DEF 14A 1 wms-def14a_20210609.htm DEF 14A wms-def14a_20210609.htm
Advanced Drainage Systems, Inc.
Shareholder Annual Meeting in a DEF 14A on 06/09/2021   Download
SEC Document
SEC Filing

 

 

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

 

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 Pursuant to §240.14a-12

ADVANCED DRAINAGE SYSTEMS, INC.

(Name of Registrant as Specified In Its Charter)  

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

 

No fee required.

 

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

(1)

 

Title of each class of securities to which transaction applies:

 

 

 

 

 

 

 

 

(2)

 

Aggregate number of securities to which transaction applies:

 

 

 

 

 

 

 

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

 

 

 

 

(4)

 

Proposed maximum aggregate value of transaction:

 

 

 

 

 

 

 

 

(5)

 

Total fee paid:

 

 

 

 

 

 

 

 

 

Fee paid previously with preliminary materials.

 

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

 

(1)

 

Amount previously paid:

 

 

 

 

 

 

 

 

(2)

 

Form, Schedule or Registration Statement No.:

 

 

 

 

 

 

 

 

(3)

 

Filing party:

 

 

 

 

 

 

 

 

(4)

 

Date Filed:

 

 

 

 

 

 

 

 

 

 

 



 

 

Letter to Stockholders

 

June 9, 2021

 

 

Dear Stockholder:

I cordially invite you to attend via webcast the 2021 Annual Meeting of Stockholders of Advanced Drainage Systems, Inc. (the “Company,” “we” or “our”), which will be held on Tuesday, July 22, 2021 at 10:00 a.m., Eastern Time. This year’s Annual Meeting will be a virtual meeting of stockholders, which means that you will be able to participate in the Annual Meeting, vote and submit your questions during the Annual Meeting via live webcast by visiting www.virtualshareholdermeeting.com/WMS2021. You will not be able to attend the Annual Meeting in person.

Details of the business to be conducted at the Annual Meeting are provided in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement, which you are urged to read carefully. If you participate in the Annual Meeting via the live webcast at www.virtualshareholdermeeting.com/WMS2021, you may revoke your proxy and vote during the Annual Meeting, even if you have previously submitted a proxy.

We have elected to take advantage of Securities and Exchange Commission (“SEC”) rules that allow us to furnish proxy materials to certain stockholders on the Internet. On or about the date of this letter, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to stockholders of record at the close of business on May 28, 2021. At the same time, we provided those stockholders with access to our online proxy materials and filed our proxy materials with the SEC. We believe furnishing proxy materials to our stockholders on the Internet will allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting. If you have received the Notice, you will not receive a printed copy of the proxy materials unless you request it by following the instructions for requesting such materials contained in the Notice.

Stockholders of record at the close of business on May 28, 2021 are entitled to vote at the 2021 Annual Meeting. Regardless of the number of shares you own, your vote is important. I urge you to vote as soon as possible by telephone, the Internet or by signing, dating and returning the enclosed proxy card by mail, even if you plan to attend the meeting via webcast.

Your continuing interest in our Company is greatly appreciated.

 

 

 

 

 

 

Very truly yours,

 

 

 

 

D. Scott Barbour

 

 

President and Chief Executive Officer


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ADVANCED DRAINAGE SYSTEMS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on July 22, 2021

The Annual Meeting of Stockholders of Advanced Drainage Systems, Inc. (the “Company”) will be held on Thursday, July 22, 2021 at 10:00 a.m., Eastern Time. This year’s Annual Meeting will be a virtual meeting of stockholders.

The purposes of the meeting are:

1. To elect, as described in the proxy statement, four Class II directors and one Class III director nominated for a term to expire at the 2022 Annual Meeting;

2. To hold a non-binding advisory vote on the compensation for the Company’s named executive officers, as disclosed in the proxy statement;

3. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending on March 31, 2022;

4. To approve an amendment to the 2017 Omnibus Incentive Plan (the “2017 Incentive Plan”) to increase the number of shares available for issuance by 1,500,000 and extend the 2017 Incentive Plan’s duration; and

5. To consider and act upon such other matters as may properly be brought before the meeting, or any adjournment or postponement thereof.

These matters are more fully described in the proxy statement. The Board recommends that you vote “FOR ALL” of the nominated directors, “FOR” the proposal to approve, on an advisory basis, the compensation of the Company’s named executive officers, “FOR” the ratification of the Company’s independent registered public accounting firm and “FOR” the proposal to amend the 2017 Incentive Plan. The Board knows of no other matters at this time that may be properly brought before the meeting.

Stockholders of record at the close of business on May 28, 2021 are entitled to notice of, and to vote at the Annual Meeting and any subsequent adjournments or postponements. A list of these stockholders will be available for inspection for 10 days preceding the Annual Meeting at our corporate headquarters, 4640 Trueman Boulevard, Hilliard, Ohio 43026. We will begin mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about June 9, 2021 to stockholders of record at the close of business on May 28, 2021. The Notice contains instructions on how to access our proxy statement, our fiscal year 2021 Annual Report to Stockholders and the form of proxy on the Internet, as well as instructions on how to request a paper copy of the proxy materials.

It is important that your common shares be represented at the Annual Meeting whether or not you are personally able to attend via webcast. Our proxy tabulator, Broadridge Financial Solutions, Inc., must receive your proxy card no later than 11:59 p.m., Eastern Time on July 21, 2021.

Please read carefully the sections in the proxy statement on attending via webcast and voting at the Annual Meeting to ensure that you comply with these requirements.

Important Notice Regarding the Availability of Proxy Materials for Stockholder Meeting to be held on July 22, 2021: The proxy statement and our annual report on Form 10-K for fiscal year 2021 are available at www.proxyvote.com.

 

 

  

By Order of the Board of Directors

 

 

 

  

Scott A. Cottrill

 

  

Corporate Secretary

Hilliard, Ohio

June 9, 2021

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TABLE OF CONTENTS

 

 

 

Page

Letter to Stockholders

ii

Notice of Annual Meeting of Stockholders

iii

Proxy Statement

1

Questions and Answers About This Proxy Statement and the Annual Meeting

2

FISCAL YEAR HIGHLIGHTS

5

Business Performance/Fiscal Year Achievements

5

ESG Strategic Initiatives

5

CORPORATE GOVERNANCE

6

Corporate Governance Highlights

6

Proposal One: Election of Directors

6

Directors Not Up for Re-Election

8

Board Oversight Responsibilities

10

Board Independence

10

Director Skills, Qualifications and Experience

11

Board Diversity and Renewal

11

Board and Director Evaluation Process

12

Review of Director Nominees

12

Board Meetings and Attendance

13

Committees of the Board

13

Board Leadership

15

Director Compensation

16

Director Stock Ownership Policy

17

Directors' Service on Other Public Boards

17

Engagement with Stockholders and Governance Improvements

18

Sustainability Oversight

18

Certain Information Regarding our Directors and Nominees

18

Corporate Governance Guidelines

19

Majority Voting Standard for Directors

19

Codes of Business Conduct and Ethics

19

How You May Communicate with Directors

19

COMPENSATION DISCUSSION AND ANALYSIS

20

Certain Information Regarding Our Executive Officers

20

Executive Compensation Highlights – Fiscal Year 2021

21

Named Executive Officers

23

Executive Compensation Program Overview

23

Benefits and Executive Perquisites

35

Other Executive Compensation Policies and Practices

36

Accounting and Tax Considerations

37

Compensation and Management Development Committee Report

37

Compensation Outcomes for 2021

38

Proposal Two: Advisory Vote on Executive Compensation

51

AUDIT COMMITTEE MATTERS

52

Proposal Three: Ratification of the Appointment of Deloitte & Touche LLP as the Company's Independent Registered Public Accounting Firm for Fiscal Year 2022

