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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 1414(a)(a) of the
Securities Exchange Act of 1934
(Amendment No. )
| Filed by the Registrant ý Filed by a Party other than the Registrant o | ||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 | |
Summit Materials, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): | ||||
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o | Fee computed on table below per Exchange Act Rules 14a-6(i) | |||
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NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS |
TO BE HELD ON TUESDAY, MAY 19, 2020 |
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, May 17, 2018
The 20182020 Annual Meeting of Stockholders (the "Annual Meeting") of Summit Materials, Inc. ("Summit Materials" or the "Company") will be held at 8:00 a.m., EasternMountain Time, on Thursday,Tuesday, May 17, 2018,19, 2020. In light of COVID-19 (Coronavirus), the Annual Meeting will be completely virtual. You may attend the Annual Meeting, submit questions and vote your shares electronically during the meeting on the Internet through a virtual web conference at the offices of the Company's subsidiary, Hinkle Contracting Company, LLC, located at 101 Helm St., Suite 110, Lexington, Kentucky 40505www.virtualshareholdermeeting.com/SUM2020. The Annual Meeting is being held for the following purposes:
| 1 | To elect the two nominees for director, named in the attached Proxy Statement (the "Proxy Statement") to serve until the 2023 Annual Meeting of Stockholders and until their respective successors are elected and qualified; | |
2 | To approve, on a nonbinding advisory basis, the compensation of our named executive officers ("NEOs"), as disclosed in the Proxy Statement; | |
3 | To ratify the appointment of KPMG LLP ("KPMG") as our independent registered public accounting firm for our fiscal year ending January 2, 2021; and | |
4 | To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
1. To elect the two nominees for director named in the attached Proxy Statement to serve until the 2021 Annual Meeting of Stockholders and until their respective successors are elected and qualified;
2. To ratify the appointment of KPMG LLP ("KPMG") as our independent registered public accounting firm for our fiscal year ending December 29, 2018;
3. To approve, on a nonbinding advisory basis, the compensation of our named executive officers ("NEOs"), as disclosed in the Proxy Statement; and
4. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Our Board of Directors recommends you vote (i) "FOR" the election of each of the nominees to the Board; (ii) "FOR" the ratification of the appointment of KPMG as our independent registered public accounting firm; and (iii) "FOR" the approval, on a nonbinding advisory basis, of the compensation of our NEOs, as disclosed in the Proxy Statement.Statement; and (iii) "FOR" the ratification of the appointment of KPMG as our independent registered public accounting firm.
The Board of Directors has fixed March 19, 201825, 2020 as the record date for determining stockholders entitled to receive notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. Only stockholders of record at the close of business on that date will be entitled to notice of, and to vote at, the Annual Meeting. This Notice of 2020 Annual Meeting of Stockholders, Proxy Statement and form of proxy are being distributed and made available on or about April 3, 2020.
| By Order of the Board of Directors | ||
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| Anne Lee Benedict Executive Vice President, Chief Legal Officer and Secretary |
Denver, ColoradoMarch 30, 2018
April 3, 2020
PROXY SUMMARY
The following description is a summary that highlights certain information in the Proxy Statement. You should read the entire Proxy Statement carefully before voting. Your vote is important. Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares promptly.
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Summit Materials is an integrated supplier of heavy-side construction materials such as aggregates, cement, ready-mix concrete, and asphalt, as well as paving services. |
We offer customers a single-source provider for construction materials and related downstream products through our vertical integration. Our companies benefit from Summit's access to capital, IT resources, performance optimization practices and a proven management team. We believe this decentralized model allows us to realize the benefits of locally invested entrepreneurs with the expertise and economies of scale of a larger entity. |
DATE: May 17, 2018TIME: 8:00 a.m., Eastern TimeLOCATION: The offices of the Company's subsidiary, Hinkle Contracting Company, LLC, located at 101 Helm St., Suite 110, Lexington, Kentucky 40505
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Our geographic and end-user diversification and vertical integration help us withstand market cycles: |
We focus on sustainability and community involvement to secure a stable and profitable future: |
2019 PERFORMANCE |
Highlights of our 2017 business achievements included the following:
Operating income increased 31.4% to $213.6 million: |
For a more detailed discussion on our financial performance, see our combined Annual Report to Stockholders and Annual Report on Form 10-K for the year ended December 30, 2017 (the "2017 Annual Report"), available atwww.proxyvote.com.
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OUR GOVERNANCE |
DECLASSIFYING THE BOARD AND ELIMINATING SUPERMAJORITY VOTING |
Our Board is currently divided into three classes. Each year our stockholders are asked to elect the directors comprising one of the classes for a three-year term. In addition, the Company's Amended and Restated Certificate of Incorporation (the "Charter") requires the affirmative vote of the holders of at least 662/3% in voting power of all outstanding shares of stock of the Company to amend certain provisions of the Charter (the "Supermajority Voting Requirement"). The Board believes that the classified board structure and Supermajority Voting Requirement served the Company well following its initial public offering ("IPO") in 2015 by promoting continuity and stability. However, the Board now feels, given the Company's continued growth following the IPO, that a classified board structure and Supermajority Voting Requirement are no longer necessary.Accordingly, the Board plans to include proposals at the Company's annual meeting of stockholders in 2021 to declassify the Board and remove the Supermajority Voting Requirement.
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You will find important information about
To Our Valued Investors: |
2019 was a year of substantial progress and improved financial performance at Summit Materials.
When I wrote to you last year, we were at the qualificationsend of a challenging period for our company. At that time, I reiterated the Board's focus on supporting and advancing Summit's strategic objective to become a premier vertically integrated heavy-side materials company, and the Board's commitment to working alongside management to improve performance and drive earnings and revenue growth.
As a result of this focus and execution, Summit achieved much improved financial performance in 2019, including volume and price growth across all lines of business. The Aggregates business delivered outstanding performance, the Products business showed marked improvement, and our Cement business demonstrated resilience despite unprecedented flooding on the Mississippi River in the first half of the year. We are pleased with the positive momentum of each of our director nominees beginningbusinesses, and the continued value we are providing to Summit's customers and employees.
However, we are also mindful that the economy has been significantly challenged early in 2020 by the COVID-19 global pandemic and acknowledge the heightened uncertainty related to the potential impacts of the virus on page 9.Ourour future financial results. During this critical time, we are committed first and foremost to the health and well-being of our employees, our customers and the local communities where we operate. We will communicate additional market updates as more specific information becomes available.
We remain focused on delivering sustainable, long-term value to all Summit stockholders. The Board of Directors ("Board") recommendsremains actively engaged in the business, including by meeting monthly with management to discuss operations, capital structure and expenditures, and in its strategic focus, including acquisitions, talent planning and incentive programs.
The Board of Directors is also committed to practicing good Corporate Governance. To that you vote "FOR" eachend we will ask shareholders in 2021 to approve i) the de-classification of the following director nominees.Summit Board of Directors, and ii) the elimination of the super-majority voting requirements in our Charter, Summit has maintained a classified board structure and supermajority voting requirements since its IPO in 2015 in order to promote continuity and stability. Given Summit's continued growth, the Board of Directors now believes these provisions are no longer necessary.
Finally, integral to our focus on ensuring the long-term value of Summit is a focus on being stewards of the environment and good corporate citizens in the communities in which we live and work. We continued to make progress in 2019 on this commitment to environmental and social responsibility. We recycled hundreds of thousands of tons of concrete, asphalt and metal. These efforts represented marked improvements from the prior year. We continued our partnership with the Wildlife Habitat Council to support biodiversity and educational programs on our properties, including over 1,700 acres that are now certified under the Council's standards at the end of 2019. Our employees logged more than 2,700 volunteer hours this year, a more than 60% increase above 2018, and 3,600 students participated in educational events we hosted.
On behalf of the Board of Directors, we thank you for your continued support as we work to continue advancing Summit's strategic efforts to drive sustainable, long-term shareholder value.
| Sincerely, | |||||
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| Howard Lance | Summit Materials, Inc. |
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We are seeking ratification of the appointment of KPMG to serve as our independent registered public accounting firm for 2018 as set forth in Item 2 on page 19.Our Board recommends that you vote "FOR" the ratification.
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Our stockholders have the opportunity to cast a nonbinding advisory vote on the compensation of our NEOs, as set forth in Item 3 on page 25. Last year, stockholders representing approximately 96% of the votes cast approved our executive compensation program for our NEOs. In evaluating this "say on pay" proposal, we recommend you review our Compensation Discussion and Analysis beginning on page 28, which explains how and why our Compensation Committee arrived at the compensation actions and decisions for 2017.Our Board recommends that you vote "FOR" the approval, on a nonbinding advisory basis, of the compensation of our NEOs.
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Directors Whose Terms Expire at the 2020 Annual Meeting | ||
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Director Not Standing for Reelection | 9 | |
Board Organization | 10 | |
Board Operations | 14 | |
Director Compensation | 15 | |
OUR PAY | ||
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Compensation Discussion and | 19 | |
Compensation Discussion and Analysis—How We Paid | 28 | |
Compensation Tables | ||
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table | 34 | |
OUR AUDITORS | 43 | |
Item 3—Ratification of Appointment of KPMG | 43 | |
Independent Registered Public Accounting Firm | 44 | |
Audit Committee Report | 45 | |
Certain Relationships and Related Person Transactions | 46 | |
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ANNEX A RECONCILIATION OF NON-GAAP |
SUMMIT MATERIALS, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, May 17, 2018
The enclosed proxy is solicited by the Board of Directors (the "Board") of Summit Materials, Inc. ("Summit Materials" or the "Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at 8:00 a.m., Eastern Time, on Thursday, May 17, 2018, at the offices of the Company's subsidiary, Hinkle Contracting Company, LLC, located at 101 Helm St., Suite 110, Lexington, Kentucky 40505, and at any adjournment or postponement thereof. Our principal executive offices are located at 1550 Wynkoop Street, 3rd Floor, Denver, Colorado 80202. This Proxy Statement is first being made available to our stockholders on or about March 30, 2018.
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Only holders of record of our Class A Common Stock and Class B Common Stock (each such designation having par value $0.01 per share) at the close of business on March 19, 2018, the record date, will be entitled to notice of, and to vote at, the Annual Meeting. On that date, we had 111,228,077 shares of Class A Common Stock outstanding and entitled to vote and 97 shares of Class B Common Stock outstanding and entitled to vote. Holders of shares of our Class A Common Stock and Class B Common Stock vote together as a single class on all matters on which stockholders are entitled to vote generally (except as may be required by law).
Each share of Class A Common Stock is entitled to one vote for each director nominee and one vote for each other item to be voted on at the Annual Meeting. All of the shares of our outstanding Class B Common Stock are currently held by our pre-initial public offering ("IPO") investors, including certain members of management or their family trusts that directly hold limited partnership interests (the "LP Units"). A holder of Class B Common Stock is entitled, without regard to the number of shares of Class B Common Stock held by such holder, to a number of votes that is equal to the aggregate number of LP Units held by such holder. As of the record date, the total number of LP Units to which the voting power of the Class B Common Stock relates was 3,332,266.
A majority of the voting power of Class A Common Stock and Class B Common Stock entitled to vote, present in person or represented by proxy, constitutes a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes will be included in determining the presence of a quorum at the Annual Meeting.
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We are furnishing proxy materials to some of our stockholders via the Internet by mailing a Notice of Internet Availability of Proxy Materials, instead of mailing printed copies of those materials. The Notice of Internet Availability of Proxy Materials directs stockholders to a website where they can access our proxy materials, including this Proxy Statement and our Annual Report on Form 10-K for the year ended
December 30, 2017 (the "2017 Annual Report"), and view instructions on how to vote via the Internet or by telephone. If you received a Notice of Internet Availability of Proxy Materials and would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. If you elect to receive our future proxy materials electronically, you will receive access to those materials via e-mail unless and until you elect otherwise.
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Shares that are properly voted via the Internet or by telephone or for which proxy cards are properly executed and returned will be voted at the Annual Meeting in accordance with the directions given or, in the absence of directions, will be voted in accordance with the Board's recommendations as follows: "FOR" the election of each of the nominees to the Board named herein; "FOR" the ratification of the appointment of our independent registered public accounting firm; and "FOR" the approval, on a nonbinding advisory basis, of the compensation of our named executive officers ("NEOs") as disclosed in this Proxy Statement. It is not expected that any additional matters will be brought before the Annual Meeting, but if other matters are properly presented, the persons named as proxies in the proxy card or their substitutes will vote in their discretion on such matters.
The manner in which your shares may be voted depends on how your shares are held. If you own shares of record, meaning that your shares are represented by certificates or book entries in your name so that you appear as a stockholder on the records of Broadridge Financial Solutions, Inc. ("Broadridge"), our stock transfer agent, you may vote by proxy, meaning you authorize individuals named in the proxy card to vote your shares. You may provide this authorization by voting via the Internet, by telephone or (if you have received paper copies of our proxy materials) by returning a proxy card. In these circumstances, if you do not vote by proxy or in person at the Annual Meeting, your shares will not be voted. If you own shares in street name, meaning that your shares are held by a bank, brokerage firm, or other nominee, you may instruct that institution on how to vote your shares. You may provide these instructions by voting via the Internet, by telephone, or (if you have received paper copies of proxy materials through your bank, brokerage firm, or other nominee) by returning a voting instruction form received from that institution.
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With respect to the election of directors (Item 1), a nominee for director shall be elected to the Board by a plurality of the votes cast in respect of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors. A plurality vote requirement means that the director nominees with the greatest number of votes cast "FOR," even if less than a majority, will be elected. You may vote "FOR" or "WITHHOLD" with respect to each nominee. A withhold vote in the election of directors will have the same effect as an abstention. Neither a withhold vote nor a broker non-vote will affect the outcome of the election of directors. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker lacks the authority to vote uninstructed shares at its discretion. Under current New York Stock Exchange ("NYSE") interpretations that govern broker non-votes, Items 1 and 3 are considered non-discretionary matters, and a broker will lack the authority to vote uninstructed shares at its discretion on such proposals. Item 2 is considered a discretionary matter, and a broker will be permitted to exercise its discretion to vote uninstructed shares on the proposal. This means that, if you do not provide voting instructions on Item 2, your broker may nevertheless vote your shares on your behalf with respect to the ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 29, 2018, but cannot vote your shares on any other matters being considered at the Annual Meeting.
For all matters proposed for a vote at the Annual Meeting other than the election of directors (Item 1), the affirmative vote of a majority of the voting power of common stock present in person or represented by proxy and entitled to vote on the matter is required to approve the matter. With respect to the ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 29, 2018 (Item 2) and the nonbinding advisory vote on the compensation of our NEOs (Item 3), you may vote "FOR," "AGAINST," or "ABSTAIN." For these matters, abstentions are not counted as affirmative votes on a matter but are counted as present at the Annual Meeting and entitled to vote and will have the effect of a vote "against" the matter, and broker non-votes, if any, will have no effect on the outcome of these matters.
Voting via the Internet or by telephone helps save money by reducing postage and proxy tabulation costs.
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VOTE BY MAIL. If you have received paper copies of our proxy materials, you have the option to vote by mail by marking, dating and signing your proxy card or voting instruction form and returning it in the postage-paid envelope.
We encourage you to register to receive all future stockholder communications electronically, instead of in print. This means that, after you register, access to the annual report, proxy statement, and other correspondence will be delivered to you via e-mail.
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If you own common stock of record, you may attend the Annual Meeting and vote in person, regardless of whether you have previously voted by proxy card, via the Internet or by telephone. If you own common stock in street name, you may attend the Annual Meeting, but in order to vote your shares at the Annual Meeting you must obtain a "legal proxy" from the bank, brokerage firm, or other nominee that holds your shares. You should contact your bank or brokerage account representative to learn how to obtain a legal proxy. We encourage you to vote your shares in advance of the Annual Meeting by one of the methods described above, even if you plan on attending the Annual Meeting. If you have already voted prior to the Annual Meeting, you may nevertheless change or revoke your vote at the Annual Meeting as described below. Only stockholders as of the record date (March 19, 2018) are entitled to attend the Annual Meeting in person. If you own common stock of record, your name will be on a list and you will be able to gain entry with a government-issued photo identification, such as a driver's license, state-issued identification card, or passport. If you own common stock in street name, in order to gain entry you must present a government-issued photo identification and proof of beneficial stock ownership as of the record date, such as your Notice of Internet Availability of Proxy Materials, a copy of your proxy card or voting instruction form if you received one, or an account or brokerage statement or other similar evidence showing stock ownership as of the record date. If you are a representative of an entity that owns common stock of the Company, you must present a government-issued photo identification, evidence that you are the entity's authorized representative or proxyholder and, if the entity is a street name owner, proof of the entity's beneficial stock ownership as of the record date.
If you are not a stockholder, you will be entitled to admission only if you have a valid legal proxy from a record holder and a government-issued photo identification. Each stockholder may appoint only one proxyholder or representative to attend on his or her behalf.
You can find directions to the Annual Meeting atinvestors.summit-materials.com/FinancialDocs. Cameras, recording devices and other electronic devices are prohibited at the Annual Meeting.
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If you own common stock of record, you may revoke your proxy or change your voting instructions at any time before your shares are voted at the Annual Meeting by delivering to the Secretary of the Company a written notice of revocation or a duly executed proxy (via the Internet or telephone or by returning a proxy card) bearing a later date or by attending the Annual Meeting and voting in person. A stockholder owning common stock in street name may revoke or change voting instructions by contacting the bank, brokerage firm or other nominee holding the shares or by obtaining a legal proxy from such institution and voting in person at the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Summit Materials, Inc.Annual Meeting of Stockholders to be Held on Thursday, May 17, 2018
This Notice, our Proxy Statement, and our combined Annual Report and Annual Report onForm 10-K for the year ended December 30, 2017 are available at www.proxyvote.com
ELECTION OF DIRECTORS
Our Board currently has eightnine seats, divided into three classes: Class I, Class II and Class III. Each class consists, as nearly as possible, of one-third of the total number of directors.
After discussions with Mr. Gardner and in order to effectuate his wishes, the Board determined not to nominate Mr. Gardner for reelection at this Annual Meeting. Immediately following the Annual Meeting, the size of the Board is expected to be reduced to eight members. The Board proposes that Mr. LanceMessrs. Murphy and Ms. WadeWunning be reelected to Class IIIII for new terms of three years each. Each nominee for director will, if elected, continue in office until the 20212023 Annual Meeting and until the director's successor has been duly elected and qualified, or until the earlier of the director's death, resignation or removal. The proxy holders named on the proxy card intend to vote the proxy (if you are a stockholder of record) for the election of each of these nominees, unless you indicate on the proxy card that your vote should be withheld for any of the nominees. Under Securities and Exchange Commission ("SEC") rules, proxies cannot be voted for a greater number of persons than the number of nominees named.
Each nominee has consented to be named as a nominee in this Proxy Statement and to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the other nominees and may be voted for a substitute nominee, unless the Board chooses to reduce the number of directors serving on the Board.
THE BOARD RECOMMENDS A VOTE "FOR" EACH NOMINEE.NOMINEE
Biographical and Related Information of Director Nominees and Continuing Directors
The principal occupations and certain other information about our director nominees and our continuing directors (including the skills and qualifications that led to the conclusion that they should serve as directors) are set forth below. The age shown below for each director is as of May 17, 2018, which is the date of the Annual Meeting.
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We, the members of your Board of Directors, take seriously our jobs of overseeing Summit Materials on your behalf and on behalf of our employees, customers, suppliers and other stakeholders, all of whom uniquely matter to us.
The Board has nominated two directors to be elected at the Annual Meeting to each serve for three-year terms ending with the 20212023 Annual Meeting of Stockholders and until a successor is duly elected and qualified, or until the earlier of the director's death, resignation or removal. Each nominee is currently a director of the Company and has agreed to serve if elected. The age shown below for each director is as of May 19, 2020, which is the date of the Annual Meeting.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 1 | ||
Howard L. Lance, 62, began to serve on the Board in October 2012 and was formally elected as a director and Chairman in February 2013. He has served as President and Chief Executive Officer of Maxar
Technologies Ltd. ("Maxar"), formerly known as MacDonald, Dettwiler and Associates Ltd., a global communications and information company, since May 2016. Mr. Lance also sits on Maxar's board of directors. Prior to joining Maxar, Mr. Lance was an Executive Advisor to The Blackstone Group L.P. ("Blackstone") and as part of his duties as such, he served on the boards of certain Blackstone portfolio companies. He is also a director of Change Healthcare, Inc. He was Chairman of the Board of Directors, President and Chief Executive Officer of Harris Corporation from 2003 to 2011. Before joining Harris Corporation, Mr. Lance was president of NCR Corporation and Chief Operating Officer of its Retail and Financial Group. Previously, he spent 17 years with Emerson Electric Co., where he held senior management positions including Executive Vice President of its Electronics and Telecommunications segment, Chief Executive Officer and director of its Astec electronics subsidiary in Hong Kong, Group Vice President of its Climate Technologies segment and President of its Copeland Refrigeration division. Mr. Lance has a Bachelor of Science degree in Industrial Engineering from Bradley University and a Master of Science degree in Management from the Krannert School of Management at Purdue University.
In nominating Mr. Lance for reelection as a director, the Board considered Mr. Lance's significant management and operational experience from his service in various senior management roles, including as President and Chief Executive Officer of Maxar and of Harris Corporation and as President and Chief Operating Officer of NCR Corporation.
Anne K. Wade, 46, was appointed by the Board as a director in January 2016, at which time she was also appointed to the Audit Committee. From 1995 to 2012, Ms. Wade held positions of increasing responsibility, most recently as Senior Vice President and Director, at Capital International, a part of the Capital Group Companies, the Los Angeles based investment management firm. Ms. Wade is currently a partner at Leaders' Quest, an organization focused on culture, values, and driving social and financial impact in major corporations. In that capacity she was the co-Director of the BankingFutures initiative in the United Kingdom. Ms. Wade also currently serves on the Boards of Directors of the John Laing Group plc, where she chairs the Remuneration Committee, Big Society Capital Ltd in London, and the Heron Foundation in New York City. She previously served on the Board of Directors of Holcim Ltd from 2013 to 2015, and was a member of its Governance and Strategy Committee. Ms. Wade has a Bachelor of Arts degree, Magna Cum Laude, from Harvard University and a Master of Science from the London School of Economics.
In nominating Ms. Wade for reelection as a director, the Board considered Ms. Wade's significant financial and investing experience, primarily in infrastructure sectors including the global building materials and construction industries, including as Senior Vice President and Director of Capital International.
Directors Whose Terms Expire at the 2020 Annual Meeting |
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Age: 69 Director since 2012 BOARD COMMITTEES • Audit (Chairman) • Nominating and Corporate Governance OTHER BOARDS • O'Reilly Automotive, Inc. • Alight Solutions LLC • Apria Healthcare LLC • Previously, DJO Global Inc. • Previously, Accuride Corporation | | John R. Murphy served as Summit Materials' Interim Chief Financial Officer from January 2013 to May 2013 and from July 2013 to October 2013. Career Highlights • Senior Vice President and Chief Financial Officer of Smurfit-Stone Container Corporation (2009-2010) • Various senior management roles, including Chief Financial Officer and President and Chief Operating Officer and as President and Chief Executive Officer, of Accuride Corporation (1998-2008) Skills / Experience • Financial expertise • Management experience Education • BS in Accounting, Pennsylvania State University • MBA, University of Colorado Also... Mr. Murphy is a Certified Public Accountant. |
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2 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
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Age: 69 Director since 2016 BOARD COMMITTEES • Compensation (Chairman) • Nominating and Corporate Governance OTHER BOARDS • The Sherwin Williams Company • Kennametal Inc. • Black & Veatch Holding Company • Previously, Neovia Logistics Services, LLC | | Steven H. Wunning served as Group President and Executive Office Member for Caterpillar Inc. ("Caterpillar") from January 2004 until his retirement in February 2015. He joined Caterpillar in 1973. Career Highlights • Group President and Executive Office Member for Caterpillar from January 2004 until his retirement in February 2015. • Various executive positions at Caterpillar, including Vice President, Logistics Division from January 2000 to January 2004 and Vice President, Logistics & Product Services Division from November 1998 to January 2000. Skills / Experience • Extensive board and management experience • Industrial and building products industry expertise Education • BS in Metallurgical Engineering from Missouri University of Science and Technology • MBA, University of Illinois Urbana-Champaign Also... Mr. Wunning serves on the Board of Trustees of Missouri University of Science and Technology. |
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 3 | ||
Mr. Gardner brings to the Board extensive business and leadership experience, including as a Managing Partner of Silverhawk and Managing Partner of Wachovia Capital Partners (formerly, First Union Capital Partners). In addition, Mr. Gardner has over 30 years of private equity investing experience.
