TABLE OF CONTENTS receive an incentive bonus pursuant to the pre-existing Grand Design Management Incentive Plan. Payment under this plan is 100% dependent on pre-tax net income performance of the Grand Design business, a part of our Towable segment, and, beginning in Fiscal 2020, is payable 95% in cash and 5% in restricted stock units of the Company, which units are subject to a 3-year vesting schedule. In Fiscal 2021, Mr. Clark’s incentive bonus will be payable 90% in cash and 10% in restricted stock units and in Fiscal 2022 payable 85% in cash and 15% in restricted stock units. Mr. Clark is not eligible to participate in any other Winnebago cash or stock incentive program. Performance-based Pay Mix Consistent with the Committee’s commitment to a strong, positive link between our business objectives, our performance and our executive compensation practices, we have placed a significant emphasis on pay “at risk,” based on the achievement of established business objectives and shareholder value creation. In Fiscal 2020, 83% of our Chief Executive Officer’s total target compensation and 64% of the average total target compensation of our other NEOs was performance-based pay, including annual incentive compensation and annual equity grants, with a significant emphasis on long-term performance and shareholder value creation. The following charts illustrate the components of our Chief Executive Officer’s Fiscal 2020 total target compensation, as well as the components of the average total target compensation for our other NEOs in Fiscal 2020, excluding Mr. Clark. Total target compensation includes current Fiscal 2020 annualized base salary, target annual incentive compensation, and the grant date fair value of our annual equity grants made in Fiscal 2020, as reported in the Summary Compensation Table (and excludes benefits and other compensation). Determination of Compensation Role of the Human Resources Committee The Committee is responsible for reviewing and approving, on an annual basis, the corporate goals and objectives with respect to the compensation of all of our executive officers, as described in the Committee Charter. The Committee relies on its own review and the advice of its independent compensation consultant in establishing executive officer pay. The Compensation Committee seeks the input of the CEO in making executive officer pay decisions for all executives other than himself, but the Committee makes all decisions. In October 2019, the Committee approved annual incentive performance objectives for Fiscal 2020 based upon the business plan for the year. In December 2019, the Committee increased the performance objectives to incorporate the expected performance of Newmar for the remainder of the year. In December 2019, the Committee also granted long-term incentive awards to our | | | | Proxy Statement for 2020 Annual Meeting | 35 |
TABLE OF CONTENTS executive officers under the 2019 Omnibus Incentive Plan (the “2019 Plan”), which was approved by the shareholders at the 2018 Annual Meeting, including LTIP performance share units, stock options and restricted stock units. After the completion of Fiscal 2020, the Committee (i) approved 2020 annual incentive payouts for our NEOs based on achievement of the performance objectives established at the beginning of the year, and (ii) certified achievement of performance objectives with respect to the LTIP performance share awards granted to then-current executives in Fiscal 2018 that had a performance period running from Fiscal 2018-2020. Role of the Compensation Consultant The Committee retained Semler Brossy as its independent executive compensation consultant for Fiscal 2020. Retained by and reporting directly to the Human Resources Committee, Semler Brossy provided the Committee with assistance in evaluating Winnebago’s executive compensation programs and policies, and, where appropriate, assisted with the revision of elements of the programs. The scope of the consultant’s support included: Review of annual and long-term incentive designs and assistance with determination of annual and long-term incentive awards, including Fiscal 2020 payouts Review of the total compensation program, including competitive peer group analysis and analysis of executive pay levels in relation to broader market survey data Review information provided to the Committee by management Develop recommendations with respect to CEO compensation decisions and provide advice to the Committee on the compensation decisions affecting all executives, including the NEOs Attend and participate in Committee meetings as requested by the Committee Report on compensation trends and best practices, plan design, and the reasonableness of individual compensation awards Assist the Committee in reviewing the Board’s compensation annually and assessing its competitiveness relative to market Assist the Committee in assessing the extent to which the Company’s compensation policies and practices promote reasonable and appropriate risk-taking behavior by management and avoid excessive risk-taking behavior Provide a consultant independence and conflicts of interest assessment Meet with the Committee and/or its members without management present Semler Brossy did not provide any services to us other than those detailed above. The Committee determined that no conflicts of interest exist with respect to Semler Brossy serving as an advisor to the Committee. In making this determination, the Committee considered various factors, including those set forth in the SEC’s and NYSE’s rules. | 36 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Role of Management Our CEO and our other executive officers do not set their own compensation nor are they present when the Committee sets their specific individual compensation. Our CEO provides his evaluation of each executive officer’s performance to the Committee, and makes recommendations with respect to base salary and target incentives, incentive awards and equity awards for each executive officer other than himself. This recommendation is considered by the Committee, which makes its own ultimate determinations. The Human Resources Department provides additional analysis and guidance as requested by the Committee related to NEO compensation, including the following: Developing, summarizing and presenting information and analyses to enable the Human Resources Committee to execute its responsibilities, as well as addressing specific requests for information from the Committee Attending Committee meetings as requested to provide information, respond to questions and otherwise assist the Committee Assisting the CEO in making preliminary recommendations of base salary structure, annual and LTI program design and target award levels for the NEOs and other employees eligible to receive annual incentive awards. Pay Positioning and Compensation Peers When setting Fiscal 2020 compensation, the Committee focused on trying to set pay levels, in the aggregate, within a competitive range of the market median. Some roles may be higher or lower in the competitive range based on performance, tenure in role, or other internal considerations. Competitive market data is only one of several resources made available to the Committee to assist it in setting executive compensation levels. The Committee does not use the median as a formula to determine compensation or as a fixed target. The Committee establishes an individual annual bonus and equity incentive target opportunity for each NEO based on the Committee’s evaluation of the executive’s experience, level and scope of responsibility and individual performance. Actual cash compensation may be more or less than the target opportunity as a result of performance under the incentive plan. Realized compensation from our equity-based awards may be more or less than the target opportunity as a result of our performance relative to the LTIP measures and our stock price performance. In setting compensation, the Committee compares base salaries, annual incentive opportunities and long-term compensation for the NEOs to a peer group of similarly sized companies (which we refer to collectively as our Compensation Peers). For Fiscal 2020, the Committee used the following set of companies that were determined to have similarly sized revenues and market values. Altra Industrial Motion | | | Patrick Industries | Blue Bird | | | Polaris | Brunswick | | | REV Group | Commercial Vehicle Group | | | Shiloh Industries | Cooper-Standard | | | Spartan Motors | Federal Signal | | | Standard Motor Products | Gentherm Incorporated | | | Tennant Company |
| Proxy Statement for 2020 Annual Meeting
| 39 | | | | Proxy Statement for 2020 Annual Meeting | 37 |
TABLE OF CONTENTS Individual goals for our NEOs during Fiscal 2020 included the following:Harley-Davidson
For Mr. Happe, to continue to build a high-performance culture, strengthen and expand the core RV business, elevate the importance of excellence in operations, foster innovation and digital engagement, and pursue expansion to profitable new markets.
For Mr. Hughes, to achieve targeted working capital improvements, efficiently progress the Company’s enterprise resource planning implementation, develop an improved strategic planning cycle, support inorganic growth initiatives, and optimize the Company’s cost of capital and tax rate.
For Ms. Bogart, to champion a culture of corporate responsibility, accelerate strategic philanthropy, promote diversity, equity and inclusion, leverage technology to increase efficiency and integrate Newmar’s legal and compliance functions.
For Mr. Hazelton, to oversee the launch of new products within the Class A and B product categories, reorganize certain segments of talent and promote talent development in key areas, create a culture of philanthropy, and promote diversity, equity and inclusion.
In October of 2020, the Committee evaluated performance against the Financial Performance Metrics and determined that the net sales and operating income metric thresholds were not achieved and that the net working capital metric was achieved, resulting in a 10% payout for these metrics.
| | | The table below reflectsToro Company | Hyster-Yale | | | Thor Industries | LCI Industries | | | Wabash National | Malibu Boats | | | |
Based on a review conducted by Semler Brossy, the Committee made the following changes to the peer group for setting compensation levels for Fiscal 2021 with the intent to better reflect our current business dynamics: Commercial Vehicle Group | | | Donaldson Company | Gentherm Incorporated | | | Meritor | Shiloh Industries | | | The Timken Company |
Fiscal 2020 NEO Compensation Decisions Base Salary We provide NEOs and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary ranges for NEOs are determined for each executive based on his or her position and responsibilities. The base salaries of our executives are also determined by considering such factors as: Experience of the executive Time in position Individual performance Level of responsibility for the executive Economic conditions, Company performance, financial condition and strategic goals Competitive market data provided by the Committee’s independent compensation consultant In general, base salary determinations are considered each year as part of the Committee’s review process as well as upon a promotion or other change in job responsibility. Base salary is also used as the basis for calculating annual and long-term incentive awards and in calculating payments that may be paid upon a change in control, as described below. In December 2019, as a result of a review of performance, consideration of the above referenced factors, and with input from the independent compensation consultant and our CEO, the Committee recommended and approved the following increases for Fiscal 2020: Michael J. Happe | | | $900,000 | | | $700,000 | | | 28.6% | Bryan L. Hughes | | | 507,000 | | | 490,000 | | | 3.5% | Stacy L. Bogart | | | 440,500 | | | 427,499 | | | 3.0% | Donald J. Clark | | | 400,000 | | | 400,000 | | | 0.0% | Brian D. Hazelton | | | 491,500 | | | 477,400 | | | 3.0% |
| 38 | | | | | Proxy Statement for 2020 OICP financial metric payout threshold and target as well as our performance against this metric ($ in thousands): Enterprise-Wide Financial Performance (75% of the OICP for Ms. Bogart and Messrs. Happe,(1)Hughes and Hazelton)(2)(3)
Net Sales
| | | 40%
| | | $ 2,387,790
| | | $2,600,038 – 2,706,162
| | | $2,918,410
| | | $2,355,533
| | | 0.0%
| Operating Income
| | | 50%
| | | $142,626
| | | $172,282 – 184,282
| | | $213,938
| | | $113,762
| | | 0.0%
| Net Working Capital
| | | 10%
| | | 15.3%
| | | 14.2% – 13.6%
| | | 12.5%
| | | 14.0%
| | | 10.0%
| Total Payout Percentage
| | | 10.0%Annual Meeting
|
(1)
| Mr. Happe voluntarily reduced the enterprise-wide financial performance component of his OICP to 0%, in response to the economic disruption created by COVID-19. |
(2)
| Each of the NEOs, other than Mr. Clark, also have 25% of his or her target bonus opportunities tied to individualized objectives, which are assessed by the CEO (or, the Committee, in the case of the CEO), and the proposed bonus amount is approved by the Committee. |
(3)
| 52.5% of the OICP (i.e., 70% of his 75% Enterprise-Wide Financial Performance) for Mr. Hazelton is based upon the following Motorhome business unit performance metrics: (i) 40% Net Sales, (ii) 40% Operating Income and (iii) 20% Net Working Capital. |
The Committee then considered and reviewed the CEO’s evaluation of each eligible NEO’s performance, other than himself. It determined that each of the participating NEOs outperformed expectations and earned his or her individual performance goal opportunity at a level of 170% of target, in the case of Mr. Hazelton, and 200% of target, in the case of Mr. Hughes
| 40
| | | | | Proxy Statement for 2020 Annual Meeting
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TABLE OF CONTENTS
and Ms. Bogart. The Committee also determined, in its sole discretion, that Mr. Happe’s level of achievement of his individual objectives was 200% of target.
The Committee considered executives’ significant over-achievement in contributing to the Company’s acquisition and integration of the Newmar business unit, as well as in contributing to market share and operating cash flow gains achieved during Fiscal 2020 while leading the Company through challenges associated with COVID-19, and decided to increase the portion of the OICP payment related to Mr. Hughes’ performance by an additional 50% of target for individual performance metrics and Ms. Bogart’s performance by an additional 20% of target for individual performance metrics. This process resulted in additional payments tied to these NEO’s own levels of achievement.
The following table reflects the Fiscal 2020 year-end salary (excluding temporary reductions), target OICP percentage and dollar amounts, and actual OICP percentage and dollar amounts earned by the NEOs, each as approved by the Committee. The calculated portion of the OICP payout related to achievement of the metrics set at the beginning of the fiscal year is reported on page 51 in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column, and the incremental over-achievement payment is reported under the “Bonus” column.Michael J. Happe | | | $830,770 | | | N/A(1) | | | $1,000,000 | | | 50% | | | $500,000 | Bryan L. Hughes | | | 501,115 | | | 75.0% | | | 375,837 | | | 70% | | | 263,086 | Stacy L. Bogart | | | 436,000 | | | 60.0% | | | 261,600 | | | 62.5% | | | 163,500 | Donald J. Clark(2) | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | Brian D. Hazelton | | | 486,619 | | | 65.0% | | | 316,303 | | | 67.5% | | | 213,449 |
(1)
| Mr. Happe’s target OICP is set at the listed target award amount and is not calculated as a percent of his eligible earnings. |
(2)
| Mr. Clark does not participate in the OICP. For Fiscal 2020, Mr. Clark received an incentive bonus of $5,515,397 under the Grand Design Management Incentive Plan that he participates in, which is a 6.4% increase compared to his Fiscal 2019 bonus, based on the strong performance of Grand Design during Fiscal 2020. Mr. Clark’s incentive under such plan is calculated as 3.5% of the pre-tax net income of Grand Design (before taking into account any bonus payments thereunder). |
Fiscal 2020 Equity Awards
We recognize long-term incentive opportunity as an important element of the total executive compensation program for NEOs. Long-term incentives are intended to retain and motivate executives and to encourage a strong link between management objectives and shareholder long-term interests.
In Fiscal 2020, we awarded long-term incentives under our 2019 Plan. We awarded equity in the form of LTIP performance share units, restricted stock units, and stock options.