52

Other Independent Registered Public Accounting Firm Information

52

Report of the Audit Committee

53

STOCK OWNERSHIP INFORMATION

54

Security Ownership of Certain Beneficial Owners and Management

54

Equity Compensation Plan Information

56

Certain Relationships and Related-Party Transactions

56

Delinquent Sections 16(A) Reports

56

Proposal Four: Approval of Amendment to the 2017 Omnibus Incentive Plan

57

STOCKHOLDER PROPOSALS FOR 2021 ANNUAL MEETING

63

Miscellaneous

64

Annex A

65

 

 

 

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PROXY STATEMENT

Advanced Drainage Systems, Inc. (which we refer to as “we,” “us,” “our,” “ADS” or the “Company”) is furnishing this proxy statement in connection with the solicitation by our Board of Directors (our “Board”) of proxies to vote at the Annual Meeting of Stockholders, to be held via webcast on July 22, 2021 (the “Annual Meeting” or the “2021 Annual Meeting”), or at any adjournment or postponement thereof. A copy of this proxy statement, the proxy card and our Annual Report for the fiscal year ended March 31, 2021 can be found at the web address www.proxyvote.com. We will begin mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about June 9, 2021 to stockholders of record at the close of business on May 28, 2021. The Notice contains instructions on how to access our proxy statement, our fiscal year 2021 Annual Report to Stockholders and the form of proxy on the Internet, as well as instructions on how to request a paper copy of the proxy materials. We first sent these proxy materials to our stockholders on or about June 9, 2021.

References in this proxy statement to the Company’s “2021 Annual Meeting,” “2022 Annual Meeting,” and “2023 Annual Meeting” shall mean the annual meeting of stockholders to occur following each of the fiscal years ended March 31, 2021, 2022 and 2023, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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QUESTIONS AND ANSWERS ABOUT

THIS PROXY STATEMENT AND THE ANNUAL MEETING

Who is soliciting my proxy with this Proxy Statement?

The Company is soliciting your proxy in connection with the Company’s 2021 Annual Meeting.

Where and when will the meeting be held?

This year’s meeting will be held on July 22, 2021 and will begin at 10:00 a.m. (Eastern Time). The 2021 Annual Meeting will be held only by means of a live webcast.

What if I wish to attend the meeting?

We will be hosting the Annual Meeting live via the Internet. You will not be able to attend the Annual Meeting in person. Any stockholder can listen to and participate in the Annual Meeting live via the Internet at www.virtualshareholdermeeting.com/WMS2021. The webcast will start at 10:00 a.m. (Eastern Time), on July 22, 2021. Stockholders may vote and submit questions while connected to the Annual Meeting on the Internet.

Instructions on how to connect and participate in the Annual Meeting, including how to demonstrate proof of ownership of our common shares, are posted at www.virtualshareholdermeeting.com/WMS2021. If you do not have your 16-digit control number that is printed in the box marked by the arrow on your Notice of Internet Availability of Proxy Materials or your proxy card (if you received a printed copy of the proxy materials), you will only be able to listen to the Annual Meeting.

What will be voted on at the meeting?

At the Annual Meeting, stockholders will be asked to approve (i) the election of four Class II directors (Messrs. Eversole, Fischer and Haney and Ms. Chaibi) and one Class III director (Mr. Seetharam) nominated for terms to expire at the 2022 Annual Meeting, (ii) in a non-binding advisory capacity, the Company’s named executive officer compensation, (iii) the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year ending March 31, 2022, (iv) an amendment to the 2017 Incentive Plan to increase the number of shares available for issuance by 1,500,000 and extend the 2017 Incentive Plan’s duration and (v) to transact such other business as may properly come before the 2021 Annual Meeting or any adjournment or postponement thereof.

Who is entitled to vote at the meeting?

The record date for this meeting is May 28, 2021. On that date, the Company had 72,124,305 shares of common stock (“Common Stock”) outstanding and 19,272,843 shares of redeemable convertible preferred stock (the “ESOP Preferred Stock”) outstanding. Holders of our Common Stock and ESOP Preferred Stock are entitled to one vote for each share held as of the May 28, 2021 record date. Holders of our Common Stock and ESOP Preferred Stock will vote as a single class on all matters described in this proxy statement. Stockholders may not cumulate votes in the election of directors.

If I am a stockholder of record of Common Stock, how do I vote?

If your shares of Common Stock are registered directly in your name with the Company’s transfer agent, Computershare Investor Services, LLC, you are considered the stockholder of record with respect to those shares and you may cast your vote by any one of the following ways:

 

By Telephone: Call 1-800-690-6903: You can use any touch-tone telephone. Have your proxy card or Notice of Internet Availability of Proxy Materials in hand when you call and follow the instructions.

 

Over the Internet: Go to www.proxyvote.com: You can use the Internet 24 hours a day to transmit your voting instructions. Have your proxy card or Notice of Internet Availability of Proxy Materials in hand when you access the web site and follow the instructions.

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By Mail: If you received a printed copy of the proxy materials, you may submit your vote by completing, signing and dating your proxy card and returning it in the prepaid envelope to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.

If I am a beneficial owner of shares of Common Stock held in street name, how do I vote?

If your shares of Common Stock are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the “beneficial owner” of shares held in “street name.” The organization holding your account is considered the stockholder of record for purposes of voting at the 2021 Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. If you request printed copies of these proxy materials by mail, you will receive a voting instruction form.

If I am a participant in the Advanced Drainage Systems, Inc. Employee Stock Ownership Plan, how do I vote?

If you are a participant in the Advanced Drainage Systems, Inc. Employee Stock Ownership Plan and trust (the “ESOP”), you have the right to instruct Fifth Third Bank, as administrative trustee of the ESOP (the “ESOP Trustee”), to vote the shares of ESOP Preferred Stock allocated to your ESOP account. If no instructions are given or if your voting instructions are not received by the deadline shown on the enclosed proxy card, the ESOP Trustee will vote the uninstructed shares in its discretion.

Please note that participants in the ESOP may not vote in person at the meeting, as only the ESOP Trustee is authorized to vote the shares of ESOP Preferred Stock allocated to participants’ accounts.

What if I want to change my vote?

If you want to change your vote, you may revoke your proxy by:

 

Submitting your vote at a later time via the Internet or telephone prior to the 2021 Annual Meeting;

 

Submitting a properly signed proxy card with a later date that is received at or prior to the Annual Meeting; or

 

Providing notice in writing before the meeting to: Secretary, Advanced Drainage Systems, Inc., 4640 Trueman Boulevard, Hilliard, Ohio 43026 USA.

What if I submit a proxy without giving specific voting instructions?