John R. Murphy, 67, was elected as a director and Chairman of the Audit Committee in February 2012. Since March 2015, he also has served as a member of the Nominating and Corporate Governance Committee. Mr. Murphy served as Summit Materials' Interim Chief Financial Officer from January 2013 to May 2013 and from July 2013 to October 2013. He was Senior Vice President and Chief Financial Officer of Smurfit-Stone Container Corporation from 2009 to 2010 and served in various senior management roles from 1998 to 2008, including Chief Financial Officer and President and Chief Operating Officer and as President and Chief Executive Officer of Accuride Corporation. Accuride Corporation filed for Chapter 11 bankruptcy protection in October 2009 and emerged in 2010. Since 2003, Mr. Murphy has served on the Board, the Governance Committee and as Chairman of the Audit Committee of O'Reilly Automotive, Inc. He has also served as a director and Audit Committee Chairman of DJO Global Inc. since January 2012. Mr. Murphy was elected as a director and Audit Committee member of Graham Packaging in February 2011. Graham Packaging was subsequently sold in September 2011. Mr. Murphy has a Bachelor of Science degree in Accounting from Pennsylvania State University and a Master of Business Administration degree from the University of Colorado and is a Certified Public Accountant.
Mr. Murphy brings to the Board extensive financial knowledge, including from his service as Chief Financial Officer of Smurfit-Stone Container Corporation and Accuride Corporation.
Steven H. Wunning, 67, was appointed by the Board as a director in August 2016, at which time he was also appointed to the Compensation Committee. He served as Group President and Executive Office Member for Caterpillar Inc. ("Caterpillar") from January 2004 until his retirement in February 2015. Mr. Wunning joined Caterpillar in 1973 and held a variety of positions of increasing responsibility with Caterpillar, including Vice President, Logistics Division from January 2000 to January 2004 and Vice President, Logistics & Product Services Division from November 1998 to January 2000. Mr. Wunning is also a director of The Sherwin Williams Company, Kennametal Inc., Black & Veatch Holding Company and Neovia Logistics Services, LLC. Mr. Wunning serves on the Board of Trustees of Missouri University of Science and Technology. He obtained his Bachelor of Sciences degree in Metallurgical Engineering from Missouri University of Science and Technology and an executive Masters of Business Administration from the University of Illinois.
Mr. Wunning brings to the Board expansive operating and board experience across the industrial and building products industries, including his more than 40 years at Caterpillar.
Directors Whose Terms Expire at the |
Thomas W. Hill, 62, is the founder of Summit Materials and has been President and Chief Executive Officer since its inception. He has been a member of the Board of Directors since August 2009. From 2006 to 2008, he was the Chief Executive Officer of Oldcastle, Inc. ("Oldcastle"), the North American arm of CRH plc, one of the world's leading construction materials companies. Mr. Hill served on the CRH plc Board of Directors from 2002 to 2008 and, from 1992 to 2006, ran the Materials division of Oldcastle. Mr. Hill served as Chairman of the American Road and Transportation Builders Association ("ARTBA") from 2002 to 2004, during congressional consideration of the multi-year transportation bill "SAFETEA-LU." Mr. Hill has been Treasurer of both the National Asphalt Pavement Association and the National Stone Association, and he remains active with ARTBA's Executive Committee. Mr. Hill received a Bachelor of Arts in Economics and History from Duke University and a Masters of Business Administration from Trinity College in Dublin, Ireland.
Mr. Hill brings to the Board extensive knowledge of our industry and significant experience in leading companies, as well as his ongoing contributions as the Company's CEO.
Neil P. Simpkins, 52, was elected as a director in August 2009. He is a Senior Managing Director of the Corporate Private Equity Group at Blackstone. Since joining Blackstone in 1998, Mr. Simpkins has led the acquisitions of TRW Automotive, Vanguard Health Systems, Team Health, LLC, Apria Healthcare Group, Summit Materials, Change Healthcare, Inc. and Gates Corporation. Before joining Blackstone, Mr. Simpkins was a Principal at Bain Capital. While at Bain Capital, Mr. Simpkins was involved in the execution of investments in the consumer products, industrial, healthcare and information industries. Prior to joining Bain Capital, Mr. Simpkins was a consultant at Bain & Company in the Asia Pacific region and in London. He currently serves as a Director of Apria Healthcare Group, Gates Corporation, Change Healthcare, Inc. and Team Health Inc. Mr. Simpkins graduated with honors from Oxford University and received a Masters of Business Administration from Harvard Business School.
Mr. Simpkins brings to the Board significant financial and business experience, including as a Senior Managing Director in the Private Equity Group at Blackstone and Principal at Bain Capital.
Joseph S. Cantie, 54, was appointed by the Board as a director in May 2016, at which time he was also appointed to the Audit Committee. He is the former Executive Vice President and Chief Financial Officer of ZF TRW, a division of ZF Friedrichshafen AG ("ZF"), a global automotive supplier, a position he held from May 2015 until January 2016. He served in similar roles at TRW Automotive Holdings Corp., which was acquired by ZF Industries in May 2015, since 2003. Prior to that time, Mr. Cantie held other executive positions at TRW, which he joined in 1999. From 1996 to 1999, Mr. Cantie served in several executive positions with LucasVarity Plc, including serving as Vice President and Controller. Prior to joining LucasVarity, Mr. Cantie spent 10 years with KPMG. He is currently a director for TopBuild Corp. where he serves on the Audit (Chairman), Compensation and Governance Committees, and for Delphi Technologies PLC where he serves on the Audit (Chairman) and Finance Committees. Mr. Cantie is a certified public accountant and holds a Bachelor of Science degree from the State University of New York at Buffalo.
Mr. Cantie brings to the Board more than 30 years of financial and operating experience primarily in the industrials sector, which, along with his tenure at a major accounting firm, provide a diversified knowledge base and additional perspectives to the Board.
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Age: 64 Director since 2012 Chairman since 2013 BOARD COMMITTEES • Compensation • Nominating and Corporate Governance OTHER BOARDS • Change Healthcare, Inc. • Previously, Maxar Technologies Ltd. • Previously, Harris Corporation | | Howard L. Lance is the former President and Chief Executive Officer of Maxar Technologies Inc. and its predecessor MacDonald, Dettwiler and Associates Ltd., a global communications and information company, a position he held from May 2016 until January 2019. Career Highlights • President and Chief Executive Officer, Maxar Technologies Inc. (May 2016-January 2019) • Executive Advisor to The Blackstone Group L.P. (2012-April 2016) • President & CEO, Harris Corporation (2003-2011) Skills / Experience • Leadership experience • Extensive management and operational experience Education • BS in Industrial Engineering, Bradley University • MS in Management from the Krannert School of Management at Purdue University Also... Before joining Harris Corporation, Mr. Lance was co-president of NCR Corporation and Chief Operating Officer of its Retail and Financial Group. Previously, he spent 17 years with Emerson Electric Co., where he held senior management positions including Executive Vice President of its Electronics and Telecommunications segment, Chief Executive Officer and director of its Astec electronics subsidiary in Hong Kong, Group Vice President of its Climate Technologies segment and President of its Copeland Refrigeration division. |
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Age: 48 Director since 2016 BOARD COMMITTEES • Audit OTHER BOARDS • Man Group plc • John Laing Group plc • Big Society Capital Ltd. | | Anne K. Wade is currently a partner at Leaders' Quest, an organization focused on culture, values, and driving social and financial impact in major corporations. Career Highlights • As part of Leaders' Quest, Co-Director of the Banking Futures initiative in the UK (2014-2017) • Senior Vice President and Director, Capital International, a part of the Capital Group Companies (1995-2012) Skills / Experience • Financial and investing experience • Extensive knowledge of infrastructure sectors Education • BA,magna cum laude, Harvard University • MS, London School of Economics Also... Ms. Wade is a Member of the Board of Trustees of the Heron Foundation in New York. |
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 5 | ||
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Age: 52 Director since 2018 BOARD COMMITTEES • Audit | | In September 2019, Susan A. Ellerbusch was promoted to Chief Executive Officer of Air Liquide North America LLC, the North American subsidiary of Air Liquide S.A., a world leader in gases, technologies and services for industry and health, with a presence in 80 countries and more than 3 million customers and patients. Career Highlights • Chief Executive Officer of Air Liquide USA LLC (June 2017-September 2019) • President, Air Liquide Large Industries U.S. (September 2015-June 2017) • Various executive positions, including President, BP Biofuels North America from 2008 to 2015 Skills / Experience • Management and operational experience • Extensive knowledge of chemicals and energy industries Education • BS in genetics, University of Illinois Urbana-Champaign • MBA, University of Illinois Chicago Also... As head of Air Liquide's operations in the U.S. and Canada, Ms. Ellerbusch leads the company's Large Industries, Industrial Merchant, Health Care, Hydrogen Mobility and Electronics businesses. |
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6 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
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Age: 64 Director since 2009 BOARD COMMITTEES N/A | | Thomas W. Hill is the founder of Summit Materials and has been President and Chief Executive Officer since its inception, and he has been a member of the Board of Directors since August 2009. Career Highlights • Founder of Summit Materials and has served as President and Chief Executive Officer since its inception • Chief Executive Officer, Oldcastle, Inc. (2006-2008) • Ran the Materials division of Oldcastle (1992-2006) Skills / Experience • Extensive knowledge of industry • Leadership experience Education • BA in Economics and History, Duke University • MBA, Trinity College in Dublin, Ireland Also... Served as Chairman of the American Road and Transportation Builders Association during congressional consideration of the multiyear transportation bill "SAFETEA LU" and remains active with its Executive Committee. Mr. Hill has also been Treasurer of both the National Asphalt Pavement Association and the National Stone Association (a predecessor of The National Stone, Sand & Gravel Association) and sits on the board of the Wildlife Habitat Council, a non-profit organization that promotes and certifies habitat conservation and management on corporate lands through partnerships and education. |
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Age: 56 Director since 2016 BOARD COMMITTEES • Audit OTHER BOARDS • TopBuild Corp • Delphi Technologies PLC • Howmet Aerospace Inc. | | Joseph S. Cantie is the former Executive Vice President and Chief Financial Officer of ZF TRW, a division of ZF Friedrichshafen AG, a global automotive supplier, a position he held from May 2015 until January 2016. Career Highlights • Executive Vice President and Chief Financial Officer of TRW Automotive Holdings Corp., which was acquired by ZF Industries in May 2015 (2003-2015) • Various executive positions at TRW Automotive Holdings Corp. (1999-2003) • Various executive positions, including Vice President and Controller of LucasVarity Plc (1996-1999) Skills / Experience • Financial and operating experience • Extensive knowledge of the industrial sector Education • BS, State University of New York at Buffalo Also... Mr. Cantie spent 10 years at KPMG and is a certified public accountant. |
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8 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
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Age: 60 Director since 2018 BOARD COMMITTEES • Compensation • Nominating and Corporate Governance OTHER BOARDS • The Manitowoc Company, Inc. • Previously, Machinery and Allied Products Institute | | Anne M. Cooney is the former President of the Process Industries and Drives Division of Siemens Industry, Inc., a division of Siemens AG, a multinational conglomerate primarily engaged in industrial engineering, electronics, energy, healthcare and infrastructure activities, a position she held from October 2014 until her retirement in December 2018. Career Highlights • President, Process Industries and Drives Division of Siemens Industry, Inc. (2014-2018) • Chief Operating Officer for Siemens Healthcare's Diagnostics division (2011-2014) • President, Drives Technologies Division, Siemens Industry, Inc. (2009-2011) Skills / Experience • Leadership experience • Management and operational experience Education • BS in Industrial Management, Gannon University • MBA, Emory University |
Director Not Standing for Reelection |
After discussions with Mr. Gardner and in order to effectuate his wishes, the Board determined not to nominate Mr. Gardner for reelection at this Annual Meeting. We thank Mr. Gardner for his invaluable service.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 9 | ||
Board Organization |
Good corporate governance at Summit Materials starts at the top—with how we, as a Board, are governed. We believe our board governance incorporates best-practice standards as appropriate for our Company:
Our Board is currently divided into three classes. Each year our stockholders are asked to elect the directors comprising one of the classes for a three-year term. The Board believes that the classified board structure served the Company well following its IPO by promoting continuity and stability. However, the Board now feels, given the Company's continued growth following the IPO, that a classified board structure and Supermajority Voting Requirement are no longer necessary. Accordingly, the Board plans to include a proposal at the Company's annual meeting of stockholders in 2021 to declassify the Board.
Director Independence Determination |
Under our Corporate Governance Guidelines and the NYSE corporate governance rules for listed companies, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with us or any of our subsidiaries. In addition, the director must meet the bright-line test for independence set forth by the NYSE rules. Our Corporate Governance Guidelines define independence in accordance with the independence definition in the current NYSE rules. Our Corporate Governance Guidelines require the Board to review the independence of all directors at least annually. In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the objective tests set forth in the NYSE independence definition, the Board will determine, considering all relevant facts and circumstances, whether such relationship is material.
Our Board has affirmatively determined that each of Messrs. Cantie, Gardner, Lance, Murphy, Simpkins and Wunning and Ms.each of Mss. Cooney, Ellerbusch and Wade is independent, under the guidelines for director independence set forth in the Corporate Governance Guidelines and under all applicable NYSE rules, including with respect to applicable committee membership. Our Board also has determined that each of the members of the Audit Committee, Messrs. Cantie Gardner and Murphy and Ms.Mss. Ellerbusch and Wade, is "independent" for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In making its independence determinations, the Board considered and reviewed all information known to it, including information identified through annual directors' questionnaires.
Board Leadership.
Board Leadership |
The Board directs and oversees the management of the business and affairs of the Company in a manner consistent with the best interests of the Company. The Board's responsibility is one of oversight, and in performing its oversight role, the Board serves as the ultimate decision-making body of the Company, except for those matters reserved to or shared with our stockholders.
In accordance with the Company's belief that its long-term success includes being good stewards of the environment, the Board oversees and supports the Company's initiatives in these areas. In addition, the Board takes pride in supporting the Company's efforts to offer a safe work environment to its employees and being a good corporate citizen in its local communities.
In accordance with our Corporate Governance Guidelines, the Board selects the Company's Chairman and the Company's CEO in any way it considers in the best interests of the Company and, accordingly, does not have a policy on whether the roles of Chairman and CEO should be separate or combined and, if separate, whether the Chairman should be selected from the independent directors. We believe that the separation of the Chairman of the Board and CEO positions is appropriate corporate governance for us as this time. Accordingly, Mr. Lance serves as the Chairman of the Board while Mr. Hill serves as our CEO. Our Board believes that this structure best encourages the free and open dialogue of differing views and provides for strong checks and balances.
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10 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
Executive Sessions and Communications with Directors. The Board's independent directors meet at regularly scheduled executive sessions without management present. Mr. Lance presides at executive sessions of independent directors.
Stockholders and other interested parties may communicate with the Board by writing to the Chief Legal Officer, Summit Materials, Inc., 1550 Wynkoop Street, 3rd Floor, Denver, Colorado 80202. Written communications may be addressed to the Chairman of the Board, the chairperson of any of the Audit, Corporate Governance and Nominating, and Compensation Committees, or to the non-management or independent directors as a group. The Chief Legal Officer will forward such communications to the appropriate party.
Corporate Governance Documents |
Risk Oversight. The Board exercises direct oversight of strategic risks to the Company. The Audit Committee reviews guidelines and policies governing the process by which senior management assesses and manages the Company's exposure to risk, including the Company's major financial and operational risk exposures and the steps management takes to monitor and control such exposures. The Compensation Committee oversees risks relating to the Company's compensation policies and practices. Each committee charged with risk oversight reports to the Board on those matters.
With respect to cybersecurity risk oversight, our Board and our Audit Committee receive updates from our information technology team to assess the primary cybersecurity risks facing the Company and the measures the Company is taking to mitigate such risks. In addition to such updates, our Board and our Audit Committee receive updates from management as to changes to the Company's cybersecurity risk profile or significant newly identified risks.
Corporate Governance Documents. Please visit ourOur investor relations website atinvestors.summit-materials.com/govdocs, "Governance Documents," forhas additional information on our board governance and corporate governance, including:
Board Meetings and Committees |
The Board meets regularly during the year and holds special meetings and acts by unanimous written consent wheneverwhen circumstances require. During 2017,2019, there were fiveeight (8) meetings of the Board. Each director attended at least 75% of the aggregate of the total number of meetings of the Board (held during the period for which he or she was a director) and the total number of meetings held by all committees on which he or she served (during the periods that he or she served) during 2017.2019. In addition, directors are expected to make every effort to attend any meetings of stockholders. All of our directors attended the 20172019 Annual Meeting of Stockholders.
The Board has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee.Committee (collectively, the "Committees"). The Committees keep the Board informed of their actions and provide assistance toassist the Board in fulfilling its oversight responsibility to stockholders. The table below provides current membership information as well as meeting information for the last fiscal year.
Name | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | ||||||
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Thomas W. Hill | ||||||||||||
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Howard L. Lance* | | X | Chair | · | · | |||||||
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Joseph S. Cantie | X | | | · | ||||||||
Ted A. Gardner | X | X | | |||||||||
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Anne M. Cooney(1) | · | · | ||||||||||
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Susan A. Ellerbusch | · | |||||||||||
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Ted A. Gardner(2) | · | Chair | ||||||||||
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John R. Murphy | Chair | | X | Chair | · | |||||||
Neil P. Simpkins | | Chair | X | |||||||||
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Anne K. Wade | X | | | · | ||||||||
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Steven H. Wunning | | X | X | Chair | · | |||||||
Total Meetings in 2017 | 6 | 4 | 4 | |||||||||
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Total Meetings in 2019 | 5 | 4 | 4 | |||||||||
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The functions performed by these Committees, which are set forth in more detail in their charters, are summarized below.
Our Audit Committee consists of Messrs. Murphy and Cantie and GardnerMss. Ellerbusch and Ms. Wade, with
Mr. Murphy serving as chair.
Our Audit Committee is responsible for, among other things:
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 11 | ||
Audit Committee Member Independence; Financial Literacy; Financial Expert |
| | Independent under NYSE governance standards and Rule 10A-3 of Exchange Act | Financially Literate | Audit Committee Financial Expert | |||
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John R. Murphy (Chair) | ✓ | ✓ | ✓ | |||
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Joseph S. Cantie | ✓ | ✓ | ✓ | |||
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Anne K. Wade | ✓ | ✓ | ||||
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Our Compensation Committee consists of Messrs. Simpkins, Lance,Wunning, Gardner and Wunning,Lance and Ms. Cooney, with Mr. SimpkinsWunning serving as chair.
Our Compensation Committee is responsible for, among other things:
Our Nominating and Corporate Governance Committee consists of Messrs. Gardner, Lance, Murphy,Simpkins and Wunning and Ms. Cooney, with Mr. LanceGardner serving as chair. The Company expects Ms. Cooney to replace Mr. Gardner as chair of the Nominating and Corporate Governance Committee following the Annual Meeting.
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12 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
Our Nominating and Corporate Governance Committee is responsible for, among other things: |
Director Nominations |
The Nominating and Corporate Governance Committee identifies individuals believed to be qualified as candidates to serve on the Board and selects, or recommends that the Board select, the nominees for all directorships to be filled by the Board or by our stockholders at an annual or special meeting.
In identifying candidates for membership on the Board, the Committee takes into account all factors it considers appropriate, which may include:
Although the Nominating and Corporate Governance Committee considers diversity in all its forms, including diversity of viewpoints, background and experiences, the Company does not have a formal diversity policy. The Committee also
may consider the extent to which the candidate would fill a present need on the Board. When evaluating whether to re-nominate existing directors, the Committee considers matters relating to the retirement of current directors, as well as the performance of such directors.
The Nominating and Corporate Governance Committee evaluates director candidates recommended by stockholders on the same basis as it considers other nominees. Any recommendation submitted to the Chief Legal Officer and Secretary should be in writing and should include any supporting material the stockholder considers appropriate in support of that recommendation, but must include information that would be required under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of such candidate and the written consent of the candidate to serve as one of our directors, if elected. Stockholders wishing to propose a candidate for consideration may do so by submitting the above information to the attention of the Chief Legal Officer and Secretary, Summit Materials, Inc., 1550 Wynkoop Street, 3rd Floor, Denver, Colorado 80202. All recommendations for nomination received by the Chief Legal Officer and Secretary that satisfy the requirements of our Amended and Restated Bylaws (the "Bylaws") relating to such director nominations will be presented to the Nominating and Corporate Governance Committee for its consideration. Please see the section entitled "Proposals of Stockholders""Future Shareholder Proposals and Nominations" for information regarding the advance notice provisions applicable to stockholder director nominations set forth in our Bylaws.
Compensation Committee Interlocks and Insider Participation |
During 2017,2019, the members of the Compensation Committee were Messrs. Simpkins, Lance,Wunning, Gardner and Wunning,Lance and Ms. Cooney, none of whom was, during the fiscal year, an officer or employee of the Company and none of whom has ever served as an officer of the Company. During 2017,2019, none of our executive officers served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served on our Compensation Committee or the Board.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 13 | ||
Board Operations |
As a Board, we believe that the practices we follow and the guidelines we adopt governing how we operate set an important tone at the top. Among other things we:
Executive Sessions and Communications with Directors |
The Board's independent directors meet at regularly scheduled executive sessions without management present. Mr. Lance presides at executive sessions of independent directors.
Stockholders and other interested parties may communicate with the Board by writing to the Chief Legal Officer and Secretary, Summit Materials, Inc., 1550 Wynkoop Street, 3rd Floor, Denver, Colorado 80202. Written communications may be addressed to the Chairman of the Board, the chairperson of any of the Audit, Nominating and Corporate Governance, and Compensation Committees, or to the non-management or independent directors as a group. The Chief Legal Officer will forward such communications to the appropriate party.
Risk Oversight |
The Board exercises direct oversight of strategic risks to the Company. The Audit Committee reviews guidelines and policies governing the process by which senior management assesses and manages the Company's exposure to risk, including the Company's major financial and operational risk exposures and the steps management takes to monitor and control such exposures. The Compensation Committee oversees risks relating to the Company's compensation policies and practices. Each committee charged with risk oversight reports to the Board on those matters.
With respect to cybersecurity risk oversight, our Board and our Audit Committee receive updates from our information technology team to assess the primary cybersecurity risks facing the Company and the measures the Company is taking to mitigate such risks. In addition to such updates, our Board and our Audit Committee receive updates from management as to changes to the Company's cybersecurity risk profile or significant newly identified risks.
In light of the importance of environmental matters to our shareholders, communities, customers, and employees, the full Board oversees environmental risk factors and receives regular updates from management and our sustainability team on the Company's environmental risk profile and key risk mitigating initiatives.
Code of Ethics |
Our Code of Business Conduct and Ethics applies to all of our officers, directors and employees, including our principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions and is posted on our website. Our Code of Business Conduct and Ethics is a "code of ethics," as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our Code of Business Conduct and Ethics on our website. The information contained on, or accessible from, our website is not part of this Proxy Statement by reference or otherwise.
Short Sales and Hedging Policy |
ITEM 2—RATIFICATION OF APPOINTMENT OF KPMG LLP
UnderOur Securities Trading Policy prohibits directors, officers, and employees ("Summit Materials Personnel"), family members of Summit Materials Personnel and trusts, corporations and other entities controlled by any such persons (collectively, "Insiders") from trading in options, warrants, puts and calls or similar instruments on the rulesCompany's securities or selling such securities "short" (i.e., selling stock that is not owned and regulations ofborrowing the SEC, the NYSE and the Public Company Accounting Oversight Board (the "PCAOB"), the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm.shares to make delivery). In addition, Summit Materials Personnel are prohibited under the Audit Committee considers the independence of our independent registered public accounting firmSecurities Trading Policy from engaging in any transactions (including variable forward contracts, equity swaps, collars and participatesexchange funds) that are designed to hedge or offset any decrease in the selection of the independent registered public accounting firm's lead engagement partner. The Audit Committee has appointed, and, as a matter of good corporate governance, is requesting ratification by our stockholders of the appointment of, the registered public accounting firm of KPMG to serve as independent registered public accounting firm for the fiscal year ending December 29, 2018. KPMG has served as our independent registered public accounting firm since 2012.
The Board and the Audit Committee believe that the continued retention of KPMG as the Company's independent registered public accounting firm is in the best interests of the Company and its stockholders. If stockholders do not ratify the selection of KPMG, the Audit Committee will evaluate the stockholder vote when considering the selection of a registered public accounting firm for the audit engagement for the 2018 fiscal year. In addition, even if stockholders ratify the selection of KPMG as independent registered public accounting firm, the Audit Committee may nevertheless periodically request proposals from the major registered public accounting firms and as a result of such process may select KPMG or another registered public accounting firm as our independent registered public accounting firm.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 29, 2018.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Representatives of KPMG are expected to attend the Annual Meeting and will have an opportunity to make a statement and to respond to appropriate questions from stockholders.
Consistent with SEC and PCAOB requirements regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation for and overseeing the work of, the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.
