Patrick Industries, Inc.
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UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)
 
 
Filed by the Registrant ☒    
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under
§240.14a-12
PATRICK INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
☒ No fee required
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14a-6(i)(1)
and
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Proxy

Statement

& Notice of 2024 Annual Meeting of Shareholders

 

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Dear

Shareholder

 

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Notice of Annual Meeting

 

Date

       Location        Record Date

Thursday, May 16, 2024;

     Online at: meetnow.global/           March 22, 2024

10:00 A.M. ET

          MAFG6HS     
   PROPOSAL 1      PROPOSAL 2      PROPOSAL 3

 

To elect nine directors to the Board of Directors to serve until the 2025 Annual Meeting of Shareholders

      

 

To ratify the appointment of Deloitte &

Touche LLP as our independent

registered public accounting firm for

fiscal year 2024

      

 

To approve, in an advisory and non-

binding vote, the compensation of the

Company’s named executive officers

for fiscal year 2023 as disclosed in the Proxy Statement (a “Say-on- Pay” vote)

 

Board Vote

       Board Vote        Board Vote

Recommendation:

       Recommendation:        Recommendation:

For Each Nominee

 

      

For

 

      

For

 

 

In addition

To consider and transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Voting

Please vote your shares using the Internet, by telephone or by mail by signing, dating and returning the enclosed Proxy Card in the enclosed envelope. If you hold shares through a broker, custodian, fiduciary, or nominee (a “beneficial holder”), please check the voting instructions used by that broker, custodian, fiduciary, or nominee. Holders with a control number from Computershare, our transfer agent, can vote at the virtual Annual Meeting.

Please return your Proxy Card so your vote can be counted. See “Voting Q&A”.

By Order of the Board of Directors,

 

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Joel D. Duthie

Executive Vice President, Chief Legal Officer

and Secretary

April 1, 2024

Virtual Meeting Format

You will be able to attend and participate in the Annual Meeting online, vote your shares electronically and submit your questions prior to and during the meeting by visiting: meetnow.global/ MAFG6HS on the meeting date and time described in the accompanying Proxy Statement.

If you plan to attend the meeting virtually on the Internet, you must register by following the instructions contained in the “Voting Q & A” section.

Notice of Internet Availability of Proxy Materials for the Annual Meeting of Shareholders

Our 2024 Proxy Statement and Annual Report to Shareholders for fiscal 2023 are available on Patrick Industries, Inc.’s website at www.patrickind.com under “For Investors - Company Info.” You may also request hard copies of these documents free of charge by writing to us at the following address: 107 W. Franklin Street, Elkhart, Indiana 46516. Attention: Office of the Secretary.

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement


Proxy Statement

 

Annual Meeting of Shareholders

This Proxy Statement and the accompanying Proxy Card are being mailed to shareholders of Patrick Industries, Inc. (the “Company” or “Patrick”) on or about April 3, 2024, and are furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) for the Annual Meeting of Shareholders to be held online (virtual meeting) on May 16, 2024 (the “Annual Meeting”) for the purpose of considering and acting upon the matters specified in the Notice of Annual Meeting of Shareholders accompanying this Proxy Statement.

If the form of proxy which accompanies this Proxy Statement is executed and returned, or is voted by Internet or by telephone, it may be revoked by the person giving it at any time prior to the voting thereof by:

 

  changing your vote using the online voting method, in which case only your latest Internet proxy submitted prior to the Annual Meeting will be counted;

 

  filing with the Secretary of the Company, during or before the Annual Meeting, a written notice of revocation bearing a date later than the date of the proxy;

 

  duly executing and dating a subsequent proxy relating to the common stock and delivering it to the Secretary of the Company during or before the Annual Meeting; or

 

  voting your shares electronically during the Annual Meeting.

If the form of proxy is signed, dated and returned without specifying choices on one or more matters presented to the shareholders, the shares will be voted on the matter or matters listed on the Proxy Card as recommended by the Company’s Board.

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Additional solicitations in person, by telephone, or otherwise, may be made by certain directors, officers and employees of the Company regarding the proposals without additional compensation. Expenses incurred in the solicitation of proxies, including postage, printing and handling, and actual expenses incurred by brokerage houses, custodians, nominees and fiduciaries in forwarding documents to beneficial owners, will be paid by the Company.

Patrick’s Annual Report to Shareholders, which contains Patrick’s Annual Report on Form 10-K for the year ended December 31, 2023, accompanies this Proxy Statement. Requests for additional copies of the Annual Report on Form 10-K should be submitted to the Office of the Secretary, Patrick Industries, Inc., 107 W. Franklin Street, Elkhart, Indiana 46516. Annual Meeting materials may also be viewed online through our website, www.patrickind.com under “For Investors - Company Info.”

 

 

 

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Table of Contents

 

2023 HIGHLIGHTS

  

Business Financial Highlights

     1  

Sustainability & Responsibility Highlights

     2  

Executive Compensation Highlights

     3  

Corporate Governance Highlights

     4  

PROPOSAL 1:

  

Election of Directors

     6  

Nominees for Election

     8  

2023 Non-Employee Director Compensation

     13  

Board Committees

     14  

PROPOSAL 2:

  

Ratification of the Appointment of Independent Registered Public Accounting Firm

     16  

Independent Public Accountants

     18  

Audit Committee Report

     19  

PROPOSAL 3:

  

Advisory Vote to Approve the Compensation of Our Named Executive Officers

     20  

EXECUTIVE COMPENSATION

  

Named Executive Officers

     22  

Compensation Discussion and Analysis

     24  

Fiscal Year 2023 Executive Compensation

     29  

Compensation Committee Report

     35  

Summary Compensation Table

     36  

Grants of Plan-Based Awards During Fiscal Year 2023

     38  

Outstanding Equity Awards as of December 31, 2023

     39  

Equity Compensation Plan Information

     40  

Stock Options and Stock Appreciation Rights Exercises and Stock Vested in Fiscal 2023

     41  

Non-Qualified Deferred Compensation

     42  

Potential Payments upon Termination or Upon a Change of Control

     43  

CEO Pay Ratio

     46  

Pay Versus Performance

     47  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     51  

RELATED PARTY TRANSACTIONS

     52  

PROPOSALS OF SHAREHOLDERS FOR THE 2025 ANNUAL MEETING

     52  

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

     53  

OTHER MATTERS

     53  

VOTING Q&A

     54  

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement


Business Financial Highlights

Fiscal 2023 clearly demonstrated the benefits of the strategic diversification investments we have made over the last five years, evidenced by the resilience of our business model as end market demand remained challenged. Our performance and operational excellence were driven by our phenomenal team members whose passion is clear in the solutions they provide, the customer relationships they foster, and the innovative products they design. Despite the impact of higher inflation and interest rates on our end markets, our team’s thoughtful execution of our playbook resulted in record free cash flow and gross margin in 2023. We strengthened our balance sheet and continued to return cash to shareholders, punctuated by our Board’s November 2023 decision to increase our quarterly dividend by 22%.

Our performance would not have been possible without our team’s diligent optimization of our processes, coupled with stringent inventory and cost management. We paid down $260 million of debt, reduced our inventory by $158 million, and saw year-over-year declines in our expenses through prudent management of our operations. We continued to reinvest in our business and our people, focusing on automation, product innovations and our BETTER Together training. We remain forward-looking and continue to evaluate future organic and strategic growth opportunities.

As a result of our team’s efforts, we have a strong financial foundation and see a promising long-term growth trajectory for each of our end markets, as we seek to leverage the work we have done to optimize our business and the strategic diversification investments we have made. As part of these efforts, we completed the acquisition of Sportech, our largest acquisition to date, in January 2024. Sportech is another step in the evolution of our business, providing a solid platform within the Powersports market for future organic and strategic growth. Our team’s experience managing through market cycles and their drive to be the supplier of choice to the Outdoor Enthusiast and Housing markets we serve leave us confident in the future of Patrick.

 

2023 results were anchored by our team members’ passion for the outdoors and our customer-focused values they exhibit when building Patrick’s portfolio of products, creating value for our shareholders and the communities we serve.

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Sustainability & Responsibility Highlights

In pursuit of a sustainable future, Patrick champions initiatives across three foundational pillars: Empowering People, Caring for Our Planet, and Living by Our Policies. This strategic approach has enhanced our operational efficiency, preserved our ethical standards and fostered a culture that prioritizes safety, wellness and professional growth.

Key achievements in 2023 include a 36% reduction in the Total Recordable Incident Rate, a 60% total waste recycling rate, and the engagement of over 3,000 team members in leadership training experiences, underscoring our commitment to our people, our planet, and our principles.

 

OUR AMBITION

“We are stewards, dedicated to our pursuit of responsible and sustainable practices - anchored in our BETTER Together culture - to positively impact our communities.”

 

 

 

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Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    2


Executive Compensation Highlights

Aligning Pay to Differentiated Performance

Our leaders understand and are motivated to meet key metrics that drive growth, profitability and ultimately shareholder value in both the short and long term. Our Compensation Committee recommends compensation decisions to the Board which support this philosophy. The plan design is brought to life through understanding each compensation element and the impact of the individual’s and the team’s performance as outlined below.

Each compensation component, relative to peer group and general industry data, supports our philosophy of rewarding differentiated performance by emphasizing each executive’s variable pay elements.

 

 

Base Salary, though lower than peer base compensation, is designed in alignment with the philosophy of focusing on performance-dependent variable pay.

 

 

The annual Short-Term Cash Compensation Plan provides for enhanced payouts for performance above plan up to a maximum of 200% of target compensation at 115% of plan and incorporates a threshold payout of 50% of target compensation at 75% of plan.

 

 

The annual Long-Term Incentive Compensation Plan is designed to drive the executive’s focus on long-term profitability through both organic and inorganic growth over the three-year award performance period. This equity plan is also designed to motivate leadership to perform above plan with a maximum payout of 200% of target compensation at 120% of plan and a threshold payout of 50% of target compensation at 80% of plan.

 

 
Compensation Element    Percentile Positioning vs. Peer Proxy and
General Industry Data
        

Our focus on variable pay to

motivate performance, a key

component of our compensation

plan over the past decade, has

proven successful in aligning

our team’s compensation to

shareholder returns.

 

Base Salary

  

 

25th - 50th

 

Short-Term Incentive

  

 

50th - 75th

 

Total Target Cash

  

 

50th - 75th

 

Long-Term Incentive

  

 

25th - 50th

 

Total Target Compensation

  

 

50th - 75th

Key Compensation Actions Taken In Fiscal 2023

 

 

Base compensation for our Named Executive Officers (“NEOs”) was unchanged from 2022 to align with end-market conditions and expected financial performance in 2023 and size-scoping of our peer group and general industry data.

 

 

Continued to utilize external consultant, Willis Towers Watson, for data and consultation as requested by the Compensation Committee.

For the compensation of our NEOs, please refer to the Compensation Discussion and Analysis.

 

 

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Corporate Governance Highlights

 

In addition to executive compensation practices that strongly link pay and performance, the Board believes that fundamental corporate governance is critical to ensuring the Company is managed for the long-term benefit of our shareholders. Patrick’s Code of Ethics for Directors, Officers and Employees and its Corporate Governance Guidelines help to ensure that we “do business right.” For more information about our governance programs and Board of Directors, see Proposal 1.

Board Risk Oversight

The Board has delegated its risk oversight responsibilities to the Audit Committee, as described under the heading “Audit Committee”. In accordance with the Audit Committee’s Charter, each of our senior financial and accounting officers reports directly to the Audit Committee regarding material risks to our business, among other matters, and the Audit Committee meets in executive sessions with the senior financial and accounting officers, and with representatives of our independent registered public accounting firm. The Audit Committee Chairman reports to the full Board regarding material risks as deemed appropriate. In addition, the Compensation Committee annually considers the extent to which the risks arising from the compensation policies and practices of the Company are reasonably likely to have a material adverse effect on the Company as a whole.

Director Independence

Seven of the nine members of the Board (as of the date of this Proxy) have been designated by the Board as independent directors. The Board determines whether a director is independent by following the guidelines of the NASDAQ Stock Market and the SEC rules and regulations. The Board has determined that the independent directors in 2023 were Joseph M. Cerulli, John A. Forbes, Michael A. Kitson, Pamela R. Klyn, Derrick B. Mayes, Denis G. Suggs and M. Scott Welch.

Consideration of Director Candidates

 

  The Corporate Governance and Nominations Committee will consider Board nominees recommended by shareholders, which can be sent to the address provided below.