If you properly submit a proxy without giving specific voting instructions, the individuals named as proxies on the proxy card will vote your shares:

 

FOR the election of the five nominees for Director named on page 7.

 

FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers.

 

FOR the ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year ending March 31, 2022.

 

FOR the approval of an amendment to the 2017 Incentive Plan to increase the number of shares available for issuance by 1,500,000 and extend the 2017 Incentive Plan’s duration.

 

In accordance with the best judgment of the individuals named as proxies on the proxy card on any other matters properly brought before the Annual Meeting.

Will my shares be voted if I do not provide my proxy?

If you are a registered stockholder and do not submit a proxy, you must attend the meeting via webcast in order to vote your shares.

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If you hold shares in “street name,” your shares may be voted on certain matters even if you do not provide voting instructions to your bank or broker. Banks and brokers have the authority under the rules of the New York Stock Exchange (“NYSE”) to vote shares for which their customers do not provide voting instructions on certain routine matters. The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm is considered a routine matter for which banks and brokers may vote without specific instructions from their customers. You must provide voting instructions to your bank or broker for your shares to be voted on all other matters presented at the 2021 Annual Meeting.

If you are a participant in the ESOP and do not instruct Fifth Third Bank, as ESOP Trustee, to vote the shares allocated to your ESOP account, or if your voting instructions are not received by the deadline shown on the enclosed voting instruction form, Fifth Third Bank will vote the uninstructed shares in its discretion.

What should I do if I have questions?

If you have any questions or require any assistance with voting your shares of Common Stock or with respect to instructing the trustee of the ESOP with respect to any shares of ESOP Preferred Stock, please contact Scott A. Cottrill, the Company’s corporate secretary, at (614) 658-0050.


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FISCAL YEAR HIGHLIGHTS

BUSINESS PERFORMANCE/FISCAL YEAR ACHIEVEMENTS

We delivered another year of record financial performance for the fiscal year ended March 31, 2021. When confronted with a challenging operating environment, our employees adapted well to the new health and safety measures we implemented and remained focused on executing our plan and delivering exceptional results. We believe our accomplishments over the past year and our continued execution position us well for the future to deliver sustainable, long-term growth.

ESG STRATEGIC INITIATIVES

We are committed to integrating quality environmental, social and governance practices into our business, which we believe will increase the long-term sustainability and resiliency of our business model. In our daily operations, we are dedicated to promoting environmental stewardship through our products and solutions, creating a safe work environment for our employees and making a positive impact in the communities we serve. We also adhere to strong corporate governance principles by adopting best practices to strengthen our accountability and relationship of trust with our stakeholders.

We believe that a sound governance structure can serve as a solid foundation for a successful sustainability program. We have developed several key strategic initiatives in order to institutionalize our governance structure and enhance the oversight of our sustainability practices.

At last year’s annual meeting of stockholders, our Board recommended, and our stockholders approved, certain amendments to our Certificate of Incorporation dealing with the rights of our stockholders that improved our corporate governance practices. These improvements included eliminating the declassification of the Board over a three-year period and the removal of supermajority vote requirements for all but certain limited changes to the Certificate of Incorporation and Bylaws. We also adopted a majority vote standard for uncontested director elections (with a plurality carve-out for contested elections). We believe that these changes enhance our Board’s accountability and improve the rights of our stockholders, which will help us in our efforts to continue to create value over the long term.

In fiscal year 2021, we also made significant strides in building the foundation of our ESG program through:

 

expanding the efforts of our Board ESG sub-committee to further our strategic priorities regarding diversity, equity and inclusion;

 

continuing to establish processes for collecting and regularly tracking data related to our environmental impacts;

 

our review and selection of sustainability reporting standards and frameworks to guide our ESG program development and creating business-oriented key performance indicators (KPIs) in alignment with best practice standards;

 

continuing to engage with internal and external stakeholders and third parties to understand the importance of various components of our ESG program development; and

 

the creation of platforms to increase ESG-related disclosures, including increased and improved transparency about our sustainability practices in our sustainability report and website to better communicate our ESG efforts.

 


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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE HIGHLIGHTS

PROPOSAL ONE: ELECTION OF DIRECTORS

Director Election Process

Our business and affairs are managed under the direction of our Board. We currently have eleven directors. On May 19, 2021, the Board elected to expand the size of the Board to twelve directors and nominated Anil Seetharam to fill the newly created vacancy as a Class III director upon his election and qualification at the 2021 Annual Meeting. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal.

Our Board is divided into three classes of directors, Previously, directors served staggered terms of three years each. Beginning at the 2021 Annual Meeting, directors will be nominated and elected for staggered one-year terms. Our directors are currently separated into the following classes:

 

Our Class I directors are D. Scott Barbour, Michael B. Coleman, Tanya Fratto and Carl A. Nelson, Jr.;

 

Our Class II directors are Anesa T. Chaibi, Robert M. Eversole, Alexander R. Fischer and M.A. (Mark) Haney; and

 

Our Class III directors are Ross M. Jones, C. Robert Kidder and Manuel J. Perez de la Mesa.

The terms of our Class I directors are set to expire upon the election and qualification of successor directors at our 2023 Annual Meeting. The terms of our Class II directors are set to expire upon the election and qualification of successor directors at the 2021 Annual Meeting. The terms of our Class III directors are set to expire upon the election and qualification of successor directors at our 2022 Annual Meeting.

Any vacancies in our classified Board will be filled by the remaining directors and the elected person will serve the remainder of the term of the class to which he or she is appointed. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board to satisfy their oversight responsibilities effectively in light of our business and structure, our Board focused primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth below. We believe that our directors provide an appropriate mix of

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experience and skills relevant to the size and nature of our business. We also value the experience that our directors bring from their service on other boards.

2021 Nominees for Election to the Board of Directors

The Class II directors and Class III director to be elected at the 2021 Annual Meeting will serve a term that expires at the 2022 Annual Meeting. The Board has nominated (a) Ms. Chaibi and Messrs. Eversole, Fischer and Haney for re-election as Class II directors at the 2021 Annual Meeting and (b) Mr. Seetharam for election as a Class III director at the 2021 Annual Meeting. Mr. Seetharam’s nomination as director was recommended by an existing stockholder. All of the nominees have indicated a willingness to stand for re-election and to serve if re-elected.

The following paragraphs describe the business experience and education of Ms. Chaibi and Messrs. Eversole, Fischer, Haney and Seetharam, who have been nominated for terms expiring at the 2022 Annual Meeting.

Anesa T. Chaibi. Anesa T. Chaibi is an industry advisor in the Industrial and Business Services Group with Warburg Pincus, a leading global private equity firm focused on growth investing. She also serves on the boards of Sundyne LLC and Infinite TopCo LLC, both portfolio companies of Warburg Pincus. Ms. Chaibi was previously the Chief Executive Officer and Director of Optimas OE Solutions, LLC (a global provider of integrated supply chain solutions and engineering support), from 2016 to 2019. Previously, Ms. Chaibi served as President and Chief Executive Officer of HD Supply Facilities Maintenance, a division of HD Supply Holdings, Inc. (an industrial supplier), from 2005 to 2015. Prior to this role, Ms. Chaibi held a variety of roles of increasing responsibility within several business units at General Electric from 1989 to 2005. Ms. Chaibi has a B.S. in Chemical Engineering from West Virginia University and an M.B.A. from the Duke University Fuqua School of Business. Additionally, Ms. Chaibi is a director of Regal Beloit Corporation and a member of the board of WP Capital Corporation 1-A (WP CA-UN) and is an NACD Board Leadership Fellow. We believe that Ms. Chaibi's executive leadership experience, experience in manufacturing and corporate governance knowledge make her qualified to serve as a member of our Board.