LTIP / Performance Share Units
Each year, the Committee establishes a three-year performance plan to promote our long-term growth and profitability and to attract and retain executives by providing the officers an opportunity for an incentive award consisting of performance shares of the Company’s Common
TABLE OF CONTENTS After a review of the competitive market data provided by the Committee’s independent compensation consultant, and after a review of the Company’s financial performance and gains in market share, revenue and operating income since the inception of Mr. Happe’s employment with the Company, his experience in the position of Chief Executive Officer and the increased size and complexity of the Company, the Committee decided to increase Mr. Happe’s base salary to $900,000 for Fiscal 2020, a 28.6% increase over his Fiscal 2019 base salary. Effective from April 1, 2020 through the remainder of Fiscal 2020, the base salary of each of our NEOs (with the exception of Mr. Clark) was reduced by 15%, or, in the case of Mr. Happe, 25%. These temporary reductions were approved by the Board on April 1, 2020, and were taken in response to the economic disruption created by COVID-19. These reductions in base salary did not impact the calculation of incentive compensation or equity awards. Annual Incentive Plan - Officers’ Incentive Compensation Plan (OICP) The OICP is designed to motivate and reward the successful completion of our annual performance goals as set by the Committee. The amount of the participants’ incentive compensation earned for a given fiscal year is calculated under the OICP to be in direct proportion to our financial performance expressed as a percentage (Financial Factor) against compensation targets for each participant as determined by the Committee. OICP awards are earned to the extent we meet or exceed annual financial targets as well as business unit and individual performance goals. Each NEO, except for Mr. Clark, is eligible for a target award, denominated as a percentage of Fiscal 2020 base salary. NEOs may earn from 0% of the target award under the OICP up to a maximum of 200% of the target award. In setting the target award percentages for the NEOs, the Committee considers competitive data in the compensation peer studies, individual performance evaluations, and internal equity factors. | | | | Proxy Statement for 2020 Annual Meeting
| 41
|
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Stock. The amount of an NEO’s performance share incentive compensation for the three-year period is calculated to be in direct linear proportion to our measured financial performance expressed as a percentage against compensation targets as approved by the Committee.
In general, the awards are based upon our financial performance as measured against the specific three-year plan established by the Committee. The Committee has established financial measurements and weightings for each specific three-year plan (as set forth in the following chart).
For the Fiscal 2020-2022 LTIP performance share units, the Committee selected the following metrics:
Average Return on Invested Capital
| | | 50%
| Cumulative Adjusted EPS
| | | 50%
|
To calculate the Cumulative Adjusted EPS for the Fiscal 2020-2022 LTIP, the after-tax impact of certain non-recurring expenses is added to the Company’s net income, and the resulting number is divided by the weighted average number of shares. The Cumulative Adjusted EPS for Fiscal 2020 was adjusted to exclude the following: (i) the pre-tax transaction costs associated with the acquisition of Newmar, (ii) the inventory step-up related to the Newmar acquisition, (iii) non-cash interest expense, (iv) debt issuance cost write-off, (v) restructuring expense and (vi) the tax effect of all of the foregoing adjustments.
The number of performance shares that may be earned range from 0% to 200% of the target share amount.
The Committee determined that the LTIP performance share awards, if earned, would also be made subject to an additional one-year holding period following the grant of the shares, in order to encourage stock ownership, promote our long-term growth and profitability and mitigate risk.
Restricted Stock Units | | | 35% of all annual equity awards
Restricted stock units vest over three years in equal installments | | | Aligns NEOs’ interest with long-term shareholder value creation
Encourages executive retention | |
In connection with our acquisition of Grand Design, we entered into an employment agreement with Mr. Clark in November 2016, which expired per its terms on August 31, 2019. On June 19, 2019, we entered into an amended and restated employment agreement with Mr. Clark which extended his employment term to August 31, 2023. Under both the previous and current employment agreements, Mr. Clark is paid an annual base salary of $400,000, and is eligible to | 34 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS receive an incentive bonus pursuant to the pre-existing Grand Design Management Incentive Plan. Payment under this plan is 100% dependent on pre-tax net income performance of the Grand Design business, a part of our Towable segment, and, beginning in Fiscal 2020, is payable 95% in cash and 5% in restricted stock units of the Company, which units are subject to a 3-year vesting schedule. In Fiscal 2021, Mr. Clark’s incentive bonus will be payable 90% in cash and 10% in restricted stock units and in Fiscal 2022 payable 85% in cash and 15% in restricted stock units. Mr. Clark is not eligible to participate in any other Winnebago cash or stock incentive program. Performance-based Pay Mix Consistent with the Committee’s commitment to a strong, positive link between our business objectives, our performance and our executive compensation practices, we have placed a significant emphasis on pay “at risk,” based on the achievement of established business objectives and shareholder value creation. In Fiscal 2020, 83% of our Chief Executive Officer’s total target compensation and 64% of the average total target compensation of our other NEOs was performance-based pay, including annual incentive compensation and annual equity grants, with a significant emphasis on long-term performance and shareholder value creation. The following charts illustrate the components of our Chief Executive Officer’s Fiscal 2020 total target compensation, as well as the components of the average total target compensation for our other NEOs in Fiscal 2020, excluding Mr. Clark. Total target compensation includes current Fiscal 2020 annualized base salary, target annual incentive compensation, and the grant date fair value of our annual equity grants made in Fiscal 2020, as reported in the Summary Compensation Table (and excludes benefits and other compensation). Determination of Compensation Role of the Human Resources Committee The Committee is responsible for reviewing and approving, on an annual basis, the corporate goals and objectives with respect to the compensation of all of our executive officers, as described in the Committee Charter. The Committee relies on its own review and the advice of its independent compensation consultant in establishing executive officer pay. The Compensation Committee seeks the input of the CEO in making executive officer pay decisions for all executives other than himself, but the Committee makes all decisions. In October 2019, the Committee approved annual incentive performance objectives for Fiscal 2020 based upon the business plan for the year. In December 2019, the Committee increased the performance objectives to incorporate the expected performance of Newmar for the remainder of the year. In December 2019, the Committee also granted long-term incentive awards to our | | | | Proxy Statement for 2020 Annual Meeting | 35 |
TABLE OF CONTENTS executive officers under the 2019 Omnibus Incentive Plan (the “2019 Plan”), which was approved by the shareholders at the 2018 Annual Meeting, including LTIP performance share units, stock options and restricted stock units. After the completion of Fiscal 2020, the Committee (i) approved 2020 annual incentive payouts for our NEOs based on achievement of the performance objectives established at the beginning of the year, and (ii) certified achievement of performance objectives with respect to the LTIP performance share awards granted to then-current executives in Fiscal 2018 that had a performance period running from Fiscal 2018-2020. Role of the Compensation Consultant The Committee retained Semler Brossy as its independent executive compensation consultant for Fiscal 2020. Retained by and reporting directly to the Human Resources Committee, Semler Brossy provided the Committee with assistance in evaluating Winnebago’s executive compensation programs and policies, and, where appropriate, assisted with the revision of elements of the programs. The scope of the consultant’s support included: Review of annual and long-term incentive designs and assistance with determination of annual and long-term incentive awards, including Fiscal 2020 payouts Review of the total compensation program, including competitive peer group analysis and analysis of executive pay levels in relation to broader market survey data Review information provided to the Committee by management Develop recommendations with respect to CEO compensation decisions and provide advice to the Committee on the compensation decisions affecting all executives, including the NEOs Attend and participate in Committee meetings as requested by the Committee Report on compensation trends and best practices, plan design, and the reasonableness of individual compensation awards Assist the Committee in reviewing the Board’s compensation annually and assessing its competitiveness relative to market Assist the Committee in assessing the extent to which the Company’s compensation policies and practices promote reasonable and appropriate risk-taking behavior by management and avoid excessive risk-taking behavior Provide a consultant independence and conflicts of interest assessment Meet with the Committee and/or its members without management present Semler Brossy did not provide any services to us other than those detailed above. The Committee determined that no conflicts of interest exist with respect to Semler Brossy serving as an advisor to the Committee. In making this determination, the Committee considered various factors, including those set forth in the SEC’s and NYSE’s rules. | 36 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Role of Management Our CEO and our other executive officers do not set their own compensation nor are they present when the Committee sets their specific individual compensation. Our CEO provides his evaluation of each executive officer’s performance to the Committee, and makes recommendations with respect to base salary and target incentives, incentive awards and equity awards for each executive officer other than himself. This recommendation is considered by the Committee, which makes its own ultimate determinations. The Human Resources Department provides additional analysis and guidance as requested by the Committee related to NEO compensation, including the following: Developing, summarizing and presenting information and analyses to enable the Human Resources Committee to execute its responsibilities, as well as addressing specific requests for information from the Committee Attending Committee meetings as requested to provide information, respond to questions and otherwise assist the Committee Assisting the CEO in making preliminary recommendations of base salary structure, annual and LTI program design and target award levels for the NEOs and other employees eligible to receive annual incentive awards. Pay Positioning and Compensation Peers When setting Fiscal 2020 compensation, the Committee focused on trying to set pay levels, in the aggregate, within a competitive range of the market median. Some roles may be higher or lower in the competitive range based on performance, tenure in role, or other internal considerations. Competitive market data is only one of several resources made available to the Committee to assist it in setting executive compensation levels. The Committee does not use the median as a formula to determine compensation or as a fixed target. The Committee establishes an individual annual bonus and equity incentive target opportunity for each NEO based on the Committee’s evaluation of the executive’s experience, level and scope of responsibility and individual performance. Actual cash compensation may be more or less than the target opportunity as a result of performance under the incentive plan. Realized compensation from our equity-based awards may be more or less than the target opportunity as a result of our performance relative to the LTIP measures and our stock price performance. In setting compensation, the Committee compares base salaries, annual incentive opportunities and long-term compensation for the NEOs to a peer group of similarly sized companies (which we refer to collectively as our Compensation Peers). For Fiscal 2020, the Committee used the following set of companies that were determined to have similarly sized revenues and market values. Altra Industrial Motion | | | Patrick Industries | Blue Bird | | | Polaris | Brunswick | | | REV Group | Commercial Vehicle Group | | | Shiloh Industries | Cooper-Standard | | | Spartan Motors | Federal Signal | | | Standard Motor Products | Gentherm Incorporated | | | Tennant Company |
| | | | Proxy Statement for 2020 Annual Meeting | 37 |
TABLE OF CONTENTS Harley-Davidson | | | The Toro Company | Hyster-Yale | | | Thor Industries | LCI Industries | | | Wabash National | Malibu Boats | | | |
Based on a review conducted by Semler Brossy, the Committee made the following changes to the peer group for setting compensation levels for Fiscal 2021 with the intent to better reflect our current business dynamics: Commercial Vehicle Group | | | Donaldson Company | Gentherm Incorporated | | | Meritor | Shiloh Industries | | | The Timken Company |
Fiscal 2020 NEO Compensation Decisions Base Salary We provide NEOs and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary ranges for NEOs are determined for each executive based on his or her position and responsibilities. The base salaries of our executives are also determined by considering such factors as: Experience of the executive Time in position Individual performance Level of responsibility for the executive Economic conditions, Company performance, financial condition and strategic goals Competitive market data provided by the Committee’s independent compensation consultant In general, base salary determinations are considered each year as part of the Committee’s review process as well as upon a promotion or other change in job responsibility. Base salary is also used as the basis for calculating annual and long-term incentive awards and in calculating payments that may be paid upon a change in control, as described below. In December 2019, as a result of a review of performance, consideration of the above referenced factors, and with input from the independent compensation consultant and our CEO, the Committee recommended and approved the following increases for Fiscal 2020: Michael J. Happe | | | $900,000 | | | $700,000 | | | 28.6% | Bryan L. Hughes | | | 507,000 | | | 490,000 | | | 3.5% | Stacy L. Bogart | | | 440,500 | | | 427,499 | | | 3.0% | Donald J. Clark | | | 400,000 | | | 400,000 | | | 0.0% | Brian D. Hazelton | | | 491,500 | | | 477,400 | | | 3.0% |
