||||||||
JEFFREY M. RODINO Chief Sales Officer | 2019 | 417,885 | — | 842,513 | — | 423,600 | — | 12,050 | 1,696,048 | |||||||||||||||||||||||||||||||||||||||||
|
2018 |
| 396,058 | — | 765,421 | — | 630,000 | — | 12,025 | 1,803,504 | ||||||||||||||||||||||||||||||||||||||||
|
2017 |
| 370,192 | 50,000 | 807,510 | 999,695 | 926,400 | — | 11,910 | 3,165,707 | ||||||||||||||||||||||||||||||||||||||||
KIP B. ELLIS Chief Operating Officer | 2019 | 445,193 | — | 1,148,928 | — | 440,500 | — | 12,050 | 2,046,671 | |||||||||||||||||||||||||||||||||||||||||
|
2018 |
| 391,250 | — | 974,160 | — | 528,750 | — | 12,400 | 1,906,560 | ||||||||||||||||||||||||||||||||||||||||
|
2017 |
| 315,385 | 50,000 | 565,257 | 483,559 | 549,150 | — | 11,311 | 1,974,662 | ||||||||||||||||||||||||||||||||||||||||
JOSHUA A. BOONE Chief Financial Officer, | 2019 | 388,346 | — | 842,513 | — | 322,400 | — | 7,793 | 1,561,052 | |||||||||||||||||||||||||||||||||||||||||
|
2018 |
| 326,654 | — | 556,682 | — | 393,625 | — | 8,455 | 1,285,416 | ||||||||||||||||||||||||||||||||||||||||
|
2017 |
| 270,692 | 50,000 | 323,112 | 516,195 | 447,165 | — | 7,756 | 1,614,920 | ||||||||||||||||||||||||||||||||||||||||
| (1) | For information on base salaries, see “Base Salary” on page 39. |
| (2) | The NEOs received discretionary bonus awards for the year ended December 31, |
| (3) | Amounts shown do not reflect compensation actually received. Such amounts reflect the aggregate fair value of stock awards |
|
EXECUTIVE COMPENSATION
| (4) | Amounts shown do not reflect compensation actually received. Such amount reflects the aggregate fair value of stock options and SARs granted during the year which is generally the total amount that the Company expects, as of the grant date, to expense in its financial statements over the awards vesting schedule in accordance with ASC 718. See Note |
| (5) | Amounts shown represent the short-term incentive awards earned in |
| (6) | Amounts shown do not reflect compensation actually received. Such amounts reflect the aggregate change in the present value of the |
| Name | Year | 401(k) Matching Contribution ($) | Other (a) ($) | Total All Other Compensation ($) | ||||||
| Todd M. Cleveland | 2017 | $ | 495 | $ | 13,740 | $ | 14,235 | |||
| 2016 | 724 | 14,440 | 15,164 | |||||||
| 2015 | 268 | 14,440 | 14,708 | |||||||
| Andy L. Nemeth | 2017 | 810 | 14,940 | 15,750 | ||||||
| 2016 | 795 | 15,540 | 16,335 | |||||||
| 2015 | 243 | 15,340 | 15,583 | |||||||
| Jeffrey M. Rodino | 2017 | 810 | 11,100 | 11,910 | ||||||
| 2016 | 795 | 12,000 | 12,795 | |||||||
| 2015 | 247 | 11,900 | 12,147 | |||||||
| Kip B. Ellis | 2017 | 611 | 10,700 | 11,311 | ||||||
| Joshua A. Boone | 2017 | 356 | 7,400 | 7,756 | ||||||
| 2016 | 536 | 11,600 | 12,136 | |||||||
| (7) | The amounts included in “All Other Compensation” are detailed in the table below: |
Name | Year | 401(k) Matching Contribution | Other (a) | Total All Other Compensation | ||||||||||||||||||||||||||||||||||||
| 2019 | $827 | $14,040 | $14,867 | |||||||||||||||||||||||||||||||||||||
TODD M. CLEVELAND | 2018 | 796 | 14,040 | 14,836 | ||||||||||||||||||||||||||||||||||||
| 2017 | 495 | 13,740 | 14,235 | |||||||||||||||||||||||||||||||||||||
| 2019 | 1,250 | 13,440 | 14,690 | |||||||||||||||||||||||||||||||||||||
ANDY L. NEMETH | 2018 | 925 | 13,440 | 14,365 | ||||||||||||||||||||||||||||||||||||
| 2017 | 810 | 14,940 | 15,750 | |||||||||||||||||||||||||||||||||||||
| 2019 | 950 | 11,100 | 12,050 | |||||||||||||||||||||||||||||||||||||
JEFFREY M. RODINO | 2018 | 925 | 11,100 | 12,025 | ||||||||||||||||||||||||||||||||||||
| 2017 | 810 | 11,100 | 11,910 | |||||||||||||||||||||||||||||||||||||
| 2019 | 950 | 11,100 | 12,050 | |||||||||||||||||||||||||||||||||||||
KIP B. ELLIS | 2018 | 925 | 11,475 | 12,400 | ||||||||||||||||||||||||||||||||||||
| 2017 | 611 | 10,700 | 11,311 | |||||||||||||||||||||||||||||||||||||
| 2019 | 593 | 7,200 | 7,793 | |||||||||||||||||||||||||||||||||||||
JOSHUA A. BOONE | 2018 | 505 | 7,950 | 8,455 | ||||||||||||||||||||||||||||||||||||
| 2017 | 356 | 7,400 | 7,756 | |||||||||||||||||||||||||||||||||||||
| (a) | Amounts shown reflect an automobile allowance, the Company contribution to individual Health Savings Accounts and health club reimbursement pursuant to the Company’s general health and welfare program. |
| (8) | Effective January 1, |
| (9) | Mr. Nemeth assumed the position of CEO of the Company effective January 1, 2020. In addition to his CEO position, Mr. Nemeth serves as President, a position he has held since |
| 2020 PROXY STATEMENT | 45 |
Pay-at-Risk for Actual 2019 Executive Compensation Plan
Upon combining the three elements of compensation (base salary, STIP and LTIP) for 2019 actual compensation, the CEOpay-at-risk or variable pay represents 74.9% of the compensation received while the other NEOs combined havepay-at-risk or variable compensation of 68.3%. These results are reflective of the philosophical strategy topay-for-differentiated-performance as approved by the Compensation Committee for the 2019 plan.
Total Fixed vs. Variable Pay for Actual 2019 Compensation*
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC rules, the Company is providing information about the relationship of the annual total compensation of its employees and the annual total compensation of the CEO during 2017.2019. The total annual compensation of our median employee based on total annual compensation (other than our CEO), was $35,741.$37,237. The annual total compensation of the CEO was $11,868,689.$6,585,373. Based on this information, the ratio of the total compensation of the CEO for fiscal 20172019 to the median employee’s total annual compensation is 332177 to 1. Accounting for the routine annual elements of CEO compensation (excluding a one-time retention/performance long-term incentive grant consisting of option awards and SARS of $6,772,862), the total compensation for the CEO would be $5,095,827 and the ratio of the total compensation of the CEO for fiscal 2017 to the median employee's total annual compensation using this adjusted total CEO compensation would be 143 to 1.