Robert M. Eversole. Robert M. Eversole became a director in 2008. Mr. Eversole is a Managing Partner of Stonehenge Partners, Inc., a private investment capital firm and has been continuously employed as such since 2007. Prior to joining Stonehenge Partners, Mr. Eversole spent 22 years with Fifth Third Bank, most recently as President and Chief Executive Officer of Central Ohio, and additionally served as Regional President for Fifth Third Bancorp affiliate banks in Western Ohio, Central Florida and Ohio Valley. He also served as a member of the Fifth Third Bancorp Operating Committee. Mr. Eversole currently serves on the boards of directors for certain privately-held companies. Mr. Eversole previously served on the boards of Fifth Third Bank, Central Ohio, Fifth Third Bank, South Florida, United Retirement Plan Consultants, Inc., Red Capital Group, Davlyn Group Holdings, and other board representation/observation roles. Mr. Eversole is a graduate of The Ohio State University and has completed a number of executive education programs. We believe that Mr. Eversole’s extensive background in private equity and commercial banking, his expertise on financial matters and his extensive leadership and management experience make him qualified to serve as a member of our Board.

Alexander R. Fischer. Alexander R. Fischer became a director in 2014. Mr. Fischer has been the President and CEO of the Columbus Partnership, an organization of CEOs focused on civic, philanthropic, education, diversity and inclusion and economic development opportunities in Columbus, Ohio, since 2009. Prior to his role at the Columbus Partnership, Mr. Fischer worked at Battelle Memorial Institute, a science and technology company, from 2002 to 2009, where he served as Senior Vice President for Business and Economic Development, Vice President of Commercialization, and Director of Technology Transfer and Economic Development. Mr. Fischer has also worked in the public sector, as Commissioner of Economic Development, Deputy Governor and the Chief of Staff for the State of Tennessee from 1997 to 2002. In the past, he has served on the boards of directors for a variety of for-profit and not-for-profit organizations, and currently serves on the boards of Nationwide Children’s Hospital, The Ohio State University, OneColumbus, White Oak Partners and Andelyn Biosciences. Mr. Fischer graduated from the University of Tennessee with a B.S. in Economics and Public Administration and also received a Master’s of Science in Urban Planning and Economic Development from the University of Tennessee. We believe that Mr. Fischer’s executive management experience, his knowledge of economic development and commercialization and the knowledge he has gained from his extensive involvement in the public policy sectors make him qualified to serve as a member of our Board.

M.A. (Mark) Haney. M.A. (Mark) Haney became a director in 2014. Mr. Haney retired in December 2011 from Chevron Phillips Chemical Company LP, a chemical producer, where he served as Executive Vice President of Olefins and Polyolefins from January 2011 until his retirement. From 2008 to 2011, Mr. Haney served as Senior Vice President, Specialties, Aromatics and Styrenics. He also served as Vice President of Polyethylene and President of Performance

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Pipe. Prior to joining Chevron Phillips Chemical Company, Mr. Haney held numerous management positions with Phillips Petroleum Company. Mr. Haney currently serves on the board of directors of Phillips 66 Partners LP. Mr. Haney attended West Texas University and majored in chemistry. We believe that Mr. Haney’s extensive executive and management experience and his understanding of the petro-chemicals industry and the raw materials used in our products make him qualified to serve as a member of our Board.

Anil Seetharam. Anil Seetharam is director nominee in 2021. Mr. Seetharam is a Managing Director of Berkshire Partners LLC (“Berkshire”) and Stockbridge Partners LLC (“Stockbridge”), a specialized investment group affiliated with Berkshire focused on marketable securities. Mr. Seetharam joined Stockbridge in February 2007 as a member of the Stockbridge investment team and became a Managing Director in December 2014. Prior to joining Stockbridge in 2007, Mr. Seetharam was previously an associate at Berkshire, a business analyst at McKinsey & Co., a consulting firm, and a vice president at Reservoir Capital, an investment firm. The Board has nominated Mr. Seetharam to be a director because of his knowledge of public markets and private company dynamics based on his years of experience in investing in the public and private equity markets.

Although it is anticipated that each nominee will be available to serve as a director, should any nominee be unable to serve, the proxies will be voted by the proxy holders in their discretion for another person properly designated. Each nominee recommended by the Board to stockholders was recommended to the Board by the nominating and corporate governance committee.

Recommendation of the Board

The Board unanimously recommends that you vote “FOR” the election of each of Ms. Chaibi and Messrs. Eversole, Fischer, Haney and Seetharam.

Vote Required

The election of directors is by majority vote of the votes cast in such election. Brokers non-votes and abstentions are not counted toward the election of directors or toward the election of individual nominees specified on the proxy and therefore, broker non-votes and abstentions shall have no effect on this proposal.

If you return a proxy card without giving specific voting instructions, then your shares will be voted “FOR” the election of Ms. Chaibi and Messrs. Eversole, Fischer, Haney and Seetharam.

If you hold your shares in “street name” and do not provide specific voting instructions to the bank or broker or do not obtain a proxy from such bank or broker to vote those shares, then your shares will not be voted in the election of Directors.

DIRECTORS NOT UP FOR RE-ELECTION

The following paragraphs describe the business experience and education of our Class I and Class III directors (not standing for re-election).

D. Scott Barbour. D. Scott Barbour joined us as a director, Chief Executive Officer and President in 2017. Mr. Barbour has over 25 years of experience in the industrials sector. From 1989 until 2016, he worked for Emerson Electric, a global technology and engineering company that provides solutions for customers in industrial, residential and commercial markets as President and CEO of its $4.5 billion Network Power business. Mr. Barbour was responsible for managing major multi-million dollar contract negotiations, leading and implementing a global profitability optimization program, expanding Emerson’s geographic footprint, introducing new product lines, and managing the spin-off and subsequent sale of the Network Power business, now Vertiv. During his tenure at Emerson, Mr. Barbour also held several leadership positions including Group Vice President of Emerson Climate Technologies Group, President, Emerson Climate Technologies Asia Pacific Division, and President, Emerson Climate Technologies Air Conditioning Division. In these roles, Mr. Barbour drove significant technology initiatives, increased profitability and led new product development. Mr. Barbour began his career at Colt Industries, where he worked as a product engineer. Mr. Barbour is a board member of Recreation Unlimited Farm and Fun (Recreation Unlimited) a 501(c)(3) not-for profit organization serving individuals with physical and developmental disabilities and health concerns. Mr. Barbour received his Bachelor of Science in Mechanical Engineering from Southern Methodist University and his Master of Business Administration from the Owen

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Graduate School of Management, Vanderbilt University. We believe that Mr. Barbour’s extensive leadership experience and substantial business qualifications make him qualified to serve as a member of our Board.