| 38 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS After a review of the competitive market data provided by the Committee’s independent compensation consultant, and after a review of the Company’s financial performance and gains in market share, revenue and operating income since the inception of Mr. Happe’s employment with the Company, his experience in the position of Chief Executive Officer and the increased size and complexity of the Company, the Committee decided to increase Mr. Happe’s base salary to $900,000 for Fiscal 2020, a 28.6% increase over his Fiscal 2019 base salary. Effective from April 1, 2020 through the remainder of Fiscal 2020, the base salary of each of our NEOs (with the exception of Mr. Clark) was reduced by 15%, or, in the case of Mr. Happe, 25%. These temporary reductions were approved by the Board on April 1, 2020, and were taken in response to the economic disruption created by COVID-19. These reductions in base salary did not impact the calculation of incentive compensation or equity awards. Annual Incentive Plan - Officers’ Incentive Compensation Plan (OICP) The OICP is designed to motivate and reward the successful completion of our annual performance goals as set by the Committee. The amount of the participants’ incentive compensation earned for a given fiscal year is calculated under the OICP to be in direct proportion to our financial performance expressed as a percentage (Financial Factor) against compensation targets for each participant as determined by the Committee. OICP awards are earned to the extent we meet or exceed annual financial targets as well as business unit and individual performance goals. Each NEO, except for Mr. Clark, is eligible for a target award, denominated as a percentage of Fiscal 2020 base salary. NEOs may earn from 0% of the target award under the OICP up to a maximum of 200% of the target award. In setting the target award percentages for the NEOs, the Committee considers competitive data in the compensation peer studies, individual performance evaluations, and internal equity factors. Fiscal 2020 OICP Net sales, operating income, net working capital, and individual objectives related to each NEO’s particular responsibilities were chosen by the Committee as the performance measurements under the OICP for Fiscal 2020. The Committee selected these as key performance metrics because they are closely aligned with the business strategy. These metrics are described further below. Financial Performance Metrics (75% of OICP for Ms. Bogart and Messrs. Happe, Hughes and Hazelton) Net Sales (40%) - focuses on overall enterprise and business unit growth and also drives customer focus Operating Income (50%) - reinforces the importance of profitable growth across the enterprise Net Working Capital (10%) - helps measure overall financial health of the enterprise Individual objectives (25% of the OICP for Ms. Bogart and Messrs. Happe, Hughes and Hazelton) provide actionable and measurable objectives controllable by the individual to achieve financial and non-financial goals. | | | | Proxy Statement for 2020 Annual Meeting | 39 |
TABLE OF CONTENTS For corporate NEOs, Ms. Bogart and Messrs. Happe and Hughes, the OICP financial metrics were measured against enterprise-wide performance. For business unit heads, including Mr. Hazelton, the OICP financial metrics were measured against both enterprise-wide and specific business unit performance. Mr. Clark does not participate in the OICP. Individual goals for our NEOs during Fiscal 2020 included the following: For Mr. Happe, to continue to build a high-performance culture, strengthen and expand the core RV business, elevate the importance of excellence in operations, foster innovation and digital engagement, and pursue expansion to profitable new markets. For Mr. Hughes, to achieve targeted working capital improvements, efficiently progress the Company’s enterprise resource planning implementation, develop an improved strategic planning cycle, support inorganic growth initiatives, and optimize the Company’s cost of capital and tax rate. For Ms. Bogart, to champion a culture of corporate responsibility, accelerate strategic philanthropy, promote diversity, equity and inclusion, leverage technology to increase efficiency and integrate Newmar’s legal and compliance functions. For Mr. Hazelton, to oversee the launch of new products within the Class A and B product categories, reorganize certain segments of talent and promote talent development in key areas, create a culture of philanthropy, and promote diversity, equity and inclusion. In October of 2020, the Committee evaluated performance against the Financial Performance Metrics and determined that the net sales and operating income metric thresholds were not achieved and that the net working capital metric was achieved, resulting in a 10% payout for these metrics. The table below reflects the Fiscal 2020 OICP financial metric payout threshold and target as well as our performance against this metric ($ in thousands): Enterprise-Wide Financial Performance (75% of the OICP for Ms. Bogart and Messrs. Happe,(1)Hughes and Hazelton)(2)(3) Net Sales | | | 40% | | | $2,387,790
| | | $2,600,038 – 2,706,162 | | | $2,918,410
| | | $2,355,533
| | | 0.0% | Operating Income | | | 50% | | | $142,626
| | | $172,282 – 184,282 | | | $213,938
| | | $113,762
| | | 0.0% | Net Working Capital | | | 10% | | | 15.3% | | | 14.2% – 13.6% | | | 12.5% | | | 14.0% | | | 10.0% | Total Payout Percentage
| | | 10.0% |
(1)
| Mr. Happe voluntarily reduced the enterprise-wide financial performance component of his OICP to 0%, in response to the economic disruption created by COVID-19. |
(2)
| Each of the NEOs, other than Mr. Clark, also have 25% of his or her target bonus opportunities tied to individualized objectives, which are assessed by the CEO (or, the Committee, in the case of the CEO), and the proposed bonus amount is approved by the Committee. |
(3)
| 52.5% of the OICP (i.e., 70% of his 75% Enterprise-Wide Financial Performance) for Mr. Hazelton is based upon the following Motorhome business unit performance metrics: (i) 40% Net Sales, (ii) 40% Operating Income and (iii) 20% Net Working Capital. |
The Committee then considered and reviewed the CEO’s evaluation of each eligible NEO’s performance, other than himself. It determined that each of the participating NEOs outperformed expectations and earned his or her individual performance goal opportunity at a level of 170% of target, in the case of Mr. Hazelton, and 200% of target, in the case of Mr. Hughes | 40 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS and Ms. Bogart. The Committee also determined, in its sole discretion, that Mr. Happe’s level of achievement of his individual objectives was 200% of target. The Committee considered executives’ significant over-achievement in contributing to the Company’s acquisition and integration of the Newmar business unit, as well as in contributing to market share and operating cash flow gains achieved during Fiscal 2020 while leading the Company through challenges associated with COVID-19, and decided to increase the portion of the OICP payment related to Mr. Hughes’ performance by an additional 50% of target for individual performance metrics and Ms. Bogart’s performance by an additional 20% of target for individual performance metrics. This process resulted in additional payments tied to these NEO’s own levels of achievement. The following table reflects the Fiscal 2020 year-end salary (excluding temporary reductions), target OICP percentage and dollar amounts, and actual OICP percentage and dollar amounts earned by the NEOs, each as approved by the Committee. The calculated portion of the OICP payout related to achievement of the metrics set at the beginning of the fiscal year is reported on page 51 in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column, and the incremental over-achievement payment is reported under the “Bonus” column. Michael J. Happe | | | $830,770 | | | N/A(1) | | | $1,000,000 | | | 50% | | | $500,000 | Bryan L. Hughes | | | 501,115 | | | 75.0% | | | 375,837 | | | 70% | | | 263,086 | Stacy L. Bogart | | | 436,000 | | | 60.0% | | | 261,600 | | | 62.5% | | | 163,500 | Donald J. Clark(2) | | | N/A | | | N/A
| | | N/A | | | N/A
| | | N/A | Brian D. Hazelton | | | 486,619 | | | 65.0% | | | 316,303 | | | 67.5% | | | 213,449 |
(1)
| Mr. Happe’s target OICP is set at the listed target award amount and is not calculated as a percent of his eligible earnings. |
(2)
| Mr. Clark does not participate in the OICP. For Fiscal 2020, Mr. Clark received an incentive bonus of $5,515,397 under the Grand Design Management Incentive Plan that he participates in, which is a 6.4% increase compared to his Fiscal 2019 bonus, based on the strong performance of Grand Design during Fiscal 2020. Mr. Clark’s incentive under such plan is calculated as 3.5% of the pre-tax net income of Grand Design (before taking into account any bonus payments thereunder). |
Fiscal 2020 Equity Awards We recognize long-term incentive opportunity as an important element of the total executive compensation program for NEOs. Long-term incentives are intended to retain and motivate executives and to encourage a strong link between management objectives and shareholder long-term interests. In Fiscal 2020, we awarded long-term incentives under our 2019 Plan. We awarded equity in the form of LTIP performance share units, restricted stock units, and stock options. LTIP / Performance Share Units Each year, the Committee establishes a three-year performance plan to promote our long-term growth and profitability and to attract and retain executives by providing the officers an opportunity for an incentive award consisting of performance shares of the Company’s Common | | | | Proxy Statement for 2020 Annual Meeting | 41 |
TABLE OF CONTENTS Stock. The amount of an NEO’s performance share incentive compensation for the three-year period is calculated to be in direct linear proportion to our measured financial performance expressed as a percentage against compensation targets as approved by the Committee. In general, the awards are based upon our financial performance as measured against the specific three-year plan established by the Committee. The Committee has established financial measurements and weightings for each specific three-year plan (as set forth in the following chart). For the Fiscal 2020-2022 LTIP performance share units, the Committee selected the following metrics: Average Return on Invested Capital | | | 50% | Cumulative Adjusted EPS | | | 50% |
To calculate the Cumulative Adjusted EPS for the Fiscal 2020-2022 LTIP, the after-tax impact of certain non-recurring expenses is added to the Company’s net income, and the resulting number is divided by the weighted average number of shares. The Cumulative Adjusted EPS for Fiscal 2020 was adjusted to exclude the following: (i) the pre-tax transaction costs associated with the acquisition of Newmar, (ii) the inventory step-up related to the Newmar acquisition, (iii) non-cash interest expense, (iv) debt issuance cost write-off, (v) restructuring expense and (vi) the tax effect of all of the foregoing adjustments. The number of performance shares that may be earned range from 0% to 200% of the target share amount. The Committee determined that the LTIP performance share awards, if earned, would also be made subject to an additional one-year holding period following the grant of the shares, in order to encourage stock ownership, promote our long-term growth and profitability and mitigate risk. Restricted Stock Units NEOs were granted restricted stock units in Fiscal 2020 that vest in three equal annual installments, beginning on the first anniversary of the grant date. Stock Options NEOs were granted stock options in Fiscal 2020 that vest over three years in equal installments, beginning on the first anniversary of the grant date, and can be exercised over ten years. | 42 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Fiscal 2020 Awards The target value of the long-term incentive awards granted to the NEOs in Fiscal 2020 was as follows: Michael J. Happe | | | $1,550,000 | | | $1,085,000 | | | $465,000 | | | $3,100,000 | | | $1,900,000 | | | 63.2%(2) | Bryan L. Hughes | | | 278,850 | | | 195,195 | | | 83,655 | | | 557,700 | | | 507,376 | | | 9.9%(3) | Stacy L. Bogart | | | 231,263 | | | 161,884 | | | 69,379 | | | 462,525 | | | 435,751 | | | 6.1%(4) | Donald J. Clark(5) | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A
| Brian D. Hazelton | | | 270,325 | | | 189,228 | | | 81,098 | | | 540,650 | | | 525,140 | | | 3.0%
|
(1)
| To perform this calculation, we assumed that the Fiscal 2019 and Fiscal 2020 equity awards were earned at target. |
(2)
| The 63.2% increase was approved by the Committee after a review of the competitive market data provided by the Committee’s independent compensation consultant, and after a review of the Company’s financial performance and gains in market share, revenue and operating income since the inception of Mr. Happe’s employment with the Company, his experience in the position of Chief Executive Officer and the increased size and complexity of the Company. |
(3)
| The 9.9% increase was approved by the Committee, after a review of the competitive market data provided by the Committee’s independent compensation consultant, the increased size and complexity of the Company and additional responsibilities in the areas of information technology and strategic planning. |
(4)
| The 6.1% increase was approved by the Committee after a review of the competitive market data provided by the Committee’s independent compensation consultant and the increased size and complexity of the Company. |
(5)
| Under the terms of his employment agreement, Mr. Clark does not receive annual long-term incentive awards unless specifically determined by the Committee. |
Grants in Recognition of Newmar Acquisition On December 17, 2019, in recognition of additional contributions made by Ms. Bogart and Mr. Hughes during Fiscal 2020 in connection with our acquisition and integration of Newmar, the Committee approved a special grant of restricted stock units in the amount of $50,700 for Mr. Hughes and $44,050 for Ms. Bogart. This resulted in a grant of an additional 919 restricted stock units for Ms. Bogart and 1,058 restricted stock units for Mr. Hughes, using the grant date fair value of $47.93 per share as of the date of the grant. The restricted stock units have the same vesting schedule and terms as the restricted stock units granted as part of the Fiscal 2020 awards. Payout of the Fiscal 2018-2020 LTIP Cycle For the Fiscal 2018-2020 LTIP performance share units, the Committee used the metrics of average ROE, cumulative net revenue, and cumulative operating income, which are additional financial metrics separate from the metrics utilized under the OICP, as they provide another measurement of NEO effectiveness. The awards were determined based on our performance against these metrics. The payout scale provided for a minimum award of 0% of the shares | | | | Proxy Statement for 2020 Annual Meeting | 43 |
TABLE OF CONTENTS granted and a maximum award of 150% of the shares granted. The table below reflects our performance against these metrics and the amount paid to eligible NEOs under the Fiscal 2018-2020 LTIP performance share units ($ in thousands): Metric | | Weight | | Threshold
(10%
Payout) | | Target
(100%
Payout) | | Maximum
(150%
Payout) | | Fiscal
2018-2020
Performance(1) | | Actual
Payout
% | | Weight | | Threshold
(10%
Payout) | | Target
(100%
Payout) | | Maximum
(150%
Payout) | | Fiscal
2018-2020
Performance(1) | | Actual
Payout
% | Three-year Average ROE | | 40.0% | | 15.4% | | 19.2% – 19.2% | | 23.0% | | 16.7% | | 16.1% | | 40.0% | | 15.4% | | 19.2% – 19.2% | | 23.0% | | 16.7% | | 16.1% | Three-year Cumulative Net Revenue | | 30.0% | | $4,979,529
| | $5,913,190 – 6,535,632 | | $7,469,293
| | $6,358,036
| | 30% | | 30.0% | | $ 4,979,529
| | $5,913,190 – 6,535,632 | | $7,469,293
| | $ 6,358,036
| | 30% | Three-year Cumulative Operating Income | | 30.0% | | $430,314
| | $537,892 – 537,892 | | $645,470
| | $452,375
| | 8.5% | | 30.0% | | $430,314
| | $537,892 – 537,892 | | $645,470
| | $452,375
| | 8.5% | Total Payout Percentage
| Total Payout Percentage
| | 54.67% | Total Payout Percentage
| | 54.67% |
(1)
| When determining the level of actual performance, the Committee excluded the impact of certain events not contemplated when creating the initial targets. There were no adjustments to net revenue or to net working capital. The average ROE and operating income metrics were adjusted to exclude the following: (i) the net financial impacts of the Chris-Craft and Newmar acquisitions, (ii) the transaction costs associated with the acquisitions of Chris-Craft and Newmar, (iii) the net impact of the Tax Cuts and Jobs Act enacted on December 22, 2017, and (iv) restructuring costs in Fiscal 2020. |
For the Fiscal 2018-2020 LTIP performance share units, Ms. Bogart received a prorated award and Mr. Clark was not eligible to participate in the award. The target award and actual payout for the eligible participants is detailed below. Name | | Target Shares | | Target Value(1) | | Actual Shares | | Actual Value(1) | | Target Shares | | Target Value(1) | | Actual Shares | | Actual Value(1) | Michael J. Happe | | 18,651 | | $828,104 | | 10,197 | | $ 555,635 | | 18,651 | | $828,104 | | 10,197 | | $ 555,635 | Bryan L. Hughes | | 5,574 | | $247,486 | | 3,047 | | $166,031 | | 5,574 | | $ 247,486 | | 3,047 | | $ 166,031 | Stacy L. Bogart | | 3,303 | | $184,638 | | 1,806 | | $ 98,409 | | 3,303 | | $184,638 | | 1,806 | | $ 98,409 | Brian D. Hazelton | | 5,486 | | $243,578 | | 2,999 | | $163,416 | | 5,486 | | $243,578 | | 2,999 | | $163,416 |