Prior to engagement of the independent registered public accounting firm for the next year's audit, management will submit to the Audit Committee for approval a list of services and related fees expected to be rendered during that year within each of the following four categories of services:
Prior to engagement, the Audit Committee pre-approves independent registered public accounting firm services within each category and the fees of each category are budgeted. The Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the services in the table below were pre-approved by the Audit Committee.
| (in thousands) | 2017 | 2016 | |||||
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Audit Fees(1) | $ | 3,988 | $ | 4,144 | |||
Tax Fees(2) | — | 4 | |||||
Audit-Related Fees | — | — | |||||
All Other Fees | — | — | |||||
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Total | $ | 3,988 | $ | 4,148 | |||
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The Audit Committee reviews the Company's financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal control over financial reporting, for preparing the financial statements, and for the reporting process. The Audit Committee members do not serve as professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm. The Company's independent registered public accounting firm is engaged to audit and report on the conformitymarket value of the Company's financial statements to accounting principles generally accepted in the United States and the effectiveness of the Company's internal control over financial reporting.equity securities.
In this context, the Audit Committee reviewed and discussed with management and the independent registered public accounting firm the audited financial statements for the year ended December 30, 2017 (the "Audited Financial Statements"), management's assessment of the effectiveness of the Company's internal control over financial reporting, and the independent registered public accounting firm's evaluation of the Company's system of internal control over financial reporting. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Public Company Accounting Oversight Board (the "PCAOB") Auditing Standard No. 1301,Communications with Audit Committees. In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence.
Based upon the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Audited Financial Statements be included in the Company's Annual Report on Form 10-K for the year ended December 30, 2017, for filing with the Securities and Exchange Commission.
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14 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||||
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth the beneficial ownership of shares of our Class A Common Stock and LP Units by (1) each person known to us to beneficially own more than 5% of any class
Director Compensation |
In 2019, all of the outstanding voting securitiesCompany's non-employee directors received annual cash compensation of $100,000. The independent chairperson of the Company, (2)Board received an additional $150,000 in cash compensation. The respective chairpersons of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee (unless such chairperson is also the chairperson of the Board) received an additional $15,000, $10,000 and $10,000, respectively. Directors who were not employed by us may also receive compensation, from time to time, for service on any special committees of the Board. We reimburse our directors for any reasonable expenses incurred by them in connection with services provided in such capacity.
In addition, during 2019, all of the Company's non-employee directors received an annual award of restricted stock units ("RSUs") valued at $125,000, which amount differs from the grant date fair value of the RSUs. A grant of 8,143 RSUs was made to each of ourMessrs. Lance, Cantie, Gardner, Murphy, and Wunning and Mss. Cooney, Ellerbusch, and Wade on February 28, 2019. The RSUs were granted under the Summit Materials, Inc. 2015 Omnibus Incentive Plan (the "Omnibus Incentive Plan"), and the terms thereof are outlined in the table below. Further, the RSU awards are subject to the Company's incentive clawback policies, as in effect from time to time.
The Company's independent compensation consultant performs a comprehensive competitive total compensation review for the Company's non-employee directors every other year. The Company's total compensation structure and NEOs and (3) allvalue for its directors are compared to its peer companies. The Company is currently competitively positioned. In the years the Company's independent compensation consultant does not perform a comprehensive review, they review broader U.S. market trends with the Compensation Committee.
| Award Type | Vesting | Termination or Change in Control Provisions | ||
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| RSUs | Vest on the first anniversary of the date of grant | • Death or Disability / By the Company Without Cause: Unvested portion will immediately vest. • Retirement(1) / Declining to Stand for Re-election to Our Board(2): Prorated portion immediately vests; settled at such time as would have been settled according to the original vesting schedule. • Change in Control: Accelerated only if not continued, converted, assumed or replaced by the Company or successor entity. • By the Company For Cause: Vested and unvested portions are forfeited. | ||
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Director Compensation Table |
The table below summarizes the compensation paid to vote, excluding LP Units held bynon-employee directors for the Company, in each case as of March 19, 2018. The Company is the general partner of Summit Materials Holdings L.P. ("Summit Holdings"), which indirectly owns 100% of the limited liability interests of Summit Materials, LLC ("Summit LLC"). Except as otherwise noted, (i) the information is as of March 19, 2018, and (ii) the address of each beneficial owner is c/o Summit Materials, Inc., 1550 Wynkoop Street, 3rd floor, Denver, Colorado 80202. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.year ended December 28, 2019.
| | Class A Common Stock(1) | �� | LP Units(1) | Combined Voting Power(2) | |||||||||||||||
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| Name of Beneficial | Number | Percent | Number | Percent | Number | Percent | |||||||||||||
| Owner | |||||||||||||||||||
Vanguard Group Inc.(3) | 9,156,810 | 8.2 | % | — | — | 9,156,810 | 8.0 | % | |||||||||||
FMR LLC(4) | 7,496,349 | 6.7 | % | — | — | 7,496,349 | 6.5 | % | |||||||||||
BlackRock, Inc.(5) | 7,056,682 | 6.3 | % | — | — | 7,056,682 | 6.2 | % | |||||||||||
Prudential Financial, Inc./Jennison Associates LLC(6) | 5,823,387 | 5.2 | % | — | — | 5,823,387 | 5.1 | % | |||||||||||
Thomas W. Hill(7) | 403,400 | * | 619,425 | * | 1,022,825 | * | |||||||||||||
Howard L. Lance(8)(9) | 195,559 | * | 135,772 | * | 331,331 | * | |||||||||||||
Joseph S. Cantie(9)(10) | 8,810 | * | — | — | 8,810 | * | |||||||||||||
Ted A. Gardner(9)(11) | 38,009 | * | 162,752 | * | 200,761 | * | |||||||||||||
John R. Murphy(9)(12) | 18,974 | * | 4,274 | * | 23,248 | * | |||||||||||||
Neil P. Simpkins(9)(13) | 4,098 | * | — | — | 4,098 | * | |||||||||||||
Anne K. Wade(9)(14) | 10,601 | * | — | — | 10,601 | * | |||||||||||||
Steven H. Wunning(9)(15) | 8,787 | * | — | — | 8,787 | * | |||||||||||||
Michael J. Brady(16) | 330,454 | * | 283,649 | * | 614,103 | * | |||||||||||||
Brian J. Harris(17) | 327,490 | * | 332,699 | * | 660,189 | * | |||||||||||||
M. Shane Evans(18) | 203,113 | * | 78,525 | * | 281,638 | * | |||||||||||||
Douglas C. Rauh(19) | 3,644 | * | — | — | 3,644 | * | |||||||||||||
All Directors and Executive Officers as a Group (15 persons)(20) | 1,683,414 | 1.5 | % | 1,764,509 | 1.5 | % | 3,447,923 | 3.0 | % | ||||||||||
| Name | Fees Earned or Paid in Cash | Stock Awards(1)(2) | Total Compensation | |||
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Howard L. Lance | $250,000 | $138,431 | $388,431 | |||
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Joseph S. Cantie | $100,000 | $138,431 | $238,431 | |||
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Anne M. Cooney | $100,000 | $138,431 | $238,431 | |||
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Susan A. Ellerbusch | $100,000 | $138,431 | $238,431 | |||
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Ted A. Gardner | $110,000 | $138,431 | $248,431 | |||
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John R. Murphy | $115,000 | $138,431 | $253,431 | |||
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Anne K. Wade | $100,000 | $138,431 | $238,431 | |||
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Steven H. Wunning | $110,000 | $138,431 | $248,431 | |||
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of March 19, 2018, holders of the LP Units held all of the issued shares of our Class B Common Stock that were outstanding and the total number of votes that were represented by the Class B Common Stock was 3,332,366. In addition to the voting power of the Class B Common Stock conferred to him and the Hill Trust through their ownership of LP Units, Mr. Hill has sole voting power over 2,244,154 votes represented by the Class B Common Stock through revocable proxies granted to him by certain pre-IPO investors that hold LP Units, including members of management. Mr. Hill has no pecuniary interest in the LP Units held by such other LP Unit holders and disclaims any beneficial ownership in such LP Units.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 15 | ||
OUR PAY |
Our "Say-on-Pay" Resolution Received 96% Support in 2019.
We believe our executive compensation structure is competitive, is aligned with current governance trends and contains stockholder-friendly features. For instance, in 2019, our Board adopted a Policy for Clawback of Incentive Compensation that applies to any current and former "officer" of the Company and applies to annual cash bonuses and equity incentive compensation. Other stockholder-friendly features include the following: |
| What We Do (Best Practice) | What We Don't Do / Don't Allow | |
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✓ Enforce strict insider trading, anti-hedging and anti-pledging policies ✓ Set stock ownership guidelines for executives and directors ✓ Provide provisions for recoupment ("clawback") of equity incentive compensation in our award agreements and adopted a policy for clawback of annual cash bonuses and equity incentive compensation ✓ Disclose performance goals for incentive programs ✓ Set a maximum payout limit on our annual and long-term incentive programs for our NEOs ✓ Incorporate change-in-control provisions that are consistent with market practice ✓ Retain an independent compensation consultant that reports directly to the Compensation Committee ✓ Perform an annual compensation program risk assessment to ensure that the Company's compensation policies and practices are not reasonably likely to have a material adverse effect on the Company | ✗ No change-in-control severance multiple in excess of three times salary and target bonus ✗ No excise tax gross-ups upon a change in control ✗ No re-pricing or cash buyout of underwater stock options ✗ No enhanced retirement formulas ✗ No guaranteed compensation ✗ No market timing with granting of equity awards ✗ Substantially no perquisites for our NEOs | |
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16 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
ITEM 2
ITEM 3—NONBINDING ADVISORY VOTE ON THE
COMPENSATION OF OUR NEOs
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and Section 14A of the Exchange Act, our stockholders are entitled to vote to approve, on a nonbinding advisory basis, the compensation of our NEOs, as disclosed in this Proxy Statement in accordance with SEC rules. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement. The compensation of our NEOs subject to the vote is disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related narrative disclosure contained in this Proxy Statement. As discussed in those disclosures, we believe that our compensation policies and decisions are focused on pay-for-performance principles and are strongly aligned with our stockholders' interests. The compensation of our NEOs is designed to enable us to attract and retain talented and experienced executives to lead us successfully in a competitive environment. Accordingly,environment, while ensuring that our executives remain incentivized to accomplish the Company's long-term business plan. As discussed in this Proxy Statement, the vast majority of each NEO's pay is at-risk and largely tied to challenging performance goals. We believe that our compensation policies and decisions are strongly aligned with our stockholders' interests.
The Board is asking our stockholders to indicate their support for the compensation of our NEOs as disclosed in this Proxy Statement by casting a nonbinding advisory vote "FOR" the following resolution:
"RESOLVED, that the compensation paid to our NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative disclosure, is hereby APPROVED."
The Compensation Committee continually reviews the Company's performance and governance highlights to evaluate whether the goals of the executive compensation and benefits program are supported and whether such program serves the interests of the Company's stockholders. The Company's 2017 performance and governance practices include the following, as discussed in more detail in the Compensation Discussion and Analysis section of this Proxy Statement:
Performance Highlights
Highlights of our 2017 business achievements included the following:
Corporate Governance Highlights
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Because the vote to approve the compensation of our NEOs is advisory, it is not binding on the Board or the Company. Nevertheless, the views expressed by our stockholders, whether through this vote or otherwise, are important to management and the Board and, accordingly, the Board and the Compensation Committee intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements.arrangements, as a part of its robust compensation review and assessment process. Nonbinding advisory approval of this proposal requires the vote of the holders of a majority of the voting power of the shares present in person or represented by proxy and entitled to vote on the matter at the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL,
ON A
NONBINDING ADVISORY BASIS, OF THE COMPENSATION
OF OUR NEOs, AS DISCLOSED IN
THIS PROXY STATEMENT.STATEMENT
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 17 | ||
COMPENSATION COMMITTEE REPORTCompensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included (incorporated by reference) in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 201728, 2019 and in this Proxy Statement.
Submitted by the Compensation Committee of the Board.
Neil P. Simpkins,Steven H. Wunning, Chair
Anne M. Cooney
Ted A. Gardner
Howard L. LanceSteven H. Wunning
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18 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
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2019 Highlights |
2019 was a turnaround year for the Company, following a challenging 2018. During 2019, we reported volume and price growth in all lines of business, led by our aggregates business, which delivered strong results due in part to strong performance from our East Segment. In addition, we were disciplined and selective in pursuing acquisitions while generating increased cash flow from operations, which enabled us to lower our leverage ratio.For the fiscal year 2019, Summit reported a higher total shareholder return than the S&P 500 and the S&P Construction Materials Index.
In 2019, our executive compensation structure consisted of four primary components: base salary; annual cash incentives; long-term equity incentives and traditional health/welfare plans.We previously eliminated substantially all perquisites in 2017.
Named Executive Officers |
The following Compensation Discussion and Analysis ("CD&A") describes our 20172019 executive compensation structure, earned by or paid to the following named executive officers ("NEOs")., followed by a discussion of the executive pay determination process. Our NEOs for 2019 were the following individuals:
| Thomas W. Hill | | President and Chief Executive Officer |
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| Brian J. Harris | | Executive Vice President and Chief Financial Officer |
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| Michael J. Brady | | Executive Vice President and Chief Business Development Officer |
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| Anne Lee Benedict | | Executive Vice President and Chief |
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| M. Shane Evans (1) | | Former Executive Vice President and West Division President |
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| Karl H. Watson, Jr. (2) | | Former Executive Vice President and Chief Operating Officer |
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In October 2017,
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 19 | ||
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Highlights of our 2017 business achievements included the following:
| Pay Element | Description | 2019 Payout / Changes | ||||
| Fixed | Base Salary | Fixed pay to recruit and retain executives | Base salaries increased for each of our NEOs, except for Mr. Hill, by 3%, which was our standard merit increase for corporate employees in 2019, consistent with competitive market practices. Mr. Hill did not receive a base salary increase in 2019. | |||
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| Variable | Annual Cash Bonus | Annual cash incentives based on rigorous financial, operational and personal goals measured over one year: • 50%—60% EBITDA • 10%—20% Operating Cash Flows • 10% Safety • 20% Personal Objectives | Each of our NEOs earned annual cash bonuses as set forth below in "Elements of Pay: Annual Cash Incentives—2019 Actual Performance and Payouts." | |||
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| | Long-Term Equity Incentives | Long-term equity awards that align executives' interests with stockholders. 50% Performance Units • 3-year relative total shareholder return ("TSR") compared to Materials and Capital Goods Companies (consisting of GICS industry groups 2010 and 1510) from the S&P 400 Midcap Index. • Capped at target if absolute TSR is negative. • Grants are based in the Company's Class A Common Stock. | During the performance period beginning January 1, 2017 and ending December 31, 2019, our Relative TSR ranked at the 36th percentile, resulting in a payout equal to 65.73% of target. | |||
| | 50% RSUs • Vest ratably over 3 years. • Grants are based in the Company's Class A Common Stock. | |||||
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Other | Traditional Benefits | Executive benefits are substantially similar to benefits offered to other employees. | No change | |||
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Pay |
The Compensation Committee designsbelieves that a significant majority of both the executive compensation programCEO's and other NEOs' pay should be at risk and not guaranteed. Compensation is tied to deliverchallenging performance objectives and this is illustrated in our pay in accordance with corporate, segment, safety and individual performance.mix. A large percentage of total target compensation is at risk through long-term equity awards and annual cash incentive awards. These awards are linked to performance measures that correlate with long-term stockholder value creation. The amounts actually realized by our NEOs with respect to these awards depend on a variety of factors, including the level of attainment of the relevant performance goals and the extent of vesting of performance units and RSUs and the value of our stock when performance units and RSUs vest. The target values of long-term equity incentive awards used in the charts below differ from the compensation reported in the Summary Compensation Table due to the use of the grant date fair value in the Summary Compensation Table which is calculated in accordance with ASC 718, utilizing the assumptions discussed in our audited consolidated financial statements included in the 2019 Annual Report. The mix of
total direct compensation at target for 20172019 for our CEO and the average of our other NEOs is shown in the charts below.
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In 2017, our executive compensation structure consisted of four primary components: base salary; annual cash incentives; long-term equity incentives; and traditional health/welfare plans.We eliminated substantially all perquisites in 2017.
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Our Compensation Philosophy
Our executive compensation program is intended to attract, motivate and retain executive officers and to align the interests of our executive officers with stockholders' interests.
The Board's objectives for our program include, but are not limited to, the following:
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The Compensation Committee approved the following compensation targets for 2017:2019:
| | Base Salary | | Annual Bonus Target as % of Base Salary | | Long-Term Incentive Target as % of Base Salary | | | Base Salary | | Annual Bonus Target as % of Base Salary | | Long-Term Incentive Target as % of Base Salary | | |||||||||||||||||
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Thomas W. Hill | | $ | 826,956 | | | 140 | % | | 275 | % | | | | $ | 900,000 | | | 150 | % | | 360 | % | | |||||||
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Brian J. Harris | | | $ | 583,495 | | | 75 | % | | 155 | % | | ||||||||||||||||||
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Michael J. Brady | | 425,000 | | | 60 | % | | 100 | % | | | | $ | 515,000 | | | 60 | % | | 125 | % | | ||||||||
Brian J. Harris | | 550,000 | | | 75 | % | | 155 | % | | ||||||||||||||||||||
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Anne Lee Benedict | | | $ | 425,887 | | | 60 | % | | 125 | % | | ||||||||||||||||||
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M. Shane Evans | | 420,787 | | | 60 | % | | 100 | % | | | | $ | 446,413 | | | 60 | % | | 125 | % | | ||||||||
Douglas C. Rauh | | 550,000 | | | 75 | % | | 155 | % | | ||||||||||||||||||||
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Karl H. Watson, Jr. | | | $ | 566,500 | | | 75 | % | | 155 | % | | ||||||||||||||||||
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In 2017, the Compensation Committee considered the outcome of the stockholder advisory vote on 2016 executive compensation when making decisions relating to the compensation of our NEOs and our executive compensation program and policies. Our stockholders voted at our 2017 annual meeting, in a nonbinding advisory vote, on the 2016 compensation paid to our NEOs. Our stockholders overwhelmingly (96%) approved the compensation of our NEOs. Based on the level of support, the Compensation Committee determined that stockholders generally support our compensation practices. The Compensation Committee intends to continue to consider the views of our stockholders when designing, reviewing and administering the Company's compensation programs and policies.
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Timing of Compensation Decisions
Pay recommendations for our executives, including the NEOs, are typically made by the Compensation Committee at its first scheduled meeting of the fiscal year, typically held in February around the same time we report our fourth quarter and year-end financial results for the preceding fiscal year and provide our financial guidance for the upcoming year (the "February meeting"). This timing allows the Compensation Committee to have a complete financial performance picture prior to making compensation decisions.
Decisions with respect to prior year performance, as well as annual equity awards, base salary increases and target performance levels for the current year are typically made at the February meeting. Any equity awards recommended by the Compensation Committee at this meeting are reviewed by the Board and, if approved, are dated on the date of the Board meeting held later that day or the following day. As such, the Compensation Committee does not time the grants of equity incentives to the release of material non-public information. The exercise price of stock options is the closing price of our common stock on the date of grant.
The exception is grants to executives who are promoted or hired from outside the Company during the year. These executives may receive compensation changes or equity grants effective or dated, as applicable, as of the date of their promotion, hiring date, or other Board approval date.
Determination of CEO Compensation
At the February meeting, in executive session without the CEO present, the Compensation Committee also reviews and evaluates CEO performance, and determines performance achievement levels, for the prior fiscal year. The Compensation Committee also reviews competitive compensation data from the peer group companies. The Compensation Committee typically approves, or presents pay recommendations for the CEO to the Board, excluding the CEO, for approval. If applicable, during executive session, the Board conducts its own review and evaluation of the CEO's performance taking into consideration the recommendations of the Compensation Committee.
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Base Salary
Annual base salaries compensate our executive officers for fulfilling the requirements of their respective positions and provide them with a level of cash income predictability and stability with respect to a portion of their total compensation. The Compensation Committee determines base salaries for the NEOs and other executives based on a number of factors, including but not limited to, the Compensation Committee's understanding of executive pay practices, individual performance, Company performance and management recommendations (except with respect to the CEO).
For 2017, based onOur financial performance in 2018 and 2019 affected how we paid our NEOs in 2019, including Mr. Hill not receiving a base salary increase for 2019 and the other NEOS only receiving 3% increases, which were our standard merit increase for corporate employees in 2019. In addition, these base salaries reflect a thorough review of competitive market data, and internal alignment of total compensation opportunity, and are consistent with competitive market data provided by the Compensation Committee set the base salaries set forth in the table below. Mr. Brady's adjustment moved his salary closer to similar NEOsRewards Solutions Practice at peer companies. The 2017 base salaries for Messrs. Hill, Harris, Evans, and Rauh also reflect a one-time salary adjustment that was provided in
connection with the elimination of substantially all perquisites in 2017. Mr. Brady did not previously receive significant perquisites.Aon plc ("Aon").
| | 2017 Base Salary | 2016 to 2017 Increase | | 2019 Base Salary | | 2018 to 2019 Increase | | |||||||||
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Thomas W. Hill | $ | 826,956 | 3% | | | $ | 900,000 | | | 0 | % | | ||||
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Brian J. Harris | | | $ | 583,495 | | | 3.0 | % | | |||||||
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Michael J. Brady | 425,000 | 11% | | | $ | 515,000 | | | 3.0 | % | | |||||
Brian J. Harris | 550,000 | 6% | ||||||||||||||
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Anne Lee Benedict | | | $ | 425,887 | | | 3.0 | % | | |||||||
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M. Shane Evans | 420,787 | 5% | | | $ | 446,413 | | | 3.0 | % | | |||||
Douglas C. Rauh | 550,000 | 6% | ||||||||||||||
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Karl H. Watson, Jr. | | | $ | 566,500 | | | 3.0 | % | | |||||||
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Annual Cash Incentives
Elements of Pay: Annual Cash Incentives |
Each NEO was eligible to earn an annual incentive under our Short-Term Incentive Plan (the "STIP") based upon the achievement of performance targets approved by the Board at the February meeting.
2019 TARGET ANNUAL INCENTIVE AWARD OPPORTUNITIES |
2017 Target Annual Incentive Award Opportunities. At the start of each fiscal year, the Board approves annual incentive compensation targets, as a percentage of base salary, based on the understandingcompetitive market data provided by Aon for our direct competitors and overall peer group, management's
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 21 | ||
Table of the Board of competitive executive pay practices, management's Contents
recommendations and other relevant factors. The 20172019 annual incentive targets, as a percentage of base salary, for our NEOs were consistent with our 2016 targets and wereunchanged from 2018, as follows:
| | | Target Bonus | | |||
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Thomas W. Hill | | 150 | % | | ||
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Brian J. Harris | | | 75 | % | | |
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Michael J. Brady | | 60 | % | | ||
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M. Shane Evans | | 60 | % | | ||
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2017 Annual Incentive Metrics. For corporate NEOs (Messrs. Hill, Brady, Harris
2019 ANNUAL INCENTIVE METRICS |
The metrics underlying our annual incentive were selected as the strongest indicators of our success. EBITDA and Rauh), the performance metrics approved for fiscal 2017 were (i) corporate earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA"), as defined by the Board, which is defined as EBITDA, as adjusted to exclude accretion, loss on debt financings, tax receivable agreement expense, income from discontinued operations and certain non-cash and non-operating items plus the EBITDA contribution of certain recent acquisitions, (ii) operating cash flow which approximates annual cash flow exceeding capital transactions and acquisitions, (iii)are among our most important financial measures, while safety metrics, and (iv) personalgoals ensure that we focus on sustainable performance. Personal objectives which vary by individual. Mr. Brady was also subjectmeasure progress against key milestones that are important to acquisition related metrics, including acquisition spend and acquisition EBITDA performance. For Mr. Evans, the approved performance metrics included (i) corporate EBITDA, (ii) segment EBITDA, (iii) segment cash flow, (iv) segment safety and (v) personal objectives.long-term value creation. The Board has discretion to adjust the financial metrics to reflect merger, acquisition, or divestiture and other non-routine activity during the fiscal year. In 2017, as further discussed below,
For corporate NEOs (Messrs. Hill, Harris, Brady, and Watson and Ms. Benedict), the performance metrics were adjusted to reflect acquisitions completed during the year and the financial impact of Hurricane Harvey on the Company's operations.approved for fiscal 2019 were:
| Metric | Definition/Notes | |||
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| EBITDA | Corporate earnings before interest, taxes, depreciation, depletion and amortization. Results are adjusted to exclude accretion, loss on debt financings, tax receivable agreement expense, income from discontinued operations and certain non-cash and non-operating items plus the EBITDA contribution of certain recent acquisitions and dispositions. | |||
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| Operating Cash Flow | Annual cash flow in excess of capital transactions and acquisitions. | |||
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| Safety | ||||
| Recordable Incident Rate (RIR) | Any employee work-related injury that requires medical treatment and results in a positive diagnosis of an injury, a prescription or work restrictions (per OSHA), divided by hours worked. | |||
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| Lost Time Incident Rate (LTIR) | Same as RIR but only includes injuries that result in at least one full day away from work. | |||
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| Preventable Incident Rate (PVIR) | The number of preventable auto safety incidents, divided by miles driven. | |||
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| Cost Per Man Hour (CPMH) | Based on the total incurred insurance-company-posted claim reserves on 12/31 of a given year for all workers compensation, general liability and auto liability claims divided by the hours worked in that same calendar year. | |||
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| Personal objectives | Varies by individual. See "Performance Targets and Payout Ranges—Personal Performance Goals." | |||
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22 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
For 2017,Mr. Evans, the approved performance metrics included (i) corporate EBITDA, (ii) West segment EBITDA, (iii) West segment operating cash flow, (iv) West segment safety and (v) personal objectives.