This pay ratio is a reasonable estimate calculated in good faith, in a manner consistent with Item 402(u) of RegulationS-K, based on the Company’s payroll and employment records and the methodology described below. The SEC rules for identifying the “median employee” and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratios reported by other companies may not be comparable to the pay ratio set forth above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating
| 46 | |
EXECUTIVE COMPENSATION
To identify the median of the annual total compensation of all employees, as well as to determine the annual total compensation of the “median employee,” the methodology and the material assumptions, adjustments and estimates used were as follows:
| 1. | |
The median employee was identified using active employee information as of |
| 2. | |
Fiscal |
| 3. | |
The total compensation of the CEO for fiscal |
The table below sets forth information on grants in 20172019 to the NEOs of estimated payouts undernon-equity incentive plan awards as set forth under “Non-Equity“Non-Equity Incentive Plan Awards” on pages 20 to 22,39 and 40, estimated payouts under equity incentive plan awards as set forth under “Long-Term Incentive Plan” on pages 22 to 24, “Supplemental Long-Term Incentive Grant for NEOs” as set forth on pages 2541 and 26, “Performance and Retention - 2017 Stock Option and Stock Appreciation Rights Grants” on page 26,42, and of stock awards and all other option awards as set forth in the “Summary Compensation Table” on pages 27 to 29.44 and 45. The Company’s policy is generally to grant equity awards effective on the date the Compensation Committee approves such awards.
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards:# of Shares of Stock or Units (#) (3) | All Other Option Awards: # of Securities Underlying Options (#) (4) | Exercise or Closing Market Price on Grant Date ($ Per Share) (5) | Grant Date Fair Value of Stock and Option Awards/ SARs ($) (6) | ||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||
| Todd M. Cleveland | 1/17/2017 | $600,000 | $1,200,000 | $2,400,000 | 12,858 | 25,715 | 38,573 | 6,429 | — | $53.83 | $ | 2,422,638 | |||||
| 1/17/2017 | 208,845 | 53.83 | 3,709,944 | ||||||||||||||
| 1/17/2017 | 52,212 | 53.83 | 927,499 | ||||||||||||||
| 1/17/2017 | 52,212 | 60.03 | 816,168 | ||||||||||||||
| 1/17/2017 | 52,212 | 66.93 | 709,765 | ||||||||||||||
| 1/17/2017 | 52,212 | 74.63 | 609,486 | ||||||||||||||
| Andy L. Nemeth | 1/17/2017 | 375,000 | 750,000 | 1,500,000 | 6,429 | 12,858 | 19,287 | 3,215 | — | 53.83 | 1,211,373 | ||||||
| 1/17/2017 | 59,760 | 53.83 | 1,059,984 | ||||||||||||||
| 1/17/2017 | 14,918 | 53.83 | 265,005 | ||||||||||||||
| 1/17/2017 | 14,918 | 60.03 | 233,195 | ||||||||||||||
| 1/17/2017 | 14,918 | 66.93 | 202,794 | ||||||||||||||
| 1/17/2017 | 14,918 | 74.63 | 174,142 | ||||||||||||||
| Jeffrey M. Rodino | 1/17/2017 | 300,000 | 600,000 | 1,200,000 | 4,286 | 8,571 | 12,857 | 2,143 | — | 53.83 | 807,510 | ||||||
| 1/17/2017 | 30,825 | 53.83 | 547,579 | ||||||||||||||
| 1/17/2017 | 7,707 | 53.83 | 136,908 | ||||||||||||||
| 1/17/2017 | 7,707 | 60.03 | 120,474 | ||||||||||||||
| 1/17/2017 | 7,707 | 66.93 | 104,768 | ||||||||||||||
| 1/17/2017 | 7,707 | 74.63 | 89,966 | ||||||||||||||
| Kip B. Ellis | 1/17/2017 | 175,000 | 350,000 | 700,000 | 3,000 | 6,000 | 9,000 | 1,500 | — | 53.83 | 565,257 | ||||||
| 1/17/2017 | 14,910 | 53.83 | 264,863 | ||||||||||||||
| 1/17/2017 | 3,728 | 53.83 | 66,225 | ||||||||||||||
| 1/17/2017 | 3,728 | 60.03 | 58,275 | ||||||||||||||
| 1/17/2017 | 3,728 | 66.93 | 50,678 | ||||||||||||||
| 1/17/2017 | 3,728 | 74.63 | 43,518 | ||||||||||||||
| Joshua A. Boone | 1/17/2017 | 142,500 | 285,000 | 570,000 | 1,715 | 3,429 | 5,144 | 858 | — | 53.83 | 323,112 | ||||||
| 1/17/2017 | 15,915 | 53.83 | 282,715 | ||||||||||||||
| 1/17/2017 | 3,980 | 53.83 | 70,701 | ||||||||||||||
| 1/17/2017 | 3,980 | 60.03 | 62,215 | ||||||||||||||
| 1/17/2017 | 3,980 | 66.93 | 54,104 | ||||||||||||||
| 1/17/2017 | 3,980 | 74.63 | 46,460 | ||||||||||||||
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Plan Awards (2) | All Other Stock Awards: # of Shares of Stock or Units (3) | All Other Option Awards: # of Securities Underlying Option (4) | Exercise or Closing Market Price on Grant Date Per Share (5) | Grant Date Fair Value of Stock and Option Awards/ SARs (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold | Target | Stretch | Maximum | ||||||||||||||||||||||||||||||||||||||||||||||||||||
TODD M. CLEVELAND | 1/25/2019 | $900,000 | $1,800,000 | $3,600,000 | 33,334 | 66,667 | 100,001 | 133,334 | 16,667 | — | $39.39 | $4,595,552 | ||||||||||||||||||||||||||||||||||||||||||||||||
ANDY L. NEMETH | 1/25/2019 | 387,500 | 775,000 | 1,550,000 | 17,778 | 35,556 | 53,334 | 71,112 | 8,889 | — | 39.39 | 2,450,964 | ||||||||||||||||||||||||||||||||||||||||||||||||
JEFFREY M. RODINO | 1/25/2019 | 300,000 | 600,000 | 1,200,000 | 6,111 | 12,222 | 18,333 | 24,444 | 3,056 | — | 39.39 | 842,513 | ||||||||||||||||||||||||||||||||||||||||||||||||
KIP B. ELLIS | 1/25/2019 | 250,000 | 500,000 | 1,000,000 | 8,334 | 16,667 | 25,001 | 33,334 | 4,167 | — | 39.39 | 1,148,928 | ||||||||||||||||||||||||||||||||||||||||||||||||
JOSHUA A. BOONE | 1/25/2019 | 200,000 | 400,000 | 800,000 | 6,111 | 12,222 | 18,333 | 24,444 | 3,056 | — | 39.39 | 842,513 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The related performance targets and results are described in detail under |
| (2) | Represents number of shares of stock or stock units. Restricted shares granted in fiscal |
| (3) | These shares represent the Time-Based restricted stock awards granted in fiscal |
| (4) | There were no stock |
| (5) | Represents the closing price of the Company’s stock on the NASDAQ |
| (6) | Represents the fair value of stock awards |
| 2020 PROXY STATEMENT | 47 |
The following tables summarize the outstanding equity awards held by the NEOs as of December 31, 2017.