(1)
| Target payout is valued at the closing market price of our common stock on the grant date as quoted on the NYSE. For Messrs. Happe, Hughes and Hazelton, the value was $44.40 (October 18, 2017) and, for Ms. Bogart, the value was $55.90 (January 2, 2018). Actual payout is valued at the closing market price of our common stock on October 13, 2020, which was $54.49. |
Benefits Our NEOs are eligible to participate in the same benefit plans designed for all of our full-time employees. The basic insurance package includes health, dental, disability and basic group life insurance. Except as specifically summarized in this Compensation Discussion and Analysis, we do not currently provide payments and benefits for NEOs following his or her retirement, including, but not limited to, tax-qualified defined benefit plans and supplemental executive retirement plans. Profit Sharing and Deferred Savings and Investment Plan We maintain a 401(k) plan, the Winnebago Industries, Inc. Profit Sharing and Deferred Savings and Investment Plan (the “401(k) Plan”), which is a tax-qualified defined contribution plan maintained for the benefit of substantially all hourly and salaried employees, including our executives. The 401(k) Plan offers NEOs and all other employees the opportunity to defer a percentage of income that is a part of their base compensation. Effective January 1, 2018, the Company matching contribution increased to $0.50 per $1.00 of employee contribution up to 6% of the base compensation deferred by employees (subject to IRS limits and non- | 44 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS discrimination testing), subject to a 2-year, pro-rata vesting period for those employees hired after January 1, 2018. Approved in October 2020 and effective January 1, 2020, for all employees, the Company matching contribution was increased to $1.00 per $1.00 of employee contribution for the first 1% of base compensation deferred and $0.50 per $1.00 of employee contribution for the next 5% of base compensation deferred by employees (subject in each case to IRS limits and non-discrimination testing) and also subject to a 2-year, pro-rata vesting period for those employees hired after January 1, 2018. These changes, while effective January 1, 2020, have not yet been calculated or credited on an individual basis and are therefore not reflected as NEO compensation in this Proxy Statement. Although executives, including the NEOs, are eligible to participate in the 401(k) Plan, the application of the annual limitation on contributions under the Internal Revenue Code prevents executives from participating at the same level as non-executives. This compensation element is tax-deferred and is not intended to affect the value of any other compensation element. Executive Deferred Compensation Plan (2007) (Non-Qualified Deferred Compensation Plan) Under the Executive Deferred Compensation Plan, executive officers and certain key employees may annually choose to defer up to 50% of their salary and up to 100% of their cash incentive awards. The Committee has determined that the deferred compensation plan will have the same nominal investment options as the 401(k) Plan. The Company does not provide any matching contributions to the Executive Deferred Compensation Plan. Perquisites We provide NEOs with limited perquisites that the Committee believes are reasonable and consistent with the overall compensation program to better enable us to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to NEOs. Based upon this periodic review, perquisites are awarded or adjusted on an individual basis. NEOs are not automatically awarded all, or in equal amounts, perquisites granted by the Company. The perquisites provided to our NEOs include: Executive Physical. In an effort to encourage executives to monitor and maintain good health, we pay for voluntary annual physical examinations for executives, including the NEOs. Recreational Vehicle and Boat Use. Our executives, including NEOs, have the opportunity to utilize our recreational vehicles and boats on a periodic and temporary basis. We encourage the executive to have a first-hand understanding of the recreational vehicle lifestyle experienced by our customers and to provide the executive with the opportunity to evaluate product design and efficiency. Car Allowance. A car allowance is provided as frequent travel is required. Financial & Tax Planning. To address complex tax and financial situations, a tax and financial planning payment is provided. | | | | Proxy Statement for 2020 Annual Meeting | 45 |
TABLE OF CONTENTS Additional Compensation Policies Stock Ownership Guidelines The Committee has adopted Stock Ownership Guidelines for executives. In general, each executive has five years from the date he or she becomes an executive to accumulate the appropriate number of shares. In addition, each executive is required to retain 50% of any after tax shares received from the vesting of awards or exercise of stock options until his or her ownership guideline is met. The purpose of the guidelines is to encourage our executive officers to own and retain Company shares, thereby aligning their interests with our shareholders. We review our stock ownership guidelines on a periodic basis. The table below describes the current ownership guidelines for the NEOs. Each of our NEOs has either met his or her stock ownership guideline goal or is on track to meet this goal within the prescribed five-year time frame. Michael J. Happe | | | 500% | | | $4,500,000 | Bryan L. Hughes | | | 250% | | | 1,267,500 | Stacy L. Bogart | | | 250% | | | 1,101,250 | Donald J. Clark | | | 250% | | | 1,000,000 | Brian D. Hazelton | | | 250% | | | 1,228,750 |
Severance and Change in Control Arrangements Employment Agreements Mr. Happe and Mr. Clark are the only NEOs with individual employment agreements with the Company. In addition, these are the only agreements with NEOs that provide for severance following a termination of employment outside of a change in control of the Company. If Mr. Happe is terminated by the Company without “Cause” or terminates employment with the Company for “Good Reason” (as such terms are defined in his employment agreement), he is entitled to severance pay of his base salary for 12 months, health insurance for 12 months, accrued unused vacation pay and a pro-rata annual incentive bonus computed at target. Mr. Happe also is subject to one-year non-competition and non-solicitation covenants following termination of employment. If Mr. Clark is terminated by the Company without “Cause” or terminates employment with the Company for “Good Reason” (as such terms are defined in his employment agreement), he is entitled to severance pay of his base salary for 12 months and any earned but unpaid incentive bonus due under the Grand Design Management Incentive Plan through the fiscal quarter in which the termination occurred. Mr. Clark is subject to a non-compete and non-solicitation covenant that terminates upon the later of October 2021 or one year from cessation of employment. Executive Change in Control Agreement Each of the NEOs, including Mr. Happe and Mr. Clark, have also entered into an Executive Change in Control Agreement with the Company. | 46 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS The Executive Change in Control Agreements, entered into by our executives generally provide that, in the event of a termination of the executive’s employment (for a reason other than death, disability, termination for cause or, under certain circumstances, a voluntary termination of employment by the executive) within two years of a change of control, such executive will receive a severance only relative to salary and target annual incentives (as well as annual COBRA premium cost) at a 2x multiple (or 3x, in the case of Mr. Happe only). The change in control agreements for Mr. Clark and Matthew L. Miller, President, Newmar Corporation, provide that the severance benefit payable thereunder would be capped at $3,000,000. The Committee believes these agreements are an important part of the total executive compensation program because they protect our interest in the continuity and stability of the executive group. The Committee also believes that these agreements reduce the executives’ interest in working against a potential change of control and help to keep them focused on minimizing interruptions in business operations by reducing any concerns they may have of being terminated prematurely and without cause during any ownership transition. See “Potential Payments upon Termination or Change in Control-Executive Change in Control Agreements” below for additional detail. Insider Trading and Hedging With respect to the Company’s Insider Trading Policy, the policy prohibits the unauthorized disclosure of any nonpublic information acquired in the workplace and the misuse of Material Nonpublic Information (as defined in the policy) in securities trading. Additionally, our Insider Trading Policy includes our policy on hedging and pledging, which is described in “Corporate Governance - Hedging and Pledging.” Clawback Policy Our incentive compensation programs include “clawback” provisions for each of the Officers Incentive Compensation Plan and Long-Term Incentive Program which, in part, provide for the recoupment of incentive compensation payouts in the event that payments are made based upon the achievement of financial results that are subsequently subject to a restatement due to material noncompliance with financial reporting requirements. In addition, our Executive Officer Incentive Compensation Recovery Policy (the “Clawback Policy”), provides for the recovery of incentive compensation from executive officers in certain circumstances. The Clawback Policy provides that the Company will require forfeiture or recovery of all or a portion of any incentive-based compensation awarded to an executive officer after the effective date of the policy in the event of certain financial restatements or certain misconduct. Tax Considerations Deductibility of Executive Compensation Due to the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts Act”) in December 2017, compensation paid in Fiscal 2019 and later years to our NEOs in excess of $1 million is not deductible under Section 162(m) of the Code unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017. While our Committee is mindful of the benefit to us of the deductibility, it believes that we should maintain flexibility in compensating our executive officers in a manner that best promotes our corporate objectives. | | | | Proxy Statement for 2020 Annual Meeting | 47 |
TABLE OF CONTENTS Section 409A of the Internal Revenue Code Section 409A of the Internal Revenue Code deals specifically with non-qualified deferred compensation plans. Although the Company makes no guarantees with respect to exemption from, or compliance with, Section 409A of the Internal Revenue Code, we have designed all of our executive benefit plans and severance arrangements with the intention that they are exempt from, or otherwise comply with, the requirements of Section 409A of the Internal Revenue Code. Compensation-Related Risk Assessment Our Committee has analyzed the potential risks arising from our compensation policies and practices, and has determined that there are no such risks that are reasonably likely to have a material adverse effect on us. | 48 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Human Resources Committee Report The Human Resources Committee of the Board of Directors of Winnebago Industries, Inc. has reviewed and discussed the foregoing Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K and this Proxy Statement. Human Resources Committee:
John M. Murabito, Chair
Sara E. Armbruster
Robert M. Chiusano
Christopher J. Braun Human Resources Committee Interlocks and Insider Participation The current members of the Human Resources Committee of the Board of Directors, Ms. Armbruster and Messrs. Murabito, Chiusano and Braun, were not at any time during Fiscal 2020 or at any other time a Winnebago Industries officer or employee, and no member had any relationship with the Company requiring disclosure under applicable SEC rules. No executive officer has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Board of Directors or the Human Resources Committee during Fiscal 2020. | 50 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Compensation Tables and Narrative Disclosure Summary Compensation Table The following tables set forth compensation information for our NEOs for services rendered in all capacities to Winnebago Industries and its subsidiaries in Fiscal 2020, 2019, and 2018. Michael J. Happe
President, CEO
| | | 2020 | | | 739,423 | | | — | | | 2,634,999 | | | 464,992 | | | 500,000
| | | — | | | 31,354 | | | 4,370,768 | | 2019 | | | 691,346 | | | 11,731 | | | 1,425,000 | | | 475,000 | | | 138,269
| | | — | | | 34,484 | | | 2,775,830 | | 2018 | | | 657,692 | | | — | | | 1,242,179 | | | 414,062 | | | 855,658
| | | — | | | 44,082 | | | 3,213,673 | Bryan L. Hughes
CFO; Senior Vice President, Finance, IT and Strategic Planning
| | | 2020 | | | 469,267 | | | 46,980 | | | 524,786 | | | 83,647 | | | 216,106
| | | — | | | 34,506 | | | 1,375,292 | | 2019 | | | 473,183 | | | 27,746 | | | 380,532 | | | 126,844 | | | 70,997
| | | — | | | 36,084 | | | 1,115,386 | | 2018 | | | 457,356 | | | — | | | 371,228 | | | 123,753 | | | 405,277
| | | — | | | 37,446 | | | 1,395,060 | Stacy L. Bogart(6)
Senior Vice President, General Counsel, Secretary and Corporate Responsibility
| | | 2020 | | | 408,295 | | | 13,080 | | | 437,217 | | | 69,383 | | | 150,420
| | | — | | | 33,866 | | | 1,112,261 | | 2019 | | | 423,173 | | | 20,194 | | | 326,813 | | | 108,938 | | | 50,781
| | | — | | | 38,401 | | | 968,300 | | 2018 | | | 271,346 | | | 50,000 | | | 701,153 | | | — | | | 211,813
| | | — | | | 25,248 | | | 1,259,560 | Donald J. Clark(7)
President, Grand Design
| | | 2020 | | | 400,000 | | | — | | | — | | | — | | | 5,515,397(8) | | | — | | | — | | | 5,915,397 | | 2019 | | | 400,000 | | | — | | | — | | | — | | | 5,160,931
| | | — | | | — | | | 5,560,931 | | 2018 | | | 400,000 | | | — | | | — | | | — | | | 4,574,055
| | | — | | | — | | | 4,974,055 | Brian D. Hazelton
Senior Vice President,
Winnebago-brand RVs
| | | 2020 | | | 452,027 | | | — | | | 459,553 | | | 81,103 | | | 213,449
| | | — | | | 34,815 | | | 1,240,947 | | 2019 | | | 477,400 | | | — | | | 393,855 | | | 131,285 | | | 46,546
| | | — | | | 36,535 | | | 1,085,621 | | 2018 | | | 472,588 | | | — | | | 365,368 | | | 121,802 | | | 173,054
| | | — | | | 39,945 | | | 1,172,757 |
(1)
| Represents actual base salary paid during Fiscal 2020, including the temporary compensation reductions described above under “Impact and Response to COVID-19” in the “Compensation Discussion and Analysis.” |
| | | | Proxy Statement for 2020 Annual Meeting | 51 |
TABLE OF CONTENTS (2)
| The table below illustrates the two categories of stock awards as presented above: |
Michael J. Happe | | | 2020 | | | $1,084,991 | | | $1,550,008 | | | $2,634,999 | | 2019 | | | 475,000 | | | 950,000 | | | 1,425,000 | | 2018 | | | 414,075 | | | 828,104 | | | 1,242,179 | Bryan L. Hughes | | | 2020 | | | 245,929 | | | 278,857 | | | 524,786 | | 2019 | | | 126,844 | | | 253,688 | | | 380,532 | | 2018 | | | 123,742 | | | 247,486 | | | 371,228 | Stacy L. Bogart(c) | | | 2020 | | | 205,955 | | | 231,262 | | | 437,217 | | 2019 | | | 108,938 | | | 217,875 | | | 326,813 | | 2018 | | | — | | | — | | | — | Donald J. Clark | | | 2020 | | | — | | | — | | | — | | 2019 | | | — | | | — | | | — | | 2018 | | | — | | | — | | | — | Brian D. Hazelton | | | 2020 | | | 189,228 | | | 270,325 | | | 459,553 | | 2019 | | | 131,285 | | | 262,570 | | | 393,855 | | 2018 | | | 121,790 | | | 243,578 | | | 365,368 |
(a)
| These amounts represent restricted stock and restricted stock units granted each computed in accordance with Accounting Standards Codification (“ASC”) 718. The grant date fair value of each of the awards was determined at the closing price of the Company's shares on the NYSE on the grant date without regard to estimated forfeitures related to service-based vesting conditions. |
(b)