Michael B. Coleman. Michael B. Coleman became a director in 2018. Mr. Coleman is a partner at Ice Miller and serves as Partner in Charge of the firm's Government Law Group. Mr. Coleman served as Mayor of Columbus, Ohio from 2000 to 2015, the first African-American mayor and the longest-serving mayor in Columbus history. Mr. Coleman’s 25 plus years of experience in public service also includes serving as City Council President for Columbus, Ohio from 1997 to 1999 and as a member of City Council from 1992 to 1999. Prior to his term as Mayor, Mr. Coleman was a partner with the law firm of Schottenstein Zox & Dunn LLP. Mr. Coleman has received numerous national awards and is a frequent public speaker on issues involving economic development, neighborhood revitalization and environmental stewardship. Mr. Coleman has a B.S. in Political Science from the University of Cincinnati and a J.D. from the University of Dayton School of Law. We believe that Mr. Coleman’s significant legal background, his knowledge of economic development, familiarity with state and local contracting matters and his extensive involvement in the public policy sectors make him qualified to serve as a member of our Board.

Tanya D. Fratto. Tanya D. Fratto became a director in 2013. Prior to that, Ms. Fratto spent over 30 years with global industrial companies and private equity. She was Chief Executive Officer of Diamond Innovations, Inc., a world-leading manufacturer of industrial diamonds and cubic boron nitride used in oil and gas, infrastructure, automotive, aerospace, and electronics industries. In addition, she enjoyed a successful 20-year career with General Electric. Her experience has ranged from profit and loss ownership, product management and operations, to Six Sigma and supply chain management, spending time in GE Aerospace, GE Plastics, Corporate Sourcing, GE Appliances, and GE Consumer Service. Ms. Fratto holds a BS in Electrical Engineering from the University of South Alabama. She currently sits on the board of Smiths Global Plc, a global technology company; Mondi Group Plc, an international paper and packaging company; and Ashtead Group Plc, an international equipment rental company. We believe that Ms. Fratto’s extensive executive and management experience as well as her experience managing global operations and the insights gained from those experiences make her qualified to serve as a member of our Board.

Ross M. Jones. Ross M. Jones became a director in 2018. Mr. Jones, a Managing Director at Berkshire Partners since 2000, has over 25 years of private equity experience. During Mr. Jones’ career at Berkshire, he has worked with many companies across a wide range of industries, including advising the Company over a 10-year period prior to its public offering. His prior board experience also includes serving as Chairman of the Board and Nominating & Governance Committee at Bare Escentuals, Inc. and serving as Lead Director and Chairman of the Nominating & Governance and Compensation Committees at Carter’s, Inc., as well as current or former board positions on private companies Asurion Corp., Melissa & Doug and Torres Unidas. Before joining Berkshire Partners, Mr. Jones worked at a start-up merchant bank, Bain & Co. and in the Investment Banking Division of Morgan Stanley & Co. Mr. Jones has a B.A. from Dartmouth College and a M.B.A. from Stanford University Graduate School of Business. We believe that Mr. Jones’ substantial business experience and extensive knowledge of financial services make him qualified to serve as a member of our Board.

C. Robert Kidder. C. Robert Kidder became a director in 2014. Mr. Kidder also serves as the Chairman of our Board and from 2014 to 2017 served as the Lead Independent Director on our Board. Mr. Kidder served as Chairman and Chief Executive Officer of 3Stone Advisors LLC, a private investment firm, from 2006 to 2011, and as non-executive Chairman of the Board of Chrysler Group LLC from 2009 to 2011. He was a Principal at Stonehenge Partners, Inc., a private investment firm, from 2004 to 2006. Mr. Kidder served as President of Borden Capital, Inc., a company that provided financial and strategic advice to the Borden family of companies, from 2001 to 2003. He was Chairman of the Board from 1995 to 2004 and Chief Executive Officer from 1995 to 2002 of Borden Chemical, Inc. (formerly Borden, Inc.), a forest products and industrial chemicals company. Mr. Kidder was Chairman and Chief Executive Officer and President of Duracell International Inc. Prior to joining Duracell International Inc., Mr. Kidder worked in planning and development at Dart Industries and as a management consultant with McKinsey & Co. Mr. Kidder currently serves on the board of directors of Microvi Biotech Inc., Wildcat Discovery Technologies, Cohn Robbins Holdings Corp. and Andelyn Biosciences, and previously served on the boards of directors of Morgan Stanley from 1997 to 2015, Schering-Plough Corporation from 2005 to 2009 and Merck and Co., Inc. from 2005 to 2017. Mr. Kidder earned a B.S. in industrial engineering from the University of Michigan and a graduate degree in industrial economics from Iowa State University. We believe Mr. Kidder’s extensive financial and senior executive experience, including in business development, operations and strategic planning, as well as knowledge he has gained through his directorship service at other public companies, make him qualified to serve as a member of our Board.

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Carl A. Nelson, Jr. Carl A. Nelson was appointed as a director on August 4, 2016. Mr. Nelson serves on the board of Worthington Industries, a $3 billion diversified metal processing company, where he has been the audit committee chair since 2004 and a member of the executive committee. Mr. Nelson became a director of ADS in 2016 and chairs the Compensation Committee. Mr. Nelson served on the board of Star Leasing Company, a $115 million ESOP owned company that leases semi trailers through nine facilities across seven states. His term of service on that board ended on March 19, 2018. Prior to his retirement in 2002 after 31 years of service, Mr. Nelson was a partner with Arthur Andersen, LLP, where he served as Managing Partner of the Columbus, Ohio office and was the leader of the firm’s consulting services for the products industry in the United States. Mr. Nelson has taught in the MBA and executive education programs at The Ohio State University and is a member of the Dean’s Advisory Council for the Fisher College of Business at The Ohio State University. Mr. Nelson received his B.S. in Accounting from The Ohio State University and a Masters of Business Administration from the University of Wisconsin and is a Certified Public Accountant (retired). We believe that Mr. Nelson’s public company accounting expertise and his years of experience as a business consultant on a variety of projects involving strategic planning, acquisitions, financial matters and executive coaching make him qualified to serve as a member of our Board.

Manuel Perez de la Mesa. Manuel J. “Manny” Perez de la Mesa became a director in 2019. Mr. Perez de la Mesa was the President and Chief Executive Officer of Pool Corporation (NASDAQ “POOL”) from 2001 until his retirement in 2018, from 1999 to 2001 he served as the President and Chief Operating Officer. Pool Corporation is global wholesale distributor of swimming pool equipment, parts and supplies, and related outdoor living products. He now serves as Vice Chairman on the board of directors. Prior to leading Pool Corporation, he gained extensive general, financial and operations management experience with a number of companies, including Watsco, Inc., Fresh Del Monte Produce B.V., International Business Machines Corp., and Sea-Land Service Inc./R.J. Reynolds, Inc. Mr. Perez de la Mesa is also Lead Director of BCPE Empire Topco, Inc., the parent company of Imperial Dade; Lead Director of BCPE Ulysses Investor L.P., the parent company of USLBM; Chairman of Bution Holdings 1, LLC, the parent company of ORS Medco; and a board member of Hamilton HoldCo, LLC, the U.S. subsidiary of the Reece Ltd. (“REH.AX”). He served on ARC Document Solutions, Inc.'s board of directors from 2004 until 2018. Mr. Perez de la Mesa holds a B.A. in Business Administration from Florida International University, a Master of Business Administration from St. John's University (NY), was licensed as a Certified Public Accountant, and also was a Certified Management Accountant. We believe Mr. Perez de la Mesa's strong industrial distribution background, strategic planning, international operations and extensive general, financial and executive management experience make him qualified to serve as a member of our Board.