| Stock Awards | |||||||||
| Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Unearned Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares or Units That Have Not Vested (#) (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units That Have Not Vested ($) (2) | ||||
| Todd M. Cleveland | 1/17/2017 | 6,429 | 446,494 | 38,573 | 2,678,895 | ||||
| 2/23/2016 | 9,615 | 667,762 | 57,695 | 4,006,918 | |||||
| 2/16/2015 | 12,930 | 897,989 | 77,588 | 5,388,487 | |||||
| Andy L. Nemeth | 1/17/2017 | 3,215 | 223,282 | 19,287 | 1,339,482 | ||||
| 2/23/2016 | 5,385 | 373,988 | 32,309 | 2,243,860 | |||||
| 2/16/2015 | 2,326 | 161,541 | 13,967 | 970,008 | |||||
| Jeffrey M. Rodino | 1/17/2017 | 2,143 | 148,831 | 12,857 | 892,919 | ||||
| 2/23/2016 | 3,462 | 240,436 | 20,771 | 1,442,546 | |||||
| 2/16/2015 | 2,586 | 179,598 | 15,518 | 1,077,725 | |||||
| Kip B. Ellis (4) | 1/17/2017 | 1,500 | 104,175 | 9,000 | 625,050 | ||||
| 4/11/2016 | 3,000 | 208,350 | — | — | |||||
| Joshua A. Boone | 1/17/2017 | 858 | 59,588 | 5,144 | 357,251 | ||||
| 2/23/2016 | 578 | 40,142 | 3,463 | 240,505 | |||||
| 2/16/2015 | 1,125 | 78,131 | — | — | |||||
Stock Awards
Name | Grant Date | All Other Stock Awards: Number of Shares or Units of Stock That Have Not Vested (1) | All Other Stock Awards: Unearned Shares or Units | Equity Incentive Plan Awards: Number of Unearned Shares or Units That Have Not Vested (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units That Have Not Vested (2) | ||||||||||||||||||||
TODD M. CLEVELAND | 1/25/2019 | 16,667 | $873,851 | 100,001 | $5,243,052 | ||||||||||||||||||||
| 1/26/2018 | 9,091 | 476,641 | 54,546 | 2,859,847 | |||||||||||||||||||||
| 1/17/2017 | 6,429 | 337,072 | 38,573 | 2,022,382 | |||||||||||||||||||||
ANDY L. NEMETH | 1/25/2019 | 8,889 | 466,050 | 53,334 | 2,796,302 | ||||||||||||||||||||
| 1/26/2018 | 3,030 | 158,863 | 18,183 | 953,335 | |||||||||||||||||||||
| 1/17/2017 | 3,215 | 168,562 | 19,287 | 1,011,217 | |||||||||||||||||||||
JEFFREY M. RODINO | 1/25/2019 | 3,056 | 160,226 | 18,333 | 961,199 | ||||||||||||||||||||
| 1/26/2018 | 1,667 | 87,401 | 10,001 | 524,352 | |||||||||||||||||||||
| 1/17/2017 | 2,143 | 112,357 | 12,857 | 674,093 | |||||||||||||||||||||
KIP B. ELLIS | 1/25/2019 | 4,167 | 218,476 | 25,001 | 1,310,802 | ||||||||||||||||||||
| 1/26/2018 | 2,121 | 111,204 | 12,729 | 667,381 | |||||||||||||||||||||
| 1/17/2017 | 1,500 | 78,645 | 9,000 | 471,870 | |||||||||||||||||||||
JOSHUA A. BOONE | 1/25/2019 | 3,056 | 160,226 | 18,333 | 961,199 | ||||||||||||||||||||
| 1/26/2018 | 1,212 | 63,545 | 7,274 | 381,376 | |||||||||||||||||||||
| 1/17/2017 | 858 | 44,985 | 5,144 | 269,700 | |||||||||||||||||||||
| (1) | Restricted share grants related to Time-Based share awards, which were approved by the Board on January 25, 2019, January 26, 2018, and January 17, 2017, |
| (2) | Based on a market price of |
| (3) | Restricted share grants related to Performance-Contingent based share awards at stretch, which were approved by the Board on January 25, 2019, and at maximum, which were approved by the Board on January 26, 2018 and January 17, 2017, |
| Options/SARs Awards | ||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options/ SARs (#) Exercisable (1) | Number of Securities Underlying Unexercised Options/SARs (#) Unexercisable (1) | Options/SARs Exercise Price ($) | Options/SARs Expiration Date | |||
| Todd M. Cleveland | 1/17/2017 | — | 208,845 | 53.83 | 1/17/2026 | |||
| 1/17/2017 | — | 52,212 | 53.83 | 1/17/2026 | ||||
| 1/17/2017 | — | 52,212 | 60.03 | 1/17/2026 | ||||
| 1/17/2017 | — | 52,212 | 66.93 | 1/17/2026 | ||||
| 1/17/2017 | — | 52,212 | 74.63 | 1/17/2026 | ||||
| 12/18/2013 | 75,000 | — | 12.30 | 12/18/2022 | ||||
| 12/18/2013 | 18,749 | — | 12.30 | 12/18/2022 | ||||
| 12/18/2013 | 18,749 | — | 14.75 | 12/18/2022 | ||||
| 12/18/2013 | 18,749 | — | 17.71 | 12/18/2022 | ||||
| 12/18/2013 | 18,749 | — | 21.25 | 12/18/2022 | ||||
| Andy L. Nemeth | 1/17/2017 | — | 59,760 | 53.83 | 1/17/2026 | |||
| 1/17/2017 | — | 14,918 | 53.83 | 1/17/2026 | ||||
| 1/17/2017 | — | 14,918 | 60.03 | 1/17/2026 | ||||
| 1/17/2017 | — | 14,918 | 66.93 | 1/17/2026 | ||||
| 1/17/2017 | — | 14,918 | 74.63 | 1/17/2026 | ||||
| 9/26/2016 | 18,360 | 55,080 | 40.95 | 9/26/2025 | ||||
| 9/26/2016 | 4,590 | 13,770 | 40.95 | 9/26/2025 | ||||
| 9/26/2016 | 4,590 | 13,770 | 47.51 | 9/26/2025 | ||||
| 9/26/2016 | 4,590 | 13,770 | 55.11 | 9/26/2025 | ||||
| 9/26/2016 | 4,590 | 13,770 | 63.93 | 9/26/2025 | ||||
| Jeffrey M. Rodino | 1/17/2017 | — | 30,825 | 53.83 | 1/17/2026 | |||
| 1/17/2017 | — | 7,707 | 53.83 | 1/17/2026 | ||||
| 1/17/2017 | — | 7,707 | 60.03 | 1/17/2026 | ||||
| 1/17/2017 | — | 7,707 | 66.93 | 1/17/2026 | ||||
| 1/17/2017 | — | 7,707 | 74.63 | 1/17/2026 | ||||
| 9/26/2016 | 7,206 | 21,618 | 40.95 | 9/26/2025 | ||||
| 9/26/2016 | 1,802 | 5,404 | 40.95 | 9/26/2025 | ||||
| 9/26/2016 | 1,802 | 5,404 | 47.51 | 9/26/2025 | ||||
| 9/26/2016 | 1,802 | 5,404 | 55.11 | 9/26/2025 | ||||
| 9/26/2016 | 1,802 | 5,404 | 63.93 | 9/26/2025 | ||||
| Kip B. Ellis | 1/17/2017 | — | 14,910 | 53.83 | 1/17/2026 | |||
| 1/17/2017 | — | 3,728 | 53.83 | 1/17/2026 | ||||
| 1/17/2017 | — | 3,728 | 60.03 | 1/17/2026 | ||||
| 1/17/2017 | — | 3,728 | 66.93 | 1/17/2026 | ||||
| 1/17/2017 | — | 3,728 | 74.63 | 1/17/2026 | ||||
| 9/26/2016 | 2,328 | 6,984 | 40.95 | 9/26/2025 | ||||
| 9/26/2016 | 582 | 8,730 | 40.95 | 9/26/2025 | ||||
| 9/26/2016 | 582 | 8,730 | 47.51 | 9/26/2025 | ||||