For 2019, performance metrics and weightings were as follows:follows for our NEOs:
| | EBITDA | Operating Cash Flow | Safety/ Acquisition (2) | Personal Objectives | Primary Personal Objectives | | EBITDA | | Operating Cash Flow | | Safety(2) | | Personal Objectives | | |||||||||||||||||||||
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Thomas W. Hill | 50% | 20% | 10% | 20% | • Deliver on or over budget operations improvement • Progress on developing a ready-mix concrete performance team • Achieve minimum acquisition spend and acquisition performance • Improve investor relations function • Progress on management succession planning | | | 50 | % | | 20 | % | | 10 | % | | 20 | % | | ||||||||||||||||
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Brian J. Harris | | | 50 | % | | 20 | % | | 10 | % | | 20 | % | | |||||||||||||||||||||
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Michael J. Brady | 50% | 10% | 20% | 20% | • Achieve minimum acquisition spend • Achieve performance levels for 2016 and 2017 acquisitions consistent with investment thesis • Continue to build the Development team • Drive senior leadership team involvement | | | 50 | % | | 20 | % | | 10 | % | | 20 | % | | ||||||||||||||||
Brian J. Harris | 50% | 20% | 10% | 20% | • Increase interactions with Board members • Continue to develop a robust investor relations function • Provide overall direction to the information technology group • Evaluate the possibility of using a balanced scorecard approach to achieve greater alignment in strategic execution • Increase engagement with operating companies | ||||||||||||||||||||||||||||||
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Anne Lee Benedict | | | 50 | % | | 20 | % | | 10 | % | | 20 | % | | |||||||||||||||||||||
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M. Shane Evans(1) | 60% | 20% | 10% | 10% | • Continue to drive pricing, cost reduction, sales and sourcing achievements above and beyond 2017 budget • Evaluate vehicle allowance programs • Hold quarterly Texas managers meetings | | | 60 | % | | 10 | % | | 10 | % | | 20 | % | | ||||||||||||||||
Douglas C. Rauh | 50% | 20% | 10% | 20% | • Assist in finding a new Chief Operating Officer • Deliver on budget EBITDA and free cash flow targets • Facilitate talent management process at operating companies • Continue to drive pricing, cost reduction and sourcing achievements above and beyond 2017 budget • Continue to drive safety performance • Work with M. Shane Evans on performance at Company's Austin business • Drive the implementation of total productive maintenance throughout the Company | ||||||||||||||||||||||||||||||
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Karl H. Watson, Jr. | | | 50 | % | | 20 | % | | 10 | % | | 20 | % | | |||||||||||||||||||||
| | | | | | | | | | | ||||||||||||||||||||||||||
Performance / Payout Percentage.
PERFORMANCE TARGETS AND PAYOUT RANGES |
The achievement factor for each of the performance metrics was determined by multiplying the weight attributed to each performance metric by the applicable payout percentage for each metric. For corporate EBITDA, corporate cash flow, West Segment EBITDA, and West Segment operating cash flow, payout percentages were determined by calculating actual achievement against the target amount based on a pre-established scale.
Financial Performance |
PayoutFor corporate EBITDA, payout percentages for actual performance between the specified threshold levelslevel and 105%138% of target and between 105%138% of target and the maximum levels,level, were adjusted on a linear basis. For corporate operating cash flow, payout percentages for actual performance between the specified threshold level and 100% of target and between 100% of target and the maximum level, were adjusted on a linear basis. The following table shows the payout percentages associated with various levels of achievement of corporate EBITDA:
| | | Payout Percentage | | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | 25% (Threshold) | | 100% (Target) | | 138% | | 200% (Maximum) | | ||||||||||||
| Corporate EBITDA (Percentage of Target) | | | 90% | | | | 100% | | | | 105% | | | | 110% | | | ||||
The following table shows the payout percentages associated with various levels of achievement of corporateEBITDA and operating cash flow:
| | | Payout Percentage | | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | 0% (Threshold) | | 100% (Target) | | 125% | | 150% (Maximum) | | ||||||||||||
| Corporate Operating Cash Flow (Percentage of Target) | | | 90% | | | | 100% | | | | 105% | | | | 110% | | | ||||
| 2019 Payout Percentage | ||||||||
| | | | | | | | | |
| 25% (Threshold) | 100% (Target) | 138% | 200% (Maximum) | |||||
| | | | | | | | | |
| 2019 Corporate EBITDA (Performance as a Percentage of Target) | 90% | 100% | 105% | 110% | ||||
| | | | | | | | | |
For Mr. Evans, Segment EBITDA and Segment Cash Flow payout percentages were determined by calculating actual achievement against the target amount based on a pre-established scale. Payout percentages for actual performance between the specified threshold, target and maximum levels were adjusted on a linear basis. The following table shows the payout percentages associated with threshold, target and maximum achievement of Segment EBITDA and Segment Cash Flow:
| | | Payout Percentage | | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | 25% (Threshold) | | 100% (Target) | | 200% (Maximum) | | |||||||||
| Segment EBITDA and Segment Cash Flow (Percentage of Target) | | | 85% | | | | 100% | | | | 120% | | | |||
| | 0% (Threshold) | 100% (Target) | 125% | 150% (Maximum) | ||||
|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |
| 2019 Corporate Operating Cash Flow (Performance as a Percentage of Target) | 90% | 100% | 105% | 110% | ||||
| | | | | | | | | |
Safety Performance Targets |
The overall safety metric achievement factor equals the sum of each metric's payout percentage multiplied by its weighting. The maximum payout opportunities for the safety metrics and personal objectives wereis 150% of target. For the safety metrics, payout percentages for actual achievement between the specified threshold, target and maximum levels were adjusted on a linear basis. For the safety metrics below, the lower the result, the stronger the performance. All safety targets required year-over-year improvement in performance.
| | 2019 Payout Percentage | |||||
| | | | | | | |
| | | 0% (Threshold) | | 100% (Target) | | 150% (Maximum) |
|---|---|---|---|---|---|---|
| | | | | | | |
RIR—40% Safety | | 1.56 | | 1.35 | | 0.74 |
| | | | | | | |
LTIR—15% Safety | | 0.12 | | 0.10 | | 0.00 |
| | | | | | | |
PVIR—30% Safety | | 0.73 | | 0.63 | | 0.39 |
| | | | | | | |
CPMH—15% Safety | | 0.18 | | 0.17 | | 0.10 |
| | | | | | | |
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 23 | ||
Personal Performance Goals |
Personal performance goals may be focused on any combination of corporate, business-unit, or role-specific accomplishments or behaviors that focus executives on accomplishing our long-term business plan. The overallmaximum payout under the Personal Performance Goal portion of the annual incentive is 150% of target.
Thomas W. Hill
Mr. Hill's personal performance goals included executing the Company's 2019 operating plan and developing a three (3) year comprehensive strategic plan. In addition, Mr. Hill was to complete and deliver to the Board an executive talent assessment and management succession plan.
Brian J. Harris
Mr. Harris's personal performance goals included recruiting a new head of investor relations and maintaining excellent relationships and communications with investors. In addition, Mr. Harris was to continue to develop and strengthen relationships with members of the Board and work with Mr. Watson to evaluate new enterprise resource planning software. Further, Mr. Harris was to optimize the Company's corporate debt structure and work with the Company's subsidiaries and regional finance leaders to drive improvements in forecasting, monthly management reporting and identifying risks and opportunities in the Company's business.
Karl H. Watson, Jr.
Mr. Watson's personal performance goals included achieving 2019 budget targets and advanced commercial processes. In addition, Mr. Watson was to continue to develop and strengthen relationships between the members of the senior leadership team and his personal relationships with members of the Board and presidents of the operating companies in the West Region. Further, Mr. Watson was to work with Mr. Brady on acquisition prospects and with Mr. Harris to evaluate new enterprise resource planning software.
Anne Lee Benedict
Ms. Lee Benedict's personal performance goals included driving further integration of the legal team as a business partner of the senior leadership team and maintaining and deepening relationships with the operating companies. In addition, Ms. Lee Benedict was to execute on a training program to the operating companies and corporate headquarters. Further, Ms. Lee Benedict was to refine management communications with the Board, evaluate the Company's governance posture and undertake a governance roadshow for the Company's investors. Finally, Ms. Lee Benedict was to identify and determine the feasibility of an outside law firm management tool.
Michael J. Brady
Mr. Brady's personal performance goals included leveraging the business development team's expertise and resources to support business performance across the Company. In addition, Mr. Brady was to develop a long-term acquisition pipeline while also leading the facilitation and sourcing of investments in 2019. Further, Mr. Brady's goals included measurements related to the financial performance of certain historical acquisitions. Finally, Mr. Brady was to develop and strengthen relationships between the members of the senior leadership team.
M. Shane Evans
Mr. Evans's personal performance goals included exceeding 2018 budget price increases and achieving certain safety metric achievement factor equalsgoals. Mr. Evans's performance goals also included achieving budget targets in the sumWest Region and driving the West Region's productivity growth. In addition, Mr. Evans was to facilitate increased effectiveness of each metric's payout percentage multiplied by its weighting.the ready-mix concrete performance team in the West Region. Further, Mr. Evans was to continue to develop and strengthen relationships between the members of the senior leadership team and to partner with Mr. Watson to drive performance in the West Region.
Segment Goals
For Mr. Brady, acquisition spendEvans, West Segment EBITDA and acquisition EBITDA performanceWest Segment Operating Cash Flow payout percentages were determined by calculating actual achievement against the target amount based on a pre-established scale. Payout percentage for actual performance between the specified threshold, target and maximum levels was adjusted on a linear basis. The following table
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24 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
shows the payout percentages associated with threshold, target and maximum achievement of West Segment EBITDA and West Segment Operating Cash Flow:
| Payout Percentage | ||||||||
| | | | | | | | | |
| 5% (Threshold) | 100% (Target) | 144% | 200% (Maximum) | |||||
| | | | | | | | | |
West Segment EBITDA (Percentage of Target) | 85% | 96% | 100% | 105% | ||||
| | | | | | | | | |
West Segment Operating Cash Flow (Percentage of Target) | 85% | 96% | 100% | 105% | ||||
| | | | | | | | | |
For Mr. Evans, the West Segment safety metric achievement factor equals the sum of each West Segment metric's payout percentage multiplied by its weighting. The maximum payout opportunities for the acquisitionWest Segment safety metrics wereis 150% of targettarget. For the West Segment safety metrics, payout percentages for actual achievement at 110% of target.between the specified threshold, target and maximum levels were adjusted on a linear basis. For the safety metrics below, the lower the result, the stronger the performance.
| | 2019 Payout Percentage | | ||||||||||||||
| | | | | | | | | |||||||||
| | 0% (Threshold) | | 100% (Target) | | 150% (Maximum) | | ||||||||||
| | | | | | | | | |||||||||
West Segment RIR—40% Safety | | | 1.61 | | | | 1.40 | | | | 0.74 | | | |||
| | | | | | | | | |||||||||
West Segment LTIR—15% Safety | | | 0.20 | | | | 0.12 | | | | 0.00 | | | |||
| | | | | | | | | |||||||||
West Segment PVIR—30% Safety | | | 0.71 | | | | 0.62 | | | | 0.38 | | | |||
| | | | | | | | | |||||||||
West Segment CPMH—15% Safety | | | 0.217 | | | | 0.20 | | | | 0.10 | | | |||
| | | | | | | | | |||||||||
2019 ACTUAL PERFORMANCE AND PAYOUTS |
2017 Actual Performance.Actual results for the 20172019 annual incentive plan were certified by the Compensation Committee, as follows, based on the performance goals and funding scales approved in the first quarter of 2017:2019:
| | | Initial Target | | Adjusted Target to Account for 2017 Acquisitions and Hurricane Harvey(1) | | Actual Results | | Payout Percentage | | Weighted Achievement Factor | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Corporate EBITDA | | $ | 416.3 million | | $ | 457.1 million | | $ | 457.1 million | | 100% | | 50% (Messrs. Hill, Brady, Harris and Rauh) | ||
| | | | | | 20% (Mr. Evans) | ||||||||||
Corporate Operating Cash Flow | | 230.5 million | | 217.2 million | | 225.4 million | | 119% | | 23.8% (Messrs. Hill, Harris and Rauh) | |||||
| | | | | | 11.9% (Mr. Brady) | ||||||||||
West Segment EBITDA | | 182.5 million | | 211.5 million | | 223.2 million | | 127% | | 50.8% | |||||
West Segment Cash Flow | | 101.4 million | | 101.4 million | | 123.9 million | | 200% | | 40% | |||||
| | Initial Target | | Adjusted Target(1) | | Actual Results(2) | | Payout Percentage | | Weighted Payout | | ||||||||||
| | | | | | | | | | | | | |||||||||
| Corporate EBITDA ($ Millions) | | | $ | 471.0 | | | NA | | $461.5 | | | 85 | % | | | 42.5 | % | | ||
| | | | | | | | | | | | | |||||||||
| Corporate Operating Cash Flow ($ Millions) | | | $ | 252.4 | | | $236.9 | | $275.7 | | | 140 | % | | | 28.0 | % | | ||
| | | | | | | | | | | | | |||||||||
| West Segment EBITDA ($ Millions) | | | $ | 228.7 | | | NA | | $205.0 | | | 48 | % | | | 19.2 | % | | ||
| | | | | | | | | | | | | |||||||||
| West Segment Operating Cash Flow ($ Millions) | | | $ | 133.3 | | | NA | | $126.7 | | | 91 | % | | | 9.1 | % | | ||
| | | | | | | | | | | | | |||||||||
| | Payout Percentage Without Hurricane Harvey Adjustment | Payout Percentage With Hurricane Harvey Adjustment | ||
|---|---|---|---|---|
Corporate EBITDA | 93% | 100%(1) | ||
Corporate Operating Cash Flow | 109% | 119% | ||
West Segment EBITDA | 110% | 127% | ||
West Segment Cash Flow | 170% | 200% |
The payout percentages for the safety metrics were as follows: corporate safety was 124%69% of target, resulting in an achievement factora weighted payout of 12.4%6.9% for each NEO other than Mr. Evans; and West Segment safety for Mr. Evans was 72%71% of target, resulting in an achievement factora weighted payout of 7.2%7.1%. Each of the safety metric targets were set at a challenging level that are consistent with our long-term goals and designed to meet high stockholder expectations.
Actual annual cash incentive awards are calculated by multiplying each NEO's actual base salary by his or her target award potential, which was then adjusted by an overall achievement factor based on the combined weighted achievement of the components described above, including an evaluation of each NEO's personal objectives.
| | | 2019 Base Salary | | Target Incentive as a Percentage of Salary | | Actual Incentive Earned as a Percentage of Salary | | Annual Cash Incentive Earned | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |||||||||
Thomas W. Hill | | | $ | 900,000 | | | | 150 | % | | | 148 | % | | $1,328,738 | ||
| | | | | | | | | | |||||||||
Brian J. Harris | | | $ | 583,495 | | | | 75 | % | | | 76 | % | | $442,982 | ||
| | | | | | | | | | |||||||||
Michael J. Brady | | | $ | 515,000 | | | | 60 | % | | | 60 | % | | $310,313 | ||
| | | | | | | | | | |||||||||
Anne Lee Benedict | | | $ | 425,887 | | | | 60 | % | | | 61 | % | | $259,685 | ||
| | | | | | | | | | |||||||||
M. Shane Evans | | | $ | 446,413 | | | | 60 | % | | | 43 | % | | $191,243 | ||
| | | | | | | | | | |||||||||
Karl H. Watson, Jr.(1) | | | $ | 566,500 | | | | 75 | % | | | 0 | % | | $0 | ||
| | | | | | | | | | |||||||||
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 25 | ||
NEO's personal objectives. The following table summarizes the 2017 bonuses earned based on actual performance, as compared to the target opportunity for each NEO:
| | | 2017 Base Salary | | Target Incentive | | Overall Achievement Factor as a Percent of Target Award | | Annual Cash Incentive Earned | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Thomas W. Hill | | $ | 826,956 | | $ | 1,157,739 | | | 110 | % | | $ | 1,275,480 | | |
Michael J. Brady | | 425,000 | | 255,000 | | | 111 | % | | 283,764 | | ||||
Brian J. Harris | | 550,000 | | 412,500 | | | 109 | % | | 450,326 | | ||||
M. Shane Evans | | 420,787 | | 252,472 | | | 128 | % | | 323,669 | | ||||
Douglas C. Rauh | | 550,000 | | 412,500 | | | 106 | % | | 437,951 | | ||||
Long-Term Equity Incentives |
Long-Term Incentives
LONG-TERM INCENTIVES |
On-Going Post-IPO Long-Term Incentives
The Company maintains the Summit Materials, Inc. 2015 Omnibus Incentive Plan (the "Omnibus Incentive Plan") which allows for grants of equity-based awards in the form of stock options, stock appreciation rights, restricted stock and restricted stock units ("RSUs"), performance units, undivided fractional limited partnership interests in Summit Holdings and other stock-based awards. In 2015, the Compensation Committee determined that the size, structure, and value of the pre-IPO grants were sufficient for 2015 and no additional equity grants were made in 2015 in connection with, or after, our IPO.
In 2016, the Compensation Committee worked with the Independent Compensation Consultant to develop a competitive long-term incentive grant structure as an on-going public company. The Compensation Committee believes in a balanced approach to long-term incentive compensation, with an emphasis on performance-based compensation. The Compensation Committee determined that a similar structure in 2017 was appropriate.
Our regular ongoing equity incentives for NEOs in 2017 consisted of a balance of performance units (34%), RSUs (33%) and stock options (33%). In 2018, the Committee determined to eliminate stock options from regular ongoing equity incentive grants. Accordingly, our regular ongoing equity incentives for NEOs in 20182019 consisted of a balance of performance units (50%) and RSUs (50%). The Compensation Committee uses competitive market data from our annual total compensation study to assist with targeted long-term incentive value. In addition, the Compensation Committee considers individual performance, potential future contributions to our business, internal equity and management's recommendations.recommendations except in the case of the CEO.
| Award Type | | Weighting | | Vesting | | Value Tied To |
|---|---|---|---|---|---|---|
| | | | | | | |
| Performance Units | | | Vest at the end of a 3-year period in an amount based on the level of performance achieved | | Company | |
| | | | | | ||
| RSUs | | 50% | | Vest over 3 years in equal annual installments on each anniversary of the grant date | | Stock price performance |
| | | |
Performance Units
Performance Units Granted in 2019 |
The 20172019 performance units focus our executives on the long-term performance of the Company relative to industry peers. The 20172019 performance units vest at the end of a three-year performance period, based on our TSR ranking relative to companies that formerly compriseda TSR peer group ("Relative TSR") defined as the S&P Building & Construction Select Industry Index ("Relative TSR"), which index was discontinued in 2017, using beginning400 Midcap Materials and ending stock prices based on the trailing 20-day average closing price. The Compensation Committee determined that Relative TSR ranking against an industry index aligns management with stockholder value creation and provides incentive to achieve the Company's long-term strategy.
The performance period for the performance units granted in February 2017 began on January 1, 2017 and ends on December 31, 2019. Following the completion of the three-year performance period, the Compensation Committee will determine earned amounts based on our Relative TSR ranking versus the companies that formerly comprised the S&P Building & Construction Select Industry Index.Capital Goods Companies. This peer group is separate and distinct from the peer group used to evaluate and set NEO compensation levels discussed under "—Compensation Decision Process—Role of Peer Companies and Competitive Market Data." The Relative TSR peer group represents a broader array (approximately 130 companies)125 companies for TSR performance grants in 2017 and approximately 65 companies for TSR performance grants in 2018 and 2019) of industry peers competing for stockholders and investorsinvestors.
The performance period for the performance units granted in February 2019 began on January 1, 2019 and avoids subjectivity as it was independently constructed by Standard & Poor's.
The 2017 grants will beends on December 31, 2021 and are earned based on performance against the scheduletarget below. Earned amounts will be interpolated on a straight-line basis for performance between the stated percentiles.
| Level of Achievement | |||||||||||||||||||||
| | | | | | | | | | | | |||||||||||
| Below Threshold | Threshold | Target | Maximum | Cap (if applicable) | |||||||||||||||||
| | | | | | | | | | | | |||||||||||
| Relative TSR Position | < | 50th percentile | 75th percentile | Capped at 100% if Company TSR is negative over performance period, regardless of ranking | |||||||||||||||||
| | | | | | | | | | | | |||||||||||
| Achievement Percentage | 0% | 50% of target | 100% target | 200% of target | |||||||||||||||||
| | | | | | | | | | | | |||||||||||
See "—Potential PaymentsTreatment of Long-Term Incentive Awards Upon Termination or Change in Control" for a description of the potential vesting of the NEOs' equity awards that may occur in connection with certain termination events and a change in control.
For 2017,2019, the Compensation Committee set the target pay levels and made the grants set forth in the table below.
| | | 2017 Target Long-Term Incentive as % of Base Salary | | 2017 Target Long- Term Incentive | | Performance Units Granted | | Restricted Stock Units Granted | | Stock Options Granted | | | 2019 Target Long-Term Incentive as % of Base Salary | | 2019 Target Long-Term Incentive(1) | | Performance Units Granted (#) | | Restricted Stock Units Granted (#) | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |||||||||||||||||||||||||
Thomas W. Hill | | 275% | | $ | 2,274,129 | | 31,689 | | 30,757 | | 51,261 | | | 360% | | | $ | 3,240,000 | | | 105,537 | | | 105,537 | | | ||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Brian J. Harris | | 155% | | | $ | 904,417 | | | 29,460 | | | 29,460 | | | ||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Michael J. Brady | | 100% | | 425,000 | | 5,922 | | 5,748 | | 9,580 | | | 125% | | | $ | 643,750 | | | 20,969 | | | 20,969 | | | |||||||||
Brian J. Harris | | 155% | | 852,500 | | 11,879 | | 11,530 | | 19,216 | | |||||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Anne Lee Benedict | | 125% | | | $ | 532,359 | | | 17,341 | | | 17,341 | | | ||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
M. Shane Evans | | 100% | | 420,787 | | 5,863 | | 5,691 | | 9,485 | | | 125% | | | $ | 558,016 | | | 18,176 | | | 18,176 | | | |||||||||
Douglas C. Rauh | | 155% | | 852,500 | | 11,879 | | 11,530 | | 19,216 | | |||||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Karl H. Watson, Jr. | | 155% | | | $ | 878,075 | | | 28,602 | | | 28,602 | | | ||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
2018 Enhancements to Our On-Going Long-Term Incentive Structure
During 2017,
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26 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
Performance Units Earned for the Performance Period 2017—2019 |
In 2017, we granted performance units to our NEOs (except for Mr. Watson) that were approved forsubject to similar performance conditions as the 2018 grant cycle:
Retirement, Perquisites and Other Benefitstarget.
Retirement, Perquisites, and Other Benefits |
We have a tax-qualified contributory retirement plan established to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). The plan covers all U.S. employees, including our NEOs, who are limited to their annual tax deferred contribution limit as allowed by the Internal Revenue Service (the "IRS"). We provide for matching contributions to the plan, including 100% of pre-tax employee contributions, up to 4% of eligible compensation. Employer contributions vest immediately.
The Company also offers the members of a select group of management or highly compensated employees, including the NEOs, the opportunity to supplement their retirement savings through the Summit Materials Deferred Compensation Plan (the "DCP"). An eligible participant in the DCP may elect to defer up to 50% of such participant's base salary compensation and up to 100% of such participant's designated discretionary bonus award compensation and annual incentive award compensation. The DCP also permits Company-provided credits to participants' accounts, but no such credits are currently being
made. Additional information about the DCP is reflected in "—20172019 Non-Qualified Deferred Compensation" below.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 27 | ||
Beginning in 2017, we eliminated substantially all perquisites to our NEOs and senior executives. A one-time salary adjustment was provided to offset the changes.
Change in Control and Severance Arrangements
Also on December 15, 2017, Mr. Rauh entered into the Agreement and Release in connection with his departure. In recognition of Mr. Rauh's service to the Company, the Agreement and Release provided for the beneficial modification of the terms of Mr. Rauh's outstanding equity awards. The terms of the Agreement and Release are described below under "Potential Payments Upon Termination or Change in Control."Contents
|
Our Compensation Philosophy |
Our executive compensation program is intended to attract, motivate and retain executive officers and to align the interests of our executive officers with stockholders' interests.
The Board's objectives for our program include, but are not limited to, the following:
Stock Ownership Guidelines
Say-on-Pay Votes |
In 2019, the Compensation Committee considered the outcome of the stockholder advisory vote on 2018 executive compensation when making decisions relating to the compensation of our NEOs and our executive compensation program and policies. Our stockholders voted at our 2019 annual meeting, in a nonbinding advisory vote, on the 2018 compensation paid to our NEOs. Our stockholders overwhelmingly (96%) approved the compensation of our NEOs. Based on the level of support, the Compensation Committee determined that stockholders generally support our compensation practices. The Compensation Committee intends to continue to consider the views of our stockholders when designing, reviewing and administering the Company's compensation programs and policies.
Compensation Decision Process |
| Role of the Compensation Committee | The Compensation Committee is responsible to our Board for oversight of our executive compensation program. The Compensation Committee is responsible for the review and approval of all aspects of our program. Among its duties, the Compensation Committee is responsible for: • Assessing competitive market data from Aon, our independent compensation consultant (the "Independent Compensation Consultant") • Reviewing each NEO's performance in conjunction with competitive market data and, accordingly, approving compensation recommendations including, but not limited to, base salary, annual bonus, long-term incentives, and benefits/perquisites • Considering, recommending and approving incentive plan goals, achievement levels, and program structure • Incorporating meaningful input from our stockholders, if applicable | |
| | | |
| Role of Management | For each NEO excluding himself, our CEO recommends to the Compensation Committee compensation levels for NEOs based on a review of market data and individual performance. The Compensation Committee reviews and discusses all recommendations prior to approval, then submits all recommendations to the Board for approval. For the CEO, during executive session without the CEO present, the Compensation Committee is solely responsible for assessing performance and making compensation recommendations to the Board for approval. Management does not make compensation-related recommendations for the CEO. | |
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28 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
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| Role of the Independent Compensation Consultant | In 2019, the Compensation Committee retained the Independent Compensation Consultant in accordance with the Compensation Committee's charter. The Independent Compensation Consultant reports directly to the Compensation Committee. The Compensation Committee retains sole authority to hire or terminate the Independent Compensation Consultant, approve its fees, determine the nature and scope of services and evaluate the Independent Compensation Consultant's performance. A representative of the Independent Compensation Consultant attends Compensation Committee meetings, as requested, and communicates with the Compensation Committee chair between meetings. The Compensation Committee makes all final decisions and recommendations. The Independent Compensation Consultant's roles include, but are not limited to, the following: • Advising the Compensation Committee on executive compensation trends and regulatory developments; • Developing a peer group of companies for determining competitive compensation amounts and practices; • Providing a total compensation study for executives against peer companies; • Providing advice to the Compensation Committee on governance best practices, as well as any other areas of concern or risk; and • Reviewing and commenting on proxy disclosure items, including the CD&A. The Compensation Committee has assessed the independence of the Independent Compensation Consultant, considering all relevant factors, including those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act. Based on this review, the Compensation Committee concluded that there are no conflicts of interest raised by the work performed by the Independent Compensation Consultant and that the Independent Compensation Consultant is independent. | |
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| Role of Peer Companies and Competitive Market Data | In the Fall of 2018, to assist with 2019 compensation decisions, the Independent Compensation Consultant performed a competitive pay study. To develop competitive market values for the NEOs, the Independent Compensation Consultant developed, and the Compensation Committee approved, a peer group of 17 companies, which were the same companies used in the prior year. The peer group development criteria included: • Industry: Companies in the building products or construction materials industries • Company size: Approximately 0.4x to 3x times our annual revenues • ISS: Companies considered by Institutional Shareholder Services ("ISS") to be the Company's compensation peers and used in ISS' annual report regarding the Company • Peers of Peers: Companies used in the peer groups of potential peer companies • Consistency: Companies contained in the peer group in the prior year The approved peer group had annual revenues which ranged from approximately $867 million to $4.4 billion, with median annual revenue of approximately $1.8 billion. For our Fall 2018 total compensation study, our 2018 annual revenue was estimated at approximately $2.2 billion. The Independent Compensation Consultant developed size-adjusted market values (regression analysis) for each position using our annual revenue. The 50th percentile for total compensation is a key reference point for the Compensation Committee; however, the Compensation Committee also considers other factors, including, experience, performance and expected future contributions. For positions where peer company proxy data was not available, the Independent Compensation Consultant utilized published and private compensation survey sources. | |
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PEER GROUP |
• Armstrong World Industries, Inc. • Boise Cascade Company • Compass Minerals International, Inc. • CONSOL Energy Inc. • Dycom Industries, Inc. • Eagle Materials Inc. | • Gibraltar Industries, Inc. • Granite Construction Inc. • Louisiana-Pacific Corp. • Martin Marietta Materials, Inc. • Masonite International Corporation • NCI Building Systems Inc. | • Quanex Building Products Corp. • Simpson Manufacturing Company • US Concrete Inc. • USG Corp. • Vulcan Materials Company |
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 29 | ||
TIMING OF COMPENSATION DECISIONS |
Pay recommendations for our executives, including the NEOs, are typically made by the Compensation Committee at its first scheduled meeting of the fiscal year, typically held in February around the same time we report our fourth quarter and year-end financial results for the preceding fiscal year and provide our financial guidance for the upcoming year (the "first meeting"). This timing allows the Compensation Committee to have a complete financial performance picture prior to making compensation decisions.
Decisions with respect to prior year performance, as well as annual equity awards, base salary increases and target performance levels for the current year are typically made at the first meeting. Any equity awards recommended by the Compensation Committee at this meeting are reviewed by the Board and, if approved, are dated on or within a few days of the date of the Board meeting held later that day or the following day. As such, the Compensation Committee does not time the grants of equity incentives to the release of material non-public information.
The exceptions are grants to executives who are promoted or hired from outside the Company during the year, and discretionary grants made throughout the year for retention and extraordinary purposes. These executives may receive compensation changes or equity grants effective or dated, as applicable, as of the date of their promotion, hiring date, or other Board approval date.
DETERMINATION OF CEO COMPENSATION |
At the first meeting, in executive session without the CEO present, the Compensation Committee also reviews and evaluates CEO performance, and determines performance achievement levels, for the prior fiscal year. The Compensation Committee also reviews competitive compensation data from the peer group companies. The Compensation Committee typically approves, or presents, pay recommendations for the CEO to the Board, excluding the CEO, for approval. If applicable, during executive session, the Board conducts its own review and evaluation of the CEO's performance taking into consideration the recommendations of the Compensation Committee.
EQUITY PLAN |
The Company maintains the Omnibus Incentive Plan which allows for grants of equity-based awards in the form of stock options, stock appreciation rights, restricted stock and RSUs, performance units, undivided fractional limited partnership interests in Summit Holdings and other stock-based awards.
Governance of Executive Compensation |
STOCK OWNERSHIP GUIDELINES |
We have established stock ownership guidelines for our CEO, officers reporting to the CEO, and directors. The approved guidelines are as follows:
Participants are expected to comply with the ownership requirements within five years of the later of (x)(a) December 12, 2015 and (y)(b) an appointment to a qualified position. Once the ownership requirements have been satisfied, future declines in share price will not affect compliance so long as the participant holds the number of equity interests he or she had at the time he or she achieved the expected ownership level. As of December 30, 2017,February 14, 2020, all of our executive officers have met or exceeded the ownership expectations under the guidelines.
The following components satisfy the ownership guidelines: Equity interests owned directly or indirectly (e.g., by or with a spouse or held in trust for the individual or one or more family members of the individual), equity interests, including LP Unitslimited partnership interests (the "LP Units") and unvested RSUs, held in qualified or nonqualified savings, profit sharing, or deferred compensation accounts, value of in-the-money spread of shares underlying vested but unexercised stock options and value of in-the-money spread of shares underlying
vested but unexercised warrants. Annually,At least annually, the Compensation Committee monitors participants' compliance with these guidelines.
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30 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
INCENTIVE COMPENSATION RECOUPMENT ("INCENTIVE CLAWBACK") POLICIES |
In 2019, our Board adopted a Policy for Clawback of Incentive Compensation Recoupment(the "Policy") because it believes that it is in the best interests of the Company and its stockholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company's pay-for-performance compensation philosophy. This policy applies to any current and former "officer" of the Company, as such term is defined under Rule 16a-1(f) of the Exchange Act (the "Covered Executives"). The Policy applies to annual cash bonuses and equity incentive compensation ("Clawback"Incentive Compensation"). Under the Policy, if the Company is required to prepare an accounting restatement of the reported financial results of the Company or any of its segments due to (a) the material non-compliance of the Company with any financial reporting requirement (unless due to a change in accounting policy or applicable law) and (b) intentional misconduct by a Covered Executive, then the Compensation Committee may require any Covered Executive to repay to the Company any "Excess Compensation." Excess Compensation means that part of the Incentive Compensation received by a Covered Executive during the one-year period preceding the publication of the restated financial statement that the Committee determines was in excess of the amount that such Covered Executive would have received had such Incentive Compensation been calculated based on the financial results reported in the restated financial statement.
EachIn addition, each of the RSU, stock option and performance unit award agreements under the Omnibus Incentive Plan generally provides that if a restrictive covenant violation occurs or the Company discovers after a termination of employment or services that grounds existed for "cause" (as defined in the Omnibus Incentive Plan) at the time thereof, then the participant shall be required, in addition to any other remedy available (on a non-exclusive basis), to pay to the Company, within ten business days of the Company's request to the participant therefor, an amount equal to the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) the participant received upon the sale or other disposition of, or distributions in respect of, the equity award thereunder and any shares issued in respect thereof (minus, in the case of options, the aggregate cost (if any) of the shares). Without limiting the foregoing, all awards are subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law. Our policy will be updated to comply with the SEC's final regulations as part of the Dodd-Frank Act.
Compensation Risk Assessment |
Our governance policies and compensation structure are not reasonably likely to have a material adverse effect on the Company. The Independent Compensation Consultant and management delivered a compensation risk assessment report to the Compensation Committee in 2017.2019. The following features of our program mitigate risk:
  | The Compensation Committee consults with the Independent Compensation Consultant to assist with annual compensation decisions | |
| The Compensation Committee approves the annual incentive plan's financial goals at the start of the fiscal year, and approves the performance achievement level and final payments earned at the end of the fiscal year | |
| The Compensation Committee benchmarks total compensation opportunity for executive positions using multiple survey sources and has discretion over payout calculations and oversight of compensation plans for our executives | |
| We utilize a mix of cash and equity variable incentive programs, with a balanced mix of | |
| Our performance units payout opportunities are capped at 200% of the target total opportunity | |
| We utilize competitive change-in-control severance programs to help ensure executives continue to work towards our stockholders' best interests in light of potential employment uncertainty | |
| Executive officers are subject to minimum stock ownership guidelines | |
| Incentive clawback |
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 31 | ||
Compensation Tables |
Summary Compensation Table |
The following table sets forth the compensation of our NEOs for the fiscal years ended 2017, 20162019, 2018 and 2015,2017, and their respective titles as of December 30, 2017.28, 2019.
| Name and Principal Position | | Year | | Salary ($) | | Stock Awards ($)(1) | | Option Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($)(3) | | All Other Compensation ($)(4) | | Total ($) | | Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
Thomas W. Hill | | | | | | | | | 2019 | 900,000 | 4,559,198 | — | 1,328,738 | 24,493 | 6,812,429 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| President and Chief | 2018 | 900,000 | 3,750,312 | — | — | 23,693 | 4,674,005 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Executive Officer, Director | 2017 | 826,956 | 1,735,523 | 620,771 | 1,275,480 | 16,140 | 4,474,870 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | |||||||||||||||||||||||
| Brian J. Harris | 2019 | 583,495 | 1,272,672 | — | 442,982 | 15,964 | 2,315,113 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Executive Vice President, Chief Financial Officer | 2018 | 566,500 | 1,521,907 | — | — | 13,694 | 2,102,101 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| | 2017 | | 826,956 | | 1,735,523 | | 620,771 | | 1,275,480 | | 16,140 | | 4,474,870 | | 2017 | 550,000 | 650,591 | 232,706 | 450,326 | 10,400 | 1,894,023 | ||||||||||||||||
President and Chief | | | | | | | | | |||||||||||||||||||||||||||||
Executive Officer, Director | | 2016 | | 800,000 | | 5,039,389 | | 2,696,940 | | 1,367,520 | | 20,541 | | 9,924,390 | | ||||||||||||||||||||||
| | 2015 | | 746,750 | | 4,530,452 | | 5,535,004 | | 1,134,127 | | 22,170 | | 11,968,503 | | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
Michael J. Brady | | | | | | | | | 2019 | 515,000 | 905,861 | — | 310,313 | 14,748 | 1,745,922 | ||||||||||||||||||||||
| | 2017 | | 425,000 | | 324,336 | | 116,014 | | 283,764 | | 11,029 | | 1,160,143 | | |||||||||||||||||||||||
Chief Business | | | | | | | | | |||||||||||||||||||||||||||||
Development Officer | | 2016 | | 382,454 | | 1,405,378 | | 760,073 | | 290,973 | | 11,495 | | 2,850,373 | | ||||||||||||||||||||||
| | 2015 | | 371,315 | | 1,459,930 | | 1,707,379 | | 271,803 | | 10,975 | | 3,821,402 | | |||||||||||||||||||||||
Brian J. Harris | | | | | | | | | |||||||||||||||||||||||||||||
| | 2017 | | 550,000 | | 650,591 | | 232,706 | | 450,326 | | 10,400 | | 1,894,023 | | |||||||||||||||||||||||
Chief Financial Officer | | | | | | | | | |||||||||||||||||||||||||||||
| | 2016 | | 519,045 | | 1,347,477 | | 643,236 | | 469,087 | | 26,261 | | 3,005,106 | | |||||||||||||||||||||||
| | 2015 | | 503,928 | | 1,334,756 | | 905,740 | | 459,204 | | 24,730 | | 3,228,358 | | |||||||||||||||||||||||
M. Shane Evans | | | | | | | | | |||||||||||||||||||||||||||||
| | 2017 | | 420,787 | | 321,112 | | 114,863 | | 323,669 | | 14,056 | | 1,194,487 | | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Executive Vice President, | 2018 | 500,000 | 769,241 | — | — | 13,292 | 1,282,533 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Chief Business Development Officer | 2017 | 425,000 | 324,336 | 116,014 | 283,764 | 11,029 | 1,160,143 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Anne Lee Benedict | 2019 | 425,887 | 749,131 | — | 259,685 | 13,073 | 1,447,776 | ||||||||||||||||||||||||||||||
| Executive Vice President, Chief Legal Officer, and Secretary | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| M. Shane Evans(4) | 2019 | 446,413 | 785,203 | — | 191,243 | 16,682 | 1,439,541 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Executive Vice President, | 2018 | 433,411 | 654,555 | — | — | 15,859 | 1,103,825 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
West Division President | | | | | | | | | 2017 | 420,787 | 321,112 | 114,863 | 323,669 | 14,056 | 1,194,487 | ||||||||||||||||||||||
Douglas C. Rauh | | | | | | | | | |||||||||||||||||||||||||||||
| | 2017 | | 550,000 | | 1,264,589 | | 2,177,649 | | 437,951 | | 10,400 | | 4,440,589 | | |||||||||||||||||||||||
Former Chief Operating Officer | | | | | | | | | |||||||||||||||||||||||||||||
| | 2016 | | 519,045 | | 1,393,123 | | 739,563 | | 469,087 | | 46,163 | | 3,166,981 | | |||||||||||||||||||||||
| | 2015 | | 503,928 | | 1,113,297 | | 1,150,299 | | 459,204 | | 34,121 | | 3,260,849 | | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | |||||||||||||||||||||||
| Karl H. Watson, Jr.(5) | 2019 | 283,250 | 1,235,606(6) | — | — | 12,361 | 1,531,217 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
| Former Executive Vice President, Chief Operating Officer | 2018 | 550,000 | 2,036,565 | — | — | 11,332 | 2,597,897 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||||||||
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32 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
|
The following table provides supplemental information relating to grants of plan-based awards to help explain information provided above in our Summary Compensation Table.
| | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) (4) | All Other Option Awards: Number of Securities Underlying Options (#) (5) | | | | | | | | | | | | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | | | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts under Equity Incentive Plan Awards (2) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (6) | | | | | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | Grant Date Fair Value of Stock Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||
Name | Award Type | Grant Date (3) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | Award Type | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Thomas W. Hill | Annual Cash Incentive | — | 18,524 | 1,157,738 | 2,026,042 | — | — | — | — | — | — | — | | Annual Cash Incentive | | — | | 16,200 | | 1,350,000 | | 2,497,500 | | — | | — | | — | | — | | — | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Performance Units | 2/28/2017 | — | — | — | 15,845 | 31,689 | 63,378 | — | — | — | 1,000,739 | | Performance Units | | 2/28/2019 | | — | | — | | — | | 52,769 | | 105,537 | | 211,074 | | — | | 2,765,069 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| RSUs | 2/28/2017 | — | — | — | — | — | — | 30,757 | — | — | 734,785 | | RSUs | | 2/28/2019 | | — | | — | | — | | — | | — | | — | | 105,537 | | 1,794,129 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Brian J. Harris | | Annual Cash Incentive | | — | | 5,251 | | 437,621 | | 809,599 | | — | | — | | — | | — | | — | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Stock Options | 2/28/2017 | — | — | — | — | — | — | — | 51,261 | 23.89 | 620,771 | | Performance Units | | 2/28/2019 | | — | | — | | — | | 14,730 | | 29,460 | | 58,920 | | — | | 771,852 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| | RSUs | | 2/28/2019 | | — | | — | | — | | — | | — | | — | | 29,460 | | 500,820 | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Michael J. Brady | Annual Cash Incentive | — | 4,080 | 255,000 | 446,250 | — | — | — | — | — | — | — | | Annual Cash Incentive | | — | | 4,635 | | 309,000 | | 714,563 | | — | | — | | — | | — | | — | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Performance Units | 2/28/2017 | — | — | — | 2,961 | 5,922 | 11,844 | — | — | — | 187,017 | | Performance Units | | 2/28/2019 | | — | | — | | — | | 10,485 | | 20,969 | | 41,938 | | — | | 549,388 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| RSUs | 2/28/2017 | — | — | — | — | — | — | 5,748 | — | — | 137,320 | | RSUs | | 2/28/2019 | | — | | — | | — | | — | | — | | — | | 20,969 | | 356,473 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Anne Lee Benedict | | Annual Cash Incentive | | — | | 3,066 | | 255,532 | | 472,735 | | — | | — | | — | | — | | — | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Stock Options | 2/28/2017 | — | — | — | — | — | — | — | 9,580 | 23.89 | 116,014 | | Performance Units | | 2/28/2019 | | — | | — | | — | | 8,671 | | 17,341 | | 34,682 | | — | | 454,334 | |||||||||||||||||||||||||
Brian J. Harris | Annual Cash Incentive | — | 6,600 | 412,500 | 721,875 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Performance Units | 2/28/2017 | — | — | — | 5,940 | 11,879 | 23,758 | — | — | — | 375,139 | | RSUs | | 2/28/2019 | | — | | — | | — | | — | | — | | — | | 17,341 | | 294,797 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| M. Shane Evans | | Annual Cash Incentive | | — | | 3,214 | | 267,848 | | 495,518 | | — | | — | | — | | — | | — | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| RSUs | 2/28/2017 | — | — | — | — | — | — | 11,530 | — | — | 275,452 | | Performance Units | | 2/28/2019 | | — | | — | | — | | 9,088 | | 18,176 | | 36,352 | | — | | 476,211 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Stock Options | 2/28/2017 | — | — | — | — | — | — | — | 19,216 | 23.89 | 232,706 | | RSUs | | 2/28/2019 | | — | | — | | — | | — | | — | | — | | 18,176 | | 308,992 | |||||||||||||||||||||||||
M. Shane Evans | Annual Cash Incentive | — | 4,040 | 252,472 | 454,450 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Karl H. Watson, Jr.(5) | | Annual Cash Incentive | | — | | 5,098 | | 424,875 | | 786,019 | | — | | — | | — | | — | | — | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | �� | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Performance Units | 2/28/2017 | — | — | — | 2,932 | 5,863 | 11,726 | — | — | — | 185,154 | | Performance Units | | 2/28/2019 | | — | | — | | — | | 14,301 | | 28,602 | | 57,204 | | — | | 749,372 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
| RSUs | 2/28/2017 | — | — | — | — | — | — | 5,691 | — | — | 135,958 | | RSUs | | 2/28/2019 | | — | | — | | — | | — | | — | | — | | 28,602 | | 486,234 | |||||||||||||||||||||||||
| Stock Options | 2/28/2017 | — | — | — | — | — | — | — | 9,485 | 23.89 | 114,863 | |||||||||||||||||||||||||||||||||||||||||||||
Douglas C. Rauh | Annual Cash Incentive | — | 6,600 | 412,500 | 721,875 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 2/28/2017 | — | — | — | 5,940 | 11,879 | 23,758 | — | — | — | 375,139 | |||||||||||||||||||||||||||||||||||||||||||||
| RSUs | 2/28/2017 | — | — | — | — | — | — | 11,530 | — | — | 275,452 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock Options | 2/28/2017 | — | — | — | — | — | — | — | 19,216 | 23.89 | 232,706 | |||||||||||||||||||||||||||||||||||||||||||||
| Modified Awards: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pre-IPO LP Units | 12/15/2017 | — | — | — | — | — | — | 1,742 | — | — | 52,483 | |||||||||||||||||||||||||||||||||||||||||||||
| Pre-IPO Leverage Restoration Options | 12/15/2017 | — | — | — | — | — | — | — | 147,805 | 18.00 | 1,802,383 | |||||||||||||||||||||||||||||||||||||||||||||
| Performance Units | 12/15/2017 | — | — | — | 7,829 | 15,657 | 31,314 | — | — | — | 522,641 | |||||||||||||||||||||||||||||||||||||||||||||
| RSUs | 12/15/2017 | — | — | — | — | — | — | 11,530 | — | — | 689,465 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock Options | 12/15/2017 | — | — | — | — | — | — | — | 19,216 | 23.89 | 375,266 | |||||||||||||||||||||||||||||||||||||||||||||
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 33 | ||
Narrative Disclosure to Summary Compensation |
Employment Arrangements |
Messrs. Hill and Harris and Ms. Lee Benedict each have employment agreements and Messrs.Mr. Brady and Evans havehas a signed offersoffer of employment. Their employment agreements and offers of employment provide for base salary subject to annual adjustment by the Board, an annual incentive award, participation in Company-sponsored broad-based and executive benefit plans and such other compensation as may be approved by the Board. In connection with implementing the Executive Severance Plan (the "Severance Plan"), Messrs. Hill and Harris and Ms. Lee Benedict waived the provisions in their employment agreements that would have applied under the conditions set forth in the Severance Plan, other than any provisions in their employment agreements which were intended to survive the termination of such employment agreements.
Pre-IPO Long-Term Incentive Awards
Pre-IPO Long-Term Incentive Awards (Value From Modifications to Eliminate Misalignment Post-IPO) |
Prior to the Company's IPOinitial public offering ("IPO") in March 2015, the equity-based long-term incentive program consisted of Class D interests. In connection with the Company's IPO in March 2015, the limited partnership agreement of Summit Holdings was amended and restated to, among other things, modify its capital structure by creating LP Units (the "Reclassification"). Immediately following the Reclassification, 69,007,297the LP Units were outstanding, which were reclassified from previously issued Class A-1, Class B-1, Class C, Class D-1 and Class D-2 interests. The Class A-1, Class B-1 and Class C interests, which were issued in respect of pre-IPO investments and not related to employee compensation, were fully vested as of the Reclassification. A portion, but not all, of the Class D-1 interests were vested, and none of the Class D-2 interests were vested. Accordingly, vested and unvested Class D interests were converted into vested and unvested LP Units, respectively. The vesting terms were substantially similar to those applicable to the unvested Class D interests immediately prior to the Reclassification. As of their respective grant date, approximately half of the Class D-1 interests were time-vesting interests and approximately half of the D-1 interests and all of the D-2 interests were performance-vesting interests.