 

  To nominate a candidate for director, under our Bylaws, a shareholder must provide to the Secretary of the Company:

 

    Timely notice of the nomination (not less than 20 days or more than 50 days prior to the next Annual Meeting of Shareholders)

 

    Written notice of nominee

 

    Nominee’s name, age, business address, residential address, principal occupation, and number of shares of the Company owned

 

    Nominee’s consent to be elected and serve

 

    Documents required under federal securities laws

 

    Candidate’s other board memberships (if any)

Communication With Our Shareholders And Ensuring Document Accessibility

You can find our committee charters, Board Diversity Policy, Code of Ethics and Business Conduct, Corporate Governance Guidelines, and other documents on our website at www. patrickind.com, under “For Investors-Governance” or by writing to:

Patrick Industries, Inc.

Attn: Joel D. Duthie

EVP - Chief Legal Officer and Secretary

107 W. Franklin Street

Elkhart, Indiana 46516

Shareholders can reach out directly to our full Board or a Board member by writing to the above address. Communications intended for independent directors should be directed to the Chairman of the Corporate Governance and Nominations Committee.

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    4


Board Leadership and Accountability

As of the date of this Proxy Statement, our Board has nine members. Todd Cleveland serves as Chairman of the Board and M. Scott Welch serves as Lead Independent Director. Except for Andy Nemeth, our Chief Executive Officer, no director is an employee.

 

 

Directors are elected for a one-year term

 

 

Board had 16 meetings in 2023

 

 

Each director attended at least 75% of Board meetings and meetings of Board Committees on which they serve in 2023

 

 

All directors attended the most recent Annual Meeting of Shareholders which was held on May 25, 2023

 

 

We expect all Board Members to attend the annual meetings, but from time to time, other commitments may prevent all directors from attending each meeting

Director Qualifications and Diversity

The Corporate Governance and Nominations Committee follows a diversity policy that requires the committee to consider diversity criteria - including race, ethnicity and gender - when identifying candidates for membership. The Committee will consider a candidate’s qualifications and background, including responsibility for operating a public company or a division of a public company, international business experience, a candidate’s technical and financial background or professional qualification, diversity of background and personal experience, and any other public company boards on which the candidate is a director. The Committee will also consider whether the candidate would be “independent” for purposes of the NASDAQ Stock Market and the SEC rules and regulations. The Committee may, from time to time, engage the services of a professional search firm to identify and evaluate potential nominees.

Board Composition Matrix (9 Total Directors)*

 

                   

Experience
and

Expertise

     J. Cerulli      T. Cleveland      J. Forbes      M. Kitson      P. Klyn      D. Mayes      A. Nemeth      D. Suggs      M. Welch
                   

 

Strategic Planning

 

                                            
                   

 

Sales/Marketing

 

                                              
                   

 

Manufacturing/

New Product

Development

 

                                                
                   

 

Acquisitions

 

                                                
                   

 

Banking/Finance

Relations

 

                                                
                   

 

Operations/Risk

Management

 

                                                
                   

 

Industry Experience

 

                                                    
                   

 

Other Public

Company Boards

Currently Serving

 

                                                      
                   

 

Diversity

 

                                                                       
                   

 

Gender Identity

 

     Male      Male      Male      Male      Female      Male      Male      Male      Male
                   

 

Race/Ethnicity

 

     White      White      White      White      White      African
American
     White      African
American
     White

* As of March 22, 2024

 

 

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Proposal 1

 

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Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    6


 

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2023 Board Composition and Governance Highlights

       
Size of Board    9     Annual Election of All Directors   
       
Average Age (in years) of Directors    59     Diverse Board Committee Chairs     
       
Number of Independent Directors   

7/9 

  

Independent Directors Meet Without

Non-Independent Directors Present

  
       

Directors that are Gender or Racially/

Ethnically Diverse

  

 

33% 

   Board Orientation and Continuing Education   
       
Audit Committee Expertise    67%    

Board-level Oversight of Environmental,

Social & Governance (ESG) Matters

  
       
Average Tenure (in years) on Board    10.9    

Annual Review of Committee Charters,

Code of Ethics & Governance Guidelines

  
       
Separate Chairman and CEO positions       Succession Planning   
       
Lead Independent Director       Sustainability Reporting Framework: SASB   

 

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Andy Nemeth, CEO

 

 

 

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Nominees

for Election

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Biography

 

Joseph M. Cerulli, age 64, has been employed by Tontine Associates, LLC, an investment management firm (together with its affiliates, “Tontine”), since January 2007.

 

Qualifications

 

Mr. Cerulli possesses extensive knowledge with respect to business operations, strategic planning, financial and investment matters, including investment banking, capital markets, and mergers and acquisitions strategy.

 

Joseph M. Cerulli 

 

Age 64

 

Director since 2008 Committees Corporate Governance and Nominations (Chair)

   
   

 

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Biography

 

Todd M. Cleveland, age 56, has been our Chairman of the Board since January 1, 2023 and Executive Chairman of the Board from January 2020 to December 31, 2022. Prior to that, Mr. Cleveland was Chairman of the Board from May 2018 to December 2019 and our Chief Executive Officer from February 2009 to December 2019. Mr. Cleveland was President of the Company from May 2008 to December 2015 and Chief Operating Officer of the Company from May 2008 to March 2013. Mr. Cleveland has served as a Director of IES Holdings, Inc. (“IES”) from 2017 to the present, and he has been the chairman of IES’s Human Resources and Compensation Committee since February 2019 and a member of IES’s Audit Committee since February 2021.

 

 

Todd M. Cleveland

 

Age 56

Director since 2008 Committees None

 

Other Public Board Directorships

IES Holdings, Inc.

   

 

Qualifications

 

Mr. Cleveland has over 33 years of RV, marine, manufactured housing, and industrial experience in various operating capacities. He also has extensive knowledge of our Company and the industries to which we sell our products. Mr. Cleveland’s experience includes management development and leadership, acquisitions, strategic planning, finance and capital allocation, and the manufacturing and sales of our products.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    8


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Biography

 

John A. Forbes, age 64, has been a partner with Outcomes LLC and Full Sails LLC, two firms engaged in new product development and strategic business consulting, since June 2017. In addition, Mr. Forbes served as the interim Chief Financial Officer (“CFO”) of the Company from June 2020 to November 2020. Previously, Mr. Forbes was the President of Utilimaster, a business unit of Shyft Group (formerly known as Spartan Motors USA, Inc.), from July 2010 to June 2017. Prior to that time, he was the CFO of Utilimaster from May 2009 to July 2010, the CFO of Nautic Global Group, LLC from 2007 to 2009 and the CFO of Adorn, LLC from 2003 to 2007. Mr. Forbes has served as a director of Chase Packaging Corporation since March 2019.

 

John A. Forbes 

 

Age 64

Director since 2011 Committees Audit • Compensation • Corporate Governance and Nominations

 

Other Public Board Directorships

Chase Packaging Corporation 

   

 

Qualifications

 

Mr. Forbes has over 37 years of experience in serving various manufacturing industries, having held senior financial leadership roles. Mr. Forbes also has extensive experience with operations and talent management, acquisitions, strategic planning, risk management and banking relations. He has been determined by our Board to be an “audit committee financial expert” under the rules and regulations of the Securities and Exchange Commission (the “SEC”).

 

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Biography

 

Michael A. Kitson, age 65, served as a fractional Chief Financial Officer (“CFO”) at Ascent CFO Solutions, a provider of outsourced financial and accounting services, from May 2022 to March 2023. Prior to that time, Mr. Kitson served as the CFO of oVertone Haircare, Inc. from July 2018 through January 2022. Previously, Mr. Kitson was a principal with AVL Growth Partners, a firm that provides Chief Financial Officer and other financial advisory services, from March 2017 to July 2018. Prior to that, Mr. Kitson was the CFO of MikaTek, Ltd. from January 2016 to July 2016, the Chief Executive Officer (“CEO”) of SharpShooter Imaging from March 2015 to January 2016, the CEO of Nautic Global Group (“Nautic”) from March 2011 to October 2013, and the CFO of Nautic from August 2010 to March 2011.

 

Michael A. Kitson

 

Age 65

Director since 2013 Committees Audit (Chair) • Compensation
• Corporate Governance and Nominations

 

   

 

Qualifications

 

Mr. Kitson has over 37 years of experience in serving various manufacturing industries in senior financial leadership roles. Mr. Kitson also has extensive experience with corporate and operations management, finance and capital allocation, strategic planning and risk management. He has been determined by our Board to be an “audit committee financial expert” under the SEC’s rules and regulations.

 

 

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Biography

 

Pamela R. Klyn, age 53, has been the Executive Vice President of Corporate Relations and Sustainability at Whirlpool Corporation, a leading global major appliance company, since August 2023 and the Senior Vice President of Corporate Relations and Sustainability at Whirlpool from January 2022 to July 2023. Prior to that time, Ms. Klyn was a Senior Vice President in the Global Product Organization at Whirlpool Corporation from 2018 to 2021, and has held various leadership positions in marketing and engineering with Whirlpool Corporation since 1993.

 

Pamela R. Klyn 

 

Age 53

Director since 2019 Committees Audit • Compensation • Corporate Governance and Nominations

 

   

 

Qualifications

 

Ms. Klyn has over 30 years of experience in the home appliance industry and has extensive experience in marketing, engineering, strategic planning, new product development, and sustainability practices.

 

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Biography

 

Derrick B. Mayes, age 50, has been a Managing Partner of Bonaventure Equity, LLC since 2022. Prior to that time, Mr. Mayes was a Managing Partner of Play Like a Champion Capital, LLC from 2020 to 2022, and Vice President of WME/IMG, a strategic advisory firm to the sports and entertainment industry, from 2015 to 2021. Previously, he was the Chief Executive Officer of Executive Action Sports & Entertainment, serving as a strategic adviser to high profile individuals, groups and organizations in the sports and entertainment industry, from 2007 to 2015.

 

Derrick B. Mayes

 

Age 50

Director since 2019 Committees Audit • Compensation • Corporate Governance and Nominations

 

   

 

Qualifications

 

Mr. Mayes has over 23 years of experience in strategic planning, mergers and acquisitions, and executive leadership, with extensive experience in the digital communications space, and has been a leadership and diversity speaker to numerous public companies and private organizations, particularly in the sports and entertainment markets.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    10


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Biography

 

Andy L. Nemeth, age 55, has been the Company’s Chief Executive Officer since January 2020. Prior to that time, Mr. Nemeth was the President from January 2016 to July 2021, Executive Vice President of Finance and Chief Financial Officer from May 2004 to December 2015, and Secretary-Treasurer from 2002 to 2015. He was also the Vice President of Finance and Chief Financial Officer from 2003 to 2004.

 

Andy L. Nemeth  

 

Age 55

Director since 2006 Committees None

 

   

 

Qualifications

 

Mr. Nemeth has over 32 years of RV, marine, manufactured housing, and industrial experience in various financial and management capacities. Mr. Nemeth also has particular knowledge of our Company and the industries to which we sell our products and has extensive experience with corporate management, development and leadership, acquisitions, strategic planning, risk management, capital allocation, and banking and finance relations.

 

LOGO  

 

Biography

 

Denis G. Suggs, age 58, has been the Chief Executive Officer of LCP Transportation, LLC, a non-emergency medical transportation company, since February 2020. Prior to that time, Mr. Suggs was the President and Chief Executive Officer of Strategic Materials Corp. from March 2014 to January 2020 and also served as Chairman from 2017 to 2020. Prior to that time, Mr. Suggs was the Global Executive Vice President of Belden, Inc. from 2009 to 2013 and the President of the Americas Division / Vice President of Belden, Inc. from 2007 to 2009. Mr. Suggs has served as a director of Smith & Wesson Brands, Inc. from May 2021 to present.

 

Denis G. Suggs

 

Age 58

Director since 2019 Committees Compensation (Chair) • Audit • Corporate Governance and Nominations

 

Other Public Board Directorships

Smith & Wesson Brands, Inc.

   

 

Qualifications

 

Mr. Suggs has over 25 years of experience in leading complex global businesses, having also held senior financial executive leadership roles with Danaher Corporation and Public Storage Corporation. Mr. Suggs also has extensive experience with corporate and operations management, strategic planning, mergers and acquisitions and risk management. Mr. Suggs served as a director of the Education Corporation of America from 2015 to 2018 and of Strategic Materials, Inc. and the Glass Packaging Institute from 2014 to 2020. He has been determined by our Board to be an “audit committee financial expert” under the SEC’s rules and regulations.

 

 

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LOGO  

 

Biography

 

M. Scott Welch, age 64, has been the President and Chief Executive Officer of Welch Packaging Group, a large independently owned corrugated packaging company, since 1985. Prior to establishing Welch Packaging Group, he worked at Northern Box, Performance Packaging and Elkhart Container. Mr. Welch has served as a director of Lakeland Financial Corporation (“Lakeland”) from 1998 to present and a member of the compensation committee since 2012, and he was Lakeland’s lead independent director from 2012 to 2019. He has also served as a trustee of DePauw University since 2005.