BOARD OVERSIGHT RESPONSIBILITIES

The entire Board is engaged in risk management oversight. At the present time, our Board has not established a separate committee to facilitate its risk oversight responsibilities. Our Board expects to continue to monitor and assess whether such a committee would be appropriate. The audit committee assists our Board in its oversight of our risk management and the process established to identify, measure, monitor, and manage risks, in particular major financial risks. Our Board will receive regular reports from management, as well as from the audit committee, regarding relevant risks and the actions taken by management to address those risks.

BOARD INDEPENDENCE

Our common stock has been listed on the New York Stock Exchange, or NYSE, under the symbol “WMS” since July 25, 2014. Under the rules of the NYSE, independent directors must comprise a majority of our Board within a specified period after the completion of our initial public offering (“IPO”). In addition, the rules of the NYSE require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Under the rules of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In order to be considered to be independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, our Board, or any other board committee: (i) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or (ii) be an affiliated person of the listed company or any of its subsidiaries.

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In fiscal year 2021, our Board undertook a review of its composition, the composition of its committees, and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment, and affiliations, including family relationships, our Board has determined that none of our directors except for Mr. Barbour has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors, other than Mr. Barbour, is “independent” as that term is defined under the rules of the NYSE.

Except as otherwise described below, our Board has determined that those directors who serve on our audit committee, compensation and management development committee and nominating and corporate governance committee satisfy the independence standards for those committees established by the rules of the NYSE and (in the case of the audit committee) the applicable SEC rules. In making this determination, our Board considered the relationships that each non-employee director has with us and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

DIRECTOR SKILLS, QUALIFICATIONS AND EXPERIENCE

In our process for assessing the composition of the Board, we strive to maintain a diverse and dynamic Board that combines an appropriate mix in business, strategic, and financial skills, as well as independence, integrity and time availability.

Our directors bring a wealth of knowledge and expertise to the Board, including skills and experiences that are relevant for our strategy development and long-term sustainable performance. As illustrated in the bios of our directors, many of them have extensive leadership experience, with several of having served as CEOs of public companies and experiences in mergers and acquisitions, strategic planning, and operations. Further, several of our Board members have direct knowledge and experience related in the industrial sector both in terms of technical knowledge and in relation to the markets we operate. Additional skills and backgrounds of our directors that bring significant value to our Board include legal expertise, audit and accounting, public policy and government contracting, and international operations.

 

 

BOARD DIVERSITY AND RENEWAL

The nominating and corporate governance committee considers Board diversity and Board renewal as two fundamental components for ensuring dynamism and quality in the composition of the Board. We believe that diversity of viewpoints, backgrounds and experiences can improve the Board's ability to engage with management, while regular renewal and a

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balance of tenure at the Board can help revitalize this diversity. The nominating and corporate governance committee considers multiple aspects of diversity among directors, including professional skills and experiences, industry knowledge, subject matter expertise, gender, ethnicity and age. The director nomination process allows for the Board to design recruitment procedures that meet the Board's and the Company's strategic priorities at a given point in time. Our annual Board self-evaluation process serves as an effective mechanism for monitoring the need for Board refreshment.

Represents female or ethnically diverse directors

BOARD AND DIRECTOR EVALUATION PROCESS

We believe that a robust Board evaluation process is critical to maintaining an effective and dynamic Board. Our nominating and corporate governance committee authorizes our Board Chair to conduct an annual evaluation of the overall performance of the Board and each of its members. In addition, each committee conducts an annual performance evaluation. These performance evaluations, along with an assessment of the Board’s compliance with Corporate Governance principles as well as areas of potential improvement, are presented to the Board in a report annually.

Our Board’s annual self-evaluation process allows us to assess the effectiveness of the Board in fulfilling its duties and responsibilities related to strategy development, the review of business plans, and the monitoring of operational and financial performance and compliance with laws and regulations. In addition, the annual self-evaluation process gives the Board an opportunity to review the effectiveness of the administrative process, such as the number and duration of Board meetings, the amount, quality, and timing of information that directors receive, and the agenda and conduct at Board meetings. Further, the annual evaluation helps the Board assess its strategic needs related to Board size, Board composition, Board renewal, and relevant skills and expertise.

REVIEW OF DIRECTOR NOMINEES

Our nominating and corporate governance committee maintains a rigorous director nomination process, which allows us to identify potential nominees based on a set of criteria developed in accordance with our strategic needs at the time of recruitment. In identifying and evaluating director candidates, the nominating and corporate governance committee first considers the Company’s developing needs and desired characteristics of a new director, as determined from time to time by the nominating and corporate governance committee.

In the recruitment process, the nominating and corporate governance committee, with the assistance of independent advisers as needed, assesses the strategic needs of the Board in terms of backgrounds and qualifications, including the following: business, strategic, and financial skills; independence, integrity, and time availability; diversity of gender, race, and other personal characteristics; and overall experience in the context of the Board’s needs. This process is supplemental to the annual Board evaluation process and helps our Board make recruitment and succession planning decisions that sustain and improve its capacity, diversity, and independence.

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BOARD MEETINGS AND ATTENDANCE

During fiscal year 2021, the Board met 4 times. Each Director attended at least 75% of the total number of meetings of the Board and the committees on which he or she served. In accordance with the Company’s Corporate Governance Guidelines, the Directors are encouraged to attend the annual meetings of stockholders. All directors as of the 2020 annual meeting of stockholders attended the meeting.  

COMMITTEES OF THE BOARD

Our Board has established an audit committee, a compensation and management development committee, a nominating and corporate governance committee, an executive committee and a stock repurchase committee, each of which has the composition and responsibilities described below. Our Board has adopted written charters for the audit committee, the compensation and management development committee and the nominating and corporate governance committee that comply with current federal law and applicable NYSE rules relating to corporate governance matters, which charters are available on our website (www.adspipe.com). Our Board may also establish from time to time any other committees that it deems necessary or desirable.

Audit Committee

Our audit committee is comprised of Messrs. Coleman, Eversole, Fischer and Mses. Chaibi and Fratto, with Mr. Eversole serving as the chairperson of the audit committee. Our audit committee met 6 times in fiscal year 2021. All of the members of the audit committee are financially literate and have accounting or related financial management expertise within the meaning of the rules of the NYSE. Our Board has determined that Mr. Eversole qualifies as an “audit committee financial expert,” as that term is defined under the Securities and Exchange Commission (“SEC”) rules implementing Section 407 of the Sarbanes-Oxley Act of 2002.