In addition, in substitution for part of the economic benefit of the Class C and Class D interests that was not reflected in the conversion of such interests to LP Units, warrants were issued to holders of Class C interests to purchase an aggregate of 160,333 shares of Class A Common Stock, and options were issued to holders of Class D interests to purchase an aggregate of 4,358,842 shares of Class A Common Stock ("Leverage Restoration Options"). The exercise price of the warrants and Leverage Restoration Options was the IPO price of $18.00 per share. The Leverage Restoration Options were granted under the Omnibus Incentive Plan. All Leverage Restoration Options vest over four years at a rate of 25% of the award on each of the first four anniversaries of the Reclassification, subject to the employee's continued employment through the applicable vesting date. The Leverage Restoration Options that correlated to performance-vesting interests vested only if both the relevant return multiple was achieved and the four year time-vesting condition was satisfied.
On August 9, 2016, our Board upon the recommendation of the Compensation Committee, determined that it was in the best interest of the Company and its stockholders to remove the 3.00 times investment return condition on the approximately 23% remaining pre-IPO performance-vesting LP Units and Leverage Restoration Options. As a result, all pre-IPO performance-vesting LP Units are now fully vested and the performance-vesting Leverage Restoration Options continue to be subject to the same four-year time vesting condition as the time-vesting Leverage Restoration Options.
In 2018, a sub-committee of the Compensation Committee consisting of members that do not hold LP Units (the "Sub-Committee") determined that the administrative burden and costs associated with the monthly vesting of the remaining time-vesting LP Units outweighed any remaining retention incentive associated with the awards. As a result, the Sub-Committee determined it was appropriate to accelerate the vesting of all the remaining time-vesting LP Units held by our employees. The incremental fair value computed in accordance with FASB ASC Topic 718 with respect to this modification for each of the NEOs was not material.
All outstanding equity grants associated with the Reclassification and subsequent modifications are summarized in the table titled "Outstanding Equity Awards at 20172019 Fiscal Year-End."
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34 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
Outstanding Equity Awards at |
A summary of the outstanding equity awards for each NEO as of December 30, 201728, 2019 is as follows:follows in the below table. Upon Mr. Watson's departure date of June 28, 2019, Mr. Watson forfeited all of his unvested equity awards.
| | Option Awards | Stock Awards | |||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date (1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | |||||||||||||||||||||
Thomas W. Hill | 3/11/15 | 293,055(3 | ) | 643,059 | — | 18.00 | 3/11/25 | — | — | — | — | ||||||||||||||||||||
| 3/11/15 | 29,463(4 | ) | — | — | 18.00 | 3/11/25 | — | — | — | — | |||||||||||||||||||||
| 2/24/16 | 23,980(6 | ) | 47,958 | — | 17.07 | 2/24/26 | — | — | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | 28,763(7 | ) | 904,309 | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | — | — | 44,452(8 | ) | 1,397,571 | |||||||||||||||||||||
| 2/28/17 | — | 51,261(6 | ) | — | 23.89 | 2/28/27 | — | — | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | 30,757(7 | ) | 967,000 | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | — | — | 63,378(9 | ) | 1,992,604 | |||||||||||||||||||||
Michael J. Brady | 3/11/15 | 203,536(3 | ) | 203,536 | 18.00 | 3/11/25 | — | — | — | — | |||||||||||||||||||||
| 3/11/15 | 6,852(4 | ) | — | — | 18.00 | 3/11/25 | — | — | — | — | |||||||||||||||||||||
| 3/11/15 | — | — | — | — | — | 1,655(5 | ) | 52,033 | — | — | |||||||||||||||||||||
| 2/24/16 | 4,500(6 | ) | 8,998 | — | 17.07 | 2/24/26 | — | — | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | 5,397(7 | ) | 169,682 | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | — | — | 8,341 (8 | ) | 262,241 | |||||||||||||||||||||
| 2/28/17 | — | 9,580(6 | ) | — | 23.89 | 2/28/27 | — | — | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | 5,748(7 | ) | 180,717 | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | — | — | 11,844(9 | ) | 372,375 | |||||||||||||||||||||
Brian J. Harris | 3/11/15 | 116,380(3 | ) | 116,380 | — | 18.00 | 3/11/25 | — | — | — | — | ||||||||||||||||||||
| 3/11/15 | — | — | — | — | — | 19,978(5 | ) | 628,108 | — | — | |||||||||||||||||||||
| 2/24/16 | 9,465(6 | ) | 18,930 | — | 17.07 | 2/24/26 | — | — | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | 11,353(7 | ) | 356,938 | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | — | — | 17,546(8 | ) | 551,646 | |||||||||||||||||||||
| 2/28/17 | — | 19,216(6 | ) | — | 23.89 | 2/28/27 | — | — | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | 11,530(7 | ) | 362,503 | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | — | — | 23,758(9 | ) | 746,952 | |||||||||||||||||||||
M. Shane Evans | 3/11/15 | 116,241(3 | ) | 123,443 | — | 18.00 | 3/11/25 | — | — | — | — | ||||||||||||||||||||
| 3/11/15 | — | — | — | — | — | 993(5 | ) | 31,220 | — | — | |||||||||||||||||||||
| 2/24/16 | 4,718(6 | ) | 9,436 | — | 17.07 | 2/24/26 | — | — | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | 5,659(7 | ) | 177,919 | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | — | — | 8,756(8 | ) | 275,289 | |||||||||||||||||||||
| 2/28/17 | — | 9,485(6 | ) | — | 23.89 | 2/28/27 | — | — | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | 5,691(7 | ) | 178,925 | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | — | — | 11,726(9 | ) | 368,665 | |||||||||||||||||||||
Douglas C. Rauh(10) | 3/11/15 | — | 147,805(3 | ) | 18.00 | 3/11/25 | — | — | — | — | |||||||||||||||||||||
| 3/11/15 | — | — | — | — | — | 1,742(5 | ) | 54,768 | — | — | |||||||||||||||||||||
| 2/24/16 | — | 18,930(6 | ) | — | 17.07 | 2/24/26 | — | — | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | 11,353(7 | ) | 356,938 | — | — | |||||||||||||||||||||
| 2/24/16 | — | — | — | — | — | — | — | 17,546(8 | ) | 551,646 | |||||||||||||||||||||
| 2/28/17 | — | 19,216(6 | ) | — | 23.89 | 2/28/27 | — | — | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | 11,530(7 | ) | 362,503 | — | — | |||||||||||||||||||||
| 2/28/17 | — | — | — | — | — | — | — | 23,758(9 | ) | 746,952 | |||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| Thomas W. Hill | 3/11/2015 | 536,111(3) | — | — | 18.00 | 3/11/2025 | — | — | — | — | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 3/11/2015 | 29,463(4) | — | — | 18.00 | 3/11/2025 | — | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/24/2016 | 23,979(5) | — | — | 17.07 | 2/24/2026 | — | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | 34,174(5) | 17,087(5) | — | 23.89 | 2/28/2027 | — | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 10,252(6) | 244,407 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 20,829(7) | 496,563 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | 34,505(6) | 822,599 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | — | — | 51,757(8) | 1,233,887 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | 105,537(6) | 2,516,002 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | — | — | 211,074(9) | 5,032,004 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| Brian J. Harris | 2/28/2017 | 12,811(5) | 6,405(5) | — | 23.89 | 2/28/2027 | — | — | — | — | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 3,843(6) | 91,617 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 7,808(7) | 186,143 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | 9,352(6) | 222,952 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | — | — | 14,027(8) | 334,404 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | 29,460(6) | 702,326 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | — | — | 58,920(9) | 1,404,653 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| Michael J. Brady | 3/11/2015 | 407,072(3) | — | — | 18.00 | 3/11/2025 | — | — | — | — | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 3/11/2015 | 6,852(4) | — | — | 18.00 | 3/11/2025 | — | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/24/2016 | 13,498(5) | — | — | 17.07 | 2/24/2026 | — | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | 6,387(5) | 3,193(5) | — | 23.89 | 2/28/2027 | — | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 1,916(6) | 45,677 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 3,893(7) | 92,809 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | 6,656(6) | 158,679 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | — | — | 9,984(8) | 238,019 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | 20,969(6) | 499,901 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | — | — | 41,938(9) | 999,802 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| Anne Lee Benedict | 2/28/2017 | 5,975(5) | 2,987(5) | — | 23.89 | 2/28/2027 | — | — | — | — | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 1,792(6) | 42,721 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 3,641(7) | 86,253 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | 5,504(6) | 131,215 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | — | — | 8,256(8) | 196,823 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | 17,341(6) | 413,409 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | — | — | 34,682(9) | 826,819 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| M. Shane Evans | 2/28/2017 | 6,323(5) | 3,162(5) | — | 23.89 | 2/28/2027 | — | — | — | — | ||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 1,897(6) | 45,224 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2017 | — | — | — | — | — | 3,854(7) | 91,879 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | 5,770(6) | 137,557 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2018 | — | — | — | — | — | — | — | 8,654(8) | 206,311 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | 18,176(6) | 433,316 | — | — | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
| 2/28/2019 | — | — | — | — | — | — | — | 36,352(9) | 866,632 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | |
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 35 | ||
|
The following table provides information regarding the amounts recognized by our NEOs upon the exercise of stock options and the vesting of stock awards during 2017.2019.
| | Option Awards | Stock Awards | | Option Awards | | Stock Awards | | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | |||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | Number of Shares Acquired on Vesting (#)(3) | Value Realized on Vesting ($)(4) | | Number of Shares Acquired on Exercise (#)(1) | | Value Realized on Exercise ($)(2) | | Number of Shares Acquired on Vesting (#)(3) | | Value Realized on Vesting ($)(4) | | |||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Thomas W. Hill | 350,000 | 3,825,500 | 14,382 | 336,826 | | | — | | | — | | | 62,715 | | | 1,126,827 | | | ||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Brian J. Harris | | | 261,155 | | | 1,630,690 | | | 22,003 | | | 396,949 | | | ||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Michael J. Brady | — | — | 3,940 | 97,818 | | | — | | | — | | | 11,836 | | | 212,558 | | | ||||||||||||||||
Brian J. Harris | — | — | 29,647 | 801,081 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Anne Lee Benedict | | | 42,904 | | | 243,956 | | | 10,831 | | | 194,804 | | | ||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
M. Shane Evans | 7,200 | 69,120 | 3,575 | 87,047 | | | 253,838 | | | 1,441,327 | | | 11,465 | | | 206,222 | | | ||||||||||||||||
Douglas C. Rauh | 157,268 | 1,683,945 | 6,983 | 169,393 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
Karl H. Watson, Jr. | | | — | | | — | | | 21,388 | | | 310,768 | | | ||||||||||||||||||||
| | | | | | | | | | | |||||||||||||||||||||||||
|
The following table provides information regarding contributions, earnings and balances for our NEOs with respect to our DCP, the only defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
Name | Executive Contributions in Last FY(1) ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY(2) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE(3) ($) | | Executive Contributions in Last FY(1) ($) | | Registrant Contributions in Last FY ($) | | Aggregate Earnings in Last FY(2) ($) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE(3) ($) | | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |||||||||||||||||||||||||||||||
Thomas W. Hill | 273,504 | — | 50,836 | — | 324,340 | | | — | | | — | | | 140,380 | | | — | | | 674,149 | | | ||||||||||||||||||||
| | | | | | | | | | | | | |||||||||||||||||||||||||||||||
Brian J. Harris | 275,000 | — | 64,515 | — | 520,283 | | | 291,748 | | | — | | | 238,955 | | | — | | | 1,262,253 | | | ||||||||||||||||||||
| | | | | | | | | | | | | |||||||||||||||||||||||||||||||
Pursuant to the DCP, an eligible participant may elect to defer up to 50% of such participant's base salary compensation (in 5% increments) and up to 100% of such participant's designated discretionary bonus award compensation and annual incentive award compensation (in 5% increments). Deferral elections are generally made by participants prior to the close of the taxable year preceding the taxable year for which the applicable compensation is earned. The DCP also permits Company-provided credits to participants' accounts, but no such credits are currently being made. Participants are permitted to make individual investment elections that will determine the rate of return on their deferral amounts under the DCP and may change their investment elections at any time. Deferrals are only deemed to be invested in the investment options selected. Participants have no ownership interest in any of the funds as investment elections are used solely to measure the amounts of investment earnings or losses that will be credited or debited to the participants' accounts on the Company's books and records. Investment funds are valued each day that the NYSE is open for trading. Participant deferrals under the DCP and the earnings thereon are always 100% vested.
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36 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
The table below shows the funds in which our NEOs invested during 2017,2019, and their rate of return from January 1, 20172019 through December 31, 2017.2019.
Name of Investment Fund | | Rate of Return % | | |||
|---|---|---|---|---|---|---|
| | | | | |||
Alger Capital Appreciation Z | | | | |||
| | | | | |||
American Beacon Mid-Cap Value Instl | | | 26.55% | | | |
| | | | | |||
American Century Real Estate R6 | | | 31.14% | | | |
| | | | | |||
American Funds Income Fund of Amer R6 | | | 19.27% | | | |
| | | | | |||
American Funds New World R6 | | | | |||
| | | | | |||
Columbia Dividend Income Y | | | | |||
| | | | | |||
Fidelity Advisor International Discv Z | | | | |||
| | | | | |||
Janus Henderson Triton N | | | | |||
| | | | | |||
Pioneer Bond K | | | 9.35% | | | |
| | | | | |||
T. Rowe Price New Era | | | 16.88% | | | |
| | | | | |||
Templeton Global Bond R6 | | | 1.01% | | | |
| | | | | |||
Undiscovered Managers Behavioral Val R6 | | | | |||
| | | | | |||
Vanguard 500 Index Investor | | | | |||
| | | | | |||
Vanguard Market Neutral Inv | | | -9.57% | | | |
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Vanguard Mid Cap Index Investor | | | | |||
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Vanguard Mid-Cap Growth Index Investor | | | 33.86% | | | |
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Vanguard Small Cap Index Fund | | | | |||
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Vanguard Target Retirement 2015 Inv | | | 14.81% | | | |
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Vanguard Target Retirement 2025 Inv | | | 19.63% | | | |
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Vanguard Target Retirement 2035 Inv | | | 22.44% | | | |
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Vanguard Target Retirement 2045 Inv | | | 24.94% | | | |
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Western Asset High Yield IS | | | 15.09% | | | |
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A DCP participant may elect, at the time of such participant's deferral elections, to receive benefit distributions upon (i) separation from service with the Company or (ii) following the earlier of (a) a specified date that occurs no earlier than at least three years from the end of the calendar year in which the deferred compensation is credited or (b) separation from service with the Company. Additionally, a DCP participant may elect, at the time of such participant's deferral elections, to receive benefit distributions in the form of (i) a single lump sum payment or (ii) for distributions following retirement, annual installments with an installment term of between two and 15 years. A participant may elect to change the benefit distribution date and/or form under certain circumstances specified in the DCP. In addition, in the event of certain unforeseeable emergencies, a participant may apply for immediate distribution in an amount necessary to satisfy such financial hardship and the tax liability attributable to such distribution. In the event of a participant's death or disability, the entire value of such participant's account will be distributed in a single lump sum.
Potential Payments Upon Termination or Change in Control |
Executive Severance Plan
EXECUTIVE SEVERANCE PLAN |
The Board, upon the recommendation of the Compensation Committee, adopted the Severance Plan in December 2017, which provides severance benefits to certain executive officers of the Company and its affiliates in the event that an eligible employee experiences a termination of employment by the Company without "cause" (and other than due to death or disability) or by the employee as a result of a "constructive termination" (as such terms are defined in the Severance Plan) (each, a "Qualifying Termination"). In the event that a Qualifying Termination occurs during the two-year period beginning on the date of a change in control (each such termination, a "Qualifying Change in Control Termination"), the Severance Plan provides enhanced severance benefits. In connection with implementing the Severance Plan, all participants in the Severance Plan waived the provisions of any applicable employment agreement that would have applied under the conditions set forth under the Severance Plan, other than any provisions in such employment agreements which were intended to survive the termination of such employment agreement.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 37 | ||
Each participant in the Severance Plan (a "Participant") is designated as a Tier 1 Participant or Tier 2 Participant. Tier 1 Participants are limited to the Chief Executive Officer. Tier 2 Participants are limited to Executive Vice Presidents. Accordingly, Mr. Hill is a Tier 1 Participant and Messrs. Brady, Evans and Harris and EvansMs. Lee Benedict are each Tier 2 Participants.
In the event of a Qualifying Termination, Participants are provided with the following payments and benefits:
In the event of a Qualifying Change in Control Termination, Participants are provided with the following payments and benefits:
The payments and benefits provided under the Severance Plan are subject to each Participant's execution and delivery of a release of claims and each Participant's compliance with non-competition, non-disparagement, non-solicitation and confidentiality covenants applicable pursuant to each Participant's Participation Notice and Agreement under the Severance Plan. The non-disparagement and confidentiality covenants each have an indefinite term and the non-competition and non-solicitation covenants each have a term of 12 months following the Participant's date of termination (18 months for Mr. Hill). Additionally, the Severance Plan provides that if a Participant is subject to an excise tax under Section 4999 of the Code, then the payments and benefits the Participant receives may be reduced so that the excise tax does not apply; however, such reduction will only occur if it results in the receipt of a greater after-tax severance than would otherwise be provided.
Treatment
DEPARTURE OF KARL H. WATSON, JR. |
On June 6, 2019, Mr. Watson resigned from his role as Executive Vice President and Chief Operating Officer of Long-Term Incentive Awards Upon Termination or Changethe Company. Mr. Watson remained an employee of the Company through June 28, 2019. Pursuant to the Executive Severance Plan and the award agreements between the Company and Mr. Watson, upon Mr. Watson's departure he was not entitled to any severance, and he forfeited all of his unvested equity awards. In addition, pursuant to his offer letter, Mr. Watson repaid his one-time cash sign-on bonus of $300,000 in Controlconnection with his resignation.
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38 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
Treatment of Long-Term Incentive Awards Upon Termination or Change in Control |
Each of the RSUs stock options and performance units granted in 20172019 is subject to restrictive covenants related to post-employment (i) employee, client and consultant non-solicitation and (ii) non-competition, in each case for 12 months following any termination of employment and indefinite covenants covering confidentiality and non-disparagement (participant only). Further, the equity awards and all proceeds therefrom are generally subject to the Company's incentive clawback policy,policies, as in effect from time to time, to the extent the participant is a director or "officer" as defined under Rule 16a-1(f) of the
Exchange Act. Additional provisions regarding the treatment of the equity awards upon a termination of employment are outlined in the table below.
| Award Type | Termination or Change in Control Provisions | ||||
| | | | |||
| Stock Options | • Death or Disability: Unvested portion will immediately vest; vested stock options remain exercisable for one year thereafter.(1) •
• Constructive • Change in Control: Accelerated only if (i) not continued, converted, assumed, or replaced by the Company or successor entity or (ii) employment is terminated by the Company or successor entity without cause or by the participant as a result of a "constructive termination" during the two-year period following a change in control; vested stock options remain exercisable for three months thereafter. • By the Company For Cause / by Participant When Grounds for Cause | ||||
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| RSUs | • Death or Disability: Unvested portion will immediately vest. • Retirement: Unvested portion will continue to vest according to the original vesting schedule. • Constructive Termination / By the Company Without Cause: Prorated portion of the number of RSUs that would otherwise vest on the next applicable vesting date will immediately vest. • Change in Control: Accelerated only if (i) not continued, converted, assumed, or replaced by the Company or successor entity or (ii) employment is terminated by the Company or successor entity without cause or by the participant as a result of a "constructive termination" during the two-year period following a change in control. • By the Company For Cause: Vested and unvested portions are forfeited. | ||||
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| Performance Units | • Death or Disability(5): Prorated portion will vest at the end of the performance period, based on actual performance. • Retirement: Prorated portion will vest at the end of the performance period, based on actual performance. • Constructive Termination / By the Company Without Cause: Prorated portion will vest at the end of the performance period, based on actual performance. • Change in Control: (i) Full vesting at target only if not continued, converted, assumed, or replaced by the Company or successor entity and (ii) pro-rata vesting at target if employment is terminated by the Company or successor entity without cause or by the participant as a result of a "constructive termination" during the two-year period following a change in control. • By the Company For Cause: Vested and unvested portions are forfeited. | |
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 39 | ||
responsibilities, (c) a relocation of the participant's primary place of business by more than 50 miles from its then-current location, or (d) any material breach by the Company of any written agreement relating to the participant's compensation (including any equity awards). "Constructive termination" provisions are limited to the Chief Executive Officer and his direct reports.reports and other Section 16 officers.
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40 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
Termination Benefits Table
TERMINATION BENEFITS TABLE |
The following table describes the potential payments and benefits under the Company's Severance Plan and equity award agreements to which the NEOs (other than Mr. Watson, see "—Departure of Karl H. Watson, Jr.") would have been entitled assuming an eligible termination of employment or change in control occurred on December 29, 2017,27, 2019, the last business day of fiscal 2017.2019. A description of the provisions governing such payments under our agreements and any material conditions or obligations applicable to the receipt of payments are described above under "Executive Severance Plan" and "Treatment of Long-Term Incentive Awards Upon Termination or Change in Control."
The amounts shown in the table do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the NEOs. These include accrued but unpaid salary and distributions of vested plan balances under our 401(k) savings plans.
| | | | | Acceleration of Long-Term Incentive Awards | | Acceleration of Long-Term Incentive Awards | ||||||||||||||||||||||||||||||||||||
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Named Executive Officer | Cash Severance Payment ($)(1) | Pro-rata Bonus ($)(2) | COBRA Benefit ($)(3) | Pre-IPO LP Units ($) | Pre-IPO Leverage Restoration Options ($) | RSUs ($) | Stock Options ($) | Performance Units ($)(4) | Total | Cash Severance Payment ($)(1) | Pro-rata Bonus ($)(2) | COBRA Benefit ($)(3) | RSUs ($) | Stock Options ($)(*) | Performance Units ($)(4) | Total ($) | ||||||||||||||||||||||||||
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Thomas W. Hill | ||||||||||||||||||||||||||||||||||||||||||
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Qualifying Termination | 2,067,390 | 1,275,480 | 57,071 | — | — | 645,406 | 394,654 | — | 5,570,823 | 2,250,000 | — | 64,589 | 1,245,312 | — | — | 3,559,901 | ||||||||||||||||||||||||||
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Qualifying Change in Control Termination | 4,961,738 | 1,275,480 | 57,071 | — | 8,642,713 | 1,871,309 | 1,076,177 | 2,393,873 | 20,278,361 | 5,625,000 | — | 64,589 | 3,583,009 | — | 4,505,355(6) | 13,777,953 | ||||||||||||||||||||||||||
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Change in Control | — | — | — | — | 8,642,713 | 1,871,309 | 1,076,177 | 2,393,873 | 13,984,072 | — | — | — | 3,583,009 | — | 4,505,355(6) | 8,088,364 | ||||||||||||||||||||||||||
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Termination Upon Death or Disability(5) | — | — | — | — | — | 1,871,309 | 1,076,177 | — | 4,078,308 | — | — | — | 3,583,009 | — | — | 3,583,009 | ||||||||||||||||||||||||||
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Brian J. Harris | ||||||||||||||||||||||||||||||||||||||||||
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Qualifying Termination | 1,166,990 | — | 42,743 | 364,335 | — | — | 1,574,068 | |||||||||||||||||||||||||||||||||||
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Qualifying Change in Control Termination | 2,042,233 | — | 42,743 | 1,016,895 | — | 1,319,925(6) | 4,421,796 | |||||||||||||||||||||||||||||||||||
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Change in Control | — | — | — | 1,016,895 | — | 1,319,925(6) | 2,336,820 | |||||||||||||||||||||||||||||||||||
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Termination Upon Death or Disability(5) | — | — | — | 1,016,895 | — | — | 1,016,895 | |||||||||||||||||||||||||||||||||||
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Michael J. Brady | ||||||||||||||||||||||||||||||||||||||||||
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Qualifying Termination | 850,000 | 283,764 | 45,657 | — | — | 120,900 | 73,967 | — | 1,586,265 | 1,030,000 | — | 51,671 | 243,042 | — | — | 1,324,713 | ||||||||||||||||||||||||||
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Qualifying Change in Control Termination | 1,360,000 | 283,764 | 45,657 | — | 2,735,524 | 350,399 | 201,630 | 448,429 | 5,425,403 | 1,648,000 | — | 51,671 | 704,257 | — | 879,100 (6) | 3,283,028 | ||||||||||||||||||||||||||
| | | | | | | �� | | | | | | | | | ||||||||||||||||||||||||||||
Change in Control | — | �� | — | — | 2,735,524 | 350,399 | 201,630 | 448,429 | 3,735,982 | — | — | — | 704,257 | — | 879,100(6) | 1,583,357 | ||||||||||||||||||||||||||
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Termination Upon Death or Disability(5) | — | — | — | — | — | 350,399 | 201,630 | — | 764,006 | — | — | — | 704,257 | — | — | 704,257 | ||||||||||||||||||||||||||
Brian J. Harris | ||||||||||||||||||||||||||||||||||||||||||
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Anne Lee Benedict | ||||||||||||||||||||||||||||||||||||||||||
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Qualifying Termination | 1,100,000 | 450,326 | 37,821 | — | — | 249,420 | 153,644 | — | 2,432,071 | 851,774 | — | 29,244 | 205,110 | — | — | 1,086,128 | ||||||||||||||||||||||||||
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Qualifying Change in Control Termination | 1,925,000 | 450,326 | 37,821 | — | 1,564,147 | 719,442 | 417,105 | 925,122 | 6,038,963 | 1,362,838 | — | 29,244 | 587,346 | — | 742,306(6) | 2,721,734 | ||||||||||||||||||||||||||
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Change in Control | — | — | — | — | 1,564,147 | 719,442 | 417,105 | 925,122 | 3,625,816 | — | — | — | 587,346 | — | 742,306(6) | 1,329,652 | ||||||||||||||||||||||||||
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Termination Upon Death or Disability(5) | — | — | — | — | — | 719,442 | 417,105 | — | 1,577,407 | — | — | — | 587,346 | — | — | 587,346 | ||||||||||||||||||||||||||
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M. Shane Evans | ||||||||||||||||||||||||||||||||||||||||||
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Qualifying Termination | 841,574 | 323,669 | 45,657 | — | — | 123,834 | 76,390 | — | 1,630,348 | 892,826 | — | 51,671 | 215,368 | — | — | 1,159,865 | ||||||||||||||||||||||||||
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Qualifying Change in Control Termination | 1,346,518 | 323,669 | 45,657 | — | 1,659,074 | 356,844 | 207,207 | 459,276 | 4,398,245 | 1,428,522 | — | 51,671 | 616,097 | — | 779,401(6) | 2,875,691 | ||||||||||||||||||||||||||
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Change in Control | — | — | — | — | 1,659,074 | 356,844 | 207,207 | 459,276 | 2,682,401 | — | — | — | 616,097 | — | 779,401(6) | 1,395,498 | ||||||||||||||||||||||||||
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Termination Upon Death or Disability(5) | — | — | — | — | — | 356,844 | 207,207 | — | 783,275 | — | — | — | 616,097 | — | — | 616,097 | ||||||||||||||||||||||||||
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In the event of a constructive termination or termination by the Company without cause during the two-year period beginning on the date of a change in control of the Company, the cash severance payment includes the following:
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 41 | ||
DepartureDouglas C. Rauh
In connection with the departure2017 Performance Units, which were subsequently earned as of Douglas C. Rauh, effective December 30, 2017, Mr. Rauh entered into the Agreement and Release with Summit Holdings and, solely for certain purposes specified therein, the Company, which provided for the following:
The payments and benefits provided for in the Agreement and Release were subject to Mr. Rauh's execution and delivery of a release of claims and his continued compliance with the non-competition, non-disparagement, non-solicitation and confidentiality covenants contained in his employment agreement. The non-disparagement and confidentiality covenants each have an indefinite term and the non-competition and non-solicitation covenants each have a term of 12 months following Mr. Rauh's departure.
Additionally, pursuant to the Agreement and Release, beginning on January 1, 2018, Mr. Rauh agreed to provide Summit Holdings with consulting services on a month-to-month basis, unless terminated earlier by either party with 10 business days' prior written notice (such applicable term, the "Rauh Consulting Term"). During the Rauh Consulting Term, Mr. Rauh will be entitled to (i) a monthly consulting fee of $15,000 and (ii) reimbursement of reasonable business expenses and wireless internet and cellular phone expenses incurred by Mr. Rauh in connection with his consulting services.
CEO Pay Ratio |
The CEO pay ratio figures below are a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Exchange Act.
We determined thatIn 2017, we identified our median employee using our global employee population as of December 5, 2017,2017. There was no significant change in our total number of full-employee population or compensation arrangement in 2018 or 2019, and part-time U.S. employees was 5,642 and non-U.S. employees was 265. We chose not to exclude any countries as permitted by SEC regulations, which resulted in 5,907 employees includedthere have been no changes in the calculation.median employee's circumstances during 2018 or 2019, that we reasonably believe would result in a significant change in our pay ratio disclosure. Accordingly, we have used the same median employee we identified in 2017 for purposes of calculating our CEO pay ratio for 2019. We identified our median employee for the 2017 pay ratio analysis using the methodology and the material assumptions, adjustments, and estimates described below.
To determine our median employee pay in 2017, we chose taxable wages as our consistently applied compensation measure. We then calculated an annual taxable wage for each employee, annualizing pay for those full-time or part-time permanent employees who commenced work during 2017 or who were on leave for a portion of 2017. We used a valid statistical sampling method to identify the group of employees within a 5% range of the estimated median level of taxable wages for our employee population. The historical compensation of this group was then analyzed to identify a median employee whose annual total compensation was reasonably representative of the median annual total compensation in respect of 2017 and was also reasonably likely to remain representative of the median in future years. After identifying the median employee, we
We calculated the median employee's annual total compensation for 2019 in accordance with the requirements of the Summary Compensation Table. For 2017,2019, the median employee's annual total compensation was $56,523$61,969 and the annual total compensation of our CEO was $4,490,470, which amount varies from his total compensation amount as reflected in the Summary Compensation Table because each of these amounts includes the value of non-discriminatory employer paid health benefits.$6,812,429. Accordingly, for 2017,2019, the ratio of CEO pay to median employee pay was 79:110:1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on such 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.
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42 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
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ITEM 3
RATIFICATION OF APPOINTMENT OF
KPMG LLP
Under the rules and regulations of the SEC, the NYSE and the Public Company Accounting Oversight Board (the "PCAOB"), the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. In addition, the Audit Committee considers the independence of our independent registered public accounting firm and participates in the selection of the independent registered public accounting firm's lead engagement partner. The Audit Committee has appointed, and, as a matter of good corporate governance, is requesting ratification by our stockholders of the appointment of, the registered public accounting firm of KPMG to serve as independent registered public accounting firm for the fiscal year ending January 2, 2021. KPMG has served as our independent registered public accounting firm since 2012.
The Board and the Audit Committee believe that the continued retention of KPMG as the Company's independent registered public accounting firm is in the best interests of the Company and its stockholders. If stockholders do not ratify the selection of KPMG, the Audit Committee will evaluate the stockholder vote when considering the selection of a registered public accounting firm for the audit engagement for the 2020 fiscal year. In addition, even if stockholders ratify the selection of KPMG as independent registered public accounting firm, the Audit Committee may nevertheless periodically request proposals from the major registered public accounting firms and as a result of such process may select KPMG or another registered public accounting firm as our independent registered public accounting firm.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL
YEAR ENDING JANUARY 2, 2021.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 43 | ||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Representatives of KPMG are expected to attend the Annual Meeting and will have an opportunity to make a statement and to respond to appropriate questions from stockholders.
Consistent with SEC and PCAOB requirements regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation for and overseeing the work of, the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.
Prior to 2017, weengagement of the independent registered public accounting firm for the next year's audit, management will submit to the Audit Committee for approval a list of services and related fees expected to be rendered during that year within each of the following four categories of services:
Prior to engagement, the Audit Committee pre-approves independent registered public accounting firm services within each category and the fees of each category are budgeted. The Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the services in the table below were not employedpre-approved by us or Blackstone. Following the November 2016 secondary offering of Blackstone's sharesAudit Committee.
| (in thousands) | | 2019 | | 2018 | | ||
|---|---|---|---|---|---|---|---|
| | | | | | | ||
Audit Fees(1) | | $ | 4,046 | | $ | 3,974 | |
| | | | | | | ||
Tax Fees | | — | | — | | ||
| | | | | | | ||
Audit-Related Fees | | — | | — | | ||
| | | | | | | ||
All Other Fees | | — | | — | | ||
| | | | | | | ||
Total | | $ | 4,046 | | $ | 3,974 | |
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44 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Board determined it was appropriateCompany's financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal control over financial reporting, for preparing the financial statements, and for the reporting process. The Audit Committee members do not serve as professional accountants or auditors, and their functions are not intended to begin paying compensationduplicate or to directors who are employed by Blackstone, commencing with fiscal 2017.
In 2017, allcertify the activities of management and the independent registered public accounting firm. The Company's independent registered public accounting firm is engaged to audit and report on the conformity of the Company's non-employee directors (other than Ms. Julia Kahr) received annual cash compensation of $100,009. Ms. Kahr received cash compensation of $16,667 for her service priorfinancial statements to her resignation fromaccounting principles generally accepted in the Board effective February 28, 2017. The chairpersonUnited States and the effectiveness of the Board received an additional $150,000 in cash compensation and the respective chairpersons ofCompany's internal control over financial reporting.
In this context, the Audit Committee Compensation Committeereviewed and Nominatingdiscussed with management and Corporate Governance Committee (unless such chairperson is also the chairpersonindependent registered public accounting firm the audited financial statements for the year ended December 28, 2019 (the "Audited Financial Statements"), management's assessment of the Board) receive an additional $15,000, $10,000 and $10,000, respectively. Directors who were not employed by us may also receive compensation, from time to time, for service on any special committees of the Board. We reimburse our directors for any reasonable expenses incurred by them in connection with services provided in such capacity.
In addition, during 2017, alleffectiveness of the Company's non-employee directors (other than Ms. Kahr) received an annual award of RSUs valued at $99,991. A grant of 4,098 RSUs was made to each of Messrs. Lance, Cantie, Gardner, Murphy, Simpkins, and Wunning and Ms. Wade, on February 28, 2017. The RSUs were granted under the Omnibus Incentive Plan,internal control over financial reporting, and the terms thereof are outlinedindependent registered public accounting firm's evaluation of the Company's system of internal control over financial reporting. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Public Company Accounting Oversight Board (the "PCAOB") Auditing Standard No. 1301,Communications with Audit Committees. In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence.
Based upon the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Audited Financial Statements be included in the table below. Further,Company's Annual Report on Form 10-K for the RSU awards are subject toyear ended December 28, 2019, for filing with the Company's clawback policy, as in effect from time to time.Securities and Exchange Commission.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 45 | ||
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The table below summarizes the compensation paid to non-employee directors for the year ended December 30, 2017.
| Name | Fees Earned or Paid in Cash | Stock Awards(1) | Option Awards(2) | Total Compensation | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Howard L. Lance(3) | $ | 250,009 | $ | 99,991 | $ | — | $ | 350,000 | |||||
Joseph S. Cantie | 100,009 | 99,991 | — | 200,000 | |||||||||
Ted A. Gardner | 100,009 | 99,991 | — | 200,000 | |||||||||
John R. Murphy | 115,009 | 99,991 | — | 215,000 | |||||||||
Neil P. Simpkins | 110,009 | 99,991 | — | 210,000 | |||||||||
Anne K. Wade | 100,009 | 99,991 | — | 200,000 | |||||||||
Steven H. Wunning | 100,009 | 99,991 | — | 200,000 | |||||||||
Julia C. Kahr(4) | 16,667 | — | — | 16,667 | |||||||||
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Exchange Agreement |
In connection with the IPO, we entered into an Exchange Agreement with the holders of LP Units pursuant to which each holder of LP Units (and certain permitted transferees thereof) may, subject to the terms of the Exchange Agreement, exchange their LP Units for shares of Class A Common Stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. The Exchange Agreement also provides that a holder of LP Units will not have the right to exchange LP Units if the Company determines that such exchange would be prohibited by law or regulation or would violate other agreements with the Company or its subsidiaries to which such holder may be subject. The Company may impose additional restrictions on exchange that it determines to be necessary or advisable so that Summit Holdings is not treated as a "publicly traded partnership" for U.S. federal income tax purposes. As a holder exchanges LP Units for shares of Class A Common Stock, the number of LP Units held by the Company is correspondingly increased as it acquires the exchanged LP Units. In accordance with the Exchange Agreement, any holder who surrenders all of its LP Units for exchange must concurrently surrender all shares of Class B Common Stock held by it (including fractions thereof) to the Company.
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In connection with the IPO, we entered into a registration rights agreement with our pre-IPO owners and the former holders of Class B Units of Continental Cement Company, L.L.C. (the "Former CCC Minority Holders") pursuant to which we granted them, their affiliates and certain of their transferees the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act of 1933, as amended (the "Securities Act"), the offering of shares of Class A Common Stock delivered in exchange for LP Units. Under the registration rights agreement, we agreed to register the exchange of LP Units for shares of Class A Common Stock by our pre-IPO owners. In addition, Blackstone had the right to request an unlimited number of "demand" registrations and had customary "piggyback" registration rights. The Former CCC Minority Holders had the right to request one "demand" registration and had customary piggyback registration rights.
Tax Receivable Agreement |
In connection with the IPO, we entered into a tax receivable agreement with the holders of LP Units that provides for the payment to exchanging holders of LP Units of 85% of the benefits, if any, that the Company is deemed to realize as a result of the increases in tax basis resulting from exchanges of LP Units and certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. Certain current and former holders of LP Units, who include certain of our executive officers and directors, are expected to receive payments under the tax receivable agreement in the future. The increases in tax basis as a result of an exchange of LP Units for shares of Class A Common Stock, as well as the amount and timing of any payments
under the tax receivable agreement, are difficult to accurately estimate as they will vary depending upon a number of factors, including:
We anticipate funding payments under the tax receivable agreement from cash flows from operations, available cash and available borrowings under our senior secured revolving credit facilities. As of December 30, 2017,28, 2019, we had accrued $331.9$327 million as a tax receivable agreement liability. Other than $0.6 million which was paid in January 2018, theThe tax receivable agreement liability is a long termlong-term liability as no additional payments are expected in the next twelve months.
In addition, the tax receivable agreement provides that upon certain changes of control, the Company's (or its successor's) obligations would be based on certain assumptions, including that the Company would have sufficient taxable income to fully utilize the deductions arising from the tax deductions, tax basis and other tax attributes subject to the tax receivable agreement.
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46 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
With respect to our obligations under the tax receivable agreement relating to previously exchanged or acquired LP Units and certain net operating losses, we would be required to make a payment equal to the present value (at a discount rate equal to one year LIBOR plus 100 basis points) of the anticipated future tax benefits determined using assumptions (ii) through (v) of the following paragraph.
Furthermore, the Company may elect to terminate the tax receivable agreement early by making an immediate payment equal to the present value of the anticipated future cash tax savings. In determining such anticipated future cash tax savings, the tax receivable agreement includes several assumptions,
including that (i) any LP Units that have not been exchanged are deemed exchanged for the market value of the shares of Class A Common Stock at the time of termination, (ii) the Company will have sufficient taxable income in each future taxable year to fully realize all potential tax savings, (iii) the Company will have sufficient taxable income to fully utilize any remaining net operating losses subject to the tax receivable agreement on a straight line basis over the shorter of the statutory expiration period for such net operating losses or the five-year period after the early termination or change of control, (iv) the tax rates for future years will be those specified in the law as in effect at the time of termination and (v) certain non-amortizable assets are deemed disposed of within specified time periods. In addition, the present value of such anticipated future cash tax savings are discounted at a rate equal to LIBOR plus 100 basis points.
Under the terms of the tax receivable agreement, the Company can terminate the tax receivable agreement at any time, which would trigger a cash payment to the pre-IPO owners. Based upon a $31.44$23.84 per share price of our Class A common stock, the closing price of our stock on December 30, 201727, 2019 (the last business day of our fiscal year) and a contractually defined discount rate of 3.11%3.00%, the Company estimates that if it were to exercise its right to terminate the tax receivable agreement, the aggregate amount required to settle the tax receivable agreement would be approximately $282$289 million.
Summit Materials Holdings L.P. Amended and Restated Limited Partnership Agreement |
The Company holds LP Units in Summit Holdings and is the sole general partner of Summit Holdings. Accordingly, the Company operates and controls all of the business and affairs of Summit Holdings and, through Summit Holdings and its operating entity subsidiaries, conducts our business.
Pursuant to the limited partnership agreement of Summit Holdings, the Company has the right to determine when distributions will be made to holders of LP Units and the amount of any such distributions. If a distribution is authorized, such distribution will be made to the holders of LP Units pro rata in accordance with the percentages of their respective limited partnership interests.
No distributions will be made in respect of unvested LP Units and instead such amounts will be distributed to holders of vested LP Units pro rata in accordance with their vested interests. If, from time to time, an unvested LP Unit becomes vested, then, on the next distribution date, all amounts that would have been distributed pro rata in respect of that LP Unit if it had been vested on prior distribution dates will be required to be "caught up" in respect of that LP Unit before any distribution is made in respect of other vested LP Units.
The holders of LP Units, including the Company, incur U.S. federal, state and local income taxes on their share of any taxable income of Summit Holdings. The limited partnership agreement of Summit Holdings provides for tax distributions to the holders of the LP Units in an amount generally calculated to provide each holder of LP Units with sufficient cash to cover its tax liability in respect of the LP Units. These tax distributions are generally only paid to the extent that other distributions made by Summit Holdings were otherwise insufficient to cover the estimated tax liabilities of all holders of LP Units. In general, these tax distributions are computed based on our estimate of the net taxable income of Summit Holdings allocated to each holder of LP Unitsthe Company multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate applicable to an individual ora corporate resident in New York, New York (or a corporate resident in certain circumstances).York. In the year ended December 30, 2017,28, 2019, Summit LLC paid distributions to Summit Holdings totaling $49.7$0.1 million, all of which $1.8 million was distributed to Summit Holdings' partners, other than the Company, and of which $47.9 million was paid to the Company.
The limited partnership agreement of Summit Holdings also provides that substantially all expenses incurred by or attributable to the Company, but excluding obligations incurred under the tax receivable agreement by the Company, income tax expenses of the Company and payments on indebtedness incurred by the Company, will be borne by Summit Holdings.
The Company as the general partner may (i) at any time, require all holders of LP Units, other than holders who are current employees or service providers, to exchange their units for shares of our common stock or (ii) with the consent of partners in Summit Holdings whose vested interests exceed 66 2/3%2/3% of the aggregate vested interests in Summit Holdings, require all holders of interests in Summit Holdings to transfer their interests, provided that the prior written consent of each holder that is an affiliate of Blackstone affected by any such proposed transfer will be required. These provisions are designed to ensure that the general partner can, in the context of a sale of the Company, sell Summit Holdings as a wholly-owned entity subject to the approval of the holders thereof, including specific approval by any Blackstone affiliates then holding such units. For so long as affiliates of Blackstone collectively owned at least 5% of the outstanding LP Units, the consent of each Blackstone holder was required to amend the limited partnership agreement.thereof.
Indemnification Agreements |
We have entered into indemnification agreements with our directors and executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted by Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors or executive officers, we have been informed that in the opinion of the SEC such indemnification is against public policy and is therefore unenforceable.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 47 | ||
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Warrant Issuances |
In connection with the modification of the capital structure of Summit Holdings at the time of our IPO, we issued warrants to purchase an aggregate of 160,333 shares of Class A Common Stock to limited partners of Summit Holdings who held Class C limited partnership interests of Summit Holdings. Holders of the Class C limited partnership interests include Thomas W. Hill, a limited liability company controlled by Ted A. Gardner, and Michael J. Brady, who received warrants to purchase 29,463, 27,408, and 6,852 shares of Class A Common Stock, respectively. The warrants were issued in substitution for part of the economic benefit of the Class C interests that was not reflected in the conversion of the Class C interests to LP Units. The exercise price of the warrants is equal to the IPO price of $18.00 per share. The warrants became exercisable from and after March 17, 2016 and will expire on March 11, 2025.
Other |
Thomas A. Beck, theour Executive Vice President and President of our Cement Division, through the Thomas A. Beck Family, LLC (the "Beck LLC"), is a party to a Contribution and Purchase Agreement, dated December 18, 2014 that we entered into with the Formerformer holders of Class B Units of Continental Cement Company, L.L.C. (the "Former CCC Minority HoldersHolders") (the "Contribution and
Purchase Agreement"). In connection with the Contribution and Purchase Agreement, on March 17, 2015, Summit Holdings issued to the Former CCC Minority Holders $15.0 million in aggregate principal amount of non-interest bearing notes payable over six years. The pro rata share of the $15.0 million in notes that is due to the Beck LLC is $208,344, payable in six equal annual installments of $34,724 on each anniversary of March 17, 2015. During 2017, the second installment on the notes was paid to the Beck LLC. In addition, during 2017, tax distributions to the Beck LLC in connection with Mr. Beck's interest in the Contribution and Purchase Agreement totaled $12,160.
Statement of Policy Regarding Transactions with Related Persons |
Statement of Policy Regarding Transactions with Related Persons
We have adopted a written statement of policy regarding transactions with related persons, which we refer to as our "related person policy." Our related person policy requires that a "related person" (as defined in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to our Chief Legal Officer any "related person transaction" (defined as any transaction that is anticipated would be reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. The Chief Legal Officer will then promptly communicate that information to our Board. No related person transaction will be executed without the approval or ratification of our Board or a duly authorized committee of our Board. It is our policy that directors interested in a related person transaction will recuse themselves from any vote on a related person transaction in which they have an interest.
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48 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
OUR STOCKHOLDERS |
HOLDINGS OF MAJOR STOCKHOLDERS |
The following table sets forth the beneficial ownership of shares of our Class A Common Stock and LP Units by (1) each person known to us to beneficially own more than 5% of any class of the outstanding voting securities of the Company, (2) each of our directors and NEOs and (3) all of our directors and executive officers as a group as of March 25, 2020.
| Class A Common Stock(1) | LP Units(1) | Combined Voting Power(2) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Stockholder Name | Number | Percent | Number | Percent | Number | Percent | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Vanguard Group Inc.(3) | 10,287,018 | 9.0 | % | — | — | 10,287,018 | 8.8 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
BlackRock, Inc.(4) | 8,789,120 | 7.7 | % | — | — | 8,789,120 | 7.5 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Janus Henderson Group PLC(5) | 8,079,237 | 7.1 | % | — | — | 8,079,237 | 6.9 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
FMR LLC(6) | 7,212,715 | 6.3 | % | — | — | 7,212,715 | 6.2 | % | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Thomas W. Hill(7) | 871,571 | * | 544,425 | * | 1,415,996 | 1.2 | % | ||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Howard L. Lance(8) | 269,349 | * | 135,772 | * | 405,121 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Joseph S. Cantie(9) | 20,947 | * | — | — | 20,947 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Anne M. Cooney(10) | 13,280 | * | — | — | 13,280 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Susan A. Ellerbusch(11) | 13,280 | * | — | — | 13,280 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Ted A. Gardner(12) | 50,146 | * | 162,752 | * | 212,898 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
John R. Murphy(13) | 25,857 | * | 4,274 | * | 30,131 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Anne K. Wade(14) | 22,738 | * | — | — | 22,738 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Steven H. Wunning(15) | 20,924 | * | — | — | 20,924 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Brian J. Harris(16) | 152,561 | * | 332,699 | * | 485,260 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Michael J. Brady(17) | 464,121 | * | 283,649 | * | 747,770 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Anne Lee Benedict(18) | 27,419 | * | 61,422 | * | 88,841 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
M. Shane Evans(19) | 23,511 | * | — | — | 23,511 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Karl H. Watson(20) | 51,236 | * | — | — | 51,236 | * | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
All Directors and Executive Officers as a Group (13 persons)(21) | 2,010,259 | 1.7 | % | 1,551,942 | 1.3 | % | 3,562,201 | 3.0 | % | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
The percentage of beneficial ownership of (1) Class A Common Stock is based upon 114,109,647 shares issued and outstanding and (2) LP Units is based upon 117,162,760 LP Units outstanding (including 114,109,647 LP Units held by the Company), in each case as of March 25, 2020. Percentage of combined voting power is based upon 117,052,510 votes represented by outstanding securities, consisting of (1) 114,109,647 shares of Class A Common Stock issued and outstanding and (2) 2,942,863 LP Units outstanding and eligible to vote, excluding LP Units held by the Company, in each case as of March 25, 2020. The Company is the general partner of Summit Holdings, which indirectly owns 100% of the limited liability interests of Summit Materials, LLC ("Summit LLC"). Except as otherwise noted, (i) the information is as of March 25, 2020, and (ii) the address of each beneficial owner is c/o Summit Materials, Inc., 1550 Wynkoop Street, 3rd floor, Denver, Colorado 80202. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 49 | ||
March 25, 2020, holders of the LP Units held all of the issued shares of our Class B Common Stock that were outstanding and the total number of votes that were represented by the Class B Common Stock was 2,942,863. In addition to the voting power of the Class B Common Stock conferred to him and the Hill Trust through their ownership of LP Units, Mr. Hill has sole voting power over 1,988,793 votes represented by the Class B Common Stock through revocable proxies granted to him by certain pre-IPO investors that hold LP Units, including members of management. Mr. Hill has no pecuniary interest in the LP Units held by such other LP Unit holders and disclaims any beneficial ownership in such LP Units.