 

M. Scott Welch

 

Age 64

Director since 2015

Lead Independent Director

since 2018

Committees Audit • Compensation • Corporate Governance and Nominations

 

Other Public Board Directorships

Lakeland Financial Corporation

   

 

Qualifications

 

Mr. Welch has over 42 years of experience in the packaging industry and has extensive experience in sales, marketing, acquisitions, organizational development, strategic planning, finance and capital allocation. He has been determined by our Board to be an “audit committee financial expert” under the SEC’s rules and regulations.

 

  LOGO

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    12


2023 Non-Employee Director Compensation

 

   
     

 

01/01/2023-12/31/2023

    (1) Non-employee directors receive
an annual restricted stock grant in
May of each year, which vests
upon such director’s continued
service as a Board member for one
year from the grant date or earlier
upon certain events. In addition,
non-employee directors receive
cash dividends on their restricted
common stock holdings. The
Company does not have stock
ownership guidelines for its
directors.

 

Chairman of the Board Annual Retainer

     $400,000  

 

Annual Retainer (Non-Chairman Members)

     90,000  

 

Committee Chairpersons Annual Retainer:

        

 

  Audit

     20,000  

 

  Compensation

     15,000  

 

  Corporate Governance and Nominations

     10,000  

 

Lead Independent Director Additional Annual Retainer

     25,000  

 

Annual Restricted Stock Grant (1)

     125,000  

In addition to the compensation described above, the Company reimburses the non-employee directors’ expenses, including travel, accommodations and meals, for attending Board and Board Committee meetings, our Annual Meeting of Shareholders and any other activities related to our business. Employee directors receive no compensation as such.

The compensation paid by the Company to the directors for 2023, other than Mr. Nemeth, is set forth in the table below. Information on compensation for Mr. Nemeth is set forth in the “Executive Compensation” section.

 

  Name

 

 

  Fees Earned Or Paid In 

Cash (2)

 

   

  Stock Awards (3)  

 

   

Other
  Compensation (4)  

 

   

    Total     

 

 
         

 

Joseph M. Cerulli

 

 

 

 

$100,000

 

 

 

 

 

 

$125,020

 

 

 

 

 

 

$3,477

 

 

 

 

 

 

$228,497

 

 

         

Todd M. Cleveland (1)

    400,000       173,719       2,974       576,693  
         

John A. Forbes

    90,000       125,020       3,477       218,497  
         

Michael A. Kitson

    110,000       125,020       3,477       238,497  
         

Pamela R. Klyn

    90,000       125,020       3,477       218,497  
         

Derrick B. Mayes

    90,000       125,020       3,477       218,497  
         

Denis G. Suggs

    105,000       125,020       3,477       233,497  
         

M. Scott Welch

    115,000       125,020       3,477       243,497  

(1) Effective January 1, 2023, Mr. Cleveland was appointed Chairman of the Board (a non-executive position). Prior to that time, Mr. Cleveland was Executive Chairman of the Board of the Company (a named executive officer position) from January 2020 through December 31, 2022.

(2) Fees consist of an annual cash retainer for the Board, lead independent director, and committee chairperson’s service.

(3) Amounts shown do not represent compensation actually received. Such amounts reflect the aggregate grant date fair value of 1,803 shares of restricted stock granted to each non-employee director, at a closing stock price of $69.34 on May 25, 2023. In addition, upon Mr. Cleveland’s appointment as Chairman of the Board, he was granted an additional 799 shares of restricted stock at a closing stock price of $60.95 on January 3, 2023, which represents a pro-rated portion of the restricted stock granted to the other non-employee directors on May 12, 2022. These shares were 100% vested on May 12, 2023.

(4) Amounts shown represent cash dividends paid by the Company in 2023 on unvested shares held by the non-employee directors.

 

 

LOGO    13


Board

Committees

Audit Committee

The Board has an Audit Committee for which Michael A. Kitson serves as the Chairman. The Audit Committee met 13 times in 2023.

The Audit Committee has a charter, which sets forth the responsibilities of the Audit Committee, which include:

 

  Oversight responsibilities related to potential material risks to the business, including, but not limited to, credit, liquidity, IT security, and operational risks;
  Recommending to the Board the independent auditors to be engaged by the Company for the purpose of conducting the annual audit of our financial statements;
  Discussing with the independent auditors the scope of their examination;
  Reviewing our financial statements and the independent auditors’ report thereon with our personnel and the independent auditors;
  Inviting the recommendations of the independent auditors regarding internal controls and other matters; and
  Approving all non-audit services provided by the independent auditors and reviewing these engagements on a per occurrence basis.

The Board has determined that each of the current members of the Audit Committee is independent, as defined in the NASDAQ listing standards and relevant SEC rules. In addition, as of the date of this proxy, the Board has determined that four of these members also meet both the qualifications required to be an audit committee financial expert and the financial sophistication requirements contained in the NASDAQ listing standards (Messrs. Forbes, Kitson, Suggs and Welch).

For a more detailed list of the roles and responsibilities of the Audit Committee, please see the Audit Committee Charter located in the “For Investors – Governance – Governance Documents” section of our website at www.patrickind.com

Compensation Committee

The Board has a Compensation Committee for which Denis G. Suggs serves as Chairman. The Compensation Committee met six times in 2023.

The Compensation Committee has a charter, which sets forth the responsibilities of the Compensation Committee, which include:

 

  Reviewing and recommending to the independent members of the Board the overall compensation programs for the officers of the Company;
  Oversight authority to attract, develop, promote and retain qualified senior executive management; and
  Oversight authority for the stock-based compensation programs.

In its oversight of executive officer compensation, the Compensation Committee seeks assistance from our management and our independent compensation consultant, Willis Towers Watson, as further described below under the heading “Compensation Discussion and Analysis.” Willis Towers Watson’s fees are approved by the Compensation Committee. Willis Towers Watson provides the Compensation Committee with data about the compensation paid by our peer group and industry benchmark groups, updates the Compensation Committee on new developments in areas that fall within the Compensation Committee’s scope and is available to advise the Compensation Committee regarding all of its responsibilities, including best practices, market trends in executive compensation, and pay versus performance disclosures. Our Compensation Committee has assessed the independence of Willis Towers Watson pursuant to SEC and NASDAQ listing rules and determined that their work did not give rise to any conflicts of interest.

The Board has determined each of the current members of the Compensation Committee, as of the date of this proxy, is independent as defined in the NASDAQ listing standards and our Corporate Governance Guidelines.

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    14


Compensation Committee Interlocks and Director Participation

During 2023, no executive officer served on the board or compensation committee of any other corporation with respect to which any member of the Compensation Committee was engaged as an executive officer. No member of the Compensation Committee was an officer or employee of the Company during 2023.

 

For a more detailed list of the roles and responsibilities of the Compensation Committee, please see the Compensation Committee Charter located in the “For Investors – Governance – Governance Documents” section of our website at www.patrickind.com

Corporate Governance and Nominations Committee

The Board has a Corporate Governance and Nominations Committee for which Joseph M. Cerulli serves as the Chairman. The Corporate Governance and Nominations Committee met five times in 2023.

The Corporate Governance and Nominations Committee has a charter, which sets forth the responsibilities of the Corporate Governance and Nominations Committee, which include:

 

  Assisting the Board in identifying, screening and recommending qualified candidates to serve as directors;

 

  Recommending nominees to the Board to fill new positions or vacancies as they occur;

 

  Reviewing and recommending to the Board the compensation of directors;

 

  Recommending to the Board nominees for election by shareholders at the Annual Meeting;

 

  Reviewing and monitoring corporate governance compliance as well as recommending appropriate changes;
  Reviewing the succession planning for our senior executive officers;

 

  Providing overall oversight of our ESG policies and initiatives and working with management to identify and define relevant ESG topics and programs; and

 

  Conducting an annual assessment of the Board’s performance.

The Board has determined that each of the current members of the Corporate Governance and Nominations Committee, as of the date of this proxy, is independent as defined in the listing standards of the NASDAQ Stock Market and our Corporate Governance Guidelines.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 requires that certain of our officers, directors and 10% shareholders file with the SEC an initial statement of beneficial ownership and certain statements of changes in beneficial ownership of our common stock. Based solely on our review of such forms and written representation from the directors and officers that no other reports were required, we are unaware of any instances of noncompliance or late compliance with such filings during the fiscal year ended December 31, 2023, except with respect to the late filings of: two Form 4 filings on June 8, 2023 and on September 11, 2023 for Andy L. Nemeth, Chief Executive Officer, with respect to the gifting of stock transactions that occurred on June 5, 2023 and July 28, 2023, respectively; one Form 4 filing on September 22, 2023 for Derrick B. Mayes, Director, with respect to a transaction that occurred on September 13, 2023; and one Form 4 filing on October 4, 2023 for Joel D. Duthie, Executive Vice President, Chief Legal Officer and Secretary, with respect to a transaction that occurred on September 29, 2023.

 

For a more detailed list of the roles and responsibilities of the Corporate Governance and Nominations Committee, please see the Corporate Governance and Nominations Committee Charter located in the “For Investors – Governance – Governance Documents” section of our website at www.patrickind.com

 

 

 

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LOGO

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    16


LOGO

 

 

LOGO    17


Independent Public Accountants

Audit Fees

 

The following table presents fees and out-of-pocket expenses for professional audit services rendered by Deloitte during the fiscal years ended December 31, 2023 and 2022:

As noted above in Proposal 2, the Audit Committee has appointed Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2024.

 

 

       2023             2022       
     

Audit Fees (1)

       $2,918,600          $2,674,300  
     

Audit Related Fees (2)

       -          298,300  
     

Tax Fees (3)

       507,600          362,800  
     

Other Fees (4)

       1,900          1,900  
     

Total Fees

       $3,428,100          $3,337,300  

(1) Audit fees consist of fees for professional services rendered for the annual audit of the Company’s financial statements, the reviews of the financial statements included in the Company’s quarterly reports, and other services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements.

(2) Audit related fees in 2022 consist of fees related to due diligence services.

(3) Tax fees include fees related to tax compliance and consulting services.

(4) Other fees consist of an annual subscription for an online accounting research tool licensed from Deloitte.

 

The Audit Committee has advised us that it has determined that the non-audit services rendered by our independent auditors during our most recent fiscal year are compatible with maintaining the independence of such auditors.

The Audit Committee has adopted a Preapproval Policy for Audit and Non-Audit Services pursuant to which it preapproves all audit and non-audit services provided by the independent auditors prior to each particular engagement.

The Audit Committee has delegated authority to its Chairman to approve certain proposed services other than the annual audit, tax and quarterly review services, and the Chairman must report any approvals to the balance of the Committee at the next scheduled meeting.

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    18


Audit Committee Report

The following report of the Audit Committee does not constitute soliciting material and shall not be deemed incorporated by reference by any general statement incorporating by reference the proxy statement into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.

 

The responsibilities of the Audit Committee, which are set forth in the Audit Committee Charter adopted by the Board, include providing oversight of our financial reporting process through periodic meetings with our independent auditors, principal accounting officer and management to review accounting, auditing, internal controls and financial reporting matters.

The Audit Committee has met and held discussions with management and Deloitte with respect to the 2023 audited financial statements. The Audit Committee reviewed and discussed with Deloitte the consolidated financial statements, and Deloitte’s evaluation of the Company’s internal controls over financial reporting.

The Audit Committee also discussed with Deloitte the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC, and other professional standards and regulatory requirements currently in effect.

We have received from Deloitte a letter providing the disclosures required by the applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte’s communications with the Audit Committee concerning independence with respect to any relationships between us and Deloitte that in their professional judgment may reasonably be thought to bear on independence. Deloitte has discussed its independence with us, and has confirmed in such letter that, in its professional judgment, it is independent from us within the meaning of the federal securities laws. The Audit Committee concluded that non-audit services provided by Deloitte during the year ended December 31, 2023 were compatible with Deloitte’s independence.

Based on the review and discussions described above, with respect to our audited financial statements included in our 2023 Annual Report to Shareholders, we have recommended to the Board of Directors that such financial statements be included in our Annual Report on Form 10-K for filing with the SEC.

As specified in the Audit Committee Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that our financial statements are complete and accurate and in accordance with generally accepted accounting principles. That is the responsibility of management and our independent auditors. In giving our recommendation to the Board of Directors, we have relied on (i) management’s representation that such financial statements have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles and (ii) the report of our independent auditors with respect to such financial statements. This report was adopted by the Audit Committee on February 27, 2024.

 

The Audit Committee

 

Michael A. Kitson (Chairman)

 

John A. Forbes

 

Pamela R. Klyn

 

Derrick B. Mayes

 

Denis G. Suggs

 

M. Scott Welch

 
 

 

 

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LOGO

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    20


LOGO

 

 

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Executive Compensation

The following Compensation Discussion and Analysis (“CD&A”) should be read in conjunction with the executive compensation tables and corresponding footnotes that follow. The discussion focuses on the compensation program approved by the Board for the 2023 fiscal year for the Named Executive Officers (“NEOs”).