Our audit committee is responsible for, among other things:

 

reviewing and approving the selection of our independent auditors, and approving the audit and non-audit services to be performed by our independent auditors;

 

monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

 

reviewing the adequacy and effectiveness of our internal control policies and procedures;

 

discussing the scope and results of the audit with the independent auditors and reviewing with management and the independent auditors our interim and year-end operating results; and

 

preparing the audit committee report that the SEC requires in our annual proxy statement.

Compensation and Management Development Committee

Our compensation and management development committee is comprised of Messrs. Haney, Kidder, Nelson and Perez de la Mesa and met 7 times in fiscal year 2021. Mr. Nelson is the chairperson of our compensation and management development committee. Our compensation and management development committee is responsible for, among other things:

 

overseeing our compensation policies, plans, and benefit programs;

 

reviewing and approving for our executive officers: the annual base salary, the annual incentive bonus, including the specific goals and amount, equity compensation, employment agreements, severance arrangements and change in control arrangements, and any other benefits, compensations or arrangements;

 

reviewing the succession planning for our executive officers;

 

preparing the compensation committee report that the SEC requires to be included in our annual proxy statement; and

 

administrating our equity compensation plans.

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Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is comprised of Messrs. Fischer, Jones and Kidder and Ms. Fratto and met 8 times in fiscal year 2021. Mr. Fischer is the chairperson of our nominating and corporate governance committee. Our nominating and corporate governance committee is responsible for, among other things:

 

assisting our Board in identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to our Board;

 

reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our Board;

 

overseeing the evaluation of our Board and management;

 

recommending members for each Board committee to our Board; and

 

overseeing a sub-committee focused on the Company’s ESG initiatives.

In identifying and evaluating director candidates, the nominating and corporate governance committee first considers the Company’s developing needs and desired characteristics of a new director, as determined from time to time by the nominating and corporate governance committee. The nominating and corporate governance committee then considers various candidate attributes, including the following: business, strategic, and financial skills; independence, integrity, and time availability; diversity of gender, race, and other personal characteristics; and overall experience in the context of the Board’s needs.

The nominating and corporate governance committee will also consider director candidates recommended by Company security holders. The nominating and corporate governance committee does not intend to alter the manner in which it evaluates a candidate for nomination to the Board based on whether or not the candidate was recommended by a Company security holder.

Security holders who wish to recommend individuals for consideration by the nominating and corporate governance committee to become nominees for election to the Board at an annual meeting of stockholders must do so by delivering not less than ninety nor more than one hundred twenty calendar days prior to the first anniversary date of the preceding year’s annual meeting a written recommendation to the nominating and corporate governance committee c/o Advanced Drainage Systems, Inc., 4640 Trueman Boulevard, Hilliard, OH 43026, Attn: Chief Executive Officer and must meet the deadlines and other requirements set forth in the Company’s Bylaws and the rules and regulations of the Securities and Exchange Commission. Based on the current date of the 2021 Annual Meeting, a proposal for the 2022 Annual Meeting must be delivered no earlier than March 24, 2022 or later than April 23, 2022 to be timely. Each written recommendation must set forth, among other information as described more fully in the Company’s Bylaws:

 

the name and address of the Company security holder(s) on whose behalf the recommendation is being made;

 

the class or series and number of shares of Company stock that are, directly or indirectly, owned of record or beneficially owned by such security holder(s) on whose behalf the recommendation is being made as of the date of the written recommendation;

 

the proposed director candidate’s full legal name, age, business address and residential address;

 

a description of the proposed director candidate’s principal occupation or employment and business experience for at least the previous five years;

 

complete biographical information for the proposed director candidate;

 

a description of the proposed candidate’s qualifications as a director;

 

the class and number of shares of Company stock that are beneficially owned by the proposed director candidate as of the date of the written recommendation; and

 

any other information relating to the proposed director candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.

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Each submission must be accompanied by the written consent of the proposed candidate to be named as a nominee and to serve as a director if elected.

If a proposed director candidate is recommended by a security holder in accordance with the procedural requirements discussed above, the Chief Executive Officer will provide the foregoing information to the nominating and corporate governance committee. The nominating and corporate governance committee will evaluate the proposed director’s candidacy and recommend whether the Board should nominate the proposed director candidate for election by the Company’s stockholders.

Executive Committee

Our executive committee is comprised of the Chair of the Board and the Chairperson of each of the audit, compensation and nominating and corporate governance committees. The executive committee meets between meetings of our Board, as needed, and has the power to exercise all the powers and authority of our Board with respect to matters delegated to the executive committee by our Board, except for the limitations under Section 141(c) of the Delaware General Corporation Law and/or applicable limitations under our organizational documents.

Stock Repurchase Committee

Our stock repurchase committee is comprised of Messrs. Kidder and Eversole. Our stock repurchase committee is responsible for, among other things:

 

administering the Company’s stock repurchase program (the “Repurchase Program”);

 

otherwise approving any repurchase under the Repurchase Program as so recommended by the Company’s Chief Executive Officer, or any other such officer designated by him in writing; and

 

taking such other actions with regard to the oversight of the Repurchase Program as the committee determines to be necessary, desirable or appropriate.

The stock repurchase committee did not meet in fiscal year 2021, with share repurchase matters being considered by the entire Board as part of the Board’s regular review of capital allocation generally.

BOARD LEADERSHIP

Our Board does not have a formal policy on whether the roles of Chair of our Board and Chief Executive Officer of the Company should be separate or combined and has the flexibility to decide which structure is in the best interests of our stockholders. While the positions of the Chair and Chief Executive Officer have historically been combined, we believe that our stockholders are best served by separate Chair and CEO roles. D. Scott Barbour serves as the Chief Executive Officer, and C. Robert Kidder serves as the Chair of the Board.

A number of factors support the separate leadership structure chosen by the Board. Separate Chair and CEO roles promote balance between the Board’s independent authority to oversee the Company’s business and the CEO’s management team, which manages the business on a day-to-day basis. Separation of the Chair and CEO roles allows Mr. Barbour to focus his time and energy on operating and managing the Company and leverages the experience and perspectives of Mr. Kidder, who previously served as Lead Independent Director of the Board and currently presides over executive sessions of the Board. Separating the Chair and CEO roles fosters accountability, creates an environment that is more conducive to objective evaluation of management’s performance and enhances the effectiveness of the Board as a whole. Separating these positions allows Mr. Kidder to focus on the general policy of the Company and lead the Board in its fundamental role of providing oversight and advice while also allowing Mr. Barbour to streamline his duties as CEO and attain a comprehensive focus on the Company’s day-to-day business operations. For these reasons, having two separate positions is the appropriate leadership structure for the Company at this time.

Our Board recognizes that depending on future circumstances, other leadership models may become more suitable in addressing the interests of our stockholders. Accordingly, our Board will periodically review its leadership structure.

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DIRECTOR COMPENSATION

COVID-19 Mitigation Actions Impacting Director Compensation

Consistent with proactive actions taken with our executive officers to mitigate the potential impact of COVID-19 to the Company’s performance in April 2020, the annual cash retainer paid to our directors was temporarily reduced by 25%. Based on the year-to-date financial performance of the company on November 2020, the temporary reduction was discontinued. In December 2020 restoration payments were made to each director to compensate for the reduced cash retainer paid from April to November 2020. This payment was also made to directors who elected stock in lieu of the cash retainer as the stock awards delivered in July 2020 reflected the temporary reduction in the annual cash retainer.