| 9/26/2016 | 582 | 8,730 | 55.11 | 9/26/2025 | ||||
| 9/26/2016 | 582 | 8,730 | 63.93 | 9/26/2025 | ||||
| Joshua A. Boone | 1/17/2017 | — | 15,915 | 53.83 | 1/17/2026 | |||
| 1/17/2017 | — | 3,980 | 53.83 | 1/17/2026 | ||||
| 1/17/2017 | — | 3,980 | 60.03 | 1/17/2026 | ||||
| 1/17/2017 | — | 3,980 | 66.93 | 1/17/2026 | ||||
| 1/17/2017 | — | 3,980 | 74.63 | 1/17/2026 | ||||
|
EXECUTIVE COMPENSATION
Options/SARs Awards
Name | Grant Date | Number of Securities Underlying Unexercised Options/SARs Exercisable (1) | Number of Securities Underlying Unexercised Options/SARs Unexercisable (1) | Options/SARs Exercise Price | Options/SARs Expiration Date | |||||||||||||||||||||||||
TODD M. CLEVELAND | 1/17/2017 | 104,422 | 104,423 | $53.83 | 1/17/2026 | |||||||||||||||||||||||||
| 1/17/2017 | 26,106 | 26,106 | 53.83 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 26,106 | 26,106 | 60.03 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 26,106 | 26,106 | 66.93 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 26,106 | 26,106 | 74.63 | 1/17/2026 | ||||||||||||||||||||||||||
| 12/18/2013 | 75,000 | — | 12.30 | 12/18/2022 | ||||||||||||||||||||||||||
| 12/18/2013 | 18,749 | — | 12.30 | 12/18/2022 | ||||||||||||||||||||||||||
| 12/18/2013 | 18,749 | — | 14.75 | 12/18/2022 | ||||||||||||||||||||||||||
| 12/18/2013 | 18,749 | — | 17.71 | 12/18/2022 | ||||||||||||||||||||||||||
| 12/18/2013 | 18,749 | — | 21.25 | 12/18/2022 | ||||||||||||||||||||||||||
ANDY L. NEMETH | 1/17/2017 | 29,835 | 29,835 | $53.83 | 1/17/2026 | |||||||||||||||||||||||||
| 1/17/2017 | 7,459 | 7,459 | 53.83 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 7,459 | 7,459 | 60.03 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 7,459 | 7,459 | 66.93 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 7,459 | 7,459 | 74.63 | 1/17/2026 | ||||||||||||||||||||||||||
| 9/26/2016 | 55,080 | 18,360 | 40.95 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 13,770 | 4,590 | 40.95 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 13,770 | 4,590 | 47.51 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 13,770 | 4,590 | 55.11 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 13,770 | 4,590 | 63.93 | 9/26/2025 | ||||||||||||||||||||||||||
JEFFREY M. RODINO | 1/17/2017 | 15,412 | 15,413 | $53.83 | 1/17/2026 | |||||||||||||||||||||||||
| 1/17/2017 | 3,853 | 3,854 | 53.83 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 3,854 | 3,853 | 60.03 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 3,853 | 3,854 | 66.93 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 3,854 | 3,853 | 74.63 | 1/17/2026 | ||||||||||||||||||||||||||
| 9/26/2016 | 21,618 | 7,206 | 40.95 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 5,404 | 1,802 | 40.95 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 5,403 | 1,803 | 47.51 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 5,404 | 1,802 | 55.11 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 5,403 | 1,803 | 63.93 | 9/26/2025 | ||||||||||||||||||||||||||
KIP B. ELLIS | 1/17/2017 | 7,455 | 7,455 | $53.83 | 1/17/2026 | |||||||||||||||||||||||||
| 1/17/2017 | 1,864 | 1,864 | 53.83 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 1,864 | 1,864 | 60.03 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 1,864 | 1,864 | 66.93 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 1,864 | 1,864 | 74.63 | 1/17/2026 | ||||||||||||||||||||||||||
| 9/26/2016 | 6,984 | 2,328 | 40.95 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 1,746 | 582 | 40.95 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 1,746 | 582 | 47.51 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 1,746 | 582 | 55.11 | 9/26/2025 | ||||||||||||||||||||||||||
| 9/26/2016 | 1,746 | 582 | 63.93 | 9/26/2025 | ||||||||||||||||||||||||||
JOSHUA A. BOONE | 1/17/2017 | 7,958 | 7,957 | $53.83 | 1/17/2026 | |||||||||||||||||||||||||
| 1/17/2017 | 1,990 | 1,990 | 53.83 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 1,990 | 1,990 | 60.03 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 1,990 | 1,990 | 66.93 | 1/17/2026 | ||||||||||||||||||||||||||
| 1/17/2017 | 1,990 | 1,990 | 74.63 | 1/17/2026 | ||||||||||||||||||||||||||
| (1) | Both the stock options and SARs that were granted to Mr. Cleveland in 2013 vestedpro-rata over three years, commencing on December 18, 2014, and expire after nine years. The stock options and SARs that were granted to Messrs. Nemeth, Rodino and Ellis in 2016 vestpro-rata over four years, commencing on September 26, 2017, and expire after nine years. The stock options and SARs that were granted to Messrs. Cleveland, Nemeth, Rodino, Ellis and Boone in 2017 vestpro-rata over four years, commencing on January 17, 2018, and expire after nine years. Unvested options and SARs are subject |
| Performance Stock Units | |||||
| Name | Grant Date | Equity Incentive Plan Awards: Number of Unearned Shares or Units That Have Not Vested (#) (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units That Have Not Vested ($) (2) | ||
| Andy L. Nemeth | 2/23/2016 | 13,200 | 916,740 | ||
| 3/30/2015 | 13,200 | 916,740 | |||
| Jeffrey M. Rodino | 2/23/2016 | 13,200 | 916,740 | ||
| 3/30/2015 | 13,200 | 916,740 | |||
| 2020 PROXY STATEMENT | 49 |
The following table sets forth information about the value realized by the NEOs on vesting of stock awards and PSUs,Performance Share Units (“PSUs”) and the exercise of stock options and SARS in 2017.