Named Executive Officers

Andy L. Nemeth, Jeffrey M. Rodino, Kip B. Ellis, Matthew S. Filer and Joel D. Duthie, who are the NEOs for fiscal 2023, are shown below along with a brief biography. Mr. Filer, who joined the Company in November 2022 as Senior Vice President of Finance, assumed the position of Interim Chief Financial Officer (“CFO”) effective May 15, 2023 upon the resignation of Jacob R. Petkovich. Mr. Petkovich, who served as CFO from November 2020 until his departure from the Company effective May 14, 2023, was an NEO for a portion of 2023 and is included in the CD&A and accompanying tables as applicable.

 

LOGO  

 

 

Andy L. Nemeth was appointed Chief Executive Officer of the Company in January 2020. Prior to that time, Mr. Nemeth served as President of the Company from January 2016 to July 2021. Mr. Nemeth was the Executive Vice President of Finance and Chief Financial Officer from May 2004 to December 2015, and Secretary-Treasurer from 2002 to 2015. Mr. Nemeth has over 32 years of RV, marine, manufactured housing, and industrial experience in various financial and managerial capacities.

 

 

Andy L. Nemeth

 

Chief Executive Officer

 

 

LOGO  

 

 

Jeffrey M. Rodino was appointed President of the Company in July 2021. Prior to that time, Mr. Rodino was Chief Sales Officer from September 2016 to July 2021 and Executive Vice President of Sales from December 2011 to July 2021. Mr. Rodino was Chief Operating Officer of the Company from March 2013 to September 2016, and Vice President of Sales for the Midwest from August 2009 to December 2011. Mr. Rodino has over 30 years of experience in serving the RV, marine, manufactured housing, and industrial markets. Effective January 24, 2024, Mr. Rodino was named President – Recreational Vehicles (“RV”) with responsibility for the oversight, leadership, strategic planning, and accounting for our RV end market businesses.

 

 

Jeffrey M. Rodino

 

President

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    22


LOGO  

 

 

Kip B. Ellis was appointed Executive Vice President of Operations and Chief Operating Officer of the Company in September 2016. He was elected an officer in September 2016. Mr. Ellis joined the Company as Vice President of Market Development in April 2016. Prior to his role at Patrick, Mr. Ellis served as Vice President of Aftermarket Sales for the Dometic Group from 2015 to 2016. Prior to his tenure at Dometic, Mr. Ellis served as Vice President of Global Sales and Marketing from 2007 to 2015 at Atwood Mobile Products. Mr. Ellis has over 27 years of experience serving the RV, marine, manufactured housing, and industrial and automotive markets. Effective January 24, 2024, Mr. Ellis was named President - Powersports, Technology and Housing, with responsibility for the oversight, leadership, strategic planning and accounting in those end markets.

 

 

Kip B. Ellis

 

Executive Vice President of Operations and Chief Operating Officer

 

 

LOGO  

 

 

Matthew S. Filer was appointed Interim Executive Vice President - Finance, Chief Financial Officer, and Treasurer of the Company in May 2023, a position which he held until March 4, 2024 at which time he returned to his previous role as Senior Vice President of Finance. Mr. Filer joined the Company in November 2022 as Senior Vice President of Finance. Prior to his role at Patrick, Mr. Filer was with Caterpillar Inc. from 2007 to 2021, serving in a series of progressive global leadership roles which culminated in his appointment as Chief Financial Officer for divisions within Caterpillar’s Resource Industries segment. With over 27 years of experience with prior organizations that include Honeywell and Raytheon, Mr. Filer has extensive industry knowledge across multiple disciplines such as rail, mining, industrial and defense.

 

 

Matthew S. Filer

 

Interim Executive Vice President of Finance, Chief Financial Officer, and Treasurer

 

 

LOGO  

 

 

Joel D. Duthie joined the Company as General Legal Counsel in November 2020 and was appointed Executive Vice President, Chief Legal Officer and Secretary in May 2021. Prior to joining Patrick, Mr. Duthie was a partner with Barnes & Thornburg LLP, and practiced law at the firm from 2000 to 2002 and 2007 to 2020. As a corporate lawyer, Mr. Duthie focused on mergers and acquisitions, supply chain management and commercial contract counseling. Mr. Duthie served as an assistant general counsel for a privately held manufacturer of flow control products from 2002 to 2006.

 

 

Joel D. Duthie

 

Executive Vice President, Chief Legal Officer and Secretary

 

 

 

 

LOGO    23


Compensation Discussion

and Analysis

We believe our compensation plan, as it relates to the NEOs and other executives, should be aligned with the Company’s short-term and long-term organizational strategic agendas and its operating performance and cash flows and ensure appropriate management ownership in the Company. Messrs. Nemeth, Rodino, Ellis, Filer, Petkovich and Duthie comprise our NEOs for fiscal 2023, as such term is used under SEC rules. Our philosophy and objectives are to provide a comprehensive market competitive compensation program designed to attract, retain and motivate the best qualified talent from inside and outside the industry and to align the interests of our senior management team with the interests of our shareholders, in both the short-term and long-term.

The Company utilizes a “pay-for-differentiated performance” compensation philosophy that establishes base salaries that are generally low relative to its peer group companies while offering the opportunity for greater upside potential by establishing performance-based short-term and long-term incentives that are generally high relative to its peer group companies. Our performance management system links compensation to achieving or exceeding certain objectives based on our short-term and long-term goals. In order to meet these objectives, the Compensation Committee has met numerous times over the past year and has conducted independent benchmark studies and analyses, in conjunction with the utilization of a third-party compensation consultant, to develop a comprehensive performance and rewards compensation strategy as it relates to our NEOs and other executives. See “Plan Components” discussion below.

2023 Executive Compensation Plan: Pay-at-Risk

The 2023 Executive Compensation Plan for the NEOs was designed to compensate and reward the plan participants with “pay-for-differentiated performance.” The executive compensation is designed for each component to incrementally reward the NEO as performance against established key financial metrics is achieved. This plan design places a high degree of emphasis and reward based on variable compensation or “pay-at-risk.” Each element of compensation is outlined below to demonstrate the philosophy and architecture of the plan design.

Base Pay (Salary)

To implement our variable pay-at-risk philosophy in 2023, we intentionally set the NEOs’ base salaries lower than market-based salaries. The base pay in 2023 was unchanged from the 2022 base pay for each of the NEOs, including that of Messrs. Filer and Duthie, who were not NEOs in 2022. Base compensation in 2023 was set to align with end-market conditions and expected financial performance in 2023 and was in alignment with the Company’s and NEO’s scope and to assure a competitive position with the market for total target direct compensation.

The CEO and each of the other NEOs’ base compensation for 2023 was aligned to the 25th to 50th percentile range of their respective established peer group and general industry data.

 

                                                                                                                     
Executive   

 

2023 Base Pay

 

     Fixed Or Variable Pay  
     

CEO

     $850,000        Fixed Pay  
     

All Other NEOs Combined (1)

     1,925,000        Fixed Pay  

(1) All other NEOs comprised of Messrs. Rodino, Ellis, Filer and Duthie. Mr. Petkovich is excluded.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    24


Non-Equity Incentive Plan Compensation (Short-Term Incentive Plan)

 

The 2023 Short-Term Incentive Plan (“STIP”) was designed to reward the CEO and each of the other NEOs for differentiated incremental performance against the net income of the plan year (net of 2023 acquisitions) and individual performance goals of each NEO. The STIP is designed to be 100% variable, performance dependent, pay-at-risk. Assuming target performance, the net income metric performance accounts for 70% of the performance payout and each NEO’s personal strategic objectives account for 30% of the performance payout, allowing for differentiation of each individual NEO’s contributions to the performance of the Company. STIP compensation may range from 0% to 200% of target.

If an individual’s performance rating is below the threshold performance rating, such individual is not eligible for a STIP award regardless of Company performance. If the Company’s net income (net of acquisitions) performance is below the threshold Company performance, no individual is eligible for that performance plan year’s annual STIP award regardless of individual performance.

The STIP threshold, target, stretch and maximum performance levels for both net income (net of 2023 acquisitions) and personal performance and related payouts, are noted below for reference.

 

 

Company Performance (70% Of Target Performance Payout)

 

                                                                                                                     
   
Net Income Performance   

 

Performance To Plan (%)

 

     Payout (%)  
     

Less Than Threshold

     <75        -  
     

Threshold

     75        50  
     

Target (Plan)

     100        100  
     

Stretch

     110        175  
     

Maximum

     115        200  

NEO Individual Performance (30% Of Target Performance Payout)

 

                                                                                                                     
Personal Performance   

 

 

 Performance Rating 

(0-5 Scale)

 

     Payout (%)  
     

Less Than Threshold

     <2.5        -  
     

Threshold

     2.5        50  
     

Target (Plan)

     3.5        100  
     

Stretch

     4.4        175  
     

Maximum

     5.0        200  

The STIP target amount for the CEO and each of the other NEOs is designed to align to the 50th to 75th percentile range of established peer group and general industry pay percentiles.

 

                                                                                                                     
Executive   

 

2023 Target STIP

 

     Fixed Or Variable Pay  
     

CEO

     $1,800,000        Variable Pay  
     

All Other NEOs Combined (1)

     2,650,000        Variable Pay  

(1) All other NEOs comprised of Messrs. Rodino, Ellis, Filer and Duthie. Mr. Petkovich is excluded.

 

 

 

LOGO    25


Long-Term Incentive Plan Compensation (Long-Term Incentive Plan)

The 2023 Long-Term Incentive Plan (“LTIP”) was designed to reward the NEOs for sustained, long-term performance while ensuring incremental reward for differentiated performance against the Company’s three-year cumulative earnings before interest, taxes, depreciation and amortization (“EBITDA”) plan. The design of the LTIP creates 80% of the target value of the award in the form of performance-dependent variable pay and 20% in the form of retentive, time-based fixed compensation with three-year cliff vesting.

The LTIP threshold, target, stretch and maximum performance levels for three-year cumulative EBITDA and related payouts are noted below for reference.

 

                                                                   

 

3-Year Cumulative EBITDA

 

  

 

 Performance To Plan (%) 

 

    

 

 Payout (%) 

 

 
     

Less Than Threshold

     <80        -  
     

Threshold

     80        50  
     

Target (Plan)

     100        100  
     

Stretch

     110        150  
     

Maximum

     120        200  

The LTIP target amount for the CEO and each of the other NEOs is designed to align to the 25th to 50th percentile range of peer and general industry pay percentiles. The target value of the LTIP is awarded in Restricted Stock Units (“RSUs”). The table below outlines the target LTIP amount for the CEO and all the other NEOs combined.

 

                                                                                                                       
 

 

Executive

 

 

 

2023 Target LTIP

 

   

 

Variable Pay (80%)

 

   

 

Fixed Pay (20%)

 

 
       

CEO

    $3,000,000       $2,400,000       $600,000  
       

All Other NEOs Combined (1)

    3,113,000       2,490,400       622,600  

(1) All other NEOs comprised of Messrs. Rodino, Ellis, Filer and Duthie. Mr. Petkovich is excluded.

Total Target Compensation Fixed vs. Variable Pay Summary

Upon combining all pay elements of the 2023 Executive Compensation Plan, the percentages of Total Fixed versus Variable Pay at target are depicted in the table below.

 

                                                                                                                                           
 
Executive   Total Target Compensation     

 

Total Target Fixed Pay

   

 

Total Target Variable Pay

 
 

 

$

 

   

 

%

 

   

 

$

 

   

 

%

 

 
           

CEO

    $5,650,000       $1,450,000       25.7     $4,200,000       74.3
           

All Other NEOs Combined (1)

    7,688,000       2,547,600       33.1     5,140,400       66.9

(1) All other NEOs comprised of Messrs. Rodino, Ellis, Filer and Duthie. Mr. Petkovich is excluded.

Clawback Policy

In 2023, the Board implemented an Incentive Compensation Recovery Policy (otherwise commonly referred to as a “Clawback Policy”). The Incentive Compensation Recovery Policy was implemented in alignment with federal securities regulations and NASDAQ listing requirements.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    26


Participants and Roles

 

 

 

Participants

 

  

 

Responsibilities

 

   
Compensation Committee   

 

•  Reviews and approves, with input from our management team and external advisors, the Company’s executive compensation and benefits programs, including the NEOs.

 

•  Provides annual and ongoing review, discussion, analysis and recommendations regarding the evaluation of the execution of the performance plan for the NEOs against defined business objectives.

 

   

Independent Committee

Consultant

  

 

•  Provides published survey data, peer group proxy data and analysis and consultation to the Compensation Committee on executive and non-employee director compensation.

 

•  Establishes and maintains an independent perspective to avoid any conflicts of interests while working directly for the Compensation Committee unless the Committee has preapproved any work to be conducted with management for review by the Committee and approval by the Board.