There were no changes to the structure or amounts of our Board Compensation in fiscal year 2021, outside the COVID-19 related reduction and restoration. Below is a summary of the program design.

Cash Retainer

Each non-employee director receives an $85,000 annual cash retainer for their service on the Board and committees.

The chair of each committee of our Board receives an additional cash retainer. The chair of the compensation and management development committee and the chair of the nominating and corporate governance committee each receives an annual cash retainer of $15,000 and $10,000, respectively. The annual cash retainer for the chair of our audit committee for serving in that capacity is $35,000. For his service as Chair of the Board and lead independent director during fiscal year 2021, Mr. Kidder was paid $90,000. None of our directors receive meeting fees in addition to these retainers.

Stock Awards and Stock in Lieu of Cash Retainer

Each non-employee director receives shares of restricted stock in an amount equal to $100,000 at the date of grant that will vest on the one-year anniversary of the grant date, subject to cancellation and forfeiture of unvested shares upon termination of service with our Board (the “Director Stock Awards”). Such shares would be issued pursuant to the 2017 Omnibus Incentive Plan.

Each non-employee director is also provided the option to receive their annual cash retainer of $85,000 in the form of shares of restricted stock under the 2017 Omnibus Incentive Plan in an amount equal to $85,000 (“Stock in Lieu of Cash Awards”), subject to the same vesting parameters as the Director Stock Awards. For fiscal year 2021, Messrs. Nelson, Jones, Eversole, Fratto and Perez de la Mesa elected to receive Stock in Lieu of Cash Awards.

Director Stock Awards and Stock in Lieu of Cash Awards are to be made on the date of the annual meeting of the Company’s stockholders, are valued as of the grant date and are subject to forfeiture in the event that the Director ceases to serve as a Director during the one-year vesting period.

Expense Reimbursement

Non-employee directors will also continue to receive reimbursement of all reasonable travel and other expenses for attending meetings of our Board or other Company-related functions.

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Fiscal Year 2021 Director Compensation

The following table summarizes the total compensation earned by each of our directors for fiscal year 2021.

Name

 

Fees Earned or

Paid in Cash

($)

 

Stock Awards

($)(6)

 

All Other

Compensation

($)

 

Total

($)

 

 

 

 

 

 

 

 

 

D. Scott Barbour

 

 

 

 

Robert M. Eversole (1)

 

47,396

 

174,392

 

 

221,788

Tanya Fratto (2)

 

12,396

 

174,392

 

 

186,788

Alexander R. Fischer (3)

 

95,000

 

100,032

 

 

195,032

M.A. (Mark) Haney (2)

 

85,000

 

100,032

 

 

185,032

C. Robert Kidder (4)

 

175,000

 

130,032

 

 

305,032

Anesa T. Chaibi (2)

 

63,750

 

100,032

 

 

163,782

Carl A. Nelson, Jr. (5)

 

27,396

 

174,392

 

 

201,788

Michael B. Coleman (2)

 

85,000

 

100,032

 

 

185,032

Ross M. Jones (2)

 

12,396

 

174,392

 

 

186,788

Manuel J. Perez de la Mesa (2)

 

12,396

 

174,392

 

 

186,788

 

(1)

Represents quarterly payments of annual retainer for membership on our Board as well as chairperson of the audit committee.

(2)

Represents quarterly payments of annual retainer for membership on our Board.

(3)

Represents quarterly payment of annual retainer for membership on our Board and for serving as chairperson of the nominating and corporate governance committee.

(4)

Represents quarterly payment of annual retainer for serving as Chair and member of our Board and serving as our lead independent director.

(5)

Represents quarterly payments of annual retainer for membership on our Board, as well as for serving as chairperson of compensation and management development committee.

(6)

Each of Messrs. Nelson, Jones, Perez de la Mesa and Eversole, and Ms. Fratto elected to receive shares of restricted stock in lieu of their $85,000 annual retainer paid in cash for membership on our board of directors. See above under "— Stock Awards and Stock in Lieu of Cash Retainer." The number of shares of common stock granted in lieu of cash compensation will be based on the aggregate grant date fair value of our common stock computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation. These awards will be made on the date of the annual meeting of the Company's stockholders. The awards will be valued as of the grant date and will vest on the one-year anniversary of the grant date.

Compensation Committee Interlocks and Insider Participation

There are no interlocking relationships between any member of our compensation and management development committee and any of our executive officers that require disclosure under the applicable rules promulgated under the federal securities laws.

DIRECTOR STOCK OWNERSHIP POLICY

To encourage equity ownership among non-employee directors, our Board has adopted stock ownership guidelines applicable to all non-employee directors. Under the stock ownership guidelines, each non-employee director is expected to own Common Stock having a value of at least three times their annual cash retainer. The non-employee directors have five years from the later of the completion of our IPO or the date of their election to fulfill this ownership requirement. The stock ownership guidelines require each non-employee director to retain all shares received, net of shares sold for tax purposes, until the ownership requirements are met.

DIRECTORS' SERVICE ON OTHER PUBLIC BOARDS

After first becoming a director of the Company, without the specific approval from the Board, no director may accept an invitation to serve on another public company board or any committee thereof. No director may sit on the board of any competitor of the Company in its principal lines of business to the extent that any such service would constitute a violation of U.S. antitrust law.

As part of our annual Board evaluation process described above, we regularly review each director's ability to continue to contribute to the Board considering other commitments. Based on our assessment, we believe that our directors’ other commitments do not prevent them from sufficiently fulfilling their duties at our Board.

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ENGAGEMENT WITH STOCKHOLDERS AND GOVERNANCE IMPROVEMENTS

Our commitment to good governance practices extends to building trusting relationships and partnerships with our stockholders through continued engagement and accountability.

Our engagement with our stockholders serves a crucial role in preserving a robust and effective corporate governance program that serves their long-term interests and positions us for sustainable growth. We engage with our stockholders regularly to understand their perspective and to ensure that our practices are aligned with expectations. Over the past year, we continued to engage with investors around the effectiveness and development of our corporate governance program and our sustainability efforts.

As a result of our internal review of our governance practices and the feedback we received during outreach to investors, we implemented enhancements to our corporate governance program, including declassification of the Board and reducing the supermajority vote requirements for certain charter and bylaws changes. We also adopted a majority vote standard for uncontested director elections (with a plurality carve-out for contested elections). We continue to value the views of our stockholders as we strive for continuous improvement across our corporate governance practices and processes.

SUSTAINABILITY OVERSIGHT

We have an informal sub-committee of the Nominating and Corporate Governance Committee that is referred to as the ESG sub-committee, chaired by Mr. Fischer and with participation from other members of the Board, including Messrs. Coleman and Barbour, to develop and review ADS’ corporate citizenship and sustainability programs as well as our environmental, employee health & safety, and business ethics policies. The ESG sub-committee periodically reviews the Company’s sustainability strategy and performance, including, but not limited to, material environmental, social, and governance (ESG) trends and related long- and short-term Company impacts, as well as the Company’s ESG reporting and disclosure practices. In fiscal 2021, the sub-committee conducted quarterly reviews of the Company’s diversity, