UNITED STATES
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
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MATRIX SERVICE COMPANY
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MATRIX SERVICE COMPANY
This proxy statement, along with a proxy card and our 20182019 Annual Report, is first being mailed to stockholders on or about September 21, 2018
The accompanying proxy is solicited by the Board of Directors (the “Board”) of Matrix Service Company (“Matrix”, the “Company”, “we”, “our” or “us”) for use at the 20182019 Annual Meeting of Stockholders (the “Annual Meeting”), which is scheduled to be held at 2:9:00 PM,AM, Central Time on October 30, 2018,November 5, 2019, and at any adjournment or postponement thereof for the purposes set forth in the accompanying Notice of 20182019 Annual Meeting of Stockholders. The Annual Meeting is scheduled to be held at the Company'sCompany’s corporate headquarters, 5100 EastE. Skelly Drive,Dr., Ste. 100, Tulsa, Oklahoma.OK. This proxy statement and accompanying proxy card were first sent on or about September 21, 201826, 2019 to stockholders of record on September 14, 201820, 2019 (the "Record Date"“Record Date”). The annual report of the Company on Form 10-K for the fiscal year ended June 30, 20182019 accompanies this proxy statement.
If the accompanying proxy card is properly executed and returned or a stockholder votes his or her proxy by Internet or telephone, the shares represented by the proxy will be voted at the Annual Meeting in accordance with the directions noted thereon or, if no direction is indicated, those shares will be voted FOR each of the Board'sBoard’s nominees in respect of Proposal 1 and FOR Proposals 2 3 and 4.3. In addition, the proxy confers authority on the persons named in the proxy card to vote, in their discretion, on any other matters properly presented at the Annual Meeting. The Board is not currently aware of any other such matters. Any stockholder who has given a proxy, whether by mail, Internet or telephone, has the power to revoke it at any time before it is voted by executing a subsequent proxy and sending it to Kevin S. Cavanah,Justin D. Sheets, Vice President, General Counsel and Secretary, Matrix Service Company, 5100 EastE. Skelly Drive, Suite 500,Dr., Ste. 100, Tulsa, OklahomaOK 74135, or by a later dated vote by Internet or by telephone. The proxy also may be revoked if the stockholder is present at the meeting and elects to vote in person.
The expenses of this proxy solicitation, including the cost of preparing and mailing this proxy statement and enclosed proxy card, will be borne by the Company. Such expenses will also include the charges and expenses of banks, brokerage firms and other custodians, nominees or fiduciaries for forwarding solicitation materials regarding the Annual Meeting to beneficial owners of the Company’s common stock. In addition to solicitation by mail, certain directors, officers and regular employees of the Company may solicit proxies in person or by telephone, electronic transmission and facsimile transmission. Other than the persons described in this proxy statement, no general class of employee of the Company will be employed to solicit stockholders in connection with this proxy solicitation. However, in the course of their regular duties, employees may be asked to perform clerical or ministerial tasks in furtherance of this solicitation. Any such directors, officers or employees will not be additionally compensated, but may be reimbursed for their out-of-pocket expenses in connection therewith.
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At the close of business on the Record Date, there were 27,009,42027,131,446 shares of the Company’s common stock, par value $0.01 per share, outstanding. Each outstanding share of our common stock is entitled to one vote upon each of the matters to be voted on at the Annual Meeting. There is no cumulative voting with respect to the election of directors. The presence, in person or by proxy, of at least a majority of the outstanding shares of common stock as of the Record Date is required for a quorum for the transaction of business.
If you hold your shares through an account with a bank or broker, the bank or broker may vote your shares on some matters even if you do not provide voting instructions. Brokerage firms have the authority to vote shares on certain matters (such as the ratification of auditors) when their customers do not provide voting instructions. However, on other matters (such as the election of directors), when the brokerage firm has not received voting instructions from its customers, the brokerage firm cannot vote the shares on that matter and a “broker non-vote” occurs.
Please note that an uncontested election of directors is no longer considered a routine matter. This means that brokers may not vote your shares on the election of directors if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted.Abstentions and broker non-votes will be counted for purposes of determining whether a quorum has been reached. Votes will be tabulated by an inspector of election appointed by the Board. Abstentions may be specified on all proposals. The following vote is needed in order for the various proposals to be adopted:
Proposal 1-Election1 - Election of Directors.Directors: The affirmative vote of a majority of the votes cast at the meeting is required for the election of directors. This means that the number of shares voted for a director nominee must exceed the number of votes cast against that nominee in order to elect that nominee in an uncontested election. With respect to the election of directors, you may vote for or against each nominee. Abstentions do not count as votes for or against the nominee'snominee’s election.
Proposal 2-Ratification2 - Ratification of Independent Registered Public Accounting Firm.Firm: The appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 20192020 will be ratified if a majority of the shares of common stock present or represented by proxy and entitled to vote thereon at the Annual Meeting vote in favor. Abstentions will have the effect of a vote against the proposal.
Proposal 3-Advisory3 - Advisory Vote on Executive Compensation.Compensation: The approval, on an advisory basis, of the compensation paid to our executive officers named in this proxy statement requires the affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote thereon at the Annual Meeting. Abstentions will have the effect of a vote against the proposal.
A “broker non-vote” will have no effect on the outcome of the election of directors or Proposals 2 3 and 4.3.
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The Company’s Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws provide that the number of directors on the Board be fixed from time to time by the Board but shall not be less than three nor more than 15 persons. In anticipation of the retirement of Mr. Maxwell, the Board recently added Liane K. Hinrichs as a new director. The Board size is temporarilycurrently fixed at eight but will be reduced to seven as of the date of the Annual Meeting.members. Directors hold office until the next annual meeting of the stockholders of the Company or until their successors have been elected and qualified.
In accordance with the recommendation of the Nominating and Corporate Governance Committee, the Board has unanimously nominated the seven nominees identified below. The Board recommends that you vote “For” the election of its seven nominees. Proxies solicited by the Board will be voted “For” all seven nominees unless stockholders specify otherwise in their proxies.
Each of the Board’s nominees has consented to be named as a nominee in this proxy statement and to serve as a director if elected. If, at the time of the Annual Meeting, any of the nominees is unable to serve or for good cause will not serve, the discretionary authority provided in the proxies solicited by the Board may be used to vote for a substitute or substitutes who may be recommended by the Nominating and Corporate Governance Committee and whom the Board may propose to replace such nominee. The Board has no reason to believe that any substitute nominee or nominees will be required.
Each of our directors possesses a combination of attributes that qualifies him or her for service on the Board. The directors were specifically recruited for these attributes, which include business experience specifically related to the industries in which we operate, knowledge based on specialized education or training such as accounting, legal and finance, and senior executive management experience that demonstrates leadership qualities and a practical understanding of organizations, processes, business strategies, risk management and how to drive change and growth. We believe that the qualifications, skills and experiences of the directors, individually and collectively, have resulted in the Board being highly effective. The specific skills for each director is listed below:
Board of Directors - Skills Matrix
Martha Z. Carnes | John D. Chandler | John W. Gibson | John R. Hewitt | Liane K. Hinrichs | James H. Miller | Jim W. Mogg | |
Public Company Board Experience | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
Strategic Leadership | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
Financial Expertise/Literacy | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
Industry Experience | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
Enterprise Risk Management | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
Corporate Governance | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
International Business | ✔ | ✔ | ✔ | ✔ | ✔ | ||
Mergers and Acquisitions | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ |
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Set forth below is biographical information for each of the Board’s nominees for election as a director at the Annual Meeting, including a summary of the specific experience, qualifications, attributes and skills which led our Board to conclude that the individual should serve on the Board at this time, in light of the Company’s business and structure.
Martha Z. Carnes
![]() ![]() Age: 59 Director Since: July 2017 Committees: • Audit (Chairman) • Compensation • Nominating and Corporate Governance | Ms. Carnes retired from PricewaterhouseCoopers LLP accountant Skills and Qualifications: The specific experience, qualifications, attributes or skills that led to the conclusion Ms. Carnes should serve as a Director include her extensive expertise in financial oversight, financial reporting and broad accounting knowledge gained from working with and auditing public companies in the energy industry and her operational and leadership experience at PwC. |
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John D. Chandler
![]() ![]() Age: 49 Director Since: June 2017 Committees: • Audit • Compensation • Nominating and Corporate Governance | On August 28, 2017, Mr. Chandler was appointed as Senior Vice President and Chief Financial Officer for The Williams Companies, Inc. Skills and Qualifications: The specific experience, qualifications, attributes or skills that led to the conclusion that Mr. Chandler should serve as a Director include his long history of service in senior corporate leadership positions, his extensive experience in the energy industry, his extensive financial oversight expertise and his understanding of complex financial matters gained from his experience as a CFO of companies. |
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John W. Gibson
![]() ![]() Age: 67 Director Since: April 2016 Committees: • Audit • Compensation (Chairman) • Nominating and Corporate Governance | Mr. Gibson is currently the non-executive Chairman of the Board of ONEOK, Inc. Mr. Gibson also served as the non-executive Chairman of the Board of ONEOK Partners GP, L.L.C., the general partner of ONEOK Partners, L.P., until its merger with a subsidiary of ONEOK, Inc. in June 2017. He served as Chief Executive Officer at ONEOK, Inc. from January 1, 2007 to January 31, 2014. He was appointed Chairman of the Board of ONEOK Partners GP, L.L.C. in 2007 and of ONEOK, Inc. in May 2011, and served as ONEOK, Inc.’s President from 2010 through 2011. He also served as Chief Executive Officer of ONEOK Partners GP, L.L.C. from 2007 until January 31, 2014, and served as President from 2010 through 2011. From 2005 until May 2006, he was President of ONEOK Energy Companies, which included natural gas gathering and processing, natural gas liquids, pipelines and storage and energy services business segments. Prior to that, he was ONEOK, Inc.’s President, Energy from May 2000 to 2005. Mr. Gibson joined ONEOK in May 2000 from Koch Energy, Inc., a subsidiary of Koch Industries, where he was an Executive Vice President. His career in the energy industry began in 1974 as a refinery engineer with Exxon USA. He spent 18 years with Phillips Petroleum Company in a variety of domestic and international positions in its natural gas, natural gas liquids and exploration and production businesses. He holds an engineering degree from Missouri University of Science and Technology, formerly known as the University of Missouri at Rolla. Mr. Gibson also serves as the non-executive Chairman of the Board of ONE Gas, Inc. His service as a member of the board of directors of BOK Financial Corporation ended in December 2017, and he is also a former member of the Board of Trustees of Missouri University of Science and Technology. Skills and Qualifications: The specific experience, qualifications, attributes or skills that led to the conclusion that Mr. Gibson should serve as a director include his service in a variety of roles of continually increasing responsibility at ONEOK, ONEOK Partners GP, L.L.C., Koch Energy, Inc., Exxon USA and Phillips Petroleum. In these roles, Mr. Gibson had direct responsibility for and extensive experience in strategic and financial planning, acquisitions and divestitures, operations, management supervision and development, and compliance. As the executive responsible for numerous merger and acquisition transactions over the course of his career, Mr. Gibson has significant experience in assessing acquisition opportunities and in structuring, financing and completing merger and acquisition transactions. Over the course of his long career in a variety of sectors of the oil and gas industry, Mr. Gibson has gained extensive management and operational experience and has demonstrated a strong track record of leadership, strategic vision and risk management. |
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John R. Hewitt
![]() ![]() Age: 61 Director Since: May 2011 | Mr. Hewitt has spent his entire career in the engineering, procurement, and construction industry. Prior to joining Matrix in May 2011, Mr. Hewitt worked for approximately 25 years for various operating businesses of Aker Solutions ASA (“Aker”) and its predecessor companies, which provide engineering and construction services, technology products, and integrated solutions to the energy and process industries worldwide. Up until his appointment with the Company, Mr. Hewitt served as Vice President of Aker Solutions, where he was responsible for providing executive oversight on major capital projects in the power and liquefied natural gas industries. He also served as President, United States Operations at Aker Solutions E&C US, Inc. from 2007 to 2009 where he was responsible for managing all construction services in North America. Prior to that, he served as President of Aker Construction Inc. where he had full profit and loss responsibility for a multi-disciplined direct hire industrial construction business operating throughout North America. Mr. Hewitt holds a finance degree from Stetson University and an engineering degree from the Florida Institute of Technology. Mr. Hewitt is a member of the board of directors of Skills and Qualifications: As the current President and CEO of the Company, Mr. Hewitt provides a management representative on the Board with extensive knowledge of day-to-day operations. As a result, he can facilitate the Board’s access to timely and relevant information and its oversight of management’s strategy, planning and performance. In addition, Mr. Hewitt brings to the Board considerable management and leadership experience, extensive knowledge of the energy industry and our business, and significant experience with mergers and acquisitions. |
Liane K. Hinrichs
![]() ![]() Age: 62 Director Since: June 2018 Committees: • Audit • Compensation • Nominating and Corporate Governance (Chairman) | Ms. Hinrichs served as Senior Vice President, General Counsel and Corporate Secretary for McDermott International, Inc. from October 2008 to August 2017. Previously, she served as Skills and Qualifications: Ms. Hinrichs brings a combination of boardroom experience, executive leadership and general counsel credentials in the engineering and construction industry. Her deep experience and expertise in governance, enterprise risk management, compliance, international issues and strategy ensure advocacy for best practices and contribute to the |
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James H. Miller
![]() ![]() Age: 64 Director Since: May 2014 Committees: • Audit • Compensation • Nominating and Corporate Governance | On November 1, 2017, Mr. Miller was appointed as the sole director of Kvaerner U.S. with oversight and fiduciary responsibility for all U.S.-based operations. From June 2011 to October 31, 2017, Mr. Miller was Executive Vice President - Americas of Kvaerner U.S. He also serves on the Board of Directors of San Juan Construction, a privately-owned, multi-disciplined full service general contractor. Mr. Miller has had a consulting agreement with Seajay Consulting L.L.C. since October 2018. From June 2008 through June 2011, Mr. Miller served as Chief Executive Officer & President of Aker Philadelphia Shipyard. From June 2011 to April 2014, Mr. Miller also served as Chairman of the Board for Aker Philadelphia Shipyard ASA (re-named Philly Shipyard ASA in 2015) and re-assumed that position in February 2016. Skills and Qualifications: Mr. |
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Jim W. Mogg
![]() ![]() Age: 70 Director Since: August 2013 Chairman of the Board | Mr. Mogg has served on the board of directors of ONEOK, Inc., a publicly traded diversified energy company, since July 2007. Mr. Mogg also served as a director of ONEOK Partners GP, L.L.C., the general partner of ONEOK Partners, L.P., a publicly traded master limited partnership that operated natural gas and natural gas liquids gathering, processing, pipelines, and fractionation assets, from August 2009 until its merger with a subsidiary of ONEOK, Inc. in June of 2017. Mr. Mogg served as Chairman of the Board of DCP Midstream GP, LLC, the general partner of DCP Midstream Partners, L.P. Skills and Qualifications: The specific experience, qualifications, attributes or skills that led to the conclusion Mr. Mogg should serve as a Director include his long history of service in senior executive leadership positions, including as a chief executive officer and his significant knowledge of the energy industry. Mr. Mogg also brings financial expertise to the Board, including through his previous supervision of principal accounting officers, involvement in financing transactions, and his service on the audit committees of other companies. His current and previous directorships also provide Mr. Mogg with extensive corporate governance experience. |
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR ALL”“FOR” ALL OF THE ABOVE NAMED NOMINEES FOR ELECTION.