 

   

Chief Executive Officer

and Chief Human

Resources Officer

  

 

•  When requested by the Compensation Committee, provide executive compensation and benefit plan input related to the performance management structure and provides support on compensation and benefit program design and implementation, as well as compliance and disclosure requirements.

 

•  The CEO evaluates the performance plans of the President, COO and CFO and other executives in accordance with the Board approved plan.

 

Plan Factors

There are several key factors the Compensation Committee considers when recommending plan-year executive compensation decisions:

 

 

NEOs’ roles, position scope, experience, skill set and performance history;

 

External market for comparable roles;

 

Current and expected business climate; and

 

Company’s financial position and operating results.

Plan Components

The Compensation Committee utilizes its own judgment in approving the components of compensation, benefits, and plan targets for the NEOs. The Compensation Committee further reviews and approves compensation including base compensation, targets, thresholds, and maximums of short-term and long-term incentive compensation. In addition, the Compensation Committee utilizes a third-party compensation consulting firm, Willis Towers Watson, to provide relevant compensation benchmarks for the NEOs and other key leadership roles as well as plan design review and input. The CEO evaluates the performance plans of the President, COO, CFO and other executive officers with the Compensation Committee. The CEO develops his own individual objectives for the plan year and evaluates his own performance against those objectives. Final determinations regarding our CEO’s performance and compensation are made during an executive session of the Compensation Committee and are reported to and reviewed by the Board in an independent directors’ session. Holders of approximately 95% of the shares voted in the most recent shareholder advisory vote at our Annual Meeting of Shareholders held on May 25, 2023 voted to approve the compensation of the NEOs for fiscal year 2022. The Compensation Committee takes the shareholder advisory voting results, along with any other shareholder input on executive compensation, into consideration as one of several decision points in its executive compensation decision making process for each plan year.

 

 

LOGO    27


Benchmark Sources and Fiscal Year 2023 Peer Group

In an effort to provide a better aligned peer group for purposes of market comparison of our executive compensation packages based on our general guidelines and as described under “Plan Components,” an important factor in establishing the 2023 Executive Compensation Plan is the external market for comparable roles. In addition, based on the data utilized from an index of General Industry companies provided by the Central Data Base Survey of Willis Towers Watson, our independent compensation committee consultant, there were no changes made by the Compensation Committee to the benchmark peer group for the period ended December 31, 2023 (as compared to the 2022 peer group). We believe the following companies listed represent an effective comparator group of similar size and with similar scope of revenue and market capitalization.

 

    American Woodmark Corporation

 

    Apogee Enterprises, Inc.

 

    Brunswick Corporation

 

    Cavco Industries, Inc.

 

    EnPro Industries, Inc.

 

    Hyster-Yale Materials Handling, Inc.

 

    LCI Industries, Inc.

 

    Masonite International Corporation

 

    Modine Manufacturing Company

 

    Mueller Industries, Inc.

 

    Polaris, Inc.

 

    Thor Industries, Inc.

 

    UFP Industries, Inc.

 

    Wabash National Corporation

 

    Winnebago Industries, Inc.

 

 

LOGO

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    28


Fiscal Year 2023 Executive Compensation

 

   

Compensation And

Benefits Components

   Description And Purpose
   
Base Salary    Cash payments reflecting a market competitive position for performance of functional role.
   
Short-Term Incentives    Lump sum cash payments reflective of approved pay-for-performance plan and the relative achievements of the business and individual performance objectives. In addition, the Board reserves the right at any time to award discretionary bonuses to senior management based on outstanding performance or other factors.
   
Long-Term Incentives    Stock vehicle grants reflecting approved pay-for-performance plan and the relative long-term achievement of the business performance plans as well as the Company’s desire to retain high-performing talent and align the interests of senior management with shareholder interests.
   
Executive Health and Welfare Benefits    Health and welfare benefits mirror scope of standard plans for all employees.
   
Voluntary Deferred Compensation Plan    Highly compensated individuals can elect to voluntarily defer all or a portion of their wages in any given year subject to applicable laws and restrictions. Designed to supplement market competitive position and further drive retention of key executives.
   
Other Compensation    Other compensation includes: Automobile allowance, Company contributions pursuant to the Patrick Industries, Inc. 401(k) Plan and to individual Health Savings Accounts, and health club reimbursement pursuant to the Company’s general health and welfare program.
   
Severance Benefits    Reasonable and customary transition support aligned to market benchmark data.

Base Salary

The Compensation Committee reviews and approves the base salaries of the NEOs each year, as well as at the time of promotion, change in job responsibilities or any other change deemed to be a material event. Base salaries are set during the first quarter of each year. The Compensation Committee sets the salary for the CEO and approves the base salaries for the other NEOs and other executive officers based on recommendations by the CEO.

When determining base salary adjustments for its NEOs, the Compensation Committee considers a combination of (i) peer group data, (ii) market data, including industry norms and benchmarking data from companies of similar size and scope and (iii) outstanding Company and individual performance. In general, the Compensation Committee targets the 25th to 50th percentile of the Company’s peer group in determining base salaries.

 

 

LOGO    29


       
Name      2022 Base Salary          2023 Base Salary         % Increase/Decrease   
       

Andy L. Nemeth

     $850,000        $850,000        -  
       

Jeffrey M. Rodino

     575,000        575,000        -  
       

Kip B. Ellis

     525,000        525,000        -  
       

Matthew S. Filer (1)

     350,000        350,000        -  
       

Jacob R. Petkovich (2)

     475,000        475,000        -  
       

Joel D. Duthie

     475,000        475,000        -  

(1) Mr. Filer assumed the position of Interim CFO upon the resignation of Mr. Petkovich for the period of May 15, 2023 through December 31, 2023. The amount shown for 2023 represents his full annual salary. Mr. Filer joined the Company in November 2022 and his 2022 base salary represents his full annual salary for his position as Senior Vice President of Finance.

(2) Mr. Petkovich resigned from the Company effective May 14, 2023. The amount shown represents his full annual salary. The amount actually paid in 2023 was pro-rated based on his period of service.

Non-Equity Incentive Plan Awards

The short-term incentive portion of the 2023 Executive Compensation Plan consists of annual non-equity incentive plan awards, which are reviewed and approved each year and are based on the Company’s financial results and the individual’s performance against defined objectives. Several key components were considered in the development of the 2023 STIP to align the 2023 STIP with shareholder interest by measuring the Company’s financial performance and the individual’s performance in support of the Company’s short- and long-term strategies. The components are noted on pages 25.

The STIP metric components for 2023 are as follows:

 

       
2023 STIP Award Component ($ in millions)   

Threshold

    Performance    

    

Target

    Performance    

    

Maximum

     Performance     

 
       

Company Performance (Net Income) (1)

     $124.5        $166.0        $190.9  
     

Individual Rating

     2.5        3.5        5.0  
     

Payout as a Percentage of Target Award

     50%        100%        200%  

(1) All net income targets are net of the contributions of 2023 acquisitions and certain one-time and non-recurring charges and credits.

The Company achieved adjusted fiscal 2023 net income of $147.0 million (net of 2023 acquisitions and non-recurring charges and credits) which equated to 89% of the target Company performance. When combined with the individual performance rating for each NEO, the actual STIP award payouts for 2023 were as follows:

 

           
Name / Benefit   

   2023 Base   

Salary (1)

    

  Target Award  

As % Of Base

Salary (2)

    

  Target STIP Award  

    

Actual Award

  Amount As % Of  

Target Award

    

   Actual 2023 STIP   

Award Payout

 
           

Andy L. Nemeth

     $850,000        212%        $1,800,000        91%        $1,632,600  
         

Jeffrey M. Rodino

     575,000        174%        1,000,000        93%        931,900  
         

Kip B. Ellis

     525,000        171%        900,000        88%        793,890  
         

Matthew S. Filer (3)

     350,000        71%        250,000        104%        260,800  
         

Jacob R. Petkovich (4)

     475,000        153%        725,000        N/A        -  
         

Joel D. Duthie

     475,000        105%        500,000        93%        465,950  

(1) The 2023 Base Salary for each of the NEOs reflects the Base Salary in effect of as of January 2023.

(2) The target award as a percentage of base salary for the NEOs, with the exception of Mr. Filer, was determined by the Compensation Committee and applied to the base salary in effect as of January 2023. The target award as a percentage of base salary was established for each NEO in 2023 in alignment with the Company’s “pay-for-differentiated-performance” philosophy, market competitive positions for earned payout, and further enhancement of the pay-at-risk for each NEO.

(3) Mr. Filer’s actual 2023 STIP award payout excluded an additional $300,000 discretionary bonus payment related to his service as Interim CFO from May 2023 through December 2023.

(4) Mr. Petkovich’s target STIP award represents his full year target award. He did not receive an STIP award payout for the 2023 fiscal year.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    30


While these targets were used in fiscal year 2023, the Compensation Committee reserves the right to modify, cancel, change or reallocate any components of this calculation or criteria at any time.

Each NEO’s individual performance rating takes into account four strategic performance objectives in assessing the personal performance of the NEOs named in the Summary Compensation Table for 2023. The four strategic objectives are specific for each NEO and are linked to the Company’s strategic plan and that year’s organizational strategic agenda and include, among others:

 

  1.

Improving the revenue and profitability of business units under the leadership and control of the NEO;

 

  2.

The introduction of new product lines and product line extensions to achieve target revenue growth levels and market share;

 

  3.

The ongoing evaluation of strategic opportunities related to our capital allocation strategy and the execution of those opportunities, as appropriate; and

 

  4.

Objectives linked to developing and managing talent consistent with the Company’s values and enhancing and developing the leadership capabilities of the Company’s future leaders.

The NEOs, other than Mr. Nemeth, initially developed their own individual objectives for the plan year which were then reviewed and approved by the CEO. For the 2023 STIP award, Mr. Filer initially developed his own objectives for the plan year, based on his then role of Senior Vice President of Finance. His objectives were reviewed and approved by Mr. Petkovich. Mr. Nemeth developed his own objectives for the plan year which were reviewed and approved by the Board.

In assessing the NEOs’ individual performance, the Compensation Committee is provided with detailed quantitative and qualitative documentation substantiating individual performance against each individual objective.

The Compensation Committee looks to the CEO’s performance assessments of the other NEOs and his recommendations regarding a performance rating for each, as well as input from the non-management Board members. These recommendations may be adjusted by the Compensation Committee prior to finalization. The personal performance assessment of our CEO is determined by the Compensation Committee with input from members of the Board.

While the achievement of corporate objectives is quantified with an individual rating, each NEO’s relative contribution to those objectives is only one

qualitative component against which the individual’s performance is assessed by the Compensation Committee. Based upon their individual achievements, as evaluated by the Compensation Committee, and by the CEO for Messrs. Rodino, Ellis, Filer and Duthie, the individual performance rating achieved by each of these four NEOs exceeded the target performance rating of 3.5 set by the Compensation Committee.

Discretionary Bonus

In recognition of Mr. Filer’s contributions to the Company in the role of Interim CFO during 2023, Mr. Filer was awarded a year-end 2023 discretionary cash bonus in the amount of $300,000.

Long-Term Equity Incentive Plan

We believe long-term incentive compensation represents an important and appropriate motivational tool to achieve certain long-term Company goals and closely align the interests of our management team with those of our shareholders. Our executive officers participate in our long-term incentive plan as a result of their ability to make a significant contribution to the Company’s financial performance, their level of responsibility, their ability to meet performance objectives and their leadership potential and execution.

In 2023, the Compensation Committee adopted a Board approved “pay-for-differentiated-performance” based Long-Term Incentive Plan (“2023 LTIP”) for each of the NEOs. The 2023 LTIP utilizes a long-term incentive target award, which is established as a percentage of base compensation for each of the NEOs. The target award is comprised of a restricted share award (80% of which is Company performance-contingent and 20% of which is time-based contingent).

In determining the number of shares comprising the restricted share award, the target value of the restricted share component is divided by the stock price per share as established by the Board for the particular plan year, reflecting the trading price range of the common stock preceding the grant date ($68.00 for the 2023 LTIP award). The awarded target shares vest over a three-year period as follows:

 

  Time-based shares cliff vest at the conclusion of the three-year period from the grant date.
 

 

 

LOGO    31


 

Performance-contingent shares are earned based on the achievement of three-year cumulative Company EBITDA performance (2023 to 2025) against target from 0% up to a maximum payout of 200% of target.

The 2023 LTIP further reflects the Company’s “pay-for-differentiated-performance” philosophy through its upside potential for performance in excess of target levels.

For 2023, the target as a percentage of base compensation did not change from the 2022 LTIP for the NEOs, with the exception of Mr. Filer, in alignment with the Company’s “pay-for-differentiated-performance” philosophy, anticipated conditions in the Company’s end markets, market competitive positions for earned payout, and the increased component of the pay-at-risk compensation for each NEO.

The table below shows a sample calculation of 2023 LTIP award components:

 

 

Base

Salary

 

Target Award As A % 

Of Base Salary 

 

Target Award (1,500 

Restricted Shares @ 

$68.00 Per Share) 

 

Restricted Shares Target Award: 

Performance-Contingent (80%) 

(Shares @ $68.00 Per Share) 

 

Restricted Shares Target Award: 

Time-Based (20%) (Shares @ $68.00 

Per Share) 

         

$340,000

  30%    $102,000    1,200    300 

The restricted share award is divided into (i) restricted shares with time-based vesting (“Time-Based Shares”) and (ii) restricted shares with performance-based vesting (“Performance-Contingent Shares”). The Compensation Committee believes that the use of Time-Based Shares and Performance-Contingent Shares aligns the NEOs’ focus with the Company’s long-term financial performance objectives and ensures a significant retention value of the granted equity is maintained for each NEO.

The threshold, target, stretch and maximum performance metrics for the 2023 LTIP are outlined below:

 

 
   Plan Component   

Threshold EBITDA   

Performance (1)   

Payout As % Of Target   

   

Target EBITDA  

Performance (1)  

Payout As % Of Target  

   

Stretch EBITDA   

Performance (1)   

Payout As % Of Target   

   

Maximum EBITDA  

Performance (1)  

Payout As % Of Target  

 
         

Time-Based Shares     

     100 %       100 %       100 %       100 %  
         

Performance-

Contingent Shares

     50 %       100 %       150 %       200 %  

(1) The Company EBITDA performance is measured as the cumulative EBITDA achieved in 2023, 2024 and 2025.

The target 2023 LTIP award components for the NEOs, as approved by the Board in January 2023, were as follows:

 

 
   Name   

Total Target Award  

As % Of Base Salary  

   

Total Target Award   

($)   

    

Total Target Award   

(Shares)   

    

Target Time-Based   

Share Award (Shares)   

    

Target Performance   

- Contingent Share   

Award (Shares)   

 
           

Andy L. Nemeth

     353 %       $3,000,000         44,118         8,824         35,294   
           

Jeffrey M. Rodino

     222 %       1,275,000         18,750         3,750         15,000   
           

Kip B. Ellis

     210 %       1,100,000         16,177         3,235         12,942   
           

Matthew S. Filer

     68 %       238,000         3,500         700         2,800   
           

Jacob R. Petkovich

     221 %       1,050,000         15,442         3,088         12,354   
           

Joel D. Duthie

     105 %       500,000         7,353         1,471         5,882   

Individual NEO threshold, target, stretch and maximum payouts in shares for each long-term incentive component of the 2023 LTIP are outlined below:

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    32


 

Name

  

 

Threshold EBITDA   

Performance   

 Component Award    

(Shares)   

    

 

Target EBITDA  

Performance  

 Component Award   

(Shares)  

    

 

Stretch EBITDA  

Performance  

 Component Award   

(Shares)  

    

 

Maximum EBITDA  

Performance  

 Component Award   

(Shares)  

   

(1) Represents the number of
shares for the threshold,
target, stretch and maximum
payouts for the Time-Based
Shares and Performance-
Contingent Shares for the
2023 LTIP award.

 

(2) The Time-Based Shares
cliff vest at the conclusion of
the required three-year
service period.

 

(3) Mr. Petkovich’s Time-Based
Shares and Performance-
Contingent Shares were
forfeited upon the
termination of his
employment with the
Company effective May 14,
2023.

 

Time-Based Shares (1) (2)

 

                          

 

Andy L. Nemeth

  

 

 

 

8,824 

 

 

     8,824         8,824         8,824   

 

Jeffrey M. Rodino

  

 

 

 

3,750 

 

 

     3,750         3,750         3,750   

 

Kip B. Ellis

  

 

 

 

3,235 

 

 

     3,235         3,235         3,235   

 

Matthew S. Filer

  

 

 

 

700 

 

 

     700         700         700   

 

Jacob R. Petkovich (3)

  

 

 

 

3,088 

 

 

     3,088         3,088         3,088   

 

Joel D. Duthie

  

 

 

 

1,471 

 

 

     1,471         1,471         1,471   

 

Performance-Contingent Shares (1)

 

                    

 

Andy L. Nemeth

  

 

 

 

17,647 

 

 

     35,294         52,941         70,588   

 

Jeffrey M. Rodino

  

 

 

 

7,500 

 

 

     15,000         22,500         30,000   

 

Kip B. Ellis

  

 

 

 

6,471 

 

 

     12,942         19,413         25,884   

 

Matthew S. Filer

  

 

 

 

1,400 

 

 

     2,800         4,200         5,600   

 

Jacob R. Petkovich (3)

  

 

 

 

6,177 

 

 

     12,354         18,531         24,708   

 

Joel D. Duthie

  

 

 

 

2,941 

 

 

     5,882         8,823         11,764   

The Company records the estimated compensation expense over the life of the LTIP Plan performance period assuming the stretch payout (150%) and adjusts its estimates on a periodic basis, if required. For Mr. Filer’s Performance-Contingent award, the Company recorded the estimated compensation expense over the life of the LTIP plan performance period in alignment with the Company’s LTIP program target payout (100%). The NEOs have voting rights with respect to all of the shares as of the date of grant and the shares will be returned to the Company in the event that performance targets or time-based vesting requirements are not achieved. The actual payout under the 2023 LTIP for all the NEOs will be determined at the conclusion of the three-year performance period ending on December 31, 2025 (the third year in the cumulative EBITDA performance measurement period) and payment of the award will be settled in stock. Dividends on unvested shares are held in escrow by the Company and are paid in cash when the shares become fully vested. See “Potential Payments Upon Termination or Upon a Change of Control”, payable to each of the NEOs upon termination or a change in control.

Stock Ownership Requirement

The NEOs and other executive officers are required to maintain a predefined multiple of base salary in the form of ownership of the Company’s common stock based on the Board-established target price for a particular plan year to be achieved over a period of three years. The Company does not have a specific holding/retention period for stock options and stock appreciation rights (“SARS”) exercised or for the vesting of stock-based grants. For each of the NEOs employed by the Company as of December 31, 2023, with the exception of Mr. Filer as described below, their respective total common stock ownership for the year ended December 31, 2023 exceeded the stock ownership requirement. The following table sets forth information about the required share value of the common stock to be owned by each NEO for the year ended December 31, 2023:

 

Name     2023 Base Salary          2023 Multiple Of Base   
Salary  
      Required Total Share   
Value (1)  
   

(1) Inclusive of the fair value of stock
options,SARS, restricted stock and
restricted stock units awarded by the
Company and shares purchased by the
NEO in the open market. Total share
value is calculated based on the
NASDAQ Stock Market closing price on
December 31, 2023.

 

(2) The Board did not establish a required
total share value for Mr. Filer upon
assuming the role as Interim CFO
in May 2023.

 

Andy L. Nemeth

  

 

 

 

$850,000 

 

 

  

 

 

 

4X 

 

 

  

 

 

 

$3,400,000 

 

 

 

Jeffrey M. Rodino

     575,000         2X         1,150,000   

 

Kip B. Ellis

     525,000         2X         1,050,000   

 

Matthew S. Filer (2)

     350,000         -         -   

 

Jacob R. Petkovich

     475,000         2X         950,000   

 

Joel D. Duthie

     475,000         2X         950,000   

 

 

LOGO    33


Hedging

The Company does not have a policy that prevents employees (including officers) or directors from engaging in hedging transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s equity securities, and such transactions are generally permitted.

Executive Compensation Considerations

 

Executive Retirement Plan

As part of a long-term compensation program established prior to 2007, the Company maintains a non-qualified executive retirement plan (the “Executive Retirement Plan”) for Mr. Nemeth. According to the provisions of the Executive Retirement Plan, Mr. Nemeth is entitled to receive annually 40% of his highest annual base wages earned in the last three years prior to retirement or termination from the Company paid over 10 years in 260 consecutive bi-weekly payments. No new employees have been invited to participate in the Executive Retirement Plan since January 1, 2007.

Perquisites

The Company believes in a performance-based compensation and benefits package and, therefore, provides few perquisites to our NEOs. The Company provides a car allowance to our NEOs, other executives, corporate managers and general managers, all of which are included as taxable income.

Non-Qualified Excess Plan

The Company maintains a voluntary non-qualified deferred compensation plan (the “NQDC Plan”) for its key executives whereby individuals can elect at the beginning of any fiscal year to defer all or a portion of their base wages for that particular year, subject to applicable laws and restrictions. Participants are immediately vested in the plan. There were no contributions made to the NQDC Plan in 2023.

Benefit Plans

The Company does not maintain separate benefit plans for our NEOs. They participate in the same health and welfare plans as all of our other general employees with the same deductibles and co-pays. The NEOs also participate in the same 401(k) retirement program as all of the other general employees.

 

 

Insider Trading Policy

The Company has an insider trading policy whereby the mandatory trading blackout period begins two weeks or 14 calendar days prior to the close of trading on the stock market on the last trading day of the fiscal month ending in a reporting period (March, June, September and December) and ends after the expiration of one full stock market trading day following the public release of the financial information for that reporting period. During this period, Section 16 insiders and certain management and other employees who have access to “inside” information are precluded from trading in the public market any types of Company stock or other marketable securities. Additionally, the Company precludes any Section 16 insider, as defined by the SEC, director, officer or employee from trading in the public market, or any other market, based on information that is not made available to the general public.

Tax and Accounting Considerations

Under the rules in effect before 2018, compensation that qualified as “performance-based compensation” under Section 162(m) was deductible without regard to a $1 million limit. The 2017 Tax Cuts and Jobs Act generally eliminated the performance-based compensation exception under Section 162(m), effective January 1, 2018, subject to a special rule that “grandfathers” certain awards and arrangements that were in effect on or before November 2, 2017. While the Compensation Committee intended that certain incentive awards granted to our NEOs on or prior to November 2, 2017 be deductible as “performance-based compensation,” it cannot assure that result.

We expense equity awards in accordance with Accounting Standards Codification 718 Compensation—Stock Compensation (“ASC 718”). See Note 15 to the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K for the assumptions used in determining the fair value of equity awards consisting of stock options and SARS.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    34


LOGO

 

      

Compensation

Committee

Report

 

The Compensation Committee of the Company has
reviewed and discussed the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K with
management and, based on such review and discussions,
the Compensation Committee recommended to the Board
that the Compensation Discussion and Analysis be
included in this Proxy Statement.

 

The Compensation Committee

 

Denis G. Suggs (Chairman)

John A. Forbes

Michael A. Kitson

Pamela R. Klyn

Derrick B. Mayes

M. Scott Welch

 

The foregoing report of the Compensation Committee does not constitute soliciting material and shall not be deemed incorporated by reference by any general statement incorporating by reference the proxy statement into any filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts.

 

 

 

 

 

LOGO

  

 

35


Summary Compensation Table

The following Summary Compensation Table sets forth information about the compensation paid to our NEOs for the years ended December 31, 2023, 2022 and 2021. There were no stock options or SARS awarded to our NEOs for the years ended December 31, 2023, 2022 and 2021.

 

 

Name And Principal

Position

   Year      Salary (1)      Bonus (2)      Stock
Awards (3)
     Option
Awards (4)
     Non-Equity
Incentive Plan
Compensation (5)
     Change In
Pension
Value And
Non-Qualified
Deferred
Compensation
Earnings (6)
    

All

Other
Compensation (7)

     Total  
                   

Andy L. Nemeth

Chief Executive

Officer (8)

  

 

 

 

 

 2023

 

 

 

 

     $817,308        -        $4,200,020        -        $1,632,600        $69,223        $29,400        $6,748,551  
  

 

 

 

 

2022

 

 

 

 

     832,692        -        3,516,100        -        3,374,820        58,449        28,400        7,810,461  
  

 

 

 

 

2021

 

 

 

 

     742,788        -        4,067,280        -        3,145,000        41,017        27,713        8,023,798  

Jeffrey M. Rodino

President (9)

  

 

 

 

 

2023

 

 

 

 

     546,250        -        1,785,000        -        931,900        -        25,800        3,288,950  
  

 

 

 

 

2022

 

 

 

 

     611,442        -        1,494,376        -        1,850,000        -        24,800        3,980,618  
  

 

 

 

 

2021

 

 

 

 

     439,231        -        1,162,153        -        1,642,590        -        19,985        3,263,959  

Kip B. Ellis

Chief Operating

Officer and Executive

Vice President of

Operations

  

 

 

 

 

2023

 

 

 

 

     504,808        -        1,540,064        -        793,890        -        25,800        2,864,562  
  

 

 

 

 

2022

 

 

 

 

     516,346        -        1,289,264        -        1,710,090        -        24,800        3,540,500  
  

 

 

 

 

2021

 

 

 

 

     472,596        -        1,452,673        -        1,433,750        -        20,628        3,379,647  
                   

Matthew S. Filer

Interim Chief Financial

Officer, Executive Vice

President of Finance,

and Treasurer (10)

  

 

 

 

 

2023

 

 

 

 

     336,539        300,000        238,000        -        260,800        -        64,985        1,200,324  

Jacob R. Petkovich

Former Chief Financial

Officer, Executive Vice

President of Finance

and Treasurer (11)

  

 

 

 

 

2023

 

 

 

 

     205,529        -        1,470,092        -        -        -        12,530        1,688,151  
  

 

 

 

 

2022

 

 

 

 

     470,673        -        1,230,670        -        1,377,573        -        24,200        3,103,116  
  

 

 

 

 

2021

 

 

 

 

     447,596        -        1,234,710        -        1,295,000        -        184,716        3,162,022  
                   

Joel D. Duthie

Executive Vice

President, Chief Legal

Officer and

Secretary (12)

  

 

 

 

 

2023

 

 

 

 

     456,731        -        699,992        -        465,950        -        25,800        1,648,473  

(1) For information on base salaries, see “Base Salary”.