| Stock Options/SARS | Stock Awards / PSUs | |||||||
| Name | Number of Shares Acquired on Exercise (#)(1)(2) | Value Realized on Exercise ($)(1)(2) | Number of Shares Acquired on Vesting (#)(3)(4)(5) | Value Realized on Vesting ($)(3)(4) | ||||
| Todd M. Cleveland | 131,656 | 6,209,875 | 111,776 | 5,828,826 | ||||
| Andy L. Nemeth | — | — | 29,969 | 1,593,275 | ||||
| Jeffrey M. Rodino | — | — | 30,477 | 1,619,792 | ||||
| Kip B. Ellis | — | — | — | — | ||||
| Joshua A. Boone | — | — | 1,125 | 54,713 | ||||
| Option Awards | Stock Awards and Performance Share Units | ||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting (1)(2)(3) | Value Realized on Vesting (1)(2)(3) | |||||||||||||||||||||
TODD M. CLEVELAND | — | — | 67,310 | $2,489,500 | |||||||||||||||||||||
ANDY L. NEMETH | — | — | 54,197 | 2,044,194 | |||||||||||||||||||||
JEFFREY M. RODINO | — | — | 40,736 | 1,546,330 | |||||||||||||||||||||
KIP B. ELLIS | — | — | 3,000 | 147,000 | |||||||||||||||||||||
JOSHUA A. BOONE | — | — | 4,041 | 149,444 | |||||||||||||||||||||
| (1) |
The number of shares acquired on vesting in |
The number of shares acquired on vesting in |
| (2) | |
The number of shares acquired on vesting in |
| (3) | |
In 2014, Messrs. Nemeth and Rodino received supplemental long-term incentive grants in the form of PSUs that were awarded in 2014, 2015 and 2016, with vesting based on Company performance over three-year measurement periods. The number of shares acquired on vesting in |
| Plan Category | Number of securities to be issued upon exercise of outstanding options and rights (1) | Weighted average exercise price of outstanding options and rights | Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a)) (2) | ||||
| Equity compensation plans approved by security holders | 1,084,947 | $ | 49.24 | 1,099,821 | |||
| Equity compensation plans not approved by security holders | — | N/A | — | ||||
| Total | 1,084,947 | $ | 49.24 | 1,099,821 | |||
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights(1) | Weighted Average Exercise Price of Outstanding Options and Rights | Number of Securities Remaining for Future Issuance Under Equity Compensation Plans(2) | ||||||||||||
Equity Compensation Plans Approved by Security Holders | 1,072,010 | $49.82 | 668,047 | ||||||||||||
Equity Compensation Plans Not Approved by Security Holders | — | N/A | — | ||||||||||||
TOTAL | 1,072,010 | $49.82 | 668,047 | ||||||||||||
| (1) | The number of securities represented is the amount of shares to be issued upon exercise of outstanding options and SARs as of December 31, |
| (2) | Represents the number of net shares available for future awards under the 2009 Omnibus Incentive Plan as of December 31, |
| 50 | |
The following table sets forth information about the participation of the NEOs in the Executive Retirement PlansPlan and the Non-Qualified ExcessNQDC Plan and is set forth in the “Summary Compensation Table” under the caption “Change in Pension Value andNon-Qualified Deferred Compensation Earnings”:
| Name | Executive Contribution in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) (1) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance as of Last FYE ($) (2) | |||||||
| Todd M. Cleveland | — | — | — | — | — | |||||||
Andy L. Nemeth (3) | — | — | $ | 15,432 | — | $ | 210,267 | |||||
| Jeffrey M. Rodino | — | — | — | — | — | |||||||
| Kip B. Ellis | — | — | — | — | — | |||||||
| Joshua A. Boone | — | — | — | — | — | |||||||
Name / Benefit | Executive Contribution in Last FY ($) | Registrant Contribution in Last FY ($) | Aggregate Earnings in Last FY (1) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance as of Last FYE (2) | ||||||||||||||||||||
TODD M. CLEVELAND | — | — | — | — | — | ||||||||||||||||||||
ANDY L. NEMETH(3) | — | — | $30,953 | — | $270,841 | ||||||||||||||||||||
JEFFREY M. RODINO | — | — | — | — | — | ||||||||||||||||||||
KIP B. ELLIS | — | — | — | — | — | ||||||||||||||||||||
JOSHUA A. BOONE | — | — | — | — | — | ||||||||||||||||||||
| (1) | Represents the interest for the current fiscal year associated with the annuity. |
| (2) | Represents the present value of an annuity as of December 31, |
| (3) | According to the provisions of the Executive Retirement Plan, payments of the annuity for Mr. Nemeth will commence prior to his eligible retirement age over a |
Messrs. Cleveland, Rodino, Ellis and Boone did not participate in the Executive Retirement Plan as no new employees have been invited to participate in the plan since January 1, 2007. In addition, there were no contributions made to the NQDC Plan in 2019. See “Executive Retirement Plan andNon-Qualified Excess Plan” summary descriptions on pages 26 and 27.page 43.
| 2020 PROXY STATEMENT | 51 |
The Company has entered into Employment Agreements (the “Agreements”) with Messrs. Cleveland, Nemeth, Rodino, Ellis and Boone, pursuant to which they agreed to serve as executive officers of the Company. The Agreements contain anon-compete clause and certain other stipulations and provide for a severance package that includes twelve (12) months base salary. Under the Agreements, voluntary termination by the NEO or termination by the Company for cause or retirement shallwill not result in any obligation of the Company to make payments. Upon termination for good reason,by the Company without cause (as defined in the Agreement), each NEO would receive his annual non-equity incentive bonus for the year in which the termination occurs andbe entitled to: (i) one year of base salary.salary; and (ii) annualnon-equity incentive compensation that the NEO would have been entitled to receive at the end of the fiscal year. In addition, if the NEO’s employment is terminated prior to the end of the fiscal year due to death or disability or without cause, anynon-equity incentive compensation due to the NEO is to bepro-rated as of the effective date of the termination. The base salary portion would be paid out in equalbi-weekly payments on the regular payroll cycle, and thenon-equity incentive compensation would be calculated and paid in accordance with the terms of the applicable plan on apro-rata basis from the date of termination. Upon involuntary termination due to death or disability, all unvested time-based stock awards will be accelerated, and performance-based stock awards shall continue to vest subject to the achievementNEO would only receive base salary through the end of the performance criteria for such awards.
We believe that the Company should provide reasonable severance benefits to our NEOs and other general employees that are fair and commensurate with their job duties, functions, and responsibilities. We believe it is important to protect our key employees in the event of a change in control and it is also in the best interest of the Company to obtain a release from employees whose employment is terminated as well as anon-compete agreement from certain employees in the form of an employment agreement. The following table summarizes the employment agreements atas of December 31, 20172019 for each of our NEOs in the event they are terminated without cause or upon change in control. In addition to reasonable severance benefits, our NEOs, other executives, and general employees who have received long-term incentive awards (in the form of restricted stock grants, PSUs, stock options and SARS) are immediately vested in all restricted incentive awards granted as defined in the terms and conditions of the LTI grant.
Name | Severance Benefits Upon Termination Without Cause(1) | Non-Compete | Confidentiality Agreement | |||||||||||||||||||
TODD M. | 12 Months Base Salary | 2 | INDEFINITE | |||||||||||||||||||
ANDY L. | 12 Months Base Salary | 2 | INDEFINITE | |||||||||||||||||||
JEFFREY M. | 12 Months Base Salary | 2 | INDEFINITE | |||||||||||||||||||
KIP B. | 12 Months Base Salary | 2 | INDEFINITE | |||||||||||||||||||
JOSHUA A. | 12 Months Base Salary | 2 | INDEFINITE | |||||||||||||||||||
| (1) | Employee is required to sign a mutual release of claims in a form satisfactory to the Company. |
| 52 | |
EXECUTIVE COMPENSATION
Executive Equity Compensation Agreements
In addition to reasonable severance benefits outlined under the employment agreements discussed above, the Company has entered into certain long-term equity compensation agreements with its executive officers, of which the awards under those agreements (in the form of restricted stock grants, stock options and SARS) are eligible for accelerated vesting under certain circumstances.
Restricted Stock Grants: Time-Based and Performance-Based Share Awards
With respect to the time-based share awards granted under the 2009 Omnibus Plan (the “Plan”), in the event of a termination of employment by the Company without cause, upon a change of control or termination due to death or disability, all unvested time-based stock awards would become fully vested.
With respect to the performance-based share awards granted under the Plan, in the event of a termination of employment by the Company without cause or a termination due to death or disability before the performance period ending date, the number of performance-based shares shall continue to vest subject to the achievement of certainpre-established performance criteria for such awards with the performance period ending with the date as stated in the applicable award agreement. In the event of a change of control, all unvested performance-based shares would become fully vested as of the effective date of the change of control based on the assumption that the targeted amount of EBITDA performance as stated in the award agreements has been achieved.
Stock Options and SARS
With respect to stock options and SARS granted under the Plan, in the event the NEO ceases to be an employee of the Company, no further vesting will occur from and after the date of termination except in the event of a termination of employment by the Company without cause, in which case both stock options and SARS would become fully vested and exercisable as to any shares that have not otherwise vested as of the effective time of termination of employment.
In addition, if the NEO has performed at least five years of continuous service following the grant date and following grantee’s termination of service for any reason, the stock options and SARS will terminate and lapse on the expiration date. If the NEO has performed less than five years of continuous service following the grant date and following the termination of service, any unvested portion of the stock options and SARS will be immediately canceled and forfeited for no consideration and any vested portion of the stock options or SARS will terminate and lapse as follows: (i) in the event of termination of service for any reason, other than death, disability, retirement or cause, the stock options and SARS shall lapse on the earlier of the last day of the90-day period on the date of service termination or the expiration date; or (ii) in the event of termination due to death or disability or retirement, the stock options and SARS shall lapse on the earlier of the last day of theone-year period beginning on the date of termination of service or the expiration date. In the event of a termination of service for cause, the stock options and SARS will lapse immediately upon the effective date of the termination of service.
In the event of a change of control, the stock options and SARS will become fully vested and canceled in exchange for a lump sum payment from the Company in an amount equal to the excess of the then fair market value of the Company’s common stock with respect to any shares remaining subject to purchase as established in the change of control event over the option or SARS exercise price for the remaining shares, if the Company’s Board determines that the Company is unable to cause adequate provision to be made to allow the holder to continue to benefit.
Based on the employment and compensation arrangements in effect as of December 31, 20172019 and assuming a hypothetical termination date of December 31, 2017,2019, including the price of the Company’s common stock on that date, the benefits upon termination without cause or upon a change inof control, and termination due to death or disability for our NEOs would have been as follows in the table below. Peron page 55.
| 2020 PROXY STATEMENT | 53 |
Executive Chairman of the NEOs’Board Employment Agreement
In connection with Mr. Cleveland’s assuming the position of Executive Chairman, the Company and Mr. Cleveland entered into an employment agreements, there are no benefits payableagreement on March 13, 2020 to be effective as of January 1, 2020 (the “2020 Agreement”). The term of the 2020 Agreement continues until December 31, 2021, and is subject to automatic additionalone-year terms unless either the Company or Mr. Cleveland provides written notice at least thirty (30) days prior to the NEOsend of the term of his or its decision to terminate. The 2020 Agreement provides for Mr. Cleveland to report to the Board, perform such duties as are assigned or delegated to him by the Board and devote a majority of his business time to the Company. In addition, he will serve as Chairman of the Board during the term of the 2020 Agreement, subject to normal governance procedures relating to Board membership. Pursuant to the 2020 Agreement, Mr. Cleveland is entitled to: (i) an annual base salary, (ii) participate in the Company’s employee benefits as they are generally available to the Company’s executive officers, (iii) participate in the Company’s annualnon-equity incentive plan, and (iv) participate in the Company’s equity incentive plan. The 2020 Agreement also provides that Mr. Cleveland is also entitled to certain severance benefits in the event that his employment is terminated due to his death or disability or due to his termination for cause. Upon terminationby the Company without cause, or by himself for good reason each NEO would receive his annual non-equity incentive bonus for(as such terms are defined in the year2020 Agreement), which includes, in whichcertain circumstances, the termination occurs and one yearsatisfaction of base salary. Upon involuntary termination due to death or disability, all unvested time-based stock awards will be accelerated, and performance-based stock awards shall continue to vest subjectany continuing employment vesting requirement (subject to the achievementsatisfaction of applicable performance criteria) and the payment of cash in lieu of bonus and/or equity incentive awards.
The 2020 Agreement also provides that Mr. Cleveland may not compete against the Company or solicit employees or customers from the Company during the term of the performance criteria for such awards.
| Name / Benefit | Termination Without Cause | Change in Control | Termination Due to Death or Disability | ||||||
| Todd M. Cleveland | |||||||||
| Base salary | $ | 600,000 | $ | 600,000 | $ | — | |||
Acceleration of long-term incentives (1) | 14,086,545 | 14,086,545 | 14,086,545 | ||||||
Acceleration of long-term performance stock units (2) | — | — | — | ||||||
Acceleration of stock options/SARs exercise (3) | 4,701,122 | 4,701,122 | 4,701,122 | ||||||
Annual non-equity incentive bonus (4) | 1,912,800 | 1,912,800 | 1,912,800 | ||||||
| Total benefits | $ | 21,300,467 | $ | 21,300,467 | $ | 20,700,467 | |||
| Andy L. Nemeth | |||||||||
| Base salary | $ | 450,000 | $ | 450,000 | $ | — | |||
Acceleration of long-term incentives (1) | 5,312,161 | 5,312,161 | 5,312,161 | ||||||
Acceleration of long-term performance stock units (2) | 1,833,480 | 1,833,480 | 1,833,480 | ||||||
Acceleration of stock options/SARs exercise (3) | 3,357,736 | 3,357,736 | 3,357,736 | ||||||
Annual non-equity incentive bonus (4) | 1,214,250 | 1,214,250 | 1,214,250 | ||||||
| Total benefits | $ | 12,167,627 | $ | 12,167,627 | $ | 11,717,627 | |||
| Jeffrey M. Rodino | |||||||||
| Base salary | $ | 375,000 | $ | 375,000 | $ | — | |||
Acceleration of long-term incentives (1) | 3,982,055 | 3,982,055 | 3,982,055 | ||||||
Acceleration of long-term performance stock units (2) | 1,833,480 | 1,833,480 | 1,833,480 | ||||||
Acceleration of stock options/SARs exercise (3) | 1,689,941 | 1,689,941 | 1,689,941 | ||||||
Annual non-equity incentive bonus (4) | 926,400 | 926,400 | 926,400 | ||||||
| Total benefits | $ | 8,806,876 | $ | 8,806,876 | $ | 8,431,876 | |||
| Kip B. Ellis | |||||||||
| Base salary | $ | 325,000 | $ | 325,000 | $ | — | |||
Acceleration of long-term incentives (1) | 937,575 | 937,575 | 937,575 | ||||||
Acceleration of long-term performance stock units (2) | — | — | — | ||||||
Acceleration of stock options/SARs exercise (3) | 591,078 | 591,078 | 591,078 | ||||||
Annual non-equity incentive bonus (4) | 549,150 | 549,150 | 549,150 | ||||||
| Total benefits | $ | 2,402,803 | $ | 2,402,803 | $ | 2,077,803 | |||
| Joshua A. Boone | |||||||||
| Base salary | $ | 275,000 | $ | 275,000 | $ | — | |||
Acceleration of long-term incentives (1) | 775,617 | 775,617 | 775,617 | ||||||
Acceleration of long-term performance stock units (2) | — | — | — | ||||||
Acceleration of stock options/SARs exercise (3) | 358,281 | 358,281 | 358,281 | ||||||
Annual non-equity incentive bonus (4) | 447,165 | 447,165 | 447,165 | ||||||
| Total benefits | $ | 1,856,063 | $ | 1,856,063 | $ | 1,581,063 | |||
| 54 | |
EXECUTIVE COMPENSATION
Name / Benefit | Termination Without Cause | Change of Control | Termination Due to Death or Disability | |||||||||||||||||||||||||||
TODD M. CLEVELAND
Base Salary | $750,000 | $750,000 | $ | — | ||||||||||||||||||||||||||
Acceleration of Long-Term Incentives(1) | 11,812,845 | 11,812,845 | 11,812,845 | |||||||||||||||||||||||||||
Acceleration of Stock Options/SARs Exercise(2) | — | — | — | |||||||||||||||||||||||||||
Annual Non-Equity Incentive Bonus(3) | 1,243,800 | 1,243,800 | 1,243,800 | |||||||||||||||||||||||||||
Total Benefits | $13,806,645 | �� | $13,806,645 | $13,056,645 | ||||||||||||||||||||||||||
ANDY L. NEMETH
BASE SALARY | $500,000 | $500,000 | $ | — | ||||||||||||||||||||||||||
Acceleration of Long-Term Incentives(1) | 5,554,329 | 5,554,329 | 5,554,329 | |||||||||||||||||||||||||||
Acceleration of Stock Options/SARs Exercise(2) | 286,049 | 286,049 | 286,049 | |||||||||||||||||||||||||||
Annual Non-Equity Incentive Bonus(3) | 624,650 | 624,650 | 624,650 | |||||||||||||||||||||||||||
Total Benefits(4) | $6,965,028 | $6,965,028 | $6,465,028 | |||||||||||||||||||||||||||
JEFFREY M. RODINO
Base Salary | $425,000 | $425,000 | $ | — | ||||||||||||||||||||||||||
Acceleration of Long-Term Incentives(1) | 2,519,628 | 2,519,628 | 2,519,628 | |||||||||||||||||||||||||||
Acceleration of Stock Options/SARs Exercise(2) | 112,283 | 112,283 | 112,283 | |||||||||||||||||||||||||||
Annual Non-Equity Incentive Bonus(3) | 423,600 | 423,600 | 423,600 | |||||||||||||||||||||||||||
Total Benefits | $3,480,511 | $3,480,511 | $3,055,511 | |||||||||||||||||||||||||||
KIP B. ELLIS
Base Salary | $450,000 | $450,000 | $ | — | ||||||||||||||||||||||||||
Acceleration of Long-Term Incentives(1) | 2,858,378 | 2,858,378 | 2,858,378 | |||||||||||||||||||||||||||
Acceleration of Stock Options/SARs Exercise(2) | 36,270 | 36,270 | 36,270 | |||||||||||||||||||||||||||
Annual Non-Equity Incentive Bonus(3) | 440,500 | 440,500 | 440,500 | |||||||||||||||||||||||||||
Total Benefits | $3,785,148 | $3,785,148 | $3,335,148 | |||||||||||||||||||||||||||
JOSHUA A. BOONE
Base Salary | $400,000 | $400,000 | $ | — | ||||||||||||||||||||||||||
Acceleration of Long-Term Incentives(1) | 1,881,031 | 1,881,031 | 1,881,031 | |||||||||||||||||||||||||||
Acceleration of Stock Options/SARs Exercise(2) | — | — | — | |||||||||||||||||||||||||||
Annual Non-Equity Incentive Bonus(3) | 322,400 | 322,400 | 322,400 | |||||||||||||||||||||||||||
Total Benefits | $2,603,431 | $2,603,431 | $2,203,431 | |||||||||||||||||||||||||||
| (1) | Represents the market value of both unearned time-based and performance-based shares |
| (2) | Represents the market value of |
| (3) | |
Represents the short-termnon-equity incentive award earned in |
| (4) | Non-qualified deferred compensation balances are not included in the above table for Mr. Nemeth. See page 51 for additional information regarding Mr. Nemeth’s deferred compensation balances under the Executive Retirement Plans and theNon-Qualified Excess Plan. |
| 2020 PROXY STATEMENT | 55 |
Committee Report
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee:
M. Scott Welch (Chairman)
John A. Forbes
Michael A. Kitson
Pamela R. Klyn
Derrick B. Mayes
Denis G. Suggs
of Certain Beneficial
Owners and
Management
The following table sets forth, as of March 20, 2020 (the record date), information concerning shareholders known to us as having beneficial ownership of more than five percent of our outstanding common stock and information with respect to the stock ownership of all of our directors, named executive officers, and all of our directors and executive officers as a group. The address of each director and named executive officer listed below is 107 West Franklin Street, Elkhart, Indiana 46515-0638, except as otherwise provided.
| 56 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
Name and Address of Beneficial Owner | Aggregate Number of Shares of Common Stock Beneficially Owned | Percent of Class | ||||||||||||||||||
FIVE PERCENT SHAREHOLDERS: | ||||||||||||||||||||
Blackrock, Inc. 55 East 52nd St. New York, NY 10055 | | 3,340,798 | (1) | | 14.1 | %(1) | ||||||||||||||
Wellington Management Group LLP 280 Congress Street Boston, MA 02210 | | 1,709,726 | (2) |
| 7.2 | %(2) | ||||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | | 1,457,553 | (3) | | 6.1 | %(3) | ||||||||||||||
Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, TX 78746 | | 1,206,620 | (4) | | 5.1 | %(4) | ||||||||||||||
DIRECTORS: | ||||||||||||||||||||
M. Scott Welch(5) | 114,008 | * | ||||||||||||||||||
Joseph M. Cerulli | 41,311 | * | ||||||||||||||||||
John A. Forbes | 31,762 | * | ||||||||||||||||||
Michael A. Kitson | 18,352 | * | ||||||||||||||||||
Pamela R. Klyn | 2,588 | * | ||||||||||||||||||
Derrick B. Mayes | 2,588 | * | ||||||||||||||||||
Denis G. Suggs | 2,588 | * | ||||||||||||||||||
NAMED EXECUTIVE OFFICERS:(6) | ||||||||||||||||||||
Todd M. Cleveland(7) | 872,262 | 3.6 | % | |||||||||||||||||
Andy L. Nemeth | 328,465 | 1.4 | % | |||||||||||||||||
Jeffrey M. Rodino | 167,053 | * | ||||||||||||||||||
Kip B. Ellis | 102,813 | * | ||||||||||||||||||
Joshua A. Boone | 65,830 | * | ||||||||||||||||||
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (13 PERSONS)(8) | 1,818,953 | 7.6 | % | |||||||||||||||||
* Less than 1%.
| (1) | Information based on the Schedule 13G filed with the SEC by Blackrock, Inc. on February 4, 2020. |
| (2) | Information based on the Schedule 13G filed with the SEC by Wellington Management Group LLP on January 28, 2020. |
| (3) | Information based on the Schedule 13G filed with the SEC by The Vanguard Group on February 12, 2020. |
| (4) | Information based on the Schedule 13G filed with the SEC by Dimensional Fund Advisors LP on February 12, 2020. |
| (5) | Includes 94,000 shares held directly by Mr. Welch’s spouse and 8,735 shares held in entities controlled by Mr. Welch’s adult children and in which Mr. Welch has an equity interest. |
| (6) | Except as otherwise indicated, the Named Executive Officers in the table have sole voting and investment power with respect to all shares of our Common Stock shown as beneficially owned by them and such shares include stock options and stock appreciation rights, which are currently exercisable or will become exercisable or vested within sixty (60) days of the record date. |
| (7) | Mr. Cleveland has served as the Chairman of the Board since May 2018 and as a Director of the Company since 2008. In addition, his common stock holdings include 50,500 shares owned indirectly for the benefit of Mr. Cleveland’s children. |
| (8) | Includes a total of 420,748 stock options and 7,399 net stock appreciation rights which are exercisable within 60 days of the record date. |
| 2020 PROXY STATEMENT | 57 |
Transactions
In 2017,2019, the Company entered into transactions with companies affiliated with twoone of our independent Board members:
Purchased approximately $1.0$1.1 million of corrugated packaging materials from Welch Packaging Group (“Welch”), an independently owned company established by M. Scott Welch, who also serves as the President and CEO of Welch; and
Sold approximately $0.4 million of RV component products to DNA Enterprises, Inc. (“DNA”). in the first six months of 2019. After June 30, 2019, sales to DNA no longer qualified as related party transactions, as Walter E. Wells’Wells, whose son serves as the President of DNA.DNA, retired from the Board effective May 15, 2019.
Review, Approval or Ratification of Transactions with Related Persons
We have no formal policy related to the approval of related party transactions. However, the Company undergoes specific procedures when evaluating related party transactions. A related party transaction is generally reported to the Chief Executive Officer or Chief Financial Officer, who assists in gathering the relevant information about the transaction and presents the information to the Board or one of its Committees. The Board then approves, ratifies or rejects the transaction. The related party transactions with companies affiliated with two of the Company’s board members described above were approved by the Board consistent with these procedures.
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Shareholders for the 2021 Annual Meeting Proposals Included in the Proxy Statement Shareholder proposals for inclusion in proxy materials for the next Annual Meeting should be addressed to the Office of the Secretary, 107 West Franklin Street, Elkhart, Indiana 46515-0638, and must be received no later than December 24, 2020. Proposals Not Included in the Proxy Statement Our Articles of Incorporation require notice of any other business to be brought by a shareholder before the 2021 Annual Meeting of Shareholders (but not included in the proxy statement) to be delivered, in writing, to the Company’s Secretary, together with certain prescribed information, on or after March 24, 2021 and no later than April 23, 2021. Likewise, the Articles of Incorporation and Bylaws require that shareholder nominations to the Board for the election of directors to occur at the 2021 Annual Meeting of Shareholders be delivered to the Secretary, together with certain prescribed information, in accordance with the procedures for bringing business before an annual meeting at which directors are to be elected. Meeting Materials Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this Notice of Annual Meeting and Proxy Statement and the Annual Report for the year ended December 31, HOUSEHOLDING OF ANNUAL MEETING MATERIALSProposals of20172019 may have been sent to multiple shareholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact your bank, broker or other nominee. Upon written or oral request to Joshua A. Boone-Secretary,Boone — Secretary, we will provide a separate copy of the Annual Report for the year ended December 31, 20172019 or Notice of Annual Meeting and Proxy Statement.2020 PROXY STATEMENT 59
A copy of our Annual Report on Form10-K for the year ended December 31, 2017,2019, excluding certain of the exhibits thereto, may be obtained without charge by writing to Joshua A. Boone-Secretary,Boone — Secretary, Patrick Industries, Inc., 107 West Franklin Street, P.O. Box 638, Elkhart, Indiana 46515-0638.
The Board knows of no other proposals whichthat may be presented for action at the meeting. However, if any other proposal properly comes before the meeting, the persons named in the proxy form enclosed will vote in accordance with their judgment upon such matter.
Shareholders are urged to execute and return promptly the enclosed form of proxy in the envelope provided.
By Order of |
Joshua A. Boone
Secretary
April 23, 2020
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Patrick Industries, Inc. 107 West Franklin Street P.O. Box 638 Elkhart, Indiana 46515 Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Online Go to www.investorvote.com/PATK or scan the QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.investorvote.com/PATK IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 1. To elect nine directors to the Board of Directors to serve until the 2021 Annual Meeting of Shareholders. 01 - Joseph M. Cerulli 02 - Todd M. Cleveland 03 - John A. Forbes 04 - Michael A. Kitson 05 - Pamela R. Klyn 06 - Derrick B. Mayes 07 - Andy L. Nemeth 08 - Denis G. Suggs 09 - M. Scott Welch Mark here to vote FOR all nominees Mark here to WITHHOLD vote from all nominees For All EXCEPT - To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) below. 2. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year 2020. For Against Abstain 3. To approve an amendment to the Company’s 2009 Omnibus Incentive Plan to increase the number of shares available for grant. For Against Abstain 4. To approve, in an advisory and non-binding vote, the compensation of the Company’s named executive officers for fiscal year 2019. 5. To consider and transact such other business as may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.
The 2020 Annual Meeting of Shareholders of Patrick Industries, Inc. will be held on Thursday, May 14, 2020 at 10:00 A.M. EDT, virtually via the internet at www.meetingcenter.io/205000405. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. The password for this meeting is — PATK2020. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.investorvote.com/PATK IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. PATRICK INDUSTRIES, INC. Annual Meeting of Shareholders May 14, 2020 10:00 AM (EDT) This proxy is being solicited on behalf of the Board of Directors The undersigned hereby appoints Todd M. Cleveland and Andy L. Nemeth, or either of them, as the undersigned’s proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the undersigned’s Common Stock in PATRICK INDUSTRIES, INC. and at any adjournment or postponement thereof, with the same authority as if the undersigned were personally present. The 2020 Annual Meeting of Shareholders of PATRICK INDUSTRIES, INC. will be held on Thursday, May 14, 2020 at 10:00 A.M. EDT, virtually via the internet at www.meetingcenter.io/205000405. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. The password for this meeting is — PATK2020. This proxy, when properly executed, will be voted in the manner directed by the affirmative voteundersigned shareholder. If this proxy is properly executed but no such directions are made, this proxy will be voted in accordance with the Board of a majority of the entire number of Directors at the time, or (2) the affirmative vote, at a meeting of the shareholders of the Corporation, of at least a majority of the votes entitledDirectors’ recommendations. Continued and to be cast by the holderssigned on reverse side Change of the outstanding shares of all classes of stock of the Corporation entitled to vote generally in the election of directors, considered for purposes of this Article IX as a single voting group, in the case of all provisions of the Bylaws.Address — Please print new address below. Comments — Please print your comments below.