| The amounts shown represent the grant date fair value computed in accordance with ASC 718 of the LTIP / performance share awards. The amounts shown for Fiscal 2020-2022 LTIP represent the values that are based on achievement of 100% of the target performance. Assuming achievement of the maximum 200% of target performance, the value of the Fiscal 2020-2022 LTIP awards would be: $3,100,016 for Mr. Happe; $557,714 for Mr. Hughes; $462,524 for Ms. Bogart; and $540,650 for Mr. Hazelton. Assumptions used in the calculation of the amounts reported in this column are included in Note 14, Stock-Based Compensation Plans, of the Notes to the Consolidated Financial Statements included in our 2020 Form 10-K. |
(c)
| Ms. Bogart joined the Company in January 2018. |
(3)
| The amounts shown represent the aggregate grant date fair values of the option grants. Assumptions used in the calculation of the amounts reported in this column are included in Note 14, Stock-Based Compensation Plans, of the Notes to the Consolidated Financial Statements included in our 2020 Form 10-K. |
(4)
| These amounts represent actual annual incentive plan award payouts made in cash to NEOs under the 2018, 2019, and 2020 OICPs. In the case of Mr. Clark, these amounts do not represent award payouts under such OICPs, but instead represent award payouts under the pre-existing Grand Design Management Incentive Plan that he participates in. Mr. Hughes elected to defer into the Winnebago Industries Inc. Executive Deferral Compensation Plan 25% of his annual incentive plan payout for Fiscal 2019 and Fiscal 2020 and 15% of his annual incentive plan payout for Fiscal 2018. |
| 52 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS (5)
| Amounts reported in this column for Fiscal 2020 include the following: |
Michael J. Happe | | | $7,972 | | | $17,992 | | | $312 | | | $5,078 | | | $31,354 | Bryan L. Hughes | | | 7,972 | | | 17,992 | | | 479 | | | 8,063 | | | 34,506 | Stacy L. Bogart | | | 7,972 | | | 17,992 | | | 896 | | | 7,006 | | | 33,866 | Donald J. Clark | | | — | | | — | | | — | | | — | | | — | Brian D. Hazelton | | | 7,972 | | | 17,992 | | | 479 | | | 8,372 | | | 34,815 |
(6)
| Ms. Bogart received a new hire stock award of 10,000 shares of restricted stock on January 2, 2018 and a pro-rated Fiscal 2018-2020 LTIP award with a target value of 3,303 shares. She also received a sign-on bonus of $50,000 on January 2, 2018. |
(7)
| Under the terms of his amended employment agreement, Mr. Clark’s annual incentive plan payout under the Grand Design Management Incentive Plan paid out 95% in cash and 5% in restricted stock units. Both the cash and restricted stock units are reported under the Non-Equity Incentive Plan Compensation column. |
(8)
| The amount shown here includes $275,770 in restricted stock units awarded for Fiscal 2020 performance pursuant to the Grand Design Management Incentive Plan, as described above under “Elements of Fiscal 2020 Compensation”. |
| | | | Proxy Statement for 2020 Annual Meeting | 53 |
TABLE OF CONTENTS Grants of Plan-Based Awards Table The following table provides additional information relating to plan-based awards granted to our NEOs in Fiscal 2020. Actual payouts were made to the NEOs under the 2019 Plan for both those awards granted under the Fiscal 2020 OICP and under the Fiscal 2020-2022 LTIP as discussed under “Compensation Discussion and Analysis-Annual Incentive Plan,” “Fiscal 2020 OICP,” and “Fiscal 2020 Equity Awards,” respectively, above. Michael J. Happe | | | 2019 Plan | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | | | | 27,417 | | | 47.93 | | | 464,992 | | 2019 Plan | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | 22,637 | | | | | | | | | 1,084,991 | | 2020 OICP | | | | | | 250,000 | | | 1,000,000 | | | 2,000,000 | | | | | | | | | | | | | | | | | | | | | | | 2020-2022 LTIP | | | 12/17/19 | | | | | | | | | | | | 8,085 | | | 32,339 | | | 64,678 | | | | | | | | | | | | 1,550,008 | Bryan L. Hughes | | | 2019 Plan | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | | | | 4,932 | | | 47.93 | | | 83,647 | | 2019 Plan(7) | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | 5,131 | | | | | | | | | 245,929 | | 2020 OICP | | | | | | 93,959.25 | | | 375,837 | | | 751,674 | | | | | | | | | | | | | | | | | | | | | | | 2020-2022 LTIP | | | 12/17/19 | | | | | | | | | | | | 1,455 | | | 5,818 | | | 11,636 | | | | | | | | | | | | 278,857 | Stacy L. Bogart | | | 2019 Plan | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | | | | 4,091 | | | 47.93 | | | 69,383 | | 2019 Plan(8) | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | 4,297 | | | | | | | | | 205,955 | | 2020 OICP | | | | | | 65,400 | | | 261,600 | | | 523,200 | | | | | | | | | | | | | | | | | | | | | | | 2020-2022 LTIP | | | 12/17/19 | | | | | | | | | | | | 1,206 | | | 4,825 | | | 9,650 | | | | | | | | | | | | 231,262 | Donald J. Clark(6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brian D. Hazelton | | | 2019 Plan | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | | | | 4,782 | | | 47.93 | | | 81,103 | | 2019 Plan | | | 12/17/19 | | | | | | | | | | | | | | | | | | | | | 3,948 | | | | | | | | | 189,228 | | 2020 OICP | | | | | | 79,076 | | | 316,303 | | | 632,606 | | | | | | | | | | | | | | | | | | | | | | | 2020-2022 LTIP | | | 12/17/19 | | | | | | | | | | | | 1,410 | | | 5,640 | | | 11,280 | | | | | | | | | | | | 270,325 |
(1)
| Fiscal 2020 OICP targets annual performance against goals established by the Committee. Awards under the Fiscal 2020 OICP are payable in cash. The Threshold, Target and Maximum amounts presented above represent amounts that could have been earned by our NEOs for Fiscal 2020 under the Fiscal 2020 OICP. |
(2)
| Fiscal 2020-2022 LTIP refers to our performance shares. For each of the NEOs except for Mr. Clark, the Threshold, Target and Maximum amounts under the Fiscal 2020-2022 LTIP represent potential performance share amounts that are measured over a three-year performance period from September 1, 2019 through August 28, 2022. |
(3)
| Consists of restricted stock units that vest one-third each year on the anniversary of the grant date. |
(4)
| The grant date fair value per share of the restricted stock was $47.93. The Black-Scholes grant date fair value per option award was $16.96. |
(5)
| The Human Resources Committee approved the Fiscal 2020 OICP and Fiscal 2020-2022 LTIP performance share award on December 17, 2019, effective as of the beginning of Fiscal 2020. |
(6)
| Mr. Clark is not eligible to participate in the Fiscal 2020 OICP or Fiscal 2020-2022 LTIP performance share award; however he remains eligible to participate in the Grand Design Management Incentive Plan. |
(7)
| Includes 4,073 restricted stock units ($195,229 grant date fair value) for Fiscal 2020 long-term incentives and an additional 1,058 restricted stock units ($50,700 grant date fair value) in recognition of efforts contributing to the Company’s acquisition of Newmar. |
| 54 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS (8)
| Includes 3,378 restricted stock units ($161,905 grant date fair value) for Fiscal 2020 long-term incentives and an additional 919 restricted stock units ($44,050 grant date fair value) in recognition of efforts contributing to the Company’s acquisition of Newmar. |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table Executive Employment Arrangements None of the current NEOs has an employment agreement except for Mr. Happe and Mr. Clark as previously discussed. However, all NEOs are party to an Executive Change in Control Agreement that provides the executive with two-year (or three-year, in the case of Mr. Happe) severance benefits in the event he or she ceased to be employed by the Company within two years of a “Change in Control,” as defined in the agreement. Discussion of the payouts provided for under various termination situations is set forth in the section “Potential Payments upon Termination or Change in Control” below. Base Salary In general, the Committee annually reviews and adjusts base pay, in keeping with the overall objectives, pay philosophy and relative position with comparable companies, as discussed in more detail in the “Compensation Discussion and Analysis - Fiscal 2020 NEO Compensation Decisions - Base Salary” above. Stock Awards Grants of restricted stock units and stock options, the ASC 718 grant date fair value of which is disclosed in the Summary Compensation Table, begin vesting annually in increments of one-third beginning one year from the date of grant for restricted stock unit and stock option grants. Restricted stock unit grants and stock option awards are subject to earlier vesting in the event of a Change in Control or certain termination of employment scenarios, as set forth in the section “Potential Payments upon Termination or Change in Control” below. Annual Incentive Plan In addition to base salary, each NEO (other than Mr. Clark, who is eligible for a bonus as described in the "Compensation Discussion and Analysis - Elements of Fiscal 2020 Compensation") is eligible to receive, subject to the Company's achievement of certain financial performance metrics and the NEO's achievement of certain individual goals, a target annual incentive cash award equal to a percentage of his or her annual base salary, which is discussed in the “Compensation Discussion and Analysis” under “Annual Incentive Plan - Officers’ Incentive Compensation Plan (OICP)” and “Fiscal 2020 OICP” above. Long-Term Incentive Plans This element of compensation, including payouts made in Fiscal 2018, 2019, and 2020, is described in the “Compensation Discussion and Analysis - Fiscal 2020 Equity Awards" above. See “Compensation Discussion and Analysis” for further information regarding the terms of awards reported in the Summary Compensation Table and the Grants of Plan-Based Awards Table and for discussions regarding incentive compensation awards and allocations between short-term and long-term compensation. See also “Additional Compensation Policies” above for information regarding officer stock ownership guidelines. | | | | Proxy Statement for 2020 Annual Meeting | 55 |
TABLE OF CONTENTS Outstanding Equity Awards at Fiscal Year-End Table The following table provides information regarding the outstanding equity awards held by each of the NEOs as of August 29, 2020: Michael J. Happe | | | 10,000 | | | —(1) | | | 16.67 | | | 01/18/26 | | | | | | | | | | | | | | 13,300 | | | —(2) | | | 27.89 | | | 10/11/26 | | | | | | | | | | | | | | | | 17,000 | | | —(3) | | | 35.50 | | | 12/13/26 | | | | | | | | | | | | | | | | 18,676 | | | 9,339(4) | | | 44.40 | | | 10/18/27 | | | | | | | | | | | | | | | | 14,275 | | | 28,556(6) | | | 31.70 | | | 10/15/28 | | | | | | | | | | | | | | | | — | | | 27,417(7) | | | 47.93 | | | 12/17/29 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18,651(8)
| | | 1,089,405 | | | | | | | | | | | | | | | | | | | | | | 29,968(9)
| | | 1,750,431 | | | | | | | | | | | | | | | | | | | | | | 32,339(10) | | | 1,888,921 | | | | | | | | | | | | | | | | 3,109(4) | | | 181,597 | | | | | | | | | | | | | | | | | | | | | | 9,990(6) | | | 583,516 | | | | | | | | | | | | | | | | | | | | | | 22,637(7) | | | 1,322,227 | | | | | | | Bryan L. Hughes | | | 5,581 | | | 2,972(4) | | | 44.40 | | | 10/18/27 | | | | | | | | | | | | | | | | 3,812 | | | 7,626(6) | | | 31.70 | | | 10/15/28 | | | | | | | | | | | | | | | | — | | | 4,932(7) | | | 47.93 | | | 12/17/29 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,574(8)
| | | 325,577 | | | | | | | | | | | | | | | | | | | | | | 8,003(9)
| | | 467,455 | | | | | | | | | | | | | | | | | | | | | | 5,818(10) | | | 339,829 | | | | | | | | | | | | | | | | 930(4) | | | 54,321 | | | | | | | | | | | | | | | | | | | | | | 2,668(6) | | | 155,838 | | | | | | | | | | | | | | | | | | | | | | 5,131(7) | | | 299,702 | | | | | | | Stacy L. Bogart | | | 3,274 | | | 6,549(6) | | | 31.70 | | | 10/15/28 | | | | | | | | | | | | | | | | — | | | 4,091(7) | | | 47.93 | | | 12/17/29 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,303(8)
| | | 192,928 | | | | | | | | | | | | | | | | | | | | | | 6,873(9)
| | | 401,452 | | | | | | | | | | | | | | | | | | | | | | 4,825(10) | | | 281,828 | | | | | | | | | | | | | | | | 3,334(5) | | | 194,739 | | | | | | | | | | | | | | | | | | | | | | 2,292(6) | | | 133,876 | | | | | | | | | | | | | | | | | | | | | | 4,297(7) | | | 250,988 | | | | | | | Donald J. Clark | | | — | | | —
| ��� | | — | | | — | | | —
| | | — | | | —
| | | — | Brian D. Hazelton | | | 7,000 | | | —(2) | | | 27.89 | | | 10/11/26 | | | | | | | | | | | | | | | | 5,493 | | | 2,748(4) | | | 44.40 | | | 10/18/27 | | | | | | | | | | | | | | | | 3,945 | | | 7,893(6) | | | 31.70 | | | 10/15/28 | | | | | | | | | | | | | | | | — | | | 4,782(7) | | | 47.93 | | | 12/17/29 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,486(8)
| | | 320,437 | | | | | | | | | | | | | | | | | | | | | | 8,283(9)
| | | 483,810 | | | | | | | | | | | | | | | | | | | | | | 5,640(10) | | | 329,432 | | | | | | | | | | | | | | | | 915(4) | | | 53,445 | | | | | | | | | | | | | | | | | | | | | | 2,760(6) | | | 161,212 | | | | | | | | | | | | | | | | | | | | | | 3,948(7) | | | 230,603 | | | | | | |
| 56 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS (1)
| Represents stock option granted on January 18, 2016 as a new hire grant under the Company's 2014 Omnibus Equity, Performance Award and Incentive Compensation Plan (the "2014 Plan"), which vested with respect to 33% of the shares covered by the option on each of the first three anniversaries of the grant date. |
(2)
| Represents stock granted on October 11, 2016 as an annual grant under the 2014 Plan, which vested with respect to 33% of the shares covered by the option on each of the first three anniversaries of the grant date. |
(3)
| Represents award granted on December 13, 2016 as a grant for the purchase of Grand Design RV, LLC under the 2014 Plan, which vested with respect to 33% of the shares covered by the option on each of the first three anniversaries of the grant date. |
(4)
| Represents award granted on October 18, 2017 as an annual stock or option grant under the 2014 Plan, which will vest with respect to 33% of the shares covered by the stock or option grant on each of the first three anniversaries of the grant date. |
(5)
| Represents stock granted on January 2, 2018 as a new hire grant under the 2014 Plan, which will vest with respect to 33% of the shares covered by the stock award on each of the first three anniversaries of the date of grant. |
(6)
| Represents award granted on October 15, 2018 as an annual stock or option grant under the 2014 Plan, which will vest with respect to 33% of the shares on the first three anniversaries of the date of grant. |
(7)
| Represents award granted on December 17, 2019 as an annual stock or option grant under the 2019 Plan, which will vest with respect to 33% of the shares on the first three anniversaries of the date of grant. |
(8)
| Represents FY18-20 LTIP at target, under the 2014 Plan for the three-year performance period beginning August 27, 2017 and ending August 30, 2020. Settled shares subject to one year holding period. |
(9)
| Represents FY19-21 LTIP at target, under the 2014 Plan for the three-year performance period beginning August 26, 2018 and ending August 28, 2021. Settled shares subject to one year holding period. |
(10)
| Represents FY20-22 LTIP at target, under the 2019 Plan for the three-year performance period beginning September 1, 2019 and ending August 28, 2022. Settled shares subject to one year holding period. |
(11)
| Represents the value of unvested stock as of August 29, 2020 based on a closing stock price of $58.41$58.41. |
(12)
| Represents the value of unearned performance share awards at target as of August 29, 2020 based on a stock price of $58.41. |
Option Exercises and Stock Vested Table The following table provides the amounts received before payroll withholding taxes upon the exercise of options or similar instruments or the vesting of stock or similar instruments during Fiscal 2020. Michael J. Happe | | | — | | | — | | | 35,246 | | | 1,349,133 | Bryan L. Hughes | | | — | | | — | | | 11,706 | | | 489,061 | Stacy L. Bogart | | | — | | | — | | | 4,478 | | | 222,343 | Donald J. Clark | | | — | | | — | | | — | | | — | Brian D. Hazelton | | | — | | | — | | | 13,919 | | | 530,366 |
(1)
| Valued at the closing market price of the Company's Common Stock of $37.33 (October 9, 2019), $38.52 (October 11, 2019), $40.49 (October 15, 2019), $41.30 (October 18, 2019), $52.80 (January 2, 2020), and $50.58 (May 15, 2020) as quoted on the NYSE on the vesting dates. |
| | | | Proxy Statement for 2020 Annual Meeting | 57 |