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The Board uses its best efforts to adopt and implement sound corporate governance practices and believes strongly that effective corporate governance practices are an important component of its efforts to focus the entire organization on generating long-term stockholder value through conscientious, safe and ethical operations.
The Board has adopted and implemented Corporate Governance Guidelines and a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics applies to all of the Company’s directors, officers (including its Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Controller and any person performing similar functions) and employees. The Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on the Corporate Governance page included in the “Investor Relations” section of the Company’s website at
matrixservicecompany.com.Pursuant to the applicable rules for companies traded on the NASDAQ Global Market System (“NASDAQ”) and the rules and regulations of the Securities and Exchange Commission (the "SEC"“SEC”), the Board has adopted director independence guidelines. In accordance with these guidelines, each independent director must be determined to have no relationship with the Company which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The guidelines specify criteria by which the independence of the Company’s directors will be determined, including strict guidelines for directors and their immediate families with respect to past employment or affiliation with the Company or its independent registered public accounting firm.
The Board has affirmatively determined that each of Ms. Carnes, Mr. Chandler, Mr. Gibson, Ms. Hinrichs, Mr. Miller and Mr. Mogg are “independent” under the guidelines. The Board also affirmatively determined that Mr. Maxwell, who is retiring from the Board at the Annual Meeting, is independent. Mr. Hewitt is not considered to be independent because of his current employment as President and Chief Executive Officer of the Company.
The Board also considered Mr. Miller'sMiller’s familial relationships with the Company. Mr. Miller'sMiller’s son is an employee of Matrix North American Construction. The Board concluded that this relationship did not impair Mr. Miller'sMiller’s independence as his son did not hold an executive officer position within Matrix North American Construction and is several levels below the level of executive officer of Matrix.
Additionally, the Company predates Mr. Gibson's appointment to the Board, Mr. Gibson played no role in BOK's engagement and plays no role in the on-going relationship.
The full text of the Company’s director independence guidelines is included in the Company’s Corporate Governance Guidelines, which is available on the Corporate Governance page included in the “Investor Relations” section of the Company’s website at
matrixservicecompany.com.The Board has no policy mandating the separation of the offices of Chairman of the Board and Chief Executive Officer. However, as the oversight responsibilities of directors continuescontinue to increase, we believe it is beneficial to have an independent chairman whose sole job for the Company is leading the Board. We believe the separation of the Chairman and Chief Executive Officer roles provides strong leadership for our Board, while positioning our Chief Executive Officer as the leader of the Company in the eyes of our customers, employees and other stakeholders.
If, in the future, the Chief Executive Officer is serving as Chairman of the Board, then the Board will name a lead director who would, among other specified responsibilities, serve as the leader of the independent directors and facilitate communication between the Chairman/CEO and the other directors.
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The Board upon the recommendation of the Nominating and Corporate Governance Committee, temporarily increased the size of the Board from seven to eighthas six independent members and appointed Liane K. Hinrichs to serve as a Board member. Ms. Hinrichs' term commenced on June 5, 2018 and expires at the Annual Meeting. The size of the Board will revert to seven coincident with the Annual Meeting when Tom E. Maxwell retires from the Board at the end of his term in accordance with the Board's mandatory retirement policy.
The Audit Committee and full Board jointly oversee the Company’s risk management processes. The Audit Committee receives regular reports from management regarding the Company’s assessment of risks. In addition, the Audit Committee and the full Board focus on the most significant risks facing the Company and the Company’s general risk management strategy, and seek to ensure that risks undertaken by the Company are consistent with the Board’s appetite for risk. While the Board oversees the Company’s risk management, Company management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our Company and that our Board leadership structure supports this approach.
The Company’s Board met elevennine times during fiscal year 2018.2019. The Board has three standing committees – the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. Each of the members of each of the committees qualifies as an “independent director” under the NASDAQ listing standards. During fiscal 2018,2019, each director attended a minimum of 75% of the total number of meetings of the Board and of the total number of meetings held by all committees of which he or she was a member.
The Company’s Corporate Governance Guidelines provide that each director is expected to attend the annual meetings of stockholders of the Company. All of the members of the Company’s Board attended the 20172018 Annual Meeting of Stockholders with the exception of Ms. Hinrichs who was appointed to the Board in June 2018.
Audit Committee
Director | Fiscal 2019 Committee Service | |
Martha Z. Carnes, Chairman | Served all of fiscal | |
James H. Miller, Member | Served all of fiscal | |
John W. Gibson, Member | Served all of fiscal | |
John | Served all of fiscal | |
Liane K. Hinrichs, Member | Served all of fiscal | |
The Audit Committee assists the Board in monitoring the integrity of the financial statements of the Company, the independent registered public accounting firm’s qualifications and independence, the performance of the Company’s internal audit function and independent registered public accounting firm and the Company’s compliance with legal and regulatory requirements. In carrying out these purposes, the Audit Committee, among other things, appoints, evaluates and approves the compensation of the Company’s independent registered public accounting firm, reviews and approves the scope of the annual audit and the audit fee, pre-approves all auditing services and permitted non-audit services, annually considers the qualifications and independence of the independent registered public accounting firm, reviews the results of internal audits, compliance with certain of the Company’s written policies and procedures and the adequacy of the Company’s system of internal accounting controls, prepares the Audit Committee report for inclusion in the annual proxy statement and annually reviews the Audit Committee charter and the committee’s performance. The Audit Committee has also established procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of the Company of concerns regarding accounting or auditing matters. The Audit Committee operates under a written charter. A copy of the Audit Committee Charter is available on the Corporate Governance page included in the “Investor Relations” section of the Company’s website at
matrixservicecompany.com. The Audit Committee held11
Compensation Committee
Director | Fiscal 2019 Committee Service | |
John W. Gibson, Chairman | Served all of fiscal | |
James H. Miller, Member | Served all of fiscal | |
John D. Chandler, Member | Served all of fiscal | |
Martha Z. Carnes, Member | Served all of fiscal | |
Liane K. Hinrichs, Member | Served all of fiscal | |
The Compensation Committee’s functions include reviewing and approving executive salary, Board compensation, short-term and long-term incentive awards, and other benefits. In addition, the Compensation Committee, in conjunction with the Board, reviews the Company’s strategic and financial plans to determine their relationship to the Company’s compensation program. Additional information describing the Compensation Committee’s processes and procedures for considering and determining executive compensation, including the role of our Chief Executive Officer and consultants in determining or recommending the amount or form of executive compensation, is included in the Compensation Discussion and Analysis below.
The Compensation Committee operates under a written charter. The Company has made a copy of its Compensation Committee Charter available on the Corporate Governance page included in the “Investor Relations” section of the Company’s website at
matrixservicecompany.com. The Compensation Committee heldCompensation Committee Interlocks and Insider Participation
During fiscal 2018,2019, the Compensation Committee was composed of John D. Chandler, Jim W. Mogg, John W. Gibson, James H. Miller, Martha Z. Carnes and Liane K. Hinrichs, for a portion of the fourth quarter, all of whom are non-employee directors of the Company. During fiscal 2018,2019, none of the Company’s executive officers served on the Board or on the Compensation Committee of any other entity who had an executive officer that served either on the Company’s Board or on its Compensation Committee.
Nominating and Corporate Governance Committee
Director | Fiscal 2019 Committee Service | |
Liane K. Hinrichs, Chairman | ||
Served all of fiscal | ||
James H. Miller, Member | Served all of fiscal | |
John W. Gibson, Member | Served all of fiscal | |
John D. Chandler, Member | Served all of fiscal | |
Martha Z. Carnes, Member | Served all of fiscal | |
The Nominating and Corporate Governance Committee was established to assist the Board in identifying qualified individuals to become directors of the Company, recommend to the Board qualified director nominees for election by the stockholders or to fill vacancies on the Board, recommend to the Board membership on Board committees, recommend to the Board proposed Corporate Governance Guidelines and report annually to the Board on the status of the CEO succession plan. The Nominating and Corporate Governance Committee operates under a written charter. The Company has made a copy of its Nominating and Corporate Governance Committee Charter available on the Corporate Governance page included in the “Investor Relations” section of the Company’s website at
matrixservicecompany.com. The Nominating and Corporate Governance Committee has the authority under its charter to retain a professional search firm to identify candidates. The Nominating and Corporate Governance Committee held12
The Nominating and Corporate Governance Committee will consider director candidates submitted to it by other directors, employees and stockholders. In evaluating such nominations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability to address the director qualifications discussed below.
The Nominating and Corporate Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the Committee considers various potential candidates. Candidates may come to the attention of the Committee through current directors, senior management, professional search firms, stockholders or other persons.
Once a prospective nominee has been identified, the Committee makes an initial determination as to whether to conduct a full evaluation of the candidate. The initial determination involves an evaluation of the candidate against the qualifications set forth in the Corporate Governance Guidelines, which require broad experience, wisdom, integrity, the ability to make independent analytical inquiries, an understanding of the Company’s business environment and a willingness to devote adequate time to Board duties, including service on no more than four other public company boards.
The Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. Our Board believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow it to fulfill its responsibilities. The Board also strives to identify candidates with diverse backgrounds. We believe that the judgment and perspectives offered by a diverse Board improves the quality of decision making and enhances the Company’s business performance. The Company'sCompany’s Corporate Governance Guidelines provide that when searching for new directors, the Committee should actively seek out qualified women and minority candidates as well as candidates with diverse backgrounds, skills and experiences to include in the pool from which Board nominees are chosen.
The Committee also assesses the candidate’s qualifications as an “independent director” under the NASDAQ’s current director independence standards and the Company’s director independence guidelines. If the Committee determines that additional consideration is warranted, it may request a professional search firm to gather additional information about the candidate. The Committee designates, after consultation with the CEO, which candidates are to be interviewed. After completing its evaluation, the Committee makes a recommendation to the full Board as to the persons who should be nominated by the Board and the Board determines the nominees after considering the recommendation of the Committee.
Holders of common stock wishing to recommend a person for consideration as a nominee for election to the Board can do so in accordance with the Company’s Bylaws by giving timely written notice to Kevin S. Cavanah,Justin D. Sheets, Vice President, General Counsel and Secretary of Matrix Service Company, at 5100 EastE. Skelly Drive, Suite 500,Dr., Ste. 100, Tulsa, OklahomaOK 74135. In order to be considered timely, a stockholder’s notice of proposal must be delivered not later than the close of business on the 90th90th day nor earlier than the close of business on the 120th120th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th120th day prior to such annual meeting and not later than the close of business on the later of the 90th90th day prior to such annual meeting or if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the close of business on the 10th10th day following the day on which public announcement of the date of such meeting is first made by the Company. The written notice should give each such nominee’s name, address, appropriate biographical information, a description of all arrangements or understandings between the stockholder (and the beneficial owner, if any, on whose behalf the nomination is made) and each such nominee and/or any other person or persons (naming such person or persons), relating to such nominee’s service on the Board, if elected, as well as any other information that would be required in a proxy statement. Any such recommendation should be accompanied by a written statement from the person recommended, giving his or her consent to be named as a nominee and, if nominated and elected, to serve as a director. The
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written notice should also be accompanied by a completed director nominee questionnaire in the form required by the Company and a completed and signed written representation and agreement (executed by the nominee in the form provided by the Secretary of the Company upon written request) that such person:
The written notice must also set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
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The above summary may not contain all of the information about our stockholder nomination process. You are encouraged to read our Bylaws carefully for further details, which can be found in our public filings.
Executive sessions of the Board are held periodically. The sessions are chaired by the independent, non-executive Chairman of the Board. Any non-management director may request that an additional executive session be scheduled. Executive sessions of the independent directors are held on an as neededas-needed basis, but at least quarterly.
The Board provides a process by which stockholders and other interested parties may communicate with the Board or any of the directors. Stockholders and other interested parties may send written communications to the Board or any of the directors at the following address: Board of Matrix Service Company c/o Matrix Service Company, 5100 EastE. Skelly Drive, Suite 500,Dr., Ste. 100, Tulsa, OklahomaOK 74135. Stockholders and other interested parties may also contact the Board or any of the directors via the Company’s online submission form by clicking on the “Contact the Board” link included on the Corporate Governance page included in the “Investor Relations” section of the Company’s website at
The Company’s Stock Ownership Guidelines for Directors, which were revised in August 2014 and confirmed in November 2017, require each non-employee director to own a number shares of our common stock equal in value to five times the annual cash retainer. For purposes of determining compliance with the guideline, the cash retainer does not include fees earned as Chairman of the Board or as Chairman of the Audit, Compensation or Nominating and Corporate Governance committees. The following types of equity can be used to satisfy the stock ownership requirements:
(1) | shares owned separately by the director or owned either jointly with, or separately by, immediate family members residing in the same household; |
(2) | shares held in trust for the benefit of the director or his immediate family members; |
(3) | shares purchased in the open market; |
(4) | shares purchased through the Company’s Employee Stock Purchase Plan; |
(5) | vested and unvested time-based restricted stock or restricted stock units |
(6) | unvested performance or |
(7) | in-the-money vested unexercised stock options; and |
(8) | any phantom shares held on behalf of a director under the Board’s deferred compensation plan. |
Existing directors have five years from the August 2014 date of adoption or revision of the guidelines to attain this level of ownership. Directors elected or appointed after the date of the adoption of the Stock Ownership Guidelines will have five years from the date of their election or appointment to the Board to attain this level of ownership. Furthermore, once the guidelines are met, the directors will remain in compliance with the Stock Ownership Guidelines if a drop in the Company'sCompany’s stock price causes the director'sdirector’s ownership level to drop below five times the annual retainer so long as the director has not sold any shares subsequent to passing the ownership test. Messrs. MaxwellMogg and MoggMiller currently satisfy the requirements. Mr. James H. Miller, who was appointed in May 2014, Mr. John W. Gibson, who was appointed in April 2016, Mr. John D. Chandler, who was
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appointed in June 2017, Ms. Martha Z. Carnes, who was appointed in July 2017, and Ms. Liane K. Hinrichs, who was appointed in June 2018, do not currently satisfy the Stock Ownership Guidelines requirements; however, each is still within the initial five-year accumulation period.
Management directors receive no additional compensation for their service on the Board or any committee thereof. Directors of the Company are reimbursed for out-of-pocket expenses incurred in attending Board and committee meetings.
The elements of our non-employee director compensation consist of cash and equity. Our objective in establishing director compensation is to position ourselves to attract and retain individuals who have relevant business and leadership backgrounds and experience by providing a competitive package of cash and equity compensation.
Total compensation for the Company’s non-employee directors is determined in a manner similar to that for executives, which is described under the caption “Compensation Discussion and Analysis.” The Compensation Committee of the Board (the “Committee”) engages a third party compensation consultant to periodically review director compensation and make recommendations. The Committee reviews comparative data from the outside consultant and makes recommendations regarding director compensation to the full Board for approval.
Director compensation is generally reviewed on a bi-annual basis. However, due to the changesIt was last reviewed in the Board's leadership,November 2017 when the Committee engaged a third party compensation consultant, Meridian Compensation Partners, LLC (“Meridian”), to conduct a market study of director compensation in November 2017.compensation. Meridian obtained comparative data using published compensation surveys and proxy analysis of selected companies similar in size, location and industry. The companies included in the survey are consistent with those that we use to review executive compensation.
The overall conclusions of the consultant were that the compensation structure of the Board was aligned with peer practices and that the annual value of compensation approximated the median of the identified peer group of companies. Upon careful consideration of the consultant'sconsultant’s recommendations, peer practices and the Company'sCompany’s stated compensation objectives, the Committee approved the following:
Additional Cash Retainer | Amount ($) | ||||
Chairman of the Board | 75,000 | ||||
Audit Committee | 15,000 | ||||
Compensation Committee | 10,000 | ||||
Nominating and Corporate Governance Committee | 7,500 |
We also provide thea Deferred Fee Plan for Members of the Board of Directors of Matrix Service Company (the "Deferred“Deferred Fee Plan"Plan”), which allows our non-employee directors to defer all or a portion of their cash compensation with interest. The effective interest rate for the subsequent calendar year is researched and approved by the Committee at a regularly-scheduled meeting, the most recent of which took place on October 31, 2017. For 2018,30, 2018. At that meeting, the Committee approved an increase in the average interest rate wasfrom 5.0%. to 6.25% for the 2019 calendar year. Non-employee directors are also permitted to invest their cash retainer in Company common stock through the Company’s 2011 Employee Stock Purchase Plan (“ESPP”). Investment through the ESPP is limited to $60,000 per director per calendar year.
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The compensation earned by each of our non-employee directors in fiscal 20182019 is summarized in the table below:
Name(1) | Fees Earned or Paid in Cash ($)(2) | Restricted Stock Awards ($)(3) | Stock Option Awards ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($) | Total ($) | ||||||||||||
Tom E. Maxwell | 53,333 | (6) | — | — | 17,991 | — | 71,324 | |||||||||||
Jim W. Mogg | 137,500 | (7) | 85,572 | — | 13,726 | — | 236,798 | |||||||||||
James H. Miller | 85,000 | (8) | 85,572 | — | 8,985 | — | 179,557 | |||||||||||
John W. Gibson | 95,000 | (9) | 85,572 | — | 2,775 | — | 183,347 | |||||||||||
John D. Chandler | 85,000 | (8) | 85,572 | — | — | — | 170,572 | |||||||||||
Martha Z. Carnes | 100,000 | (10) | 85,572 | — | — | — | 185,572 | |||||||||||
Liane K. Hinrichs | 90,000 | (11) | 121,247 | — | — | — | 211,247 |
Name (1) | Fees Earned or Paid in Cash ($) (2) | Restricted Stock Awards ($) (3) | Stock Option Awards ($) (4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | All Other Compensation ($) | Total ($) | ||||||||||||
Michael J. Hall | 45,000 | (6) | — | — | 15,899 | — | 60,899 | |||||||||||
I. Edgar Hendrix | 33,333 | (6) | — | — | 7,518 | — | 40,851 | |||||||||||
Tom E. Maxwell | 137,500 | (7) | 94,005 | — | 10,450 | — | 241,955 | |||||||||||
Jim W. Mogg | 90,000 | (8) | 94,005 | — | 8,394 | — | 192,399 | |||||||||||
James H. Miller | 85,000 | (9) | 94,005 | — | 4,202 | — | 183,207 | |||||||||||
John W. Gibson | 95,000 | (10) | 94,005 | — | 132 | — | 189,137 | |||||||||||
John D. Chandler | 85,000 | (9) | 129,255 | — | — | — | 214,255 | |||||||||||
Martha Z. Carnes | 92,258 | (11) | 121,415 | — | — | — | 213,673 | |||||||||||
Liane K. Hinrichs | 7,083 | (12) | — | — | — | — | 7,083 |
(1) | John R. Hewitt is not included in this table because he is a current employee and thus received no compensation for his service as a director. The compensation received by Mr. Hewitt as an employee is shown in the Summary Compensation Table for our Named Executive Officers under the caption |
(2) | Includes retainer fees earned in fiscal |
(3) | The amounts shown represent the grant date fair value for awards granted during fiscal |
(4) | No stock option awards were granted to non-employee directors in fiscal |
(5) | A non-employee director may defer all or part of director fees earned into the Deferred Fee |
(6) | Represents fees earned by |
(7) | Mr. |
(8) |
Fees for Messrs. Miller and Chandler represent their annual retainers of $85,000. Mr. Miller deferred all of these fees, and Mr. |
Mr. |
Ms. |
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The Audit Committee oversees the Company’s financial reporting process, including the system of internal controls, on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the associated system of internal controls. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements and internal control over financial reporting in accordance with the Public Company Accounting Oversight Board standards and to issue a report thereon. The Audit Committee monitors these processes. The Audit Committee’s role does not provide any special assurance with regard to the Company’s financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the independent registered public accounting firm. As part of its oversight responsibilities, the Audit Committee has:
Based on the reviews and discussions above, the Audit Committee recommended to the Board of Directors that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended June 30, 20182019 for filing with the Securities and Exchange Commission. The Audit Committee, subject to ratification by the stockholders, has selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending June 30, 2019.
The Audit Committee is governed by a written charter. The Board of Directors has determined that the members of the Audit Committee are independent and financially literate as defined by the applicable standards. The Board has also determined that Martha Z. Carnes, John D. Chandler, Jim W. MoggGibson and John W. GibsonD. Chandler qualify as financial experts as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002.
Members of the Audit Committee:
Martha Z. Carnes, Audit Committee Chairman
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Fees billed for audit services in fiscal 20182019 and 20172018 include fees associated with the annual audit, the reviews of our quarterly reports on Form 10-Q, the audit of our internal controls, and services performed in connection with other filings with the SEC. Fees billed for other services in fiscal 2017 represent amounts paid for acquisition related services in connection with the Houston Interests acquisition which is more fully described in Note 2 of the Company's fiscal 2018 Form 10-K and Annual Report.
Deloitte & Touche LLP | ||||||
Fiscal 2019 | Fiscal 2018 | |||||
Audit Services | $ | 1,465,345 | $ | 1,471,700 | ||
Other Services | 10,000 | — | ||||
Total | $ | 1,475,345 | $ | 1,471,700 |
Deloitte & Touche LLP | ||||||||
Fiscal 2018 | Fiscal 2017 | |||||||
Audit Services | $ | 1,471,700 | $ | 1,436,900 | ||||
Other Services | — | 343,303 | ||||||
Total | $ | 1,471,700 | $ | 1,780,203 |
The Audit Committee’s policy is to pre-approve all audit, audit-related, tax and permissible non-audit services provided by the independent registered public accounting firm on a periodic basis up to a specified dollar amount in order to assure that the provision of such services does not impair the auditor’s independence. If the dollar amount of any anticipated services is expected to exceed the predetermined limit, pre-approval of the Audit Committee is required.
Pursuant to the Sarbanes-Oxley Act of 2002, the Audit Committee of the Board of the Company has been charged with the exclusive power and authority to engage or terminate the independent registered public accounting firm. The Audit Committee of the Board has engaged the firm of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2019.2020. Deloitte & Touche LLP has served as independent auditors for the Company since January 2006.
A proposal will be presented at the Annual Meeting asking the stockholders to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm. If the stockholders do not ratify the appointment of Deloitte & Touche LLP, the Audit Committee will reconsider the appointment.
A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and will have an opportunity to make a statement, if he or she desires to do so, and to respond to appropriate questions from those attending the meeting.
The affirmative vote of holders of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting is required for the adoption of this proposal.
The Board unanimously recommends that the stockholders vote “For” ratification of Deloitte & Touche LLP’s engagement.19
In addition to Mr. Hewitt, the Company’s President and Chief Executive Officer, who serves on the Board and whose biographical information is set forth under the caption, “Nominated Director Biographies,” the executive officers of the Company are:
Joseph F. Montalbano
, ageKevin S. Cavanah
, ageAlan R. Updyke
, ageJason W. Turner
, ageNancy E. Austin
, age20
Professional in Human Resources. She is also a member of the Society for Human Resource Management and World-at-Work.
Rick J. Bennett
, ageJustin D. Sheets
, ageBradley J. Rinehart
,ageGlyn A. Rodgers, age 61, has served as President, Matrix PDM Engineering since September 2019. He previously served as Vice President of Business Development for Matrix Service Inc. from January 2018 to September 2019. Prior to joining Matrix, he served as President for IHI E&C International Corporation from 2012 to 2016, President for Kvaerner Houston EPC Center from 2010 to 2012, President for Aker Solutions US Inc. from 2007 to 2010, President for Aker Solutions Facility Services from 2004 to 2007 and Vice President for Aker Plant Services Group Inc. from 2002 to 2004.
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This Compensation Discussion and Analysis explains our compensation philosophy, objectives and practices in place for our President and Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”) and our other named executive officers (collectively, the “Named Executive Officers” or “NEOs”) during fiscal 2018.2019. Compensation for our Named Executive Officers is determined by the Compensation Committee of the Board (the “Committee”) and is supported by market data and advice from an independent compensation consultant retained by the Committee, Meridian Compensation Partners, LLC (“Meridian”).
In fiscal 2019, the Company'sCompany’s Named Executive Officers in fiscal 2018. They continuecontinued to be the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the presidents of the Company'sCompany’s two largest operating companies. In February 2018, James P. Ryan, President of Matrix Service Inc., notified the Company of his intent to retire at the end of fiscal 2018. Matrix Service Inc. is one of the Company's principal operating subsidiaries. At that time, the Company appointed Mr Ryan's successor. Mr. Ryan served in a transitional role and remained an executive officer up until his retirement on June 30, 2018.
Summarized below are the highlights of key decisions and actions taken regarding the compensation of our Named Executive Officers in fiscal 2018.2019. These actions were approved by the Committee with advice from Meridian and are consistent with our stated compensation philosophy.
• | Fiscal 2017 Performance Share Units (“PSUs”) Award Payout: The vesting of this award was based on the Company’s relative Total Shareholder Return for fiscal 2017 through the end of fiscal 2019 in comparison to a group of peer companies. The Company’s actual performance was in the 47th percentile, which was close to target performance; therefore, these PSUs vested at 89% of target on August 23, 2019. |
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The following graphs illustrate the allocation of the fiscal 2019 target compensation opportunity for our Chief Executive Officer, Mr. Hewitt, and the weighted average of our other Named Executive Officers:
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We are focused on building and maintaining a sustainable business model that consistently delivers superior returns to our stockholders. To be successful, we must attract, retain and motivate key talent to provide the needed leadership capabilities to develop and execute our business strategy. Our compensation philosophy and approach is designed to support these objectives.