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50 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, we believe that during the fiscal year ended December 30, 2017,28, 2019, our officers, directors, and greater-than-10% stockholders timely filed all reports required by Section 16(a) of the Exchange Act, withAct.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 51 | ||
USERS' GUIDE |
Attending the Annual Meeting of Stockholders |
WHO CAN ATTEND THE ANNUAL MEETING? |
You are entitled to attend the exceptionAnnual Meeting on Tuesday, May 19, 2020 only if you were a Summit Materials stockholder at the close of (i) one Form 4 that was inadvertently not filed to report the award of restricted stock units to Joseph S. Cantie on February 28, 2017, which award was subsequently disclosed on a Form 5 filed on February 8, 2018, (ii) one Form 4 that was inadvertently not filed to report the award of restricted stock units to Steven H. Wunning on February 28, 2017, which award was subsequently disclosed on a Form 5 filed on February 8, 2018, and (iii) Form 4/As filedbusiness on March 28, 201725, 2020, or you hold a valid proxy.
HOW CAN I ATTEND THE ANNUAL MEETING? |
We will be hosting the Annual Meeting on the Internet through a virtual web conference. To attend the Annual Meeting via the virtual web conference please go towww.virtualshareholdermeeting.com/SUM2020 and enter the control number found on your proxy card, voting instruction form or notice you received.
WHY IS THE ANNUAL MEETING A VIRTUAL MEETING? |
We have decided to hold our Annual Meeting virtually due to COVID-19 (Coronavirus). We are sensitive to the public health and travel concerns of our stockholders and employees and the protocols that correctedfederal, state and local governments may impose. We have designed our virtual format to enhance, rather than constrain, stockholder access, participation and communication. For example, the Form 4s timely filedvirtual format allows stockholders to communicate with us in advance of, and during, the Annual Meeting so they can ask questions of our Board or management. During the live Q&A session of the Annual Meeting, we may answer questions as they come in and address those asked in advance, to the extent relevant to the business of the Annual Meeting, as time permits. If you encounter any difficulties accessing the virtual web conference of the Annual Meeting, please call 800-586-1548 (U.S.) or 303-562-9288 (International) for assistance. Technical support will be available beginning at 7:30 a.m., Mountain Time, on March 2, 2017 that inadvertently misstatedMay 19, 2020 through the numberconclusion of stock options grantedthe Annual Meeting.
In 2021, we plan to Thomas W. Hill, Thomas A. Beck, Anne Lee Benedict, Michael J. Brady, M. Shane Evans, Brian J. Harris, Damian J. Murphy,to have our annual meeting of stockholders be a hybrid meeting with both a physical and Douglas C. Rauh.a virtual component.
HOW CAN I ACCESS THE ANNUAL MEETING WEBSITE? |
All stockholders can visit the Annual Meeting website atwww.proxyvote.com. On our Annual Meeting website, you can vote your proxy, submit questions in advance of the Annual Meeting, access copies of our Proxy Statement and Annual Report and other information about Summit Materials, and elect to view future proxy statements and annual reports online instead of receiving paper copies in the mail.
EXPENSESIMPORTANT NOTICE REGARDING THE AVAILABILITY OF SOLICITATIONPROXY MATERIALS FOR THE SUMMIT MATERIALS, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON TUESDAY, MAY 19, 2020
The accompanying proxy
THIS NOTICE, OUR PROXY STATEMENT, AND OUR COMBINED ANNUAL REPORT AND ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 28, 2019 ARE AVAILABLE AT WWW.PROXYVOTE.COM.
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52 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
Who Can Vote and How |
WHO IS ENTITLED TO VOTE? |
You are entitled to vote at the Annual Meeting on Tuesday, May 19, 2020 only if you were a Summit Materials stockholder of record of our Class A Common Stock and Class B Common Stock (each such designation having par value $0.01 per share) at the close of business on March 25, 2020.
On March 25, 2020, we had 114,109,647 shares of Class A Common Stock outstanding and entitled to vote and 99 shares of Class B Common Stock outstanding and entitled to vote. Holders of shares of our Class A Common Stock and Class B Common Stock vote together as a single class on all matters on which stockholders are entitled to vote generally (except as may be required by law).
Each share of Class A Common Stock is solicited byentitled to one vote for each director nominee and one vote for each other item to be voted on behalfat the Annual Meeting. All of the Board,shares of our outstanding Class B Common Stock are currently held by our pre-IPO investors, including certain members of management or their family trusts that directly hold LP Units. A holder of Class B Common Stock is entitled, without regard to the number of shares of Class B Common Stock held by such holder, to a number of votes that is equal to the aggregate number of LP Units held by such holder. As of the record date, the total number of LP Units to which the voting power of the Class B Common Stock relates was 2,942,863.
A majority of the voting power of Class A Common Stock and Class B Common Stock entitled to vote, present in person or represented by proxy, constitutes a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes will be included in determining the presence of a quorum at the Annual Meeting.
HOW DO I VOTE? |
We encourage you to vote your shares in advance of the Annual Meeting, even if you plan on attending the Annual Meeting. If you have already voted prior to the Annual Meeting, you may nevertheless change or revoke your vote at the Annual Meeting.
Vote your shares as follows. In all cases, have your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form in hand and follow the instructions.
We encourage you to register to receive all future stockholder communications electronically, instead of in print. This means that, after you register, access to the annual report, proxy statement, and other correspondence will be delivered to you via e-mail.
CAN I CHANGE MY VOTE? |
If you own common stock of record, you may change your vote at any time before the polls close at the Annual Meeting. You can do this by:
A stockholder owning common stock in street name may revoke or change voting instructions by contacting the bank, brokerage firm or other nominee holding the shares.
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 53 | ||
WHO COUNTS THE VOTES? |
We have hired Broadridge Financial Solutions, Inc. to count the votes represented by proxies and cast by ballot, and Broadridge Financial Solutions, Inc. has been appointed to act as Inspector of Election.
WHEN WILL THE VOTING RESULTS BE ANNOUNCED? |
We will announce the preliminary voting results during the Annual Meeting. We will report the final results on our website and in a Current Report on Form 8-K filed with the SEC within four days following the meeting.
WILL MY VOTE BE CONFIDENTIAL? |
All stockholder proxies, ballots and tabulations that identify stockholders will be maintained in confidence. No such document will be available for examination, and the costidentity and vote of such solicitationany stockholder will not be disclosed, except as necessary to meet legal requirements and to allow the inspectors of election to certify the results of the vote.
Business Taking Place at the Annual Meeting |
WHICH PROPOSALS ARE BEING VOTED ON AT THE ANNUAL MEETING? |
WHICH PROPOSALS ARE "ROUTINE" AND WHICH ARE "NON-ROUTINE"? |
The ratification of KPMG LLP as our independent registered public accounting firm for our fiscal year ending January 2, 2021 is the only routine matter to be presented at the Annual Meeting. The other two matters—the election of two Board of Director nominees and the approval of the compensation of our named executive officers—are non-routine and brokers will not be allowed to vote on these proposals without specific voting instructions from beneficial owners. We do not expect any additional matters will be bornebrought before the Annual Meeting. However, if other matters are properly presented, the persons named as proxies in the proxy card or their substitutes will vote in their discretion.
HOW MANY VOTES ARE NEEDED TO APPROVE EACH PROPOSAL? |
With respect to the election of directors, a nominee for director shall be elected to the Board by a plurality of the Company. Solicitationsvotes cast in respect of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors. A plurality vote requirement means that the director nominees with the greatest number of votes cast "FOR", even if it is less than a majority, will be elected. You may vote "FOR" or "WITHHOLD" with respect to each nominee. A withhold vote in the election of directors will have the same effect as an abstention. Neither a withhold vote nor a broker non-vote will affect the outcome of the election of directors.
The affirmative vote of a majority of the voting power of common stock present in person or represented by proxy and entitled to vote on the matter is required to ratify the appointment of KPMG as our independent registered public accounting firm and to approve, on a nonbinding advisory basis, the compensation of our NEOs, as disclosed in this Proxy Statement. You may vote "FOR," "AGAINST," or "ABSTAIN" with respect to these matters. For these matters, abstentions are not counted as affirmative votes but are counted as present at the Annual Meeting and entitled to vote and will have the effect of a vote "against" the matter. Broker non-votes, if any, will have no effect on the outcome of these matters.
Proxies |
WHO IS SOLICITING MY PROXY? |
The Board of Summit Materials is soliciting your proxy to vote at the 2020 Annual Meeting of Stockholders.
HOW CAN I REVOKE MY PROXY? |
You can revoke your proxy by sending written notice of revocation to our Chief Legal Officer & Secretary at Summit Materials, Inc., 1550 Wynkoop Street, 3rd Floor, Denver, Colorado 80202, by May 18, 2020.
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54 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
WHAT IS THE COST OF THIS PROXY SOLICITATION? |
The Company will pay the costs of preparing, printing, assembling, and mailing the proxy materials used in the solicitation of proxies. Solicitation may be made by mail, personal interview, telephone, and electronic communications byour directors, officers, and other Company employees withoutby mail, email, telephone, or in person. Those individuals will receive no additional compensation.compensation for solicitation activities. We have hired Okapi Partners LLCInnisfree M&A Incorporated to assist in the solicitation of proxies, who will receive a fee of $15,000,$20,000, plus reasonable out-of-pocketout of pocket costs and expenses, for its services. Broadridge will distribute proxy materials to banks, brokers, and other nominees for forwarding to beneficial owners and will request brokerage houses and other custodians, nominees, and fiduciaries to forward soliciting material to the beneficial owners of the common stock held on the record date by such persons. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their expenses in forwarding solicitation materials.
Getting Our Proxy Statement and Annual Report |
HOW CAN I ACCESS PROXY MATERIALS ONLINE? |
As of the date of thisThis Proxy Statement, there are no other matters that we intend to present, or have reason to believe others will present, at the Annual Meeting. If, however, other matters properly come before the Annual Meeting, the accompanying proxy authorizes the persons named as proxies or their substitutes to vote on such matters as they determine appropriate.
Proposals of stockholders to be considered for inclusion in the proxy statementcard, and proxy card for theour 2019 Annual Meeting pursuantReport are being made available to Rule 14a-8 under the Exchange Act must be submitted in writing to the Chief Legal Officer & Secretarystockholders online atwww.proxyvote.com.
Instead of Summit Materials, Inc., at Summit Materials, Inc., 1550 Wynkoop Street, 3rd Floor, Denver, Colorado 80202, and must be received no later than November 30, 2018. The submissionmailing printed copies of a stockholder proposal does not guarantee that itthese materials, we will be included insend some of our proxy statement.
In addition, our Bylaws include advance notice provisions that require stockholders wishing to bring nominations for directors or other business before an annual meeting to provide proper notice in accordance with the terms of the advance notice provisions. The Bylaws' advance notice provisions do not apply if the stockholder only seeks to include such matters in the proxy statement pursuant to Rule 14a-8.
The Bylaws' advance notice provisions require that, among other things, stockholders give timely written notice to the Secretary of the Company regarding such nominations or other business and provide
the information and satisfy the other requirements set forth in the Bylaws. To be timely, a stockholder who intends to present nominations or a proposal at the 2019 Annual Meeting of Stockholders other than pursuant to Rule 14a-8 must provide the information set forth in the Bylaws to the Secretary of the Company no earlier than January 17, 2019 and no later than February 16, 2019. However, if we hold the 2019 Annual Meeting of Stockholders more than 30 days before, or more than 70 days after, the anniversary of the 2018 Annual Meeting date, then the information must be received no earlier than the 120th day prior to the 2019 Annual Meeting date, and not later than the close of business on the later of (i) the 90th day prior to the 2019 Annual Meeting date or (ii) the tenth day after public announcement of the 2019 Annual Meeting date. If a stockholder fails to meet these deadlines and fails to satisfy the requirements of Rule 14a-4 under the Exchange Act, we may exercise discretionary voting authority under proxies we solicit to vote on any such proposal as we determine appropriate.
We reserve the right to reject, rule out of order, or take other appropriate action with respect to any nomination or proposal that does not comply with these and other applicable requirements.
HOUSEHOLDING: AVAILABILITY OF ANNUAL REPORT ON FORM 10-KAND PROXY STATEMENT
A copy of the 2017 Annual Report accompanies this Proxy Statement. If you and others who share your mailing address own common stock in street name, meaning through a bank, brokerage firm, or other nominee, you may have received a notice that your household will receive only one Annual Report and Proxy Statement, or Notice of Internet Availability of Proxy Materials as applicable, from the Company. This practice, known as "householding," is designed("Notice"). If you received a Notice and would prefer to reduce the volume of duplicate information and reduce printing and postage costs. Unless you responded that you did not want to participate in householding, you were deemed to have consented to it, andreceive a singlepaper copy of this Proxy Statementour proxy materials, follow the instructions included in the Notice to update your preferences. If you elect to receive our future proxy materials electronically, you will receive access to those materials via e-mail unless and the 2017 Annual Report (and/oruntil you elect otherwise.
WHY DID MY HOUSEHOLD RECEIVE A SINGLE SET OF PROXY MATERIALS? |
SEC rules permit us to deliver a single copy of our Notice of Internet Availability of Proxy Materials) has been sent to your address. Each street name stockholder receiving this2019 Annual Report and Proxy Statement by mailto any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This practice benefits both you and Summit Materials, as it eliminates duplicate mailings and reduces our printing and mailing costs. Each stockholder will continue to receive a separate voting instruction form.
If you would like to revoke your consent to householding and in the future receive your own set of proxy materials (or your own Notice of Internet Availability of Proxy Materials, as applicable), or if your household is currently receiving multiple copies of the same items and you would like in the future to receive only a single copy at your address, please contact Householding Department by mail at 51 Mercedes Way, Edgewood, New York 11717, or by calling 1-866-540-7095, and indicate your name, the name of each of your brokerage firms or banks where your shares are held, and your account numbers. The revocation of a consent to householding will be effective 30 days following its receipt. You will also have an opportunity to opt in or opt out of householding by contacting your bank or broker.
If you would like an additional copy of the 2017 Annual Report, this Proxy Statement, or the Notice of Internet Availability of Proxy Materials, these documents are available in digital form for download or review by visiting "Annual Reports and Proxies" atwww.proxyvote.com. Alternatively, we will promptly send a copy of these documents to you without charge upon request by mail to 51 Mercedes Way, Edgewood, New York 11717, or by calling 1-800-690-6903. Please note, however, that if you did not receive a printed copy of our proxy materials and you wish to receive a paper proxy card or voting instruction form or othercard.
Your household may have received a single set of proxy materials for the purposes of the Annual Meeting, you should follow the instructions included in your Notice of Internet Availability of Proxy Materials.
this year. If you prefer to receive your own sharescopy now or in future years, please request a duplicate set by phone at 1-866-540-7095, online atwww.proxyvote.com, or by writing to Summit Materials, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
If you hold your stock in street name, you may receive some duplicate mailings. Certain brokers will eliminate duplicate account mailings on request. You may need to contact your broker directly if you want to discontinue duplicate mailings to your household. You can also register to receive all future stockholder communications electronically, instead of in print. This means that links to the annual report, proxy statement, and other correspondence will be delivered to you via e-mail. Holders in street name can register for electronic delivery directly with their bank, brokerage firm, or other nominee. Electronic delivery of stockholder communications helps save the Company money by reducing printing and postage costs.
Future Shareholder Proposals and Nominations |
RULE 14A-8 SHAREHOLDER PROPOSAL |
Under SEC rules, if you want us to include a proposal in our proxy statement for the 2021 Annual Meeting of Stockholders, you must submit it in writing to our Chief Legal Officer & Secretary at Summit Materials, Inc., 1550 Wynkoop Street, 3rd Floor, Denver, Colorado 80202, by December 4, 2020. Any such proposal should comply with the requirements of Rule 14a-8 promulgated under the Securities Exchange Act. The submission of a shareholder proposal does not guarantee that it will be included in our proxy statement.
PROXY ACCESS NOMINATIONS AND OTHER PROPOSALS/NOMINATIONS |
Under our Bylaws, a stockholder wishing to bring director nominations or other business before an annual meeting is required to provide advance written notice to the Chief Legal Officer & Secretary of Summit Materials regarding such nominations or other business and provide the information and satisfy the other requirements set forth in the Bylaws. To be timely, a stockholder who intends to present nominations or a proposal at the 2021 Annual Meeting other than pursuant to Rule 14a-8 must provide the information set forth in the Bylaws no earlier than January 19, 2021 and no later than February 18, 2021. However, if we hold the 2021 Annual Meeting more than 30 days before, or more than 70 days after, the anniversary of the 2020 Annual Meeting date, then the information must be received no earlier than the 120th day prior to the 2021 Annual Meeting date, and not later than the close of business on the later of the 90th day prior to the 2021 Annual Meeting date or the tenth day after public
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2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 55 | ||
announcement of the 2021 Annual Meeting date. These advance notice provisions do not apply if the stockholder only seeks to include such matters in the proxy statement pursuant to Rule 14a-8.
If a stockholder fails to meet these deadlines and fails to satisfy the requirements of Rule 14a-4 under the Securities Exchange Act, we may exercise discretionary voting authority under proxies we solicit to vote on any such proposal as we determine appropriate. We also reserve the right to reject, rule out of order, or take other appropriate action with respect to any nomination or proposal that does not comply with these and other applicable requirements.
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56 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
ANNEX A |
RECONCILIATION OF |
The table below reconciles our net income to Adjusted EBITDA and Net Leverage for the year ended December 28, 2019 and December 29, 2018.
| Year ended | ||||
| | | | | |
| December 28, 2019 ($) | December 29, 2018 ($) | |||
| | | | | |
Reconciliation of Net Income to Adjusted EBITDA | ||||
(dollars in millions) | ||||
| | | | | |
Net income | 61 | 36 | ||
| | | | | |
Interest expense | 117 | 117 | ||
| | | | | |
Income tax expense | 17 | 60 | ||
| | | | | |
Depreciation, depletion and amortization | 215 | 203 | ||
| | | | | |
EBITDA | 410 | 416 | ||
| | | | | |
Accretion | 2 | 2 | ||
| | | | | |
Loss on debt financings | 15 | – | ||
| | | | | |
Tax receivable agreement expense (benefit) | 16 | (23) | ||
| | | | | |
Gain on sale of business | – | (12) | ||
| | | | | |
Transaction costs | 2 | 4 | ||
| | | | | |
Non-cash compensation | 20 | 25 | ||
| | | | | |
Other(1) | (4) | (6) | ||
| | | | | |
Adjusted EBITDA | 461 | 406 | ||
| | | | | |
EBITDA for certain completed acquisitions(2) | – | 2 | ||
| | | | | |
Further Adjusted EBITDA(3) | 461 | 408 | ||
| | | | | |
Net Debt | 1,667 | 1,828 | ||
| | | | | |
Net Leverage (4) | 3.6x | 4.5x | ||
| | | | | |
| | |
2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENTSUMMIT MATERIALS | 57 | ||
ANNEX ARECONCILIATION OF NON-GAAP MEASURE TO GAAP
The table below reconciles our long-term debt to net debt for the year ended December 28, 2019 and December 29, 2018.
| Year ended | ||||
| | | | | |
| December 28, 2019 ($) | December 29, 2018 ($) | |||
| | | | | |
Reconciliation of Long-Term Debt to Net Debt | ||||
(dollars in millions) | ||||
| | | | | |
Long-term debt, including current portion | 1,874 | 1,831 | ||
| | | | | |
Acquisition related liabilities | 48 | 77 | ||
| | | | | |
Finance leases and other | 56 | 49 | ||
| | | | | |
Less: Cash and cash equivalents | (311) | (129) | ||
| | | | | |
Net debt | 1,667 | 1,828 | ||
| | | | | |
The table below reconciles our net income to Adjusted EBITDA for the West Segment for the year ended December 30, 201728, 2019 and December 31, 2016.29, 2018.
| | Year ended | Year ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | |||||||
| | December 30, 2017 | December 31, 2016 | December 28, 2019 ($) | December 29, 2018 ($) | |||||||
Reconciliation of Net Income to Adjusted EBITDA | |||||||||||
| | | | | | |||||||
Reconciliation of Net Income to Adjusted EBITDA for the West Segment | |||||||||||
(dollars in thousands) | |||||||||||
| | | | | | |||||||
Net income | $ | 125,777 | $ | 46,126 | 30,735 | 11,738 | |||||
Interest expense | 108,549 | 97,536 | |||||||||
Income tax benefit | (283,977 | ) | (5,299 | ) | |||||||
| | | | | | |||||||
Interest (income) expense | (171) | 950 | |||||||||
| | | | | | |||||||
Income tax expense (benefit) | 440 | (81) | |||||||||
| | | | | | |||||||
Depreciation, depletion and amortization | 177,643 | 147,736 | 22,986 | 23,627 | |||||||
| | | | | | |||||||
EBITDA | $ | 127,992 | $ | 286,099 | 53,990 | 36,234 | |||||
| | | | | | | | | | | | |
Accretion | 1,875 | 1,564 | 114 | 138 | |||||||
IPO/ Legacy equity modification costs | — | 37,257 | |||||||||
Loss on debt financings | 4,815 | — | |||||||||
| | | | | | |||||||
Tax receivable agreement expense | 271,016 | 14,938 | – | – | |||||||
| | | | | | |||||||
Transaction costs | 7,733 | 6,797 | 84 | 1 | |||||||
Management fees and expenses | — | (1,379 | ) | ||||||||
| | | | | | |||||||
Non-cash compensation | 21,140 | 12,683 | – | – | |||||||
Loss (gain) on disposal and impairment of assets | — | 3,805 | |||||||||
| | | | | | |||||||
Other | 1,206 | 9,583 | (278) | 1,310 | |||||||
| | | | | | | | | | | | |
Adjusted EBITDA | $ | 435,777 | $ | 371,347 | 53,910 | 37,683 | |||||
| | | | | | | | | | | | |
The table below reconciles our net cash provided by operating activities to free cash flow for the year ended December 28, 2019 and December 29, 2018.
| Year ended | ||||
| | | | | |
| December 28, 2019 ($) | December 29, 2018 ($) | |||
| | | | | |
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | ||||
(dollars in thousands) | ||||
| | | | | |
Net income | 61,123 | 36,330 | ||
| | | | | |
Non-cash items | 249,698 | 263,565 | ||
| | | | | |
Net income adjusted for non-cash items | 310,821 | 299,895 | ||
| | | | | |
Change in working capital accounts | 26,363 | (90,527) | ||
| | | | | |
Net cash provided by operating activities | 337,184 | 209,368 | ||
| | | | | |
Capital expenditures, net of asset sale | (156,322) | (199,050) | ||
| | | | | |
Free cash flow | 180,862 | 10,318 | ||
| | | | | |
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58 | SUMMIT MATERIALS2020 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT | ||
VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. BROADRIDGE CORPORATE ISSUER SOLUTIONS C/O SUMMIT MATERIALS, INC. P.O. BOX 1342 BRENTWOOD, NY 11717 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would likeDuring The Meeting - Go to reducewww.virtualshareholdermeeting.com/SUM2020 You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years.the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E40478-P05782E99656-P34641 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. SUMMIT MATERIALS, INC. The Board of Directors recommends you vote "FOR"FOR the following: For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee,nominee(s), mark "For All Except" and write the numbernumber(s) of the nomineenominee(s) on the line below. ! ! ! 1. Election of Directors Nominees: 01) Howard L. LanceJohn R. Murphy 02) Anne K. WadeSteven H. Wunning The Board of Directors recommends you vote "FOR"FOR proposals 2 and 3. For Against Abstain ! ! ! ! ! ! 2. Nonbinding advisory vote on the compensation of our named executive officers for 2019. 3. Ratification of the appointment of KPMG LLP as our independent auditors for 2018. 3. Nonbinding advisory vote on the compensation of our named executive officers for 2017.fiscal year ending January 2, 2021. NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. E40479-P05782E99657-P34641 SUMMIT MATERIALS, INC. Annual Meeting of Stockholders May 17, 201819, 2020, 8:00 A.M. Eastern, Mountain Time This proxy is solicited by the Board of Directors The undersigned hereby appoint(s) Thomas W. Hill, Anne Lee Benedict, and Brian J. Harris, and each of them, each with full power of substitution, as proxies, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Class A Common Stock and/or Class B Common Stock of Summit Materials, Inc. (the "Company") that the undersigned is/are entitled to vote at the Annual Meeting of Stockholders to be held at 8:00 A.M. Eastern, Mountain Time, on May 17, 2018,the Internet through a virtual web conference at the offices of the Company’s subsidiary, Hinkle Contracting Company, LLC, located at 101 Helm St., Suite 110, Lexington, Kentucky 40505,www.virtualshareholdermeeting.com/SUM2020, and at any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is given, this proxy will be voted "FOR" all portions of items (1), (2), and (3); and in the proxies' discretion on any other matters coming before the meeting or any adjournment or postponement thereof. Continued and to be signed on reverse side