TABLE OF CONTENTS Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans The following table summarizes non-qualified deferred compensation by NEOs during Fiscal 2020. Bryan L. Hughes | | | 54,027(2) | | | — | | | 9,075 | | | — | | | 153,231 |
(1)
| Balance includes (i) $60,792 of Mr. Hughes’ annual incentive payout for Fiscal 2018 that was previously reported in the Non-Equity Incentive Plan Compensation column, and (ii) $24,681 of Mr. Hughes’ annual incentive payout for Fiscal 2019 that was previously reported in the Non-Equity Incentive Plan Compensation column. |
(2)
| Represents 25% of Mr. Hughes' annual incentive plan payout for Fiscal 2020, which amount is included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
Pursuant to the Company's Executive Deferred Compensation Plan (the “Deferred Compensation Plan”), certain senior management and highly compensated employees may elect to defer up to 50% of their base salary and up to 100% of their annual cash bonus on a pre-tax basis. Each participant's account is credited with earnings (or, in the case of losses, deducted) on a tax-deferred basis. This deferral is separate, and in addition to, any contributions made into the Company's 401(k) Plan. Potential Payments upon Termination or Change in Control Executive Change in Control Agreements In October 2018, the Committee approved new executive change in control agreements for certain executive officers including our NEOs (excluding Mr. Clark), in order to align the Company's practices with market standard practices among the Company's peers. These agreements became effective in November and December of 2018. Due to the unique nature of Mr. Clark's employment and compensation arrangements with the Company initially entered into in connection with the Grand Design acquisition, Mr. Clark's executive change in control agreement was entered into effective as of September 1, 2019 in connection with his amended and restated employment agreement. We collectively refer to these executive change in control agreements herein as the "Agreements”. The purpose of the Agreements is to reinforce and encourage executives to remain with the Company, to maintain objectivity and a high level of attention to their duties without distraction from the possibility of a change in control of the Company. The Agreements provide that in the event of a “Change in Control” of the Company, as that term is defined in the Agreements, each such executive (provided such Change in Control occurs when the executive is in the employ of the Company) would receive, in the event he or she ceases to be employed by the Company within two years following a Change in Control of the Company (for a reason other than death, disability, termination for cause or, under certain circumstances, a voluntary termination of employment by the executive), a lump-sum equal to two (or three, in the case of Mr. Happe) times the annual salary and target annual incentives (as well as annual COBRA premium cost). In the case of Mr. Clark, the total severance benefit would be capped at $3,000,000. This multiple was arrived at by the Committee after an analysis of certain Compensation Peers' change in control agreements at the time these agreements were initially developed. | 58 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Under the Agreements, a “Change in Control” generally refers to the acquisition by a person or group of beneficial ownership of 30% or more of the combined voting power of the Company’s voting securities, the Company's continuing directors ceasing to constitute a majority of its Board of Directors, or the consummation of a corporate transaction as defined below (unless immediately following such corporate transaction all or substantially all of the Company’s previous holders of voting securities beneficially own 50% or more of the combined voting power of the resulting entity in substantially the same proportions). A “corporate transaction” generally means (i) a sale or other disposition of all or substantially all of the assets of the Company, or (ii) a merger, consolidation, share exchange or similar transaction involving the Company. The Agreements also include a “net best” provision providing that the amount of any severance payments and benefits that the NEO otherwise would be entitled to receive would be reduced to the extent necessary to avoid the excise tax under the Internal Revenue Code, but only if such reduction would result in the executive retaining a greater amount of such payments and benefits on an after-tax basis than had no reduction been made. The calculations in the table below do not reflect any reduction that may apply as a result of this provision. Annual Incentive Plan Payments A participant must be employed by the Company as of the bonus payment date to be eligible for annual incentive payments, except for a Change in Control as described below or as otherwise determined by the Committee in its discretion upon retirement, disability and death. In the event of a “Change in Control” (as defined in the applicable Officers Incentive Compensation Plan), participants are entitled to receive payouts of awards within 15 days of the effective date of the Change in Control in an amount equal to the greater of the actual level of performance (if determinable) and target if the participant's employment is terminated and the award is not assumed by the successor or is otherwise discontinued. 2014 and 2019 Incentive Compensation Plan Payments Long-Term Incentive Plan Payments In the event of a “Change in Control” (as defined in the applicable Plan or award agreement) participants are entitled to receive awards within 15 days of the effective date of the Change in Control. Prior to plan year Fiscal 2019, the amount to be paid was based on the Committee's estimate of our financial performance through the end of the applicable Long-Term Incentive Plan three-year performance period in which such Change in Control occurs, or in the case of plan years beginning in Fiscal 2019 and later, the amount paid is the pro rata portion of the greater of the actual level of performance (if determinable) or target. Prior to plan year Fiscal 2019, such payment was not dependent upon termination of employment, and effective as of plan year Fiscal 2019, payment is dependent upon participant's termination of employment if the award is not assumed by the successor or is otherwise discontinued. A participant must be employed by the Company at the end of the three-year fiscal period to be eligible for any long-term incentive award, except in cases of: death and termination due to disability (which each would result in a payment at target or, in the discretion of the Committee, based on actual results), or a Change in Control as described above or as waived by the Committee. | | | | Proxy Statement for 2020 Annual Meeting | 59 |
TABLE OF CONTENTS Restricted Stock and Restricted Stock Units Pursuant to award agreements entered into by each NEO other than Mr. Clark, unvested awards of restricted stock or restricted stock units will immediately vest to NEOs if the NEO's termination of employment is due to his or her death or disability (as defined in the applicable Plan). In addition, any restricted shares awarded prior to Fiscal 2019 that are not vested under the 2014 Plan will vest upon a “Change in Control” (as defined in the 2014 Plan) of the Company, while restricted stock units awarded beginning in Fiscal 2019 that are not vested under the 2014 Plan or the 2019 Plan, as applicable, vest upon the occurrence of a participant's termination following a "Change in Control" (as defined in the applicable Plan or award agreement) if the award is not assumed by the successor or is otherwise discontinued. In all other circumstances, in the event that a NEO ceases to be employed by the Company or any subsidiary, any unvested awards held by such grantee will terminate and thereafter be null and void. Stock Options Pursuant to the stock option agreements entered into by certain of our NEOs prior to Fiscal 2019, unvested options will vest upon a “Change in Control” (as defined in the 2014 Plan) of the Company, while in the case of unvested options awarded beginning in Fiscal 2019 under the 2014 Plan or 2019 Plan, as applicable, vesting occurs after a participant's termination following a "Change in Control" (as defined in the applicable award agreement or 2019 Plan) if the award is not assumed by the successor or is otherwise discontinued. In the event that a NEO ceases to be employed by the Company, stock options held by such NEO will vest as follows: if the NEO's termination of employment is due to his or her disability, the stock options become vested in full and immediately exercisable for a period of ten years after any stock option grant date for non-qualified stock options (or in the case of options granted in Fiscal 2019 or after, for a period of one year after termination); and if the NEO's termination of employment is due to his or her death, the options shall become vested in full and immediately exercisable by the NEO's estate or legal representative for a period of ten years after any stock option grant date for non-qualified stock options (or in the case of options granted beginning Fiscal 2019 or thereafter, for a period of one year after death). In the event that a NEO ceases to be employed by the Company other than because of a Change in Control, disability or death, any outstanding stock options held by the NEO which have not vested as of the date of termination of employment will terminate. | 60 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Estimated Change in Control or Termination Payments and Benefits at the End of Fiscal 2020 The following table reflects the payments and benefits payable to each of the NEOs in the event of a termination of the executive's employment under several different circumstances. The amounts shown assume that termination was effective as of August 29, 2020, at the executive's compensation and service levels as of that date, and are estimates of the amounts that would be payable to the NEOs in each scenario. The amounts do not include benefits paid by insurance providers under life and disability policies or payments and benefits provided on a non-discriminatory basis to employees upon a termination of employment. The actual amounts to be paid out can only be determined at the time of an executive's actual separation from the Company. Factors that could affect the nature and the amounts paid on termination of employment, among others, include the timing of event, compensation level, the market price of the Company's Common Stock and the executive's age. Name | | Severance (1)
($) | | Annual or
Management
Incentive
Plan (2)
($) | | LTIP /
Performance
Shares (3)
($) | | Restricted
Stock-
Unvested and
Accelerated (4)
($) | | Stock
Options-
Unvested and
Accelerated (5)
($) | | Total
Benefits
($) | | Severance(1)
($) | | Annual or
Management
Incentive
Plan(2)
($) | | LTIP /
Performance
Shares(3)
($) | | Restricted
Stock-
Unvested and
Accelerated(4)
($) | | Stock
Options-
Unvested and
Accelerated(5)
($) | | Total
Benefits
($) | Michael J. Happe
| | | | | | | | | | | | | | | | | | | | | | | | | Retirement (6) or Voluntary Separation | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | Involuntary Termination for Cause | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | Involuntary Termination without Cause or Voluntary Termination for Good Reason | | 1, 417,967 | | — | | — | | — | | — | | 1, 417,967 | | 1,417,967 | | — | | — | | — | | — | | 1,417,967 | Change in Control: (7)
| | | | | | | | | | | | | | | | | | | | | | | | | Without Termination | | — | | — | | 555,635 | | 765,113 | | 893,570 | | 2,214,318 | | — | | — | | 555,635 | | 765,113 | | 893,570 | | 2,214,318 | Termination Without Cause/Good Reason | | 5,753,900 | | 500,000 | | 3,055,629 | | 2,087,340 | | 1,180,900 | | 12,577,769 | | 5,753,900 | | 500,000 | | 3,055,629 | | 2,087,340 | | 1,180,900 | | 12,577,769 | Death | | — | | — | | 3,055,629 | | 2,087,340 | | 1,180,900 | | 6, 323,869 | | — | | — | | 3,055,629 | | 2,087,340 | | 1,180,900 | | 6,323,869 | Disability | | — | | — | | 3,055,629 | | 2,087,340 | | 1,180,900 | | 6, 323,869 | | — | | — | | 3,055,629 | | 2,087,340 | | 1,180,900 | | 6,323,869 | Bryan L. Hughes
| | | | | | | | | | | | | | | | | | | | | | | | | Retirement (6) or Voluntary Separation | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | Involuntary Termination for Cause | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | Involuntary Termination without Cause or Voluntary Termination for Good Reason | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | Change in Control: (7)
| | | | | | | | | | | | | | | | | | | | | | | | | Without Termination | | — | | — | | 166,031 | | 210,159 | | 242,806 | | 618,996 | | — | | — | | 166,031 | | 210,159 | | 242,806 | | 618,996 | Termination Without Cause/Good Reason | | 1, 810,866 | | 263,086 | | 698,583 | | 509,861 | | 294,494 | | 3,576,890 | | 1,810,866 | | 263,086 | | 698,583 | | 509,861 | | 294,494 | | 3,576,890 | Death | | — | | — | | 698,583 | | 509,861 | | 294,494 | | 1, 502,938 | | — | | — | | 698,583 | | 509,861 | | 294,494 | | 1,502,938 | Disability | | — | | — | | 698,583 | | 509,861 | | 294,494 | | 1, 502,938 | | — | | — | | 698,583 | | 509,861 | | 294,494 | | 1,502,938 |
| | | | Proxy Statement for 2020 Annual Meeting | 61 |
TABLE OF CONTENTS Stacy L. Bogart
| | | | | | | | | | | | | | | | | | | Retirement(6) or Voluntary Separation | | | — | | | — | | | — | | | — | | | — | | | — | Involuntary Termination for Cause | | | — | | | — | | | — | | | — | | | — | | | — | Involuntary Termination without Cause or Voluntary Termination for Good Reason | | | — | | | — | | | — | | | — | | | — | | | — | Change in Control:(7)
| | | | | | | | | | | | | | | | | | | Without Termination | | | — | | | — | | | 98,409 | | | 328,615 | | | 174,924 | | | 601,948 | Termination Without Cause/Good Reason | | | 1,368,000 | | | 163,500 | | | 547,545 | | | 579,602 | | | 217,797 | | | 2,876,444 | Death | | | — | | | — | | | 547,545 | | | 579,602 | | | 217,797 | | | 1,344,944 | Disability | | | — | | | — | | | 547,545 | | | 579,602 | | | 217,797 | | | 1,344,944 | Donald J. Clark
| | | | | | | | | | | | | | | | | | | Retirement(6) or Voluntary Separation | | | — | | | — | | | — | | | — | | | — | | | — | Involuntary Termination for Cause | | | — | | | — | | | — | | | — | | | — | | | — | Involuntary Termination without Cause or Voluntary Termination for Good Reason | | | 5,639,627 | | | — | | | — | | | — | | | — | | | 5,639,627 | Change in Control:(7)
| | | — | | | | | | | | | | | | | | | | Without Termination | | | — | | | — | | | — | | | — | | | — | | | — | Termination Without Cause/Good Reason | | | 3,000,000 | | | — | | | — | | | — | | | — | | | 3,000,000 | Death | | | — | | | — | | | — | | | — | | | — | | | — | Disability | | | — | | | — | | | — | | | — | | | — | | | — | Brian D. Hazelton
| | | | | | | | | | | | | | | | | | | Retirement(6) or Voluntary Separation | | | — | | | — | | | — | | | — | | | — | | | — | Involuntary Termination for Cause | | | — | | | — | | | — | | | — | | | — | | | | Involuntary Termination without Cause or Voluntary Termination for Good Reason | | | — | | | — | | | — | | | — | | | — | | | — | Change in Control:(7)
| | | | | | | | | | | | | | | | | | | Without Termination | | | — | | | — | | | 163,416 | | | 214,657 | | | 249,322 | | | 627,395 | Termination Without Cause/Good Reason | | | 1,657,884 | | | 213,449 | | | 696,312 | | | 445,259 | | | 299,437 | | | 3,312,341 | Death | | | — | | | — | | | 696,312 | | | 445,259 | | | 299,437 | | | 1,441,008 | Disability | | | — | | | — | | | 696,312 | | | 445,259 | | | 299,437 | | | 1,441,008 |
(1)
| For Messrs. Happe and Clark, the “Involuntary Termination Without Cause or Voluntary Termination for Good Reason” before a Change in Control reflects one year of base salary and actual annual incentive payout for Fiscal 2020 and, in the case of Mr. Happe, an amount for COBRA. For all NEO’s,NEOs, the Change in Control severance equals an amount equal to two times (or three times in the case of our CEO) base salary and target annual incentive (as well as annual COBRA premium cost). In the case of Mr. Clark, the total severance benefit for a Change in Control termination is capped at $3,000,000. |
(2)
| Represents the NEOs' actual annual incentive payout pursuant to the 2020 Officers Incentive Compensation Plan (other than Mr. Clark) or 2020 Grand Design Management Incentive Plan (Mr. Clark). |
| 62 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS (3)
| Represents the LTIP incentive achieved pursuant to the Fiscal 2018-2020 LTIP, except by a termination pursuant to a Change in Control, which includes the full amount payable under the Fiscal 2018-2020 LTIP and the target amount estimated to be payable under the Fiscal 2019-2021 LTIP and the Fiscal 2020-2022 LTIP. Shares earned under these plans are subject to a one-year holding period post-vesting. |
(4)
| Represents the intrinsic value of stock grants based on our closing stock price of $58.41 per share on August 29, 2020, the last day of Fiscal 2020. |
(5)
| Represents the intrinsic value of stock options based on our closing stock price of $58.41 per share on August 29, 2020, the last day of Fiscal 2020. |
(6)
| Retirement under certain of the 2014 Plan award agreements is defined as attaining age 60 and five or more years of service with the Company. Retirement under the 2019 Plan awards does not trigger automatic acceleration of such awards. |
(7)
| The term “Change of Control” as used here is the term as defined in the 2014 Plan applicable to all awards granted prior to the Fiscal 2019 equity awards. Beginning with our Fiscal 2019 equity awards, under the 2019 Plan, the definition of “Change in Control” was updated to include, among other things, a double trigger mechanism, as described further under “Compensation Tables and Narrative Disclosure - Potential Payments upon Termination or Change in Control”. |
| | | | Proxy Statement for 2020 Annual Meeting | 63 |
TABLE OF CONTENTS As a result of rules adopted by the SEC under the Dodd-Frank Act, the SEC requires disclosure of the ratio of the median employee’s annual total compensation to that of the principal executive officer (“PEO”). The Company’s PEO is Mr. Happe, our President and CEO. As of our measurement date of August 29, 2020, our employee population including all full-time, part-time and temporary workers, consisted of approximately 6,617 individuals, all of whom worked in the United States. To identify the median employee, as well as determine the annual total compensation of the median employee, we used the following methodology and consistently applied material assumptions, adjustments and estimates. We compared the payroll data for our employee population described above (minus our PEO) using a compensation measure consisting of base pay related wages and incentive pay paid during Fiscal 2020. Base pay related wages includes the amount of base salary the employee received during the year and all other pay elements related to base pay including, but not limited to, holiday pay, paid time off, overtime and shift differentials. We also included cash bonuses and commissions paid during the fiscal year, but we excluded equity grants and any adjustments for the value of benefits provided. We annualized the base pay related wages and incentive pay of all full-time and part-time employees who were hired by the Company and its subsidiaries between August 31, 2019 and August 29, 2020. Based upon base pay related wages and incentive pay of each employee, we identified a median employee and calculated that employee’s annual total compensation. We determined annual total compensation, including any perquisites and other benefits, in the same manner that we determine the annual total compensation of our PEO for purposes of the Summary Compensation Table disclosed above. This resulted in the median employee’s annual total compensation as shown below. Annual Total Compensation of Median Employee: | | | $47,249 | Annual Total Compensation of PEO (Mr. Happe): | | | $4,370,768 |
Based on this information for Fiscal 2020, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was 93 to 1. Our pay ratio estimate has been calculated in a manner consistent with Item 402(u) of Regulation S-K. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to our pay ratio reported above. | 64 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Proposal 3: Ratification of the Appointment of Independent Registered Public Accountant for the Fiscal Year Ending August 28, 2021 Deloitte & Touche LLP (“Deloitte”) was appointed by the Audit Committee as our independent registered public accountant for the fiscal year ending August 28, 2021. We are asking our shareholders to ratify the appointment of Deloitte, who has served as our independent registered public accountant for over 25 years. Representatives of the firm will be present at the Annual Meeting and will be given the opportunity to make a statement if they so desire and will be available to respond to any shareholder questions that may be asked. For a description of the fees for services rendered by Deloitte in Fiscal 2019 and Fiscal 2020, and a description of our policy regarding the approval of independent registered public accountant provision of audit and non-audit services, see “Independent Registered Public Accountant’s Fees and Services” below. Although ratification by the shareholders is not required by law, the Board of Directors has determined that it is desirable to request approval of this selection by the shareholders. In the event the shareholders fail to ratify the appointment, the Audit Committee will consider this factor when making any determination regarding Deloitte. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the Company's best interests and those of its shareholders. Passage of the proposal requires the affirmative vote of a majority of the shares entitled to vote on the proposal and represented in person or by proxy at the Meeting at which a quorum is present. | ✔ | | | YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANT FOR THE FISCAL YEAR ENDING AUGUST 28, 2021. | |
| | | | Proxy Statement for 2020 Annual Meeting | 65 |
TABLE OF CONTENTS Report of the Audit Committee The Audit Committee serves as the representative of the Company’s Board of Directors for general oversight of the Company’s financial accounting and reporting, systems of internal control and audit process, and monitoring compliance with laws, regulations, and standards of business conduct. A copy of the Audit Committee Charter, as last amended as of August 14, 2019, is available on the Corporate Governance portion of the Investor Relations section of our Web Site at http://www.winnebagoind.com and is available in print free of charge to any shareholder who requests it. Management is responsible for the financial statements and the reporting process, including the system of internal controls. The Company retained PricewaterhouseCoopers LLP ("PwC") to act as the Company’s internal audit function. In this role, PwC assisted Management with completing its assessment of the Company’s internal controls over financial reporting by testing and reviewing the Company’s internal control processes. PwC replaced Baker Tilly Virchow Krause, LLP, which had previously acted as the Company’s internal audit function. Deloitte, the Company’s independent registered public accountant, is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States and an assessment of the Company’s internal controls over financial reporting in accordance with the standards of the United States Public Company Accounting Oversight Board ("PCAOB"). The Audit Committee reviews the Company’s financial reporting process on behalf of the Board of Directors. In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited financial statements to be included in the 2020 Form 10-K with Management and the independent accountants. The Audit Committee hereby reports as follows: The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended August 29, 2020 of Winnebago Industries, Inc. (the “Audited Financial Statements”) with Winnebago Industries, Inc.’s Management. The Audit Committee has discussed with Deloitte the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. The Audit Committee has received the written disclosures and the letter from Deloitte required by applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence, and has discussed with Deloitte its independence. | 66 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Based on the review and discussion referred to in the bullet points above, the Audit Committee recommended to the Board of Directors of Winnebago Industries, Inc. that the Audited Financial Statements be included in Winnebago Industries, Inc.’s 2020 Form 10-K, for filing with the SEC. The Audit Committee
Richard D. Moss, Chair
Maria F. Blase
William C. Fisher
David W. Miles The foregoing report of our Audit Committee shall not be deemed to be incorporated by reference in any previous or future documents filed by our Company with the SEC under the Securities Act or the Exchange Act, except to the extent that we incorporate the report by reference in any such document. | | | | Proxy Statement for 2020 Annual Meeting | 67 |
TABLE OF CONTENTS Independent Registered Public Accountant’s Fees and Services The following table presents fees for professional audit services rendered by Deloitte for the audit of our annual financial statements for fiscal years ended August 29, 2020 and August 31, 2019, and fees billed for other services rendered by Deloitte during those periods. Audit Fees(1) | | | $ 1,745,000 | | | $ 979,000 | Audit-Related Fees(2) | | | $ 30,000 | | | 27,000 | Tax Fees(3) | | | $ 22,500 | | | — | All Other Fees(4) | | | — | | | 104,000 | Total | | | $1,797,500 | | | $1,110,000 |
(1)
| Represents fees for professional services provided for the audit of our annual financial statements, the audit of our internal control over financial reporting, review of our interim financial information and review of other SEC filings. |
(2)
| Represents fees for professional services provided for the audit of our benefit plan and due diligence services. |
(3)
| Represents fees for professional services related to tax compliance and tax planning. |
(4)
| Represents fees for professional services provided to us not otherwise included in the categories above. |
The Audit Committee considered whether the provision of tax, benefit plan audit and all other accounting consulting services by Deloitte are compatible with maintaining its independence and concluded that the independence of Deloitte is not compromised by the provision of such services. Policy Regarding the Approval of Independent Registered Public Accountant Provision of Audit and Nonaudit Services The Audit Committee Charter requires the Audit Committee to pre-approve the audit and non-audit fees and services that may be provided by Deloitte, our independent registered public accountant, to us. The Audit Committee shall consult with Management but shall not delegate these responsibilities, except that pre-approvals of nonaudit services may be delegated to a single member of the Audit Committee, who shall then inform the entire Audit Committee of the engagement of such services. The Audit Committee pre-approved under that policy all of the audit and non-audit fees and services provided by Deloitte for Fiscal 2020 and 2019. | 68 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS Proposal 4: Amend the Company’s Articles of Incorporation to Increase the Authorized Common Stock On October 14, 2020, the Board adopted, subject to shareholder approval, an amendment to Article IV of our Articles of Incorporation (the “Amendment”) to increase the number of authorized shares of Common Stock by 60,000,000 shares to a total 120,000,000 shares. The following discussion is qualified by the text of the Amendment, which is set forth in Appendix A attached to this Proxy Statement. The Board believes that the Amendment is necessary to maintain flexibility to issue shares of Common Stock for future corporate needs. The additional authorized shares of Common Stock to be authorized by the Amendment would have rights identical to our current issued and outstanding shares of Common Stock. Issuance of the additional shares of Common Stock would not affect the rights of the holders of our issued and outstanding shares of Common Stock, except for effects incidental to any increase in the number of shares of Common Stock issued and outstanding, such as dilution of earnings per share and voting rights. If the Amendment is approved by our shareholders at the Annual Meeting, then it will become effective upon filing of Articles of Amendment with the Secretary of State of the State of Iowa, which filing is expected to occur promptly following the Annual Meeting. Capitalization Our existing Articles of Incorporation, as amended to date, authorize 70,000,000 shares of capital stock, of which 60,000,000 shares are shares of Common Stock and 10,000,000 shares are shares of preferred stock, par value $0.01 per share (the “Preferred Stock”). As of October 17, 2020, we had no Preferred Stock issued and outstanding. We estimate that at October 17, 2020, the following shares of Common Stock were: Issued and outstanding | | | 33,758,021 | Reserved for outstanding equity awards | | | 744,043 | Reserved for future issuance under equity compensation plans | | | 4,089,776 | Reserved for conversion of outstanding convertible notes | | | 15,652,000 |
| | | | Proxy Statement for 2020 Annual Meeting | 69 |
TABLE OF CONTENTS Accordingly, at October 20,17, 2020, approximately 5,756,160 shares of Common Stock remained unreserved and available for future issuance. In consideration of the foregoing, the Board approved the Amendment in substantially the form set forth in Appendix A and has recommended that our shareholders do the same. Reasons for the Amendment We believe that the additional shares of authorized Common Stock are necessary to provide us with appropriate flexibility to utilize equity for business and financial purposes that the Board determines to be in our Company’s best interests on a timely basis without the expense and delay of a shareholders’ meeting. The Board believes that the remaining authorized Common Stock is not likely to be sufficient to permit us to respond to potential business opportunities or to pursue important objectives designed to enhance shareholder value. The number of authorized shares of Common Stock was last increased in 1972, and we have grown significantly since that time, including through acquisitions and in our number of employees. The additional authorized shares of Common Stock will provide us with flexibility to use our Common Stock, without further shareholder approval (except to the extent such approval may be required by law or by applicable exchange listing standards) for any proper corporate purposes, including, without limitation, raising capital through one or more future public offerings or private placements of equity securities, expanding our business or acquiring assets through future transactions, entering into strategic relationships, providing equity-based compensation and/or incentives to employees, officer or directors, effecting stock dividends or for other general corporate purposes. If the Amendment is approved by our shareholders, the Board does not intend to solicit further shareholder approval prior to the issuance of any additional shares of Common Stock or securities convertible into Common Stock, except as may be required by applicable law, regulation, or exchange listing rules. Possible Effects of the Amendment The increase in authorized shares of our Common Stock will not have any immediate effect on the rights of existing shareholders. Because the holders of our Common Stock do not have any preemptive rights, future issuance of shares of Common Stock or securities exercisable for or convertible into shares of Common Stock could have a dilutive effect on our earnings per share, book value per share, voting rights of shareholders and could have a negative effect on the price of our Common Stock. We are not proposing the increase in the number of authorized shares of Common Stock with the intent of using the additional shares to prevent or discourage any actual or threatened takeover of the Company. Under certain circumstances, however, the additional authorized shares could be used in a manner that has an anti-takeover effect. For example, the additional shares could be used to dilute the stock ownership or voting rights of persons seeking to obtain control of the Company or could be issued to persons allied with the Board or management and thereby have the effect of making it more difficult to remove directors or members of management by diluting the stock ownership or voting rights of persons seeking to effect such a removal. Accordingly, if the Amendment is approved by shareholders, the additional shares of authorized Common Stock may render more difficult or discourage a merger, tender offer or proxy contest, the assumption of control by a holder or group of holders of a large block of Common Stock, or the replacement or removal of one or more directors or members of management. For example, the following other provisions of our Articles of Incorporation and Bylaws, in combination with the additional authorized shares, may also have an anti-takeover effect of preventing or | 70 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS discouraging a change in control of the Company: (i) the Board has the ability to designate the terms of and issue shares of Preferred Stock without further shareholder approval; (ii) the Board is divided into three classes with staggered three-year terms; and (iii) shareholders may not cumulate votes in the election of directors. | ✔ | | | YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE INCREASE IN THE AUTHORIZED COMMON STOCK. | |
| | | | Proxy Statement for 2020 Annual Meeting | 71 |
TABLE OF CONTENTS Voting Securities and Principal Holders Thereof The following table contains information with respect to the ownership of Common Stock by each person known to us who is the beneficial owner of more than 5% of the outstanding Common Stock. This information is based on ownership reported as of October 20, 2020 according to SEC filings of the beneficial owners listed below unless more recent information was appropriate to be used. BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
| | | 4,929,621 shares of Common Stock(2) | | | [X]14.60%
| | | | | | | | Dimensional Fund Advisors LP
Building One
6300 Bee Cave Road
Austin, TX 78746
| | | 2,146,157 shares of Common Stock(3) | | | [X] 6.36%
| | | | | | | | The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
| | | 2,072,863 shares of Common Stock(4) | | | [X] 6.14%
| | | | | | | | Cooke & Bieler LP
1700 Market Street
Suite 3222
Philadelphia, PA 19103
| | | 1,985,094 shares of Common Stock(5) | | | [X]5.88% |
(1)
| Based on []33,753,646 outstanding shares of Common Stock on October 20, 2020. |
(2)
| Based on information provided in a Schedule 13G/A filed with the SEC on February 10, 2020 by BlackRock, Inc., a parent holding company (“BlackRock”). BlackRock reported that it has sole power to vote or direct the vote of 4,865,608 shares and sole power to dispose of or direct the disposition of 4,929,621 shares. |
(3)
| Based on information provided in a Schedule 13G/A filed with the SEC on February 12, 2020 by Dimensional Fund Advisors LP, an investment adviser (“DFA”). DFA reported that it has sole power to vote or direct the vote of 2,057,515 shares and sole power to dispose of or direct the disposition of 2,146,157 shares. DFA notes in its Schedule 13G/A filing that it furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (collectively, the “Funds”). In certain cases, subsidiaries of DFA may act as an adviser or sub-adviser to certain Funds. In its role as investment adviser, sub-adviser and/or manager, DFA or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds. However, all securities reported in its Schedule 13G/A are owned by the Funds and Dimensional disclaims beneficial ownership of such securities. |
| 72 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS (4)
| Based on information provided in a Schedule 13G/A filed with the SEC on February 12, 2020 by The Vanguard Group, an investment adviser. The Vanguard Group reported that it has sole voting power over 55,708 shares, shared voting power over 2,300 shares, sole dispositive power over 2,019,175 shares and shared dispositive power over 53,688 shares. |
(5)
| Based on information provided in a Schedule 13G/A filed with the SEC on February 14, 2020 by Cooke & Bieler LP, an investment adviser. Cooke & Bieler LP reported that it has shared power to vote or direct the vote of 1,555,434 shares and shared power to dispose of or direct the disposition of 1,985,094 shares. |
The following table sets forth certain information known to us with respect to beneficial ownership of our Common Stock, as defined in Rule 13d-3 under the Exchange Act, at October 20, 2020 for (i) each of our directors and director nominees, (ii) each named executive officer of the Company (“NEO”) in the summary compensation table, and (iii) all current executive officers and directors as a group. Except as otherwise indicated, the named beneficial owner has sole voting and investment power with respect to the shares held by such beneficial owner. Name | | Shares of
Common
Stock
Owned
Outright(1) | | Exercisable
Stock
Options(2) | | Winnebago
Stock
Units(3) | | Total Shares
of Common
Stock Owned
Beneficially | | % of
Common
Stock(4) | | Shares of
Common
Stock
Owned
Outright (1) | | Exercisable
Stock
Options (2) | | Winnebago
Stock
Units (3) | | Total Shares
of Common
Stock Owned
Beneficially | | % of
Common
Stock (4) | Sara E. Armbruster | | 1,580 | | — | | — | | 1,580 | | (5) | | 1,580 | | — | | — | | 1,580 | | (5) | Maria F. Blase | | 5,944 | | — | | — | | 5,944 | | (5) | | 5,944 | | — | | — | | 5,944 | | (5) | Stacy L. Bogart | | 8,863 | | 7,912 | | — | | 16,775 | | (5) | | 8,863 | | 7,912 | | — | | 16,775 | | (5) | Christopher J. Braun | | 17,684 | | — | | — | | 17,684 | | (5) | | 17,684 | | — | | — | | 17,684 | | (5) | Robert M. Chiusano | | 30,644 | | — | | 27,069 | | 57,713 | | (5) | | 30,644 | | — | | 27,069 | | 57,713 | | (5) | Donald J. Clark | | 764,426 | | — | | — | | 764,426 | | [X]% | | 764,426 | | — | | — | | 764,426 | | 2.26 % | William C. Fisher | | 22,684 | | — | | 7,851 | | 30,535 | | (5) | | 22,684 | | — | | 7,851 | | 30,535 | | (5) | Michael J. Happe | | 71,524 | | 106,008 | | — | | 177,532 | | (5) | | 71,524 | | 106,008 | | — | | 177,532 | | (5) | Brian D. Hazelton | | 19,395 | | 24,727 | | — | | 44,122 | | (5) | | 19,395 | | 24,727 | | — | | 44,122 | | (5) | Bryan L. Hughes | | 22,172 | | 17,642 | | — | | 39,814 | | (5) | | 22,172 | | 17,642 | | — | | 39,814 | | (5) | David W. Miles | | 12,684 | | — | | 1,951 | | 14,635 | | (5) | | 12,684 | | — | | 1,951 | | 14,635 | | (5) | Richard D. Moss | | 11,084 | | — | | — | | 11,084 | | (5) | | 11,084 | | — | | — | | 11,084 | | (5) | John M. Murabito | | 9,784 | | — | | — | | 9,784 | | (5) | | 9,784 | | — | | — | | 9,784 | | (5) | Directors and executive officers as a group (18 persons)(6) | | 1,548,958 | | 200,879 | | 36,871 | | 1,786,708 | | [X]% | | 1,548,958 | | 200,879 | | 36,871 | | 1,786,708 | | 5.26% |
(1)
| Includes the following shares not currently outstanding but deemed beneficially owned because of the right to acquire them pursuant to restricted stock units that vest within 60 days or have vested but have not yet been distributed: 2,947 shares for each of Ms. Blase and Messrs. Braun, Chiusano, Fisher, Miles, Moss and Murabito and 1,580 shares for Ms. Armbruster. |
(2)
| Includes shares underlying stock options that are currently exercisable or become exercisable within 60 days. |
(3)
| Winnebago Stock Units held under our Directors' Deferred Compensation Plan as of October 20, 2020 (see further discussion of the plan in the Director Compensation section). These units are vested and will be settled 100% in Common Stock upon the earliest of the following events: director's termination of service, death or disability or a “change in control” of the Company, as defined in the plan. |
(4)
| Based on []33,753,646 outstanding shares of Common Stock on October 20, 2020. |
(6)
| Includes 100 shares that Mr. Miller beneficially owns indirectly through his spouse’s direct ownership. |
| | | | Proxy Statement for 2020 Annual Meeting | 73 |
TABLE OF CONTENTS The Board of Directors does not know of any matter, other than the election of directors, the advisory approval of executive compensation, the ratification of the appointment of independent registered public accountants, and the approval of the amendment to the Articles of Incorporation, which may be presented at the Meeting. However, if any other matters should properly come before the Meeting, it is the intention of the persons named in the proxy to vote thereon in accordance with their best judgment. Fiscal 2021 Shareholder Proposals If a shareholder intends to present a proposal at our Annual Meeting following Fiscal 2021 and desires that the proposal be included in our Fiscal 2021 proxy statement and form of proxy for that meeting, the proposal must be in compliance with Rule 14a-8 under the Exchange Act and received at our principal executive offices no later than July 5, 2021. Our By-Laws require that in order to nominate persons to our Board of Directors, a shareholder must provide advance written notice in the form set forth therein to the Secretary, which notice must be delivered to or mailed and received at our principal executive offices not less than 90 days nor more than 120 days before the anniversary of the preceding year's annual meeting and must otherwise comply with our By-Laws. The By-Laws also require that in order to present a proposal for action by shareholders at an annual meeting, a shareholder must provide advance written notice to the Secretary, which notice must contain detailed information specified in our By-Laws. This notice must be delivered to or mailed and received at our principal executive offices not less than 90 days nor more than 120 days before the anniversary of the preceding year's annual meeting. A copy of our By-Laws may be obtained by written request to: Winnebago Industries, Inc., Attn: Senior Vice President, General Counsel, Secretary and Corporate Responsibility, 13200 Pioneer Trail, Suite 150, Eden Prairie, Minnesota 55347. | 74 | | | | | Proxy Statement for 2020 Annual Meeting |
TABLE OF CONTENTS The cost of this proxy solicitation will be borne by us. Solicitation will be made primarily through the Internet and the use of the mail, but our officers, directors or regular employees may solicit proxies personally or by telephone or email without additional remuneration for such activity. In addition, we will reimburse brokerage houses and other custodians, nominees or fiduciaries for their reasonable expenses in forwarding proxies and proxy material to the beneficial owners of such shares. A copy of our Annual Report for the fiscal year ended August 29, 2020, which includes audited financial statements, is available on the Internet as set forth in the Notice of Internet Availability of Proxy Materials. The financial statements contained therein are not deemed material to the exercise of prudent judgment in regard to any matter to be acted upon at the Annual Meeting and, therefore, such financial statements are not incorporated in this Proxy Statement by reference. A COPY OF THIS PROXY STATEMENT AND OUR MOST RECENT ANNUAL REPORT TO THE SEC ON FORM 10-K (WITHOUT EXHIBITS) WILL BE FURNISHED, WITHOUT CHARGE, TO OUR SHAREHOLDERS UPON WRITTEN REQUEST PURSUANT TO THE INSTRUCTIONS SET FORTH IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS. FOR INFORMATION ABOUT US, INCLUDING OUR ANNUAL, QUARTERLY AND CURRENT REPORTS ON SEC FORMS 10-K, 10-Q AND 8-K, RESPECTIVELY, PLEASE VISIT OUR HOME PAGE ON THE INTERNET - HTTP://WWW.WINNEBAGOIND.COM. INFORMATION CONTAINED ON OUR WEB SITE IS NOT INCORPORATED INTO THIS PROXY STATEMENT OR OTHER SECURITIES FILINGS. | | | By Order of the Board of Directors | | | | | November 2, 2020 | | | | | | | Stacy L. Bogart | | | | Senior Vice President - General Counsel, Secretary and Corporate Responsibility |
| | | | Proxy Statement for 2020 Annual Meeting | 75 |
TABLE OF CONTENTS Articles of Amendment of
Winnebago Industries, Inc. To the Secretary of State of the State of Iowa: Pursuant to Section 1006 of the Iowa Business Corporation Act, the undersigned corporation adopts the following amendment to the corporation’s articles of incorporation. 1. The name of the corporation is Winnebago Industries, Inc. 2. Article IV of the Articles of Incorporation of Winnebago Industries, Inc., as previously amended and restated, is further amended to read and restated to read as follows: Article IV The total number of shares of stock which the Corporation shall have authority to issue is: one hundred thirty million (130,000,000), of which one hundred twenty million (120,000,000) shall be shares of Common Stock, $.50 par value, and ten million (10,000,000) shall be shares of Preferred Stock, $.01 par value (“Series Preference Stock”). A statement of the designations and the powers, preferences and rights of such classes of stock and the qualifications, limitations or restrictions thereof, the fixing of which by the Articles of Incorporation is desired, and the authority of the Board of Directors to fix, by resolution or resolutions, the designations and the powers, preferences and rights of such classes of stock or the qualifications, limitations or restrictions thereof, which are not fixed hereby, are as follows: A.
| Provisions Applicable to All Series of Series Preference Stock. |
(1) Shares of Series Preference Stock may be issued from time to time in one or more series. The voting powers, designations, preferences, limitations and relative rights of each series may differ from those of any and all other series already outstanding; the terms of each series shall be specified in the resolution or resolutions hereinafter referred to; and the Board of Directors of the Corporation is hereby expressly granted authority to fix, by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Series Preference Stock, the voting powers, designations, preferences, limitations and relative rights of each series, including, but without limiting the generality of the foregoing, the following: (a) The rate and times at which, and the terms and conditions on which, dividends on the Series Preference Stock of such series shall be paid; (b) The right, if any, of holders of Series Preference Stock of such series to convert the same into, or exchange the same for, other classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (c) The redemption price or prices and the time at which, and the terms and conditions on which, Series Preference Stock of such series may be redeemed; | | | | Proxy Statement for 2020 Annual Meeting | A-1 |
TABLE OF CONTENTS (d) The rights of the holders of Series Preference Stock of such series upon the voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding up of the Corporation; (e) The voting power, if any, of the Series Preference Stock of such series; and (f) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Series Preference Stock of such series. (2) All shares of each series shall be identical in all respects to the other shares of such Series. The rights of the Common Stock of the Corporation shall be subject to the preferences and relative participating, optional and other special rights of the Series Preference Stock of each series as fixed herein and from time to time by the Board of Directors as aforesaid. B.
| Provisions Applicable to Common Stock. |
(1) After the requirements with respect to preferential dividends upon the Series Preference Stock of all classes and series thereof shall have been met and after the Corporation shall have complied with all requirements, if any, with respect to the setting aside of sums as a sinking fund or redemption or purchase account for the benefit of any class or series thereof, then, and not otherwise, the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amounts to be distributed to the holders of all classes and series thereof of Series Preference Stock then outstanding in the event of a voluntary or involuntary liquidation, dissolution or winding up of the Corporation and subject any additional or special rights of the Series Preference Stock as to the remaining assets of the Corporation for distribution, the holders of the Common Stock shall be entitled to receive the remaining assets of the Corporation available for distribution to its shareholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Each holder of Common Stock shall have one vote in respect of each share of such stock held by such holder. 3. The date of adoption of the amendment to Article IV was December 15, 2020. 4. The amendment to Article IV was approved by the Corporation’s shareholders. The effective date and time of this document is the time of filing on the date it is filed. | | | WINNEBAGO INDUSTRIES, INC. | | | | | | | | | | | By: | | | | | | | | | | Stacy L. Bogart
Senior Vice President – General Counsel, Secretary and Corporate Responsibility |
| A-2 | | | | | Proxy Statement for 2020 Annual Meeting |
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