Our compensation philosophy is to provide the opportunity for outstanding compensation when superior performance is demonstrated. This pay-for-performance philosophy is reflected in each aspect of the compensation package for executive officers and other management team members. All components of compensation for executive officers and key management are reviewed periodically to ensure consistency with our compensation philosophy and to verify that the overall level of compensation is competitive. We use the following principles in the design and administration of our executive compensation program:
• | Competitiveness – Our compensation programs are designed to ensure we can attract, motivate and retain the talent needed to lead and grow the business. Targets for base salary, short-term and long-term compensation are generally |
• | Pay for Performance – While we establish target pay levels at or near the median or 50th percentile market levels for target level performance, our plans provide the opportunity for significantly greater rewards for outstanding performance. At the same time, performance that does not meet expectations is not rewarded. |
Our executive compensation program is administered by the Committee. The role of the Committee is to provide oversight and direction to ensure the establishment of executive compensation programs that are competitive in nature, enable us to attract and retain top talent, and align the interests of our executive officers andwith our stockholders.
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The Committee is supported by our Vice President, Strategic Services and AdministrationChief Administrative Officer in the design, review and administration of our executive compensation programs. The Committee engaged Meridian to evaluate executive officer compensation and Company practices in relation to other companies and to provide associated recommendations.
The CEO considers all relevant information and provides recommendations to the Committee regarding compensation for review, discussion and approval for all executive officers with the exception of himself. The Committee establishes CEO compensation. The Committee reviews the performance and approves the compensation of the executive officers based on the CEO’s recommendations, and then reviews the performance and establishes appropriate compensation for the CEO in executive session without the CEO present.
In implementing our compensation philosophy, the Committee also compares our CEO’s total compensation to the total compensation of the other Named Executive Officers. However, the Committee has not established a targeted level of difference between the total compensation of the CEO and the median total compensation level for the next lower tier of management. The Committee also considers internal pay equity among the other Named Executive Officers, and in relation to the next lower tier of management, in order to maintain compensation levels that are consistent with the individual contributions and responsibilities of those officers.
We conducted our advisory vote on executive compensation last year at our 20172018 annual meeting. While this vote was not binding on us, we believe that it is important for our stockholders to have an opportunity to vote on this proposal on an annual basis as a means of expressing their views regarding our executive compensation philosophy, our compensation policies and programs, and our decisions regarding executive compensation, all as disclosed in our proxy statement. The Committee values the opinions of our stockholders and, to the extent there is any significant vote against the compensation of our Named Executive Officers, we will consider our stockholders’ concerns, and the Committee will evaluate whether any actions are necessary to address those concerns.
The Committee has reviewed the voting results from the advisory vote on executive compensation (commonly known as a say-on-pay proposal) conducted at our 20172018 Annual Meeting of Stockholders. At thisthat meeting, nearly 93%98% of the votes cast on the say-on-pay proposal were in favor of our Named Executive Officers'Officers’ compensation as disclosed in our proxy statement for that meeting.statement. The Committee determined that, given the high level of support, no changes to our executive compensation policies and decisions were necessary based on last year’s voting results. The Committee intends to continue making executive compensation decisions with a focus on aligning pay with performance and promoting stockholder value.
The primary elements of our executive compensation program include:
The Compensation Committee engages a compensation consultant on a bi-annual basis to ensure that the Company'sCompany’s compensation package is consistent with that of its competitors. The Committee engaged Meridian in fiscal 20172019 to evaluate the mixelements of targetedtarget compensation and the other incentive programs that we offer. Meridian and the Committee concluded that no formal evaluation was required in fiscal 2018 because the study conducted in fiscal 2017 continued to reflect the current market conditions.appropriate mix of compensation programs. Meridian was engaged exclusively by the Committee and does not provide other services to the Company or senior management. The Committee has assessed the independence of Meridian pursuant to SEC rules and concluded that Meridian'sMeridian’s work for the Committee does not raise any conflict of interest.
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The Committee evaluated the competitiveness of the compensation package offered to our executives in both form and structure. Meridian’s fiscal 20172019 executive compensation practices analysis included a review of general industry survey data and of proxy information and other public filings for the following companies:
Aegion Corporation | KBR Inc. | ||
Argan Inc. | MasTec Inc. | ||
Babcock & Wilcox | Mistras Group Inc. | ||
Dycom Industries Inc. | MYR Group Inc. | ||
EMCOR Group Inc. | Primoris Services Corporation | ||
Granite Construction Inc. | Sterling Construction Company Inc. | ||
Great Lakes Dredge and Dock | Team Inc. | ||
IES Holdings Inc. | |||
Base Salary
Base salary is the foundation of our executive compensation package. Our practice in establishing executive base salary, and that for other managers and employees, is to determine the market median, "or 50
We utilize a market-based job evaluation system to establish and ensure equitable, competitive pay levels throughout the organization. Salary grades and ranges are established by evaluating positions based on the external market data and internal equity. Most of our employees, including the Named Executive Officers, are assigned to a salary grade. Broad ranges of salary are associated with each grade.
Base salary and salary grade also play a factor in determining other short- and long-term incentive compensation awards. Short-and long-term target incentive awards are set at a percentage of base salary.
Consistent with the Committee’s normal practice of reviewing executive compensation, Meridian’s observations and recommendations regarding the competitiveness of executive compensation were presented to the Committee at the August 2018 meeting. The Committee approved salary adjustments, which were based on the Company's fiscal 2017 financialCompany’s compensation philosophy of competitiveness and individual and business performance Mr. Hewitt recommended, and the Committee approved, no changes to the base salaries of Messrs. Montalbano, Cavanah, Ryan and Turner. The Committee also concludedin recognition that no changes should bebase salary increases were made to Mr Hewitt's base salary. Theirin the prior fiscal 2018 base salaries were as follows:
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his base salary relative to our peer companies, Mr. Hewitt recommended a base salary increase of 9.4%, or $40,852. The Committee approved Mr. Hewitt’s recommendation, and Mr. Cavanah’s base salary was increased from $434,148 to $475,000 effective September 1, 2018.
Annual/Short-Term Incentive Compensation
Our annual/short-term incentive compensation plan is designed to offer the opportunity for substantial annual cash incentive awards for delivering outstanding performance. Rewards under our short-term incentive compensation plan are based on overall company, business unit and individual performance, as compared to pre-established objectives that are tied to enhancement of stockholder value. Our short-term incentive compensation objectives are designed to:
The base calculation of incentives is generally tied to objective measures for financial and safety performance. Incentives for executive officers other than the CEO in the form of targeted percentages of base salary are recommended by the CEO and reviewed and approved by the Committee, which is free to reject or revise the CEO’s recommendations. The targeted incentive compensation percentage of base salary for the CEO is determined solely by the Committee in executive session, without the CEO present.
For fiscal 2018,2019, the Committee approved the following key provisions of the annual/short-term incentive compensation plan:
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Incentive targets and actual performance for the Named Executive Officers are as follows:
Threshold | Target | Maximum | |||||||
TRIR | 0.60 | 0.50 | 0.40 |
Threshold | Target | Maximum | |||
TRIR | 0.60 | 0.50 | 0.37 | ||
Quality and depth of the investigation of safety incidents | 70.0% | 80.0% | 90.0% | ||
Safety audit corrective action implementation | 70.0% | 80.0% | 90.0% |
In fiscal 2019, we achieved a consolidated TRIR of 0.59 while Matrix North American Construction (“MNAC”) and Matrix Service Inc. (“MSI”) achieved a TRIR of 0.93 and 0.33, respectively. Based on these results, Messrs. Hewitt, Montalbano and Cavanah earned safety incentives of between threshold and target, Mr. Turner did not earn a safety incentive, and Mr. Updyke earned the maximum safety incentive.
MNAC | MSI | Consolidated | |||||||
(in millions) | |||||||||
Target pre-tax operating income | $ | 21.8 | $ | 25.0 | $ | 46.4 | |||
Actual pre-tax operating income | $ | 14.1 | $ | 27.4 | $ | 37.9 |
Threshold | Target | Maximum | |||
(in millions) | |||||
Pre-tax operating income | $27.6 | $36.9 | $46.1 | ||
Percentage of fiscal 2018 budgeted amount | 75.0% | 100.0% | 125.0% | ||
Percentage of target bonus earned | 50.0% | 90.0% | 150.0% |
Threshold | Target | Maximum | |||
Matrix Service Company | 10.0% | 8.0% | 6.0% | ||
Matrix Service Inc. | 9.0% | 7.0% | 5.0% | ||
Matrix North American Construction | 12.0% | 10.0% | 8.0% |
Based on this safety performance the NEOs earned an award under the safety portion of the short-term incentive plan. Since Mr. Ryan retired June 30, 2018, his award was paid in cash. The award forthese results, Messrs. Hewitt, Montalbano, Cavanah and Turner was paid in the formearned financial incentives of a service-based RSU grant that vests on the one-year anniversarybetween threshold and target while Mr. Updyke earned financial incentives of the August 27, 2018 grant date. Since the awards for Messrs. Hewitt, Montalbano, Cavanahbetween target and Turner contain a service component, they are not considered earned until after the vesting period ends in August of 2019 and, therefore, have been excluded from the Summary Compensation Table. maximum.
Details of the awardscalculated incentives for each NEO, which were approved by the Committee at the August 2019 Compensation Committee Meeting, are as follows:
Name | Safety Incentive ($) | Financial Incentive ($) | Total Incentive ($) | ||||||
John R. Hewitt | 44,000 | 442,509 | 486,509 | ||||||
Joseph F. Montalbano | 21,488 | 216,110 | 237,598 | ||||||
Kevin S. Cavanah | 19,594 | 197,055 | 216,649 | ||||||
Alan R. Updyke | 44,717 | 254,444 | 299,161 | ||||||
Jason W. Turner | — | 145,070 | 145,070 |
Name | Calculated Incentive (1)($) | Restricted Share Units Granted (2)(#) | ||||
John R. Hewitt | 121,440 | 6,081 | ||||
Joseph F. Montalbano | 60,250 | 3,017 | ||||
Kevin S. Cavanah | 52,724 | 2,640 | ||||
James P. Ryan | 49,996 | — | ||||
Jason W. Turner | 38,599 | 1,933 |
Performance measures are established shortly after the beginning of the fiscal year and do not include the impact of any acquisitions, positive or negative, completed within the fiscal year. However, it is anticipated that the Committee would evaluate any acquisitions which may be completed during the fiscal year on a case-by-case basis to determine their impact on the plan and adjust performance measures appropriately. In addition, the Committee has negative discretion with respect to actual payout of annual short term incentive awards and can reduce awards regardless of whether performance targets are achieved.
The Annual/Short-Term Incentive Compensation Plan is reviewed and evaluated periodically to ensure that it meets our objectives and may be modified, discontinued or replaced based on our changing objectives and requirements.
Long-Term Incentive Compensation
The purpose for providing long-term incentive compensation to executive officers is to tie executive rewards directly to the enhancement of long-term stockholder value and Company profitability. Offering the opportunity for executive officers and other key members of management to earn an ownership position in the Company along with a long-term cash incentive enables us to remain competitive and attract, retain and motivate top executive and management talent. We believe that long-term incentive
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awards help to create and maintain a long-term perspective among executive officers and provide a direct link between executive compensation and our long-term growth and profitability. However, we also understand that equity awards create dilution in our earnings per share and therefore, believe that a portion of our long-term incentive compensation should be in the form of cash.
The Committee believes that a combination of service-based RSUs and performance units are the most appropriate forms of equity awards to achieve our stated objectives. RSUs strongly and directly link management and stockholder interests. As a full value award, RSUs are less dilutive to stockholders than stock options, since we are able to issue fewer shares in order to attain the desired level of equity compensation for our executive officers and managers. Under the long-term incentive program, all awards are issued on an annual basis. A portion of the annual award is in the form of service-based RSUs that vest over a specified period of time. Service-based shares are an excellent tool to promote executive officer and management retention. The second portion of the award is in the form of performance units with performance criteria that link the realized value of the
Long-term incentive awards are reviewed and evaluated periodically to ensure that they continue to meet our objectives and may be modified, discontinued or replaced based on the changing objectives and requirements of the Company. The Committee reviewed the long-term incentive plan in August 20172018 in connection with the grant of fiscal 20182019 long-term incentive awards and recommended no significant changes. The Committee'sCommittee’s review carefully considered the Meridian study, trends of our peer companies, compensation objectives of retention and value creation, and the objective of conserving shares available for grant under our equity incentive plan and reducing earnings dilution.
The Committee approved the following structure for the fiscal 20182019 long-term incentive grant for NEOs:
Shareholder Return Goal | Total Shareholder Return | Shares of Common Stock for Each Performance Unit | ||
Threshold | 25th percentile of Peer Group | 0.25 | ||
Above Threshold | 35th percentile of Peer Group | 0.50 | ||
Target | 50th percentile of Peer Group | 1.00 | ||
Above Target | 75th percentile of Peer Group | 1.50 | ||
Maximum | 90th percentile of Peer Group | 2.00 |
In the event the Company achieves a relative TSR in excess of the 75th75th percentile but the actual TSR of the Company is less than zero, the Named Executive Officers will receive 1.5 shares for each performance unit.
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The peer group for the fiscal 20182019 performance unit award was as follows:
Aegion Corporation | KBR Inc. | ||
Argan Inc. | MasTec Inc. | ||
Babcock and Wilcox Enterprises Inc. | McDermott International Inc. | ||
Dycom Industries Inc. | Mistras Group Inc. | ||
EMCOR Group Inc. | MYR Group Inc. | ||
Granite Construction Inc. | Primoris Services Corporation | ||
Great Lakes Dredge and Dock Corporation | Quanta Services Inc. | ||
IES Holdings Inc. | Sterling Construction Company Inc. | ||
Jacobs Engineering Group Inc. | Team Inc. | ||
Grants made during fiscal 20182019 to our Named Executive Officers are shown in the Grants of Plan-Based Awards table under the caption "Executive“Executive Officer Compensation"Compensation”.
Perquisites and Other Benefits
Our executive officers do not receive significant compensation in the form of perquisites or supplemental benefits. In general, our executive officers are eligible to participate in the same retirement and health and welfare plans as all of our other eligible employees. We offer the following benefits to executive officers.
In addition to the company-provided life insurance policies described above, all executive officers, along with other eligible employees and managers, have the option to purchase supplemental life insurance for themselves, their spouses and dependents.
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Change of Control/Severance Agreements
We have entered into Change of Control/Severance Agreements with each of our Named Executive Officers. These agreements are designed to promote stability, continuity and focus for key members of leadership during periods of uncertainty that may be created by change of control situations. Additionally, the use of such agreements is a competitive practice that enhances our ability to attract and retain leadership talent. For further details regarding our Change of Control/Severance Agreements, see the discussion under the caption “Potential Payments Upon Termination or Change of Control.”
Consistent with the principles of responsible oversight, the Company’s Board has adopted a clawback policy, and the Company’s equity award agreements also include a clawback provision. The clawback policy provides that, to the extent permitted by law, if the Board, with the recommendation of the Committee, determines that:
we will seek to recover from the executive officer such compensation, in whole or in part, as we deem appropriate under the circumstances. The Board has sole discretion in determining whether an officer’s conduct has or has not met any particular standard of conduct under law or Company policy.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law on July 21, 2010, the SEC was directed to issue rules requiring the national securities exchanges to amend their listing standards to require listed companies to adopt mandatory clawback policies. The Company anticipates that it will modify its clawback policy to conform to the requirements of any such rules or listing requirements upon their adoption.
Hedging transactions may permit a director, officer or employee to continue to own our securities obtained through employee benefit plans or otherwise, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as our other stockholders. Our Insider Trading Policy specifically prohibits our directors, Named Executive Officers and other employees from purchasing any securities or other financial instruments or engaging in transactions that hedge or offset, or that are designed to hedge or offset, any decrease in the value of any equity securities of the Company that are held by any such person, directly or indirectly. This hedging activities with respectpolicy also applies to family members and entities controlled by our securities.
Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged as collateral for a loan may be sold in foreclosure if the
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We have reviewed our compensation policies and practices for both executives and non-executives as they relate to risk and have determined that they are not reasonably likely to have a material adverse effect on the Company. In reaching this conclusion, we considered the various elements of our compensation program that are designed to help mitigate excessive risk taking, including:
Our compensation program is designed to motivate our Named Executive Officers and other Company officers to achieve business objectives that generate strong stockholder returns and to encourage ethical behaviors.
The Board believes that our executive officers should demonstrate their commitment to, and belief in, the Company’s long-term profitability. Stock ownership more closely aligns our executive officers’ interests and actions with the interests of the Company’s stockholders. Accordingly, each officer is expected to maintain a significant investment in the Company through the ownership of our common stock. See the discussion under the caption “Security Ownership of Certain Beneficial Owners and Management -- Management—Equity Ownership Guidelines” for a description of our guidelines.
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The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-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.
Members of the Compensation Committee:
John W. Gibson, Chairman
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The following tables set forth certain information regarding compensation of the Chief Executive Officer, the Chief Financial Officer, and each of the Company’s three other most highly compensated executive officers who were serving as executive officers at June 30, 20182019 for services in all capacities to the Company and its subsidiaries. The executive officers listed below are referred to collectively as the Named Executive Officers, or “NEOs”.
The following table sets forth information with respect to the total compensation of the Named Executive Officers in fiscal 2019, 2018, 2017, and 2016:
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||
John R. Hewitt Chief Executive Officer | 2019 | 790,385 | (4) | — | 1,942,043 | — | 486,509 | — | 32,537 | 3,251,474 | |||||||||||||||||
2018 | 750,000 | — | 1,595,449 | — | — | — | 29,536 | 2,374,985 | |||||||||||||||||||
2017 | 750,000 | — | 1,462,103 | — | — | — | 27,260 | 2,239,363 | |||||||||||||||||||
Joseph F. Montalbano Chief Operating Officer | 2019 | 516,161 | (4) | — | 725,431 | — | 237,598 | — | 35,324 | 1,514,514 | |||||||||||||||||
2018 | 496,125 | — | 591,028 | — | — | — | 30,665 | 1,117,818 | |||||||||||||||||||
2017 | 491,127 | — | 541,619 | — | — | — | 32,917 | 1,065,663 | |||||||||||||||||||
Kevin S. Cavanah Chief Financial Officer | 2019 | 467,145 | (4) | — | 659,088 | — | 216,649 | — | 25,904 | 1,368,786 | |||||||||||||||||
2018 | 434,148 | — | 517,177 | — | — | — | 23,437 | 974,762 | |||||||||||||||||||
2017 | 430,616 | — | 473,971 | — | — | — | 24,746 | 929,333 | |||||||||||||||||||
Alan R. Updyke President—Matrix Service Inc. | 2019 | 395,254 | (4) | — | 400,642 | — | 299,161 | — | 26,786 | 1,121,843 | |||||||||||||||||
Jason W. Turner President—Matrix North American Construction | 2019 | 411,878 | (4) | — | 418,070 | — | 145,070 | — | 22,420 | 997,438 | |||||||||||||||||
2018 | 395,890 | — | 336,876 | — | — | — | 21,286 | 754,052 | |||||||||||||||||||
2017 | 384,935 | — | 308,584 | — | — | — | 23,249 | 716,768 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) (2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (3) | Total ($) | |||||||||||||||||
John R. Hewitt | 2018 | 750,000 | (4) | — | 1,595,449 | — | — | — | 29,536 | 2,374,985 | ||||||||||||||||
Chief Executive Officer | 2017 | 750,000 | (4) | — | 1,462,103 | — | — | — | 27,260 | 2,239,363 | ||||||||||||||||
2016 | 750,000 | — | 1,352,411 | — | 129,701 | — | 27,111 | 2,259,223 | ||||||||||||||||||
Joseph F. Montalbano | 2018 | 496,125 | (4) | — | 591,028 | — | — | — | 30,665 | 1,117,818 | ||||||||||||||||
Chief Operating Officer | 2017 | 491,127 | (4) | — | 541,619 | — | — | — | 32,917 | 1,065,663 | ||||||||||||||||
2016 | 472,500 | — | 426,020 | — | 53,111 | — | 29,537 | 981,168 | ||||||||||||||||||
Kevin S. Cavanah | 2018 | 434,148 | (4) | — | 517,177 | — | — | — | 23,437 | 974,762 | ||||||||||||||||
Chief Financial Officer | 2017 | 430,616 | (4) | — | 473,971 | — | — | — | 24,746 | 929,333 | ||||||||||||||||
2016 | 417,450 | — | 376,381 | — | 46,925 | — | 23,127 | 863,883 | ||||||||||||||||||
James P. Ryan | 2018 | 421,169 | (4) | — | 358,385 | — | 49,996 | — | 28,179 | 857,729 | ||||||||||||||||
President—Matrix Service | 2017 | 413,143 | (4) | — | 328,539 | — | — | — | 29,546 | 771,228 | ||||||||||||||||
2016 | 378,887 | — | 258,325 | — | 39,389 | — | 27,630 | 704,231 | ||||||||||||||||||
Jason W. Turner | 2018 | 395,890 | (4) | — | 336,876 | — | — | — | 21,286 | 754,052 | ||||||||||||||||
President—Matrix North | 2017 | 384,935 | (4) | — | 308,584 | — | — | — | 23,249 | 716,768 | ||||||||||||||||
American Construction | 2016 | 344,100 | — | 248,193 | — | 33,550 | — | 21,072 | 646,915 |
(1) | The amounts shown represent the grant date fair value for awards of RSUs and performance units granted during the period determined in accordance with FASB Accounting Standards Codification ASC Topic 718 – Compensation – Stock Compensation |
(2) | Represents amounts payable to the Named Executive Officer under the annual/short-term incentive compensation plan |
(3) | Represents amounts paid by us on behalf of the Named Executive Officer for life insurance and disability premiums and matching contributions to the Named Executive Officer’s account in our qualified 401(k) plan. Life insurance and disability premiums in fiscal |
(4) | The base salaries of Messrs. Hewitt, Montalbano, Cavanah, |
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The following table sets forth information with respect to grants of plan-based awards in fiscal 20182019 to the Named Executive Officers:
Estimated Future Payouts Under Non-equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | All Other Stock Awards: Number of shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(3) | ||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||
John R. Hewitt | 8/27/2018 | 400,000 | 800,000 | 1,600,000 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||
8/27/2018 | 333,330 | 666,660 | 999,990 | (5) | — | — | — | — | — | — | — | ||||||||||||||||||||||
8/27/2018 | — | — | — | 8,346 | 33,383 | 66,766 | 39,464 | — | — | 1,942,043 | |||||||||||||||||||||||
Joseph F. Montalbano | 8/27/2018 | 195,349 | 390,698 | 781,396 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||
8/27/2018 | 121,550 | 243,099 | 364,649 | (5) | — | — | — | — | — | — | — | ||||||||||||||||||||||
8/27/2018 | — | — | — | 3,043 | 12,173 | 24,346 | 15,190 | — | — | 725,431 | |||||||||||||||||||||||
Kevin S. Cavanah | 8/27/2018 | 178,126 | 356,251 | 712,502 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||
8/27/2018 | 110,832 | 221,664 | 332,496 | (5) | — | — | — | — | — | — | — | ||||||||||||||||||||||
8/27/2018 | — | — | — | 2,775 | 11,100 | 22,200 | 13,740 | — | — | 659,088 | |||||||||||||||||||||||
Alan R. Updyke | 8/27/2018 | 149,055 | 298,110 | 596,220 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||
8/27/2018 | 66,246 | 132,492 | 198,738 | (5) | — | — | — | — | — | — | — | ||||||||||||||||||||||
8/27/2018 | — | — | — | 1,659 | 6,635 | 13,270 | 8,522 | — | — | 400,642 | |||||||||||||||||||||||
Jason W. Turner | 8/27/2018 | 155,882 | 311,764 | 623,528 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||
8/27/2018 | 69,280 | 138,560 | 207,840 | (5) | — | — | — | — | — | — | — | ||||||||||||||||||||||
8/27/2018 | — | — | — | 1,735 | 6,938 | 13,876 | 8,871 | — | — | 418,070 |
Estimated Future Payouts Under Non-equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | All Other Stock Awards: Number of shares of Stock or Units (#) (2) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (3) | |||||||||||||||||||||||||||||||
Name | Grant Date | 50% of Budget ($) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||
John R. Hewitt | 8/29/2017 | 150,000 | 450,000 | 795,000 | 1,125,000 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||||
8/29/2017 | 312,500 | 625,000 | 937,500 | (5) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/29/2017 | — | — | — | 14,205 | 56,818 | 113,636 | 56,818 | — | — | 1,595,449 | ||||||||||||||||||||||||||
Joseph F. Montalbano | 8/29/2017 | 117,500 | 244,798 | 407,345 | 558,141 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||||
8/29/2017 | 115,763 | 231,525 | 347,288 | (5) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/29/2017 | — | — | — | 5,262 | 21,048 | 42,096 | 21,048 | — | — | 591,028 | ||||||||||||||||||||||||||
Kevin S. Cavanah | 8/29/2017 | 117,500 | 221,556 | 360,861 | 488,417 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||||
8/29/2017 | 101,301 | 202,602 | 303,903 | (5) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/29/2017 | — | — | — | 4,605 | 18,418 | 36,836 | 18,418 | — | — | 517,177 | ||||||||||||||||||||||||||
James P. Ryan | 8/29/2017 | 117,500 | 216,689 | 351,127 | 473,816 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||||
8/29/2017 | 70,217 | 140,433 | 210,650 | (5) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/29/2017 | — | — | — | 3,191 | 12,763 | 25,526 | 12,763 | — | — | 358,385 | ||||||||||||||||||||||||||
Jason W. Turner | 8/29/2017 | 117,500 | 207,209 | 332,168 | 445,377 | (4) | — | — | — | — | — | — | — | |||||||||||||||||||||||
8/29/2017 | 65,953 | 131,905 | 197,858 | (5) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/29/2017 | — | — | — | 2,999 | 11,997 | 23,994 | 11,997 | — | — | 336,876 |
(1) | Represents the number of shares which may be issued pursuant to fiscal |
(2) | Amounts shown represent service-based RSUs granted to the Named Executive Officers in fiscal |
(3) | Amounts shown are calculated based upon the grant date fair value calculated in accordance with ASC718. The grant date fair value of the service-based RSUs is calculated by multiplying the number of RSUs awarded by the closing stock price on the date of grant. The grant date fair value of the performance units is calculated using a Monte Carlo model. The model estimated the fair value of the award based on approximately 100,000 simulations of the future prices of the |
Service-Based Awards | Performance-Based Awards | |||||||||||||||||||||||
Name | Time-Based Awards (#) | Safety Incentive Awards (#) | Value per Share ($) | Grant Date Fair Value ($) | Shares at Target (#) | Value per Share ($) | Grant Date Fair Value ($) | Total Grant Date Fair Value ($) | ||||||||||||||||
John R. Hewitt | 33,383 | 6,081 | 21.60 | 852,422 | 33,383 | 32.64 | 1,089,621 | 1,942,043 | ||||||||||||||||
Joseph F. Montalbano | 12,173 | 3,017 | 21.60 | 328,104 | 12,173 | 32.64 | 397,327 | 725,431 | ||||||||||||||||
Kevin S. Cavanah | 11,100 | 2,640 | 21.60 | 296,784 | 11,100 | 32.64 | 362,304 | 659,088 | ||||||||||||||||
Alan R. Updyke | 6,635 | 1,887 | 21.60 | 184,075 | 6,635 | 32.64 | 216,567 | 400,642 | ||||||||||||||||
Jason W. Turner | 6,938 | 1,933 | 21.60 | 191,614 | 6,938 | 32.64 | 226,456 | 418,070 |
Service-Based Awards | Performance-Based Awards | ||||||||||||||||||||
Name | Shares (#) | Value per Share ($) | Grant Date Fair Value ($) | Shares at target (#) | Value per Share ($) | Grant Date Fair Value ($) | Total Grant Date Fair Value ($) | ||||||||||||||
John R. Hewitt | 56,818 | 11.45 | 650,566 | 56,818 | 16.63 | 944,883 | 1,595,449 | ||||||||||||||
Joseph F. Montalbano | 21,048 | 11.45 | 241,000 | 21,048 | 16.63 | 350,028 | 591,028 | ||||||||||||||
Kevin S. Cavanah | 18,418 | 11.45 | 210,886 | 18,418 | 16.63 | 306,291 | 517,177 | ||||||||||||||
James P. Ryan | 12,763 | 11.45 | 146,136 | 12,763 | 16.63 | 212,249 | 358,385 | ||||||||||||||
Jason W. Turner | 11,997 | 11.45 | 137,366 | 11,997 | 16.63 | 199,510 | 336,876 |
(4) | The amounts shown are the potential cash incentive compensation awards for each Named Executive Officer under our annual/short-term incentive compensation plan |
(5) | Amounts shown represent the potential cash awards for each Named Executive Officer under the cash portion of our fiscal |
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payout can range from 0% to 150% of the target payout and will be based on average Return on Invested Capital for fiscal 2019 and fiscal 2020. Actual payouts for the applicable fiscal year are reported in the Summary Compensation Table as a portion of the amount shown under the column “Non-Equity Incentive Plan Compensation.”
The following table sets forth certain information with respect to outstanding equity awards held by the Named Executive Officers as of June 30, 2018:
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||
John R. Hewitt | — | — | — | — | 108,370 | 2,195,576 | 213,007 | 4,315,522 | ||||||||||||||||
Joseph F. Montalbano | — | — | — | — | 40,273 | 815,931 | 78,520 | 1,590,815 | ||||||||||||||||
Kevin S. Cavanah | 16,850 | — | 10.19 | 11/17/2021 | 35,710 | 723,485 | 69,606 | 1,410,218 | ||||||||||||||||
Alan R. Updyke | — | — | — | — | 20,599 | 417,336 | 29,086 | 589,282 | ||||||||||||||||
Jason W. Turner | — | — | — | — | 23,197 | 469,971 | 44,751 | 906,655 |
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) | ||||||||||||||||
John R. Hewitt | — | — | — | — | 105,856 | 1,942,458 | 122,795 | 2,253,288 | ||||||||||||||||
Joseph F. Montalbano | — | — | — | — | 38,017 | 697,612 | 45,489 | 834,723 | ||||||||||||||||
Kevin S. Cavanah | 16,850 | — | 10.19 | 11/17/2021 | 33,325 | 611,514 | 39,805 | 730,422 | ||||||||||||||||
James P. Ryan | — | — | — | — | 23,054 | 423,041 | 27,584 | 506,166 | ||||||||||||||||
Jason W. Turner | — | — | — | — | 21,752 | 399,149 | 25,927 | 475,760 |
(1) | Based on the closing price of our common stock on June |
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The stock awards vest according to the following schedule:
Number of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | |||||||||||
Name | Shares | Vest Date | Shares | Vest Date | ||||||||
John R. Hewitt | 9,159 | 8/23/2019 | 32,605 | (1) | 8/23/2019 | |||||||
7,976 | 8/25/2019 | 113,636 | (1) | 8/29/2020 | ||||||||
8,346 | 8/27/2019 | 66,766 | (1) | 8/27/2021 | ||||||||
6,081 | 8/27/2019 | |||||||||||
14,205 | 8/29/2019 | |||||||||||
9,158 | 8/23/2020 | |||||||||||
8,346 | 8/27/2020 | |||||||||||
14,204 | 8/29/2020 | |||||||||||
8,346 | 8/27/2021 | |||||||||||
14,204 | 8/29/2021 | |||||||||||
8,345 | 8/27/2022 | |||||||||||
Joseph F. Montalbano | 3,393 | 8/23/2019 | 12,078 | (1) | 8/23/2019 | |||||||
2,512 | 8/25/2019 | 42,096 | (1) | 8/29/2020 | ||||||||
3,044 | 8/27/2019 | 24,346 | (1) | 8/27/2021 | ||||||||
3,017 | 8/27/2019 | |||||||||||
5,262 | 8/29/2019 | |||||||||||
3,392 | 8/23/2020 | |||||||||||
3,043 | 8/27/2020 | |||||||||||
5,262 | 8/29/2020 | |||||||||||
3,043 | 8/27/2021 | |||||||||||
5,262 | 8/29/2021 | |||||||||||
3,043 | 8/27/2022 | |||||||||||
Kevin S. Cavanah | 2,969 | 8/23/2019 | 10,570 | (1) | 8/23/2019 | |||||||
2,219 | 8/25/2019 | 36,836 | (1) | 8/29/2020 | ||||||||
2,775 | 8/27/2019 | 22,200 | (1) | 8/27/2021 | ||||||||
2,640 | 8/27/2019 | |||||||||||
4,605 | 8/29/2019 | |||||||||||
2,969 | 8/23/2020 | |||||||||||
2,775 | 8/27/2020 | |||||||||||
4,604 | 8/29/2020 | |||||||||||
2,775 | 8/27/2021 | |||||||||||
4,604 | 8/29/2021 | |||||||||||
2,775 | 8/27/2022 | |||||||||||
Alan R. Updyke | 1,229 | 8/23/2019 | 4,376 | (1) | 8/23/2019 | |||||||
1,039 | 8/25/2019 | 11,440 | (1) | 8/29/2020 | ||||||||
1,659 | 8/27/2019 | 13,270 | (1) | 8/27/2021 | ||||||||
1,887 | 8/27/2019 | |||||||||||
2,860 | 8/29/2019 | |||||||||||
1,229 | 8/23/2020 | |||||||||||
1,659 | 8/27/2020 | |||||||||||
2,860 | 8/29/2020 | |||||||||||
1,659 | 8/27/2021 | |||||||||||
2,860 | 8/29/2021 | |||||||||||
1,658 | 8/27/2022 | |||||||||||
Jason W. Turner | 1,933 | 8/23/2019 | 6,881 | (1) | 8/23/2019 | |||||||
1,463 | 8/25/2019 | 23,994 | (1) | 8/29/2020 | ||||||||
1,735 | 8/27/2019 | 13,876 | (1) | 8/27/2021 | ||||||||
1,933 | 8/27/2019 | |||||||||||
2,999 | 8/29/2019 | |||||||||||
1,933 | 8/23/2020 | |||||||||||
1,735 | 8/27/2020 | |||||||||||
2,999 | 8/29/2020 | |||||||||||
1,734 | 8/27/2021 | |||||||||||
2,999 | 8/29/2021 | |||||||||||
1,734 | 8/27/2022 |
Number of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | ||||||||||
Name | Shares | Vest Date | Shares | Vest Date | |||||||
John R. Hewitt | 9,159 | 8/23/2018 | — | (1 | ) | 8/25/2018 | |||||
7,976 | 8/25/2018 | 9,159 | (1 | ) | 8/23/2019 | ||||||
5,610 | 8/26/2018 | 113,636 | (1 | ) | 8/29/2020 | ||||||
14,205 | 8/29/2018 | ||||||||||
9,159 | 8/23/2019 | ||||||||||
7,976 | 8/25/2019 | ||||||||||
14,205 | 8/26/2019 | ||||||||||
9,158 | 8/23/2020 | ||||||||||
14,204 | 8/29/2020 | ||||||||||
14,204 | 8/29/2021 | ||||||||||
Joseph F. Montalbano | 3,393 | 8/23/2018 | — | (1 | ) | 8/25/2018 | |||||
2,512 | 8/25/2018 | 3,393 | (1 | ) | 8/23/2019 | ||||||
1,767 | 8/26/2018 | 42,096 | (1 | ) | 8/29/2020 | ||||||
5,262 | 8/29/2018 | ||||||||||
3,393 | 8/23/2019 | ||||||||||
2,512 | 8/25/2019 | ||||||||||
5,262 | 8/29/2019 | ||||||||||
3,392 | 8/23/2020 | ||||||||||
5,262 | 8/29/2020 | ||||||||||
5,262 | 8/29/2021 | ||||||||||
Kevin S. Cavanah | 2,969 | 8/23/2018 | — | (1 | ) | 8/25/2018 | |||||
2,220 | 8/25/2018 | 2,969 | (1 | ) | 8/23/2019 | ||||||
1,561 | 8/26/2018 | 36,836 | (1 | ) | 8/29/2020 | ||||||
4,605 | 8/29/2018 | ||||||||||
2,969 | 8/23/2019 | ||||||||||
2,219 | 8/25/2019 | ||||||||||
4,605 | 8/29/2019 | ||||||||||
2,969 | 8/23/2020 | ||||||||||
4,604 | 8/29/2020 | ||||||||||
4,604 | 8/29/2021 | ||||||||||
James P. Ryan | 2,058 | 8/23/2018 | — | (1 | ) | 8/25/2018 | |||||
1,523 | 8/25/2018 | 2,058 | (1 | ) | 8/23/2019 | ||||||
1,071 | 8/26/2018 | 25,526 | (1 | ) | 8/29/2020 | ||||||
3,191 | 8/29/2018 | ||||||||||
2,058 | 8/23/2019 | ||||||||||
1,523 | 8/25/2019 | ||||||||||
3,191 | 8/29/2019 | ||||||||||
2,058 | 8/23/2020 | ||||||||||
3,191 | 8/29/2020 | ||||||||||
3,190 | 8/29/2021 | ||||||||||
Jason W. Turner | 1,933 | 8/23/2018 | — | (1 | ) | 8/25/2018 | |||||
1,464 | 8/25/2018 | 1,933 | (1 | ) | 8/23/2019 | ||||||
1,029 | 8/26/2018 | 23,994 | (1 | ) | 8/29/2020 | ||||||
3,000 | 8/29/2018 | ||||||||||
1,933 | 8/23/2019 | ||||||||||
1,463 | 8/25/2019 | ||||||||||
2,999 | 8/29/2019 | ||||||||||
1,933 | 8/23/2020 | ||||||||||
2,999 | 8/29/2020 | ||||||||||
2,999 | 8/29/2021 |
(1) | Represents fiscal |
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common stock upon vesting. The number of shares of common stock received for each performance unit will vary from zero to two based on the Total Shareholder Return on the Company’s common stock when compared to Total Shareholder Return on common stock of peer companies selected by the Compensation Committee of the Board. The Total Shareholder Return Goals are as follows:
Shareholder Return Goal | Total Shareholder Return |
Shares of Common Stock for Each Performance Unit | ||||||
Threshold | 25th percentile of Peer Group | 0.25 | ||||
Above Threshold | 35th percentile of Peer Group | 0.50 | ||||
Target | 50th percentile of Peer Group | 1.00 | ||||
Above Target | 75th percentile of Peer Group | 1.50 | ||||
Maximum | 90th percentile of Peer Group | 2.00 |
The performance period (fiscal 2016, 2017, 2018 and 2018)2019) for the fiscal 20162017 performance unit award has been completed. In August 2018,2019, the Compensation Committee certified that the Company’s relative Total Shareholder Return for the performance period was below the amount requiredresulted in an award of 0.89 shares for a Threshold payout.each performance unit granted. Accordingly, the number of shares presented for the fiscal 20162017 performance unit award is zero.equal to the number of shares actually earned for that period. Based on the Company's relative Total Shareholder Return for fiscal 2017 and 2018 (two-thirds of the performance period for the fiscal 2017 award), the fiscal 2017 award is presented at the Threshold performance level. Based on the Company'sCompany’s relative Total Shareholder Return for fiscal 2018 (one-thirdand 2019 (two-thirds of the performance period for the fiscal 2018 award), the fiscal 2018 award is presented at the Maximum performance level.
The following table sets forth information with respect to the value realized by our Named Executive Officers upon the exercise of stock options and the vesting of RSUs in fiscal 2018.
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||
John R. Hewitt | — | — | 36,950 | 789,901 | ||||||||
Joseph F. Montalbano | — | — | 12,934 | 276,518 | ||||||||
Kevin S. Cavanah | — | — | 11,355 | 242,759 | ||||||||
Alan R. Updyke | — | — | 5,859 | 125,203 | ||||||||
Jason W. Turner | — | — | 7,426 | 158,760 |
Fiscal 2018 | ||||||||||||
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | ||||||||
John R. Hewitt | — | — | 29,020 | 299,137 | ||||||||
Joseph F. Montalbano | 21,050 | 196,380 | 9,939 | 102,336 | ||||||||
Kevin S. Cavanah | — | — | 8,716 | 89,746 | ||||||||
James P. Ryan | — | — | 6,537 | 67,386 | ||||||||
Jason W. Turner | 8,000 | 73,228 | 6,392 | 73,697 |
(1) | The value realized is the difference between the option exercise price and the sales price of the common stock on the date of exercise, multiplied by the number of shares for which the options were exercised. |
(2) | The value realized is the closing sales price of the common stock on the vesting date, multiplied by the number of shares for which the restrictions lapsed. The stock awards that vested in fiscal |
Service-Based Awards | Performance-Based Awards | Total | ||||||||||||||||
Name | Shares (#) | Value ($) | Shares (#) | Value ($) | Shares (#) | Value ($) | ||||||||||||
John R. Hewitt | 36,950 | 789,901 | — | — | 36,950 | 789,901 | ||||||||||||
Joseph F. Montalbano | 12,934 | 276,518 | — | — | 12,934 | 276,518 | ||||||||||||
Kevin S. Cavanah | 11,355 | 242,759 | — | — | 11,355 | 242,759 | ||||||||||||
Alan R. Updyke | 5,859 | 125,203 | — | — | 5,859 | 125,203 | ||||||||||||
Jason W. Turner | 7,426 | 158,760 | — | — | 7,426 | 158,760 |
Service-Based Awards | Performance-Based Awards | Total | ||||||||||||||||
Name | Shares (#) | Value ($) | Shares (#) | Value ($) | Shares (#) | Value ($) | ||||||||||||
John R. Hewitt | 29,020 | 299,137 | — | — | 29,020 | 299,137 | ||||||||||||
Joseph F. Montalbano | 9,939 | 102,336 | — | — | 9,939 | 102,336 | ||||||||||||
Kevin S. Cavanah | 8,716 | 89,746 | — | — | 8,716 | 89,746 | ||||||||||||
James P. Ryan | 6,537 | 67,386 | — | — | 6,537 | 67,386 | ||||||||||||
Jason W. Turner | 6,392 | 73,697 | — | — | 6,392 | 73,697 |
The performance based awards that did not vest in fiscal 20182019 were the fiscal 20152016 performance unit awards that were based on relative Total Shareholder Return from fiscal 20152016 through the end of fiscal 2017. The Company's2018. Based on the Company’s performance over the vesting period, was in the 19th percentile; therefore, no payout was earned.
We have entered into Change of Control/Severance Agreements with Messrs. Hewitt, Cavanah, Montalbano, Ryan and Turner.all of our NEOs. These agreements are designed to promote stability, continuity and focus for key members of leadership during periods of uncertainty that may be created by change of control situations. Additionally, the use of such agreements is a competitive practice that enhances our ability to attract and retain leadership talent.
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Under these agreements, payment of benefits may occur under two circumstances:
• | If we experience a “Change of Control” and the executive suffers an “Adverse Event” or is terminated without “Cause,” either on the date of the Change of Control or within 24 months following the Change of Control date; or |
“Change of Control"Control” means (i) the acquisition by any "person"“person” or "group"“group” (as defined pursuant to Section 13(d) under the Securities Exchange Act) of "beneficial ownership"“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act) of in excess of 35% of the combined voting power of the outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Voting Securities"“Voting Securities”); (ii) during any one (1) year period, individuals who at the beginning of such period constituted the Board of the Company (the "Board"“Board”) (together with any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors of the Company then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved (but excluding, for purposes of this definition, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) cease for any reason to constitute a majority of the members of the Board; (iii) consummation of a merger, consolidation, recapitalization or reorganization of the Company, other than a merger, consolidation, recapitalization or reorganization which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent, either by remaining outstanding or by being converted into voting stock of the surviving entity (or if the surviving entity is a subsidiary of another entity, then of the parent entity of such surviving entity), more than fifty percent (50%) of the total voting power represented by the voting stock of the surviving entity (or parent entity) outstanding immediately after such merger, consolidation, recapitalization or reorganization; (iv) a "change“change in the ownership of a substantial portion of the assets"assets” of the Company as these terms are defined under Code § 409A(a)(2)(A)(v) and Treasury Regulations § 1.409A-3(g)(5) or other then existing and applicable Treasury Regulations promulgated under Code § 409A that define the terms "change“change of control"control” for deferred compensation arrangements or (v) the Company'sCompany’s stockholders approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of related transactions) of all or substantially all of the Company’s assets to any Person.
“Cause” means, with reference to a severance event, that the executive has been severed from employment with the Company because of the executive’s theft of Company property, embezzlement or dishonesty that results in harm to the Company; continued gross or willful neglect of his or her job responsibilities after receiving written warnings regarding such neglect from the Company; conviction of a felony or pleading
nolo contendere to a felony charged under state or federal law; or willful violation of Company policy. A determination by the Company’s Board that an event constituting “Cause” under this Agreement has occurred is binding upon the Company and the executive.“Adverse Event” means that the executive has experienced an event that has a material adverse impact on the executive’s job position, responsibilities, duties, authorities, compensation or opportunities within the Company. An Adverse Event shall be considered “material” when: (i) the executive experiences any reduction in base salary; (ii) the executive experiences a reduction in salary range or opportunity for increases in salary; (iii) the executive experiences a reduction in incentive compensation range or opportunity; (iv) there is a material reduction in the executive’s executive benefits or perquisites; (v) the executive is reassigned to a position or role with a lower salary range, salary opportunity, incentive range or incentive opportunity; or (vi) the executive experiences a material reduction in responsibilities.
In the event payment of benefits is triggered under these agreements, the executive officer will be paid in the manner outlined below. All benefits paid under these agreements are conditioned upon the executive executing a non-interference, non-solicitation, waiver and release of claims and confidentiality agreement
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in a form satisfactory to us. Failure to execute such an agreement prior to the payment date is considered an absolute forfeiture of the severance benefit. In the event an executive officer is terminated for Cause, all benefits and payments under the agreement are forfeited.
In the event an executive suffers an Adverse Event or is terminated from employment for reasons other than Cause, each within 24 months of a Change of Control, benefits are paid as follows:
In the absence of a Change of Control, in the event an executive is terminated from employment for reasons other than Cause, benefits are paid as follows:
We have also entered into Change of Control Agreements with other executive officers and key members of management. These agreements are designed to promote stability, continuity and focus for key personnel during periods of uncertainty that may be created by potential change of control situations. We seek to offer some security and protection when asking officers and managers to remain engaged through uncertain times.
Under these agreements, payment of benefits occurs in the event of a Change of Control and the executive officer/manager has suffered an Adverse Event or been terminated from employment for reasons other than Cause, either on the date of the Change of Control or within six months of the Change of Control date. There is no general severance clause in these agreements.
In the event payment of benefits is triggered under these agreements, the executive officer/manager will be paid an amount equal to one year of base salary. In addition, all equity awards immediately vest and all restrictions on such benefits lapse. All benefits paid under these agreements are conditional upon the executive officer/manager executing a non-interference, non-solicitation, waiver and release of claims and confidentiality agreement in a form satisfactory to us. Failure to execute such an agreement prior to the payment date will be considered an absolute forfeiture of the severance benefit. In the event an executive officer/manager is terminated for Cause, all benefits and payments under the agreement are forfeited.
Benefits will be paid in the calendar year the triggering event occurs and, generally, within thirty days of the date of the triggering event. In no case shall the payment of the severance benefits be paid later than March 15 following the calendar year in which the event occurred.
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The following table shows potential payments to our Named Executive Officers under existing contracts, agreements, plans or arrangements, whether written or unwritten for various scenarios involving a termination of each of such Named Executive Officers, assuming a June 30, 20182019 termination date and, where applicable, using the closing price of our common stock on June 29, 201828, 2019 of $18.35.$20.26. These amounts are estimates only. The actual amounts to be paid out can only be determined at the time of such executive officer’s separation from us.
Change of Control with Adverse Event or Termination for Reasons Other than Cause | Termination by the Company at any Time for Reasons Other than Cause | Voluntary Termination | Retirement | Death, Disability or Change of Control (No Adverse Event) | |||||||||||||||||||||||||||||||||||
Name | Salary Severance ($)(1) | Non-Equity Incentive Plan Severance ($)(2) | Value of Stock Options That Would Vest ($)(3) | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($) (4) | Salary Severance ($)(5) | Non- Equity Incentive Plan Severance ($)(6) | Value of Stock Options That Would Vest ($)(3) | Value of RSUs and Performance Units for Which Restrictions Would Lapse ($) | No Contractual Benefits | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse(7) | Value of Stock Options That Would Vest ($)(3) | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($)(4) | Maximum Potential Payments | ||||||||||||||||||||||||||
John R. Hewitt | 1,600,000 | 162,170 | — | 6,056,928 | 800,000 | 800,000 | — | — | — | — | — | 6,056,928 | 7,819,098 | ||||||||||||||||||||||||||
Joseph F. Montalbano | 1,041,862 | 79,199 | — | 2,238,559 | 520,931 | 79,199 | — | — | — | 1,156,631 | — | 2,238,559 | 3,359,620 | ||||||||||||||||||||||||||
Kevin S. Cavanah | 950,000 | 72,216 | — | 1,986,391 | 475,000 | 72,216 | — | — | — | — | — | 1,986,391 | 3,008,607 | ||||||||||||||||||||||||||
Alan R. Updyke | 397,480 | 99,720 | — | 962,677 | 397,480 | 99,720 | — | — | — | — | — | 962,677 | 1,459,877 | ||||||||||||||||||||||||||
Jason W. Turner | 623,528 | 48,357 | — | 1,280,767 | 415,685 | 48,357 | — | — | — | — | — | 1,280,767 | 1,952,652 |
Change of Control with Adverse Event or Termination for Reasons Other than Cause | Termination by the Company at any Time for Reasons Other than Cause | Voluntary Termination | Retirement | Death, Disability or Change of Control (No Adverse Event) | |||||||||||||||||||||||||||||||||||
Name | Salary Severance ($) (1) | Non-Equity Incentive Plan Severance ($) (2) | Value of Stock Options That Would Vest ($) (3) | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($) (4) | Salary Severance ($) (5) | Non-Equity Incentive Plan Severance ($) (6) | Value of Stock Options That Would Vest ($) (3) | Value of RSUs and Performance Units for Which Restrictions Would Lapse ($) | No Contractual Benefits | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse (7) | Value of Stock Options That Would Vest ($) (3) | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($) (4) | Maximum Potential Payments | ||||||||||||||||||||||||||
John R. Hewitt | 1,500,000 | 43,234 | — | 5,492,753 | 750,000 | 750,000 | — | — | — | — | — | 5,492,753 | 7,035,987 | ||||||||||||||||||||||||||
Joseph F. Montalbano | 992,250 | 17,704 | — | 1,980,336 | 496,125 | 17,704 | — | — | — | 947,454 | — | 1,980,336 | 2,990,290 | ||||||||||||||||||||||||||
Kevin S. Cavanah | 868,296 | 15,642 | — | 1,735,540 | 434,148 | 15,642 | — | — | — | — | — | 1,735,540 | 2,619,478 | ||||||||||||||||||||||||||
James P. Ryan | 631,754 | 29,795 | — | 1,200,945 | 421,169 | 29,795 | — | 920,124 | — | — | — | 1,200,945 | 1,862,494 | ||||||||||||||||||||||||||
Jason W. Turner | 593,835 | 11,183 | — | 1,132,483 | 395,890 | 11,183 | — | — | — | — | — | 1,132,483 | 1,737,501 |
(1) | Represents payment of one year of base salary for Mr. Updyke, one and one-half years of base salary for Mr. Turner or two years of base salary for Messrs. Hewitt, Montalbano and Cavanah for the event specified based on base salary as of June 30, |
(2) | Represents payment of non-equity incentive severance for the event specified based on the average annual bonus compensation paid to the executive in the previous three calendar years. |
(3) | Represents the value the Named Executive Officer would realize |
(4) | Represents the value the Named Executive Officer would realize upon the lapsing of restrictions on RSUs, performance units and cash LTI awards due to the specified event. The value shown is the number of unvested RSUs and performance units, assuming a target performance level, at June 30, |
(5) | Represents payment of one year of base salary for the event specified based on base salary as of June 30, |
(6) | Represents 100% of annual salary for Mr. Hewitt. For Messrs. Montalbano, Cavanah, |
(7) | Represents the value Mr. Montalbano would realize |
There are no other agreements, arrangements or plans that entitle the Named Executive Officers to severance, perquisites or other enhanced benefits upon their termination of employment. Any agreement to provide such other payments or benefits to a terminating executive would be at the discretion of the Compensation Committee.
For the year ended June 30, 2018,2019, our last completed fiscal year:
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, the methodology and the material assumptions, adjustments, and estimates that we used are described below.
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We determined that, as of June 30, 2018, our employee population consisted of 4,397 individuals working at the Company and its consolidated subsidiaries, 4,167 of whom were U.S. employees and 230 of whom were non-U.S. employees.
As permitted under SEC rules, for purposes of identifying our median employee, we excluded 32 non-U.S. employees, or approximately 0.7% of our total employee population. Nine of the excluded employees were located in Australia, and 23 were located in South Korea. After this adjustment, our employee population consisted of 4,365 individuals.
Per Item 402(u) of Regulation S-K, a registrant is required to identify its median employee only once every three years provided that there has been no change in its employee population or employee compensation arrangements that it reasonably believes would result in a significant change to its pay ratio disclosure. For this year’s pay ratio disclosure, we intended to use the same median employee identified in June 2018. However, we believe it is no longer appropriate to use the original median employee as that median employee was promoted and received a 19% increase in total compensation. Instead we elected to use another employee from June 30, 2018, whose compensation is substantially similar to the original median employee based on the compensation measure used to select the original median employee.
Using a consistently applied compensation measure, which included base pay, overtime, and short-term incentives but excluded the value of health and welfare benefits, we ranked our employees from the highest paid to the lowest paid. We reasonably determined that the employee at the midpoint had anomalous characteristics (employed less than half of the year); therefore, we selected a substitute employee near the median with substantially similar compensation (using our consistently applied compensation measure) to the originally identified employee. Our employee population was evaluated as of June 30, 2018, and reflects compensation paid from July 1, 2017 through June 30, 2018. We applied a Canadian to U.S. dollar exchange rate to the compensation elements paid in Canadian currency to our Canadian employees. We did not use any cost of living adjustments.
Where allowed under SEC rules, we have annualized compensation through June 30, 2018 for employees newly hired after July 1, 2017.
Based on the above determination, our median employee'semployee’s total annual compensation (calculated in accordance with Item 402(c) of Regulation S-K) was $85,291.$88,688. Our CEO'sCEO’s total annual compensation (calculated in accordance with Item 402(c) of Regulation S-K and as reported in the Summary Compensation Table) was $2,374,985.$3,251,474. The resulting ratio was 28:37:1. This ratio is a reasonable estimate calculated in a manner consistent with SEC rules using the data and assumptions summarized above. The SEC rules for identifying the median compensated 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 ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, and Rule 14a-21 promulgated thereunder, we are seeking an advisory vote from our stockholders to approve our Named Executive Officer compensation, as set forth below.
We are asking for stockholder approval of the compensation of our Named Executive Officers as disclosed in this proxy statement in accordance with SEC rules, which disclosures include the disclosures under the caption “Compensation Discussion and Analysis,” the compensation tables and the narrative discussion accompanying the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the policies and practices described in this proxy statement. We are open to receiving feedback from stockholders on executive compensation and currently provide stockholders with the opportunity to cast an advisory vote to approve the compensation of our Named Executive Officers every year.
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As discussed under the heading “Compensation Discussion and Analysis,” our executive compensation and benefit programs are designed to attract, motivate and retain a talented management team and to appropriately reward individual contributions to the achievement of our strategic goals. The Board believes this approach establishes a solid alignment of our executives’ and stockholders’ interests.
We use the following principles in the design and administration of our executive compensation program:
• | Competitiveness – Our compensation programs are designed to ensure we can attract, motivate and retain the talent needed to lead and grow the business. Targets for base salary, short-term and long-term compensation are generally based on median (50th percentile) market levels. |
• | Pay for Performance – While we establish target pay levels at or near the median or 50th percentile market levels for target level performance, our plans provide the opportunity for significantly greater rewards for outstanding performance. At the same time, performance that does not meet expectations is not rewarded. |
Approval of this advisory vote requires the affirmative vote of the majority of shares present in person or by proxy at the Annual Meeting and entitled to vote for the adoption of this proposal. The Board unanimously recommends a vote “For” the approval of the compensation of our Named Executive Officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC.
The Board welcomes our stockholders’ views on this subject, and will carefully consider the outcome of this vote. However, as an advisory vote, the outcome is not binding on us or the Board.
The son of James H. Miller, an independent member of our Board, is employed by a subsidiary of the Company in a non-executive officer position and, since the beginning of fiscal 2018,2019, received total cash compensation in excess of $120,000. In addition, the son of Joseph F. Montalbano, our Chief Operating Officer, is employed by a subsidiary of the Company in a non-executive officer position and, since the beginning of fiscal 2018,2019, received total cash compensation in excess of $120,000. The Audit Committee reviewed and ratified the employment relationship of Mr. Miller’s son and Mr. Montalbano’s son. In approving these relationships, the Audit Committee considered the following:
On September 5, 2017, John D. Chandler, a member of our Board since June 20, 2017, becamewas appointed Senior Vice President and Chief Financial Officer of The Williams Companies, Inc. (“Williams”) and of WPZ GP LLC, the general partner of Williams Partners, L.P.. The Company is currently performing work which will total $1.4performed two projects totaling $4.7 million when complete for the construction of firewater tanks and related
43
piping in New Jersey for Transcontinental Gas Pipe Line Company, a subsidiary of Williams. The Audit Committee reviewed and ratified the transactions between subsidiaries of Williams and us. In approving these transactions, the Audit Committee considered the following:
The Company’s Corporate Governance Guidelines, which are available on the Corporate Governance page in the Investor Relations section of our website,
matrixservicecompany.com, provide that the Company shall conduct an appropriate review of all transactions with related persons for potential conflict of interest situations on an ongoing basis, and all such transactions shall be approved by the Audit Committee or another independent body of the Board. The Corporate Governance Guidelines further provide that the term “transactions with related persons” refers to all transactions which are required to be disclosed pursuant to Item 404 of Regulation S-K.In the course of its review and approval or ratification of a transaction, the Audit Committee will consider:
Our Corporate Governance Guidelines also provide that each director and executive officer is required to complete a Director and Officer Questionnaire on an annual basis, and to update such information when the questionnaire responses become incomplete or inaccurate. The Director and Officer Questionnaire requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest.
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The following table sets forth, as of August 31, 2018,2019, certain information with respect to the shares of common stock beneficially owned by (i) each person known by the Company to own beneficially more than 5% of its outstanding shares of Common Stock, (ii) each director and director nominee of the Company, (iii) each executive officer of the Company named in the Summary Compensation Table herein and (iv) all directors, director nominees and executive officers of the Company as a group. Unless otherwise noted, each of the persons listed below has sole voting and investment power with respect to the shares listed.
Identity of Beneficial Owner | Shares Beneficially Owned | Calculated Ownership %(1) | ||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 4,151,128 | (2) | 15.3 | % | ||
Dimensional Fund Advisors LP Building One, 6300 Bee Cave Road Austin, TX 78746 | 2,214,500 | (3) | 8.2 | % | ||
The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 | 1,641,628 | (4) | 6.1 | % | ||
Jim W. Mogg | 38,013 | (5) | * | |||
James H. Miller | 25,128 | (5) | * | |||
John W. Gibson | 19,298 | (5) | * | |||
John D. Chandler | 13,283 | (5) | * | |||
Martha Z. Carnes | 12,727 | (5) | * | |||
Liane K. Hinrichs | 5,832 | (5) | * | |||
John R. Hewitt | 188,235 | (5) | * | |||
Joseph F. Montalbano | 6,036 | (5) | * | |||
Kevin S. Cavanah | 72,428 | (5) | * | |||
Alan R. Updyke | 28,548 | (5) | * | |||
Jason W. Turner | 34,718 | (5) | * | |||
All directors, director nominees and executive officers as a group (15 persons) | 548,478 | (5) | 2.0 | % |
Identity of Beneficial Owner | Shares Beneficially Owned | Calculated Ownership % (1) | ||||||
BlackRock, Inc. | 3,630,556 | (2) | 13.4 | % | ||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
Dimensional Fund Advisors LP | 2,259,051 | (3) | 8.4 | % | ||||
Building One, 6300 Bee Cave Road | ||||||||
Austin, TX 78746 | ||||||||
LSV Asset Management | 1,582,930 | (4) | 5.9 | % | ||||
155 North Wacker Drive, Suite 4600 | ||||||||
Chicago, IL 60606 | ||||||||
The Vanguard Group | 1,488,927 | (5) | 5.5 | % | ||||
100 Vanguard Boulevard | ||||||||
Malvern, PA 19355 | ||||||||
Tom E. Maxwell | 57,526 | (6) | * | |||||
Jim W. Mogg | 23,569 | (6) | * | |||||
James H. Miller | 12,509 | (6) | * | |||||
John W. Gibson | 8,515 | (6) | * | |||||
John D. Chandler | — | (6)(7) | * | |||||
Martha Z. Carnes | — | (6)(7) | * | |||||
Liane K. Hinrichs | — | (6)(8) | * | |||||
John R. Hewitt | 136,780 | (6) | * | |||||
Joseph F. Montalbano | 34,785 | (6) | * | |||||
Kevin S. Cavanah | 94,035 | (6) | * | |||||
James P. Ryan | 43,651 | (6) | * | |||||
Jason W. Turner | 22,745 | (6) | * | |||||
All directors, director nominees and executive officers as a group (16 persons) | 523,428 | (6) | 1.9 | % |
* | Indicates ownership of less than one percent of the outstanding shares of common stock. |
(1) | Shares of common stock which were not outstanding but which could be acquired by an executive officer upon vesting of a restricted stock unit or upon exercise of an option within 60 days of August 31, |
(2) | Information is as of December 31, |
(3) | Information is as of December 31, |
(4) | Information is as of December 31, |
Includes the following shares of common stock that are issuable upon the exercise of stock options that are currently exercisable or are exercisable within 60 days after August 31, |
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The Board believes that our executive officers should demonstrate their commitment to and belief in the Company’s long-term profitability. Accordingly, each executive officer is expected to maintain a significant investment in the Company through the ownership of Company stock. Stock ownership more closely aligns our executive officers’ interests and actions with the interests of the Company’s stockholders.
Our Equity Ownership Guidelines, which were most recently revised in August 2011, and were reviewed and reaffirmed in May 2018,February 2019, are as follows:
President/CEO | |||
5 times base salary | |||
CFO/COO/President of Operations/Presidents of the three principal operating subsidiaries | 3 times base salary | ||
All other executive officers | 1 times base salary | ||
All of our executive officers have met the equity ownership guidelines as of June 30, 2018 except for Mr. Updyke, who is still within the initial five-year accumulation period.2019.
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The following table provides information concerning the Company’s common stock that may be issued upon the exercise of options, warrants and rights under our existing equity compensation plans as of June 30, 2018.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights(2) | Number of securities remaining available for future issuance under equity compensation plans | ||||||
Equity compensation plans approved by stockholders | 1,513,211 | $ | 10.19 | 1,629,134 | |||||
Equity compensation plans not approved by stockholders | — | N/A | — | ||||||
Total | 1,513,211 | $ | 10.19 | 1,629,134 | (3) |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||
(a) | (b) | (c) | |||||||||
Equity compensation plans approved by stockholders | 1,432,247 | $ | 10.19 | 1,145,949 | |||||||
Equity compensation plans not approved by stockholders | — | N/A | — | ||||||||
Total | 1,432,247 | $ | 10.19 | 1,145,949 | (3) |
(1) | Includes |
(2) | Excludes the shares issuable upon the vesting of RSUs and performance units for which there is no weighted-average exercise price. |
(3) | Represents the total number of shares available for issuance under the Matrix Service Company |
A proposal of a stockholder intended to be presented at the Company's 2019Company’s 2020 Annual Meeting of Stockholders must be received at the Company’s principal executive offices no later than May 24, 2019,29, 2020, if the proposal is to be considered for inclusion pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended ("(“Rule 14a-8"14a-8”), in the Company’s proxy statement and proxy card for such meeting.
In accordance with the Bylaws, any stockholder who intends to present a proposal at the Company’s 20192020 Annual Meeting of Stockholders and has not sought inclusion of the proposal in the Company’s proxy statement and accompanying proxy pursuant to Rule 14a-8, must provide the Secretary of the Company with notice of such proposal in order for such proposal to be properly brought before the meeting, no later than the close of business on the 90th day nor earlier than the close of business on the 120th120th day prior to the first anniversary of the preceding year'syear’s annual meeting; provided, however, that in the event that the date of such annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder must be delivered not earlier than the close of business on the 120th120th day prior to such annual meeting and not later than the close of business on the later of the 90th90th day prior to such annual meeting or if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the close of business on the 10th10th day following the day on which public announcement of the date of such meeting is first made by the Company.
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The Board knows of no matters other than those described in this proxy statement which will be brought before the Annual Meeting for a vote of the stockholders. If, however, any other matter requiring a vote of stockholders arises, the persons named in the accompanying proxy card will vote thereon in accordance with their best judgment. The enclosed proxy card confers discretionary authority to take action with respect to any additional matters that may come before the meeting.
A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 20182019 is first being mailed to stockholders on or about September 21, 201826, 2019 and accompanies this proxy statement. In addition, a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 20182019 may be found by visiting the Company’s website at
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
A number of banks and brokers with account holders who are Company stockholders may be “householding” the Company’s proxy materials and annual report. A single proxy statement and annual report will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your bank or broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your bank or broker, or direct your written request to Matrix Service Company, 5100 EastE. Skelly Drive, Suite 500,Dr., Ste. 100, Tulsa, Oklahoma,OK 74135, Attention: Secretary, Kevin S. Cavanah,Justin D. Sheets, or telephone at (918) 838-8822 and the Company will deliver a separate copy of the annual report or proxy statement upon request. Stockholders who currently receive multiple copies of the proxy statement and annual report at their address and would like to request “householding” of their communications should contact their bank or broker.
Certain statements contained in this Proxy Statement are not based on historical fact and are forward-looking statements within the meaning of federal securities laws and regulations. These statements are based on management’s current expectations, assumptions, estimates and observations of future events and include any statements that do not directly relate to any historical or current fact; actual results may differ materially due in part to the risk factors set forth in Item 1A of the 20182019 Form 10-K. These forward-looking statements can be identified by the use of words “believes,” “intends,” “expects,” “anticipates,” “projects,” “estimates,” “predicts” and similar expressions. These forward-looking statements include, among others, such things as:
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These statements are based on certain assumptions and analyses we made in light of our experience and our historical trends, current conditions and expected future developments as well as other factors we believe are appropriate. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially from our expectations, including:
Consequently, all of the forward-looking statements made in this proxy statement are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business operations. We assume no obligation to update publicly, except as required by law, any such forward-looking statements, whether as a result of new information, future events or otherwise.
Stockholders may view this proxy statement, the enclosed proxy card and our 20182019 Annual Report to Stockholders over the Internet by accessing our website at
By Order |
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Justin D. Sheets
Vice President, General Counsel and Secretary
September 26, 2019
Tulsa, Oklahoma
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