(2) The NEOs did not receive any payments that would be characterized as “Bonus” Payments for the fiscal years ended December 31, 2021, 2022 and 2023, with the exception of Mr. Filer who received a discretionary bonus payment related to his service as Interim CFO. See “Discretionary Bonus” for additional information.

(3) Amounts shown do not reflect compensation actually received. Such amounts reflect the aggregate fair value of stock awards granted during the year which is generally the total amount that the Company expects, as of the grant date, to expense in its financial statements over the awards vesting schedule in accordance with ASC 718. See Note 15 to the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K for the assumptions used in determining the fair value of equity awards. See “Long-Term Equity Incentive Plan” for additional information.

(4) There were no stock option awards granted for the fiscal years ended December 31, 2021, 2022 and 2023.

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement

  

 

36


(5) Amounts shown represent the short-term incentive awards (STIPs) earned each year by each of the NEOs, with the exception of Mr. Petkovich, and

approved by the Compensation Committee, based on the achievement of Company and individual performance targets for such year. See “Non-Equity Incentive Plan Awards” for additional information.

(6) Amounts shown do not reflect compensation actually received. Such amounts reflect the aggregate change in the present value of the NEO’s accumulated benefit under the Executive Retirement Plan and the NQDC Plan. In computing these amounts, the Company uses various assumptions including remaining years of service, estimated discount rates and present value calculations.

(7) The amounts included in “All Other Compensation” are detailed in the following table:

 

 
Name And Principal Position            Year                401(k) Matching    
Contribution
          Other (A)           Total All Other
    Compensation    
 
         

Andy L. Nemeth

  

 

 

 

 

2023

 

 

  

 

    $13,200        $16,200        $29,400   
  

 

 

 

 

2022

 

 

 

 

    12,200       16,200       28,400  
  

 

 

 

 

2021

 

 

 

 

    12,413       15,300       27,713  
         

Jeffrey M. Rodino

  

 

 

 

 

2023

 

 

 

 

    13,200       12,600       25,800  
  

 

 

 

 

2022

 

 

 

 

    12,200       12,600       24,800  
  

 

 

 

 

2021

 

 

 

 

    7,385       12,600       19,985  
         

Kip B. Ellis

  

 

 

 

 

2023

 

 

 

 

    13,200       12,600       25,800  
  

 

 

 

 

2022

 

 

 

 

    12,200       12,600       24,800  
  

 

 

 

 

2021

 

 

 

 

    8,028       12,600       20,628  
         

Matthew S. Filer (B)

  

 

 

 

 

2023

 

 

 

 

    5,385       59,600       64,985  
         

Jacob R. Petkovich (C)

  

 

 

 

 

2023

 

 

 

 

    7,530       5,000       12,530  
  

 

 

 

 

2022

 

 

 

 

    12,200       12,000       24,200  
  

 

 

 

 

2021

 

 

 

 

    2,310       182,406       184,716  
         

Joel D. Duthie

  

 

 

 

 

2023

 

 

 

 

    13,200       12,600       25,800  

(A) Amounts shown reflect an automobile allowance, the Company contribution to individual Health Savings Accounts, and health club reimbursement pursuant to the Company’s general health and welfare program. For 2021, 2022 and 2023, cash dividends paid on the Time-Based and Performance-Contingent Share awards that were granted in January 2018, January 2019 and January 2020, and which fully vested in January 2021, January 2022 and January 2023, respectively, were not required to be included in other compensation as the value of the original awards reflected the assumed effective dividend rate in the award’s initial grant date fair value calculation.

(B) Other amount in 2023 for Mr. Filer also includes a one-time cash payment related to relocation expenses upon his joining the Company in November 2022.

(C) Other amount in 2021 for Mr. Petkovich also reflects the payment of a one-time cash sign-on bonus related to his appointment as Chief Financial Officer of the Company in November 2020.

(8) Effective January 1, 2020, Mr. Nemeth assumed the position of CEO of the Company. Mr. Nemeth was President of the Company from January 2016 to July 2021.

(9) Mr. Rodino was appointed President of the Company effective July 2021. Mr. Rodino was Chief Sales Officer and Executive Vice President of Sales from September 2016 to July 2021.

(10) Effective with Mr. Petkovich’s departure from the Company, Mr. Filer assumed the position of Interim CFO on May 15, 2023, a position he held through March 4, 2024, at which time he returned to his previous role as Senior Vice President of Finance.

(11) Mr. Petkovich’s employment with the Company terminated effective May 14, 2023. The unvested stock awards granted to Mr. Petkovich in November 2020 and in January 2021, 2022 and 2023 were 100% forfeited upon his termination date and the Company adjusted the related compensation expense in its financial statements in accordance with ASC 718 in the period of forfeitures.

(12) Mr. Duthie was appointed Executive Vice President, Chief Legal Officer and Secretary of the Company in May 2021.

 

 

 

LOGO

  

 

37


Grants of Plan-Based Awards

During Fiscal Year 2023

The table below sets forth information on grants of plan-based awards to the NEOs in 2023, including estimated payouts under non-equity incentive plan awards as set forth under “Non-Equity Incentive Plan Awards”, estimated payouts under equity incentive plan awards as set forth under “Long-Term Equity Incentive Plan”, and stock awards and all other option awards as set forth in the “Summary Compensation Table”. The Company’s policy is generally to grant equity awards effective on the date the Compensation Committee approves such awards.

 

             
             

Estimated Future Payouts Under Non-

Equity Incentive Plan Awards (1)

    

Estimated Future Payouts Under Equity

Incentive Plan Awards (2)

    

All Other

Stock

Awards:

    

Closing

Market

Price On

    

Grant Date

Fair Value

 
Name   

Grant

Date

     Threshold      Target      Maximum      Threshold      Target      Stretch      Maximum     

# Of Shares

Of Stock

Or Units (3)

    

Grant

Date Per

Share (4)

    

Of Stock

Awards/

SARs (5)

 
                       

Andy L. Nemeth

     1/25/2023        $900,000        $1,800,000        $3,600,000        17,647        35,294        52,941        70,588        8,824        $68.00        $4,200,020  
                       

Jeffery M. Rodino

     1/25/2023        500,000        1,000,000        2,000,000        7,500        15,000        22,500        30,000        3,750        68.00        1,785,000  
                       

Kip B. Ellis

     1/25/2023        450,000        900,000        1,800,000        6,741        12,942        19,413        25,884        3,235        68.00        1,540,064  
                       

Matthew S. Filer (6)

     1/25/2023        125,000        250,000        500,000        1,400        2,800        4,200        5,600        700        68.00        238,000  
                       

Jacob R. Petkovich (7)

     1/25/2023        362,500        725,000        1,450,000        6,177        12,354        18,531        24,708        3,088        68.00        1,470,092  
                       

Joel D. Duthie

     1/25/2023        250,000        500,000        1,000,000        2,941        5,882        8,823        11,764        1,471        68.00        699,992  

(1) The related performance targets and results for fiscal 2023 are described in detail under “Non-Equity Incentive Plan Awards”. For the actual non-equity incentive awards for performance in 2023, see the “Summary Compensation Table”.

(2) Represents number of shares of stock. Restricted shares granted in fiscal 2023 under the 2023 LTIP that are Performance-Contingent Shares will vest based on actual EBITDA achievement compared to target EBITDA achieved at the conclusion of the cumulative three-year performance measurement period ending on December 31, 2025. Mr. Petkovich’s 2023 Performance-Contingent Shares were forfeited upon termination of his employment with the Company effective May 14, 2023. See detail under “Long-Term Equity Incentive Plan”.

(3) These shares represent the Time-Based Share awards granted in fiscal 2023 that vest on the third anniversary of the grant date. Mr. Petkovich’s 2023 Time-Based Share award was forfeited upon termination of his employment with the Company effective May 14, 2023. See detail under “Long-Term Equity Incentive Plan”.

(4) Represents the closing price of the Company’s stock on the NASDAQ Stock Market on the grant date for the share awards.

(5) Represents the fair value of share awards as of the grant date computed in accordance with ASC 718. In addition, the unvested stock awards granted to Mr. Petkovich in 2023 were 100% forfeited upon the termination of his employment with the Company. The compensation expense related to these awards was adjusted in the Company’s financial statements in accordance with ASC 718 in the period of forfeiture.

(6) The target non-equity incentive plan award for Mr. Filer and actual STIP award payout in 2023 excluded an additional $300,000 discretionary bonus related to his service as Interim CFO.

(7) The target non-equity incentive plan award for Mr. Petkovich represents his full year target award. Mr. Petkovich did not receive a payout for 2023 for his period of service prior to his termination date.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    38


Outstanding Equity Awards as of December 31, 2023

The following table summarizes the outstanding stock awards held by the NEOs as of December 31, 2023.

Stock Awards

 

   

Name

 

  

Grant Date    

 

    

Number Of Shares Or  

Units Of Stock That Have  

Not Vested (1)  

 

    

Market Value Of Unearned  

Shares Or Units Of Stock  

That Have Not Vested (2)  

 

    

Equity Incentive Plan   

Awards: Number Of   

Shares Or Units That   

Have Not Vested (3)   

 

    

Equity Incentive   
Plan Awards: Market   

Or Payout Value Of   

Unearned Shares Or   

Units That Have Not   

Vested (2)   

 
         

Andy L. Nemeth

  

 

 

 

1/25/2023 

 

 

     8,824         $885,488         52,941         $5,312,629   
  

 

 

 

1/26/2022 

 

 

     7,792         781,927         46,755         4,691,864   
  

 

 

 

1/21/2021 

 

 

     8,000         802,800         64,000         6,422,400   
         

Jeffrey M. Rodino (4)

  

 

 

 

1/25/2023 

 

 

     3,750         376,313         22,500         2,257,875   
  

 

 

 

1/26/2022 

 

 

     3,312         332,359         19,871         1,994,055   
  

 

 

 

1/21/2021 

 

 

     3,429         344,100         27,428         2,752,400   
         

Kip B. Ellis

  

 

 

 

1/25/2023 

 

 

     3,235         324,632         19,413         1,948,095   
  

 

 

 

1/26/2022 

 

 

     2,857         286,700         17,144         1,720,400   
  

 

 

 

1/21/2021 

 

 

     2,857         286,700         22,858         2,293,800   
         

Matthew S. Filer

     1/25/2023         700         70,245         2,800         280,980   
         

Jacob R. Petkovich (5)

     -           -         -         -         -   
         

Joel D. Duthie

  

 

 

 

1/25/2023 

 

 

     1,471         147,615         8,823         885,388   
  

 

 

 

1/26/2022 

 

 

     1,299         130,355         7,793         782,028   
  

 

 

 

1/21/2021 

 

 

     857         86,000         6,858         688,200   

 

(1) 

Restricted share grants related to Time-Based Share awards fully vest on January 25, 2026January 26, 2025 and January 21, 2024. Unvested restricted share awards are subject to forfeiture under certain circumstances if the NEO’s employment with the Company is terminated before the shares vest.

 

(2) 

Based on a market price of $100.35 per share which was the NASDAQ Stock Market closing price on December 31, 2023.

 

(3) 

Except for Mr. Filer, restricted share grants related to Performance-Contingent Shares at stretch Company performance will vest based on actual EBITDA achievement compared to target EBITDA achieved at the conclusion of the cumulative three-year performance measurement period. For Mr. Filer, restricted share grants related to Performance-Contingent Shares at target Company performance will vest based on actual EBITDA achievement compared to target EBITDA achieved at the conclusion of the cumulative three-year performance measurement period. Unvested restricted share awards are subject to forfeiture under certain circumstances if the NEO’s employment with the Company is terminated before the shares vest. Restricted share grants related to Performance-Contingent Shares at stretch (or 150% of target payout), which were approved by the Board on January 21, 2021, were adjusted upward to 200% of target payout as of December 31, 2023 to reflect the actual expected payout at the January 17, 2024 vesting date. The related compensation expense associated with the change in payout percentage for these awards was adjusted in the Company’s financial statements in accordance with ASC 718.

 

(4) 

The Board approved an increase to Mr. Rodino’s total target LTIP award from $800,000 in January 2021 to $1,200,000 in July 2021 upon his promotion to President of the Company. The restricted share awards related to both the Time-Based Shares and the Performance-Contingent Shares shown in the table above as outstanding as of December 31, 2023 were adjusted to reflect the impact of the increase to his 2021 total LTIP award and reflect the actual expected payout at the January 21, 2024 and January 17, 2024 vesting dates, respectively, for the Time-Based and Performance-Contingent Shares.

 

(5) 

Unvested Time-Based and Performance-Contingent Shares granted to Mr. Petkovich in 2020, 2021, 2022 and 2023 were forfeited upon termination of his employment with the Company effective May 14, 2023.

 

 

LOGO    39


Option/ SARs Awards

The table below summarizes the outstanding options and SARs held by the NEOs as of December 31, 2023.

 

           

Name


 

Grant Date   

  Number Of
Securities Underlying
Unexercised Options/
SARs Exercisable (1)
 

Number Of

Securities Underlying

Unexercised Options/
SARs Unexercisable (1)

  Options/SARs
Exercise Price
  Options/SARs
Expiration Date
           
Andy L. Nemeth  

-

 

-

 

-

 

-

 

-

           
   

05/14/2020

 

60,000

 

-

 

$41.33

 

5/14/2029

           
Jeffery M. Rodino  

01/17/2017

 

7,707

 

-

 

66.93

 

1/17/2026

           
   

01/17/2017

 

7,707

 

-

 

74.63

 

1/17/2026

           
Kip B. Ellis  

05/14/2020

 

18,000

 

-

 

41.33

 

5/14/2029

           
Matthew S. Filer  

-

 

-

 

-

 

-

 

-

           
Jacob R. Petkovich (2)  

-

 

-

 

-

 

-

 

-

           
Joel D. Duthie  

-

 

-

 

-

 

-

 

-

(1) The SARs that were granted to Mr. Rodino in 2017 are fully vested as of December 31, 2023 and expire after nine years. The stock options that were granted to Messrs. Rodino and Ellis in May 2020 are fully vested as of December 31, 2023 and expire after nine years. There were no options and SARS granted to the NEOs in 2021, 2022 and 2023.

(2) Mr. Petkovich exercised the remaining vested 9,000 stock options that were granted to him in November 2020 in June 2023 per the terms of his stock award agreement.

Equity Compensation Plan Information

 

       

Name

  

Number Of Securities To Be Issued
Upon Exercise Of Outstanding
Options And Rights (1)

   Weighted Average Exercise
Price Of Outstanding Options
And Rights
   Number Of Securities Remaining
For Future Issuance Under Equity
Compensation Plans (2)
       
Equity Compensation Plans
Approved by Security Holders
  

337,962

  

$56.59

  

1,298,039

       
Equity Compensation Plans not
Approved by Security Holders
  

-

  

N/A

  

-

       
Total   

337,962

  

$56.59

  

1,298,039

(1) The number of securities represented is the gross amount of shares to be issued upon exercise of outstanding options and SARs as of December 31, 2023.

(2) Represents the number of net shares available for future awards under the 2009 Omnibus Incentive Plan as of December 31, 2023, and excludes the number of securities to be issued upon exercise of outstanding options and SARs.

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    40


Stock Options And Stock Appreciation Rights Exercises And Stock Vested In Fiscal 2023

The table below sets forth information about the value realized by the NEOs on vesting of stock awards and the exercise of stock options in 2023. There were no SARs exercised by the NEOs in 2023.

 

     

Name

   Stock Awards (1) (2)    Option Awards (3)
                    
  

Number Of Shares
  Acquired On Vesting  

 

  

  Value Realized on Vesting  

 

  

Number Of Shares
  Acquired On Exercise  

 

  

  Value Realized On Exercise  

 

         
Andy L. Nemeth    82,800     $5,406,932     78,000     $4,590,900 
         
Jeffrey M. Rodino    21,600     1,410,504     30,825     1,473,127 
         
Kip B. Ellis    36,000     2,350,840     21,000     977,130 
         
Matthew S. Filer    -     -     -     - 
         
Jacob R. Petkovich    10,666     694,250     19,500     214,305 
         
Joel D. Duthie    1,250     93,825     -     - 

(1) For Messrs. Nemeth, Rodino and Ellis, the table below includes the number of Time-Based Shares awarded on January 23, 2020, which vested on January 23, 2023, using the NASDAQ Stock Market closing price of $66.99 per share times the total number of shares acquired on vesting. For Mr. Duthie, includes the number of Time-Based Shares awarded on October 1, 2020, which vested on October 1, 2023, using the NASDAQ Stock Market closing price of $75.06 per share times the total number of shares acquired on vesting.

 

             
         Nemeth            Rodino            Ellis            Filer            Petkovich            Duthie     
             
Number of Shares (1)      9,200        2,400        4,000        -        -        1,250  
             
Value      $616,308        $160,776        $267,960        -        -        $93,825  

(2) For Messrs. Nemeth, Rodino and Ellis, the table below includes the number of Performance-Contingent Shares awarded on January 23, 2020, which vested at 200% of target on January 20, 2023 (the date the performance conditions were met), using the NASDAQ Stock Market closing price of $65.09 per share times the total number of shares acquired on vesting. For Mr. Petkovich, includes the number of Performance-Contingent Shares awarded on November 24, 2020, which vested at 200% of target on January 20, 2023 (the date the performance conditions were met), using the NASDAQ Stock Market closing price of $65.09 per share times the total number of shares acquired on vesting.

 

 

             
         Nemeth            Rodino            Ellis            Filer            Petkovich            Duthie     
             
Number of Shares (2)      73,600        19,200        32,000        -        10,666        -  
             
Value      $4,790,624        $1,249,728        $2,082,880        -        $694,250        -  

(3) The number of shares acquired on exercise in 2023 for Messrs. Nemeth and Ellis are related to stock options granted on May 14, 2020 which became 100% vested on May 14, 2023. The number of shares acquired on exercise in 2023 for Mr. Rodino are related to stock options granted on January 17, 2017 which became 100% vested on January 17, 2021. The number of shares acquired on exercise for Mr. Petkovich in 2023 are related to stock options granted on November 24, 2020 which became 100% vested on May 14, 2023. The value realized on exercise was based on the difference between the market price per share of the common stock on the date of exercise and the option exercise price.

 

 

LOGO    41


Non-Qualified Deferred Compensation

 

LOGO

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    42


     

Potential Payments

Upon Termination

or Upon a Change

of Control

 

LOGO      

Executive Employment Agreements

 

The Company has entered into Employment Agreements (the “Agreements”) with Messrs. Nemeth, Rodino, Ellis, Petkovich and Duthie, pursuant to which they agreed to serve as executive officers of the Company. The Agreements contain a non-compete clause and certain other stipulations and provide for a severance package that includes 12 months base salary. Under the Agreements, voluntary termination by the NEO or termination by the Company for cause will not result in any obligation of the Company to make payments. Upon termination by the Company without cause (as defined in the Agreement), each NEO would be entitled to: (i) one year of base salary; and (ii) annual non-equity incentive compensation that the NEO would have been entitled to receive at the end of the fiscal year. In addition, if the NEO’s employment is terminated prior to the end of the fiscal year due to death or disability or without cause, any non-equity incentive compensation due to the NEO is to be pro-rated as of the effective date of the termination. The base salary portion would be paid out in equal bi-weekly payments on the regular payroll cycle, and the non-equity incentive compensation would be calculated and paid in accordance with the terms of the applicable plan on a pro-rata basis from the date of termination. Upon termination due to death or disability, the NEO would only receive base salary through the end of the month in which the disability or death occurred. In addition, each of the NEOs has agreed not to compete with the Company for the two-year period following termination of employment subject to certain exceptions.

 

We believe that the Company should provide reasonable severance benefits to our NEOs and other general employees that are fair and commensurate with their job duties, functions, and responsibilities. We believe it is in the best interest of the Company to obtain a release from employees whose employment is terminated as well as a non-compete agreement from certain employees in the form of an employment agreement.

 

 

 

LOGO    43


Executive Equity Compensation Agreement

In addition to reasonable severance benefits outlined under the employment agreements discussed above, the Company has entered into certain long-term equity compensation agreements with its executive officers, of which the awards under those agreements (in the form of restricted stock grants, stock options and SARS) are eligible for accelerated vesting under certain circumstances.

Restricted Share Awards

With respect to the Time-Based Share awards granted under the 2009 Omnibus Incentive Plan, in the event of a termination of employment by the Company without cause, upon a change of control or termination due to death or disability, all unvested Time-Based Share awards would become fully vested.

With respect to the Performance-Contingent Share awards granted under the 2009 Omnibus Incentive Plan, in the event of a termination of employment by the Company without cause or a termination due to death or disability before the performance period ending date, the number of Performance-Contingent Shares shall continue to vest subject to the achievement of certain pre-established performance criteria for such awards with the performance period ending with the date as stated in the applicable award agreement. In the event of a change of control, all unvested Performance-Contingent Shares would become fully vested as of the effective date of the change of control based on the assumption that the target amount of EBITDA performance as stated in the award agreements has been achieved.

Stock Options and SARs

With respect to stock options and SARS granted under the 2009 Omnibus Incentive Plan, in the event the NEO ceases to be an employee of the Company, no further vesting will occur from and after the date of termination except in the event of a termination of employment by the Company without cause, in which case both stock options and SARS would become fully vested and exercisable as to any shares that have not otherwise vested as of the effective time of termination of employment.

Based on the employment and compensation arrangements in effect as of December 31, 2023 and assuming a hypothetical termination date of December 31, 2023, including the price of the Company’s common stock on that date, the benefits upon termination without cause or upon a change of control, and termination due to death or disability for our NEOs would have been as follows in the table on page 45.

Former Chief Financial Officer Employment Agreement (Jacob R. Petkovich)

Mr. Petkovich’s Employment Agreement dated as of November 24, 2020 (the “CFO Agreement”), provided that Mr. Petkovich serve as Chief Financial Officer of the Company and that his employment term will continue to January 31, 2024 unless terminated earlier by either party in accordance with the CFO Agreement. Pursuant to the CFO Agreement, Mr. Petkovich was entitled to: (i) an annual base salary, (ii) participate in the Company’s employee benefit plans as they are generally available to the Company’s employees, (iii) participate in the Company’s STIP, and (iv) participate in the Company’s LTIP. The agreement also provided that Mr. Petkovich was also entitled to certain severance benefits in the event that his employment is terminated due to his death or disability or due to his termination by the Company without cause, or by himself for good reason (as such terms are defined in the CFO Agreement), which includes, in certain circumstances, the satisfaction of any continuing employment vesting requirement (subject to the satisfaction of applicable performance criteria) and the payment of cash in lieu of bonus and/or equity incentive awards. Mr. Petkovich voluntarily terminated his employment with the Company effective May 14, 2023 and as such is not entitled to any benefits upon the effective date of his termination of employment and as of December 31, 2023.

 

 

 

Notice of 2024 Annual Meeting of Shareholders & Proxy Statement    44


       
Name/Benefit       Termination Without   
Cause
       Change Of    
Control
    Termination Due To 
Death Or Disability
   

Andy L. Nemeth (4)

              
       

Base Salary

  

$850,000

  

$850,000

  

-

       

Acceleration of Long-Term Incentives (1)

  

18,897,108

  

18,897,108

  

$18,897,108

       

Acceleration of Stock Options/SARs Exercise (2)

  

-

  

-

  

-

       

Annual Non-Equity Incentive Bonus (3)

  

1,632,600

  

1,632,600

  

1,632,600

       

Total Benefits

  

$21,379,708

  

$21,379,708

  

$20,529,708

   

Jeffery M. Rodino

          
       

Base Salary

  

$575,000

  

$575,000

  

-

       

Acceleration of Long-Term Incentives (1)

  

8,057,102

  

8,057,102

  

$8,057,102

       

Acceleration of Stock Options/SARs Exercise (2)

  

-

  

-

  

-

       

Annual Non-Equity Incentive Bonus (3)

  

931,900

  

931,900

  

931,900

       

Total Benefits

  

$9,564,002

  

$9,564,002

  

$8,989,002

   

Kip B. Ellis

              
       

Base Salary

  

$525,000

  

$525,000

  

-

       

Acceleration of Long-Term Incentives (1)

  

6,860,327

  

6,860,327

  

$6,860,327

       

Acceleration of Stock Options/SARs Exercise (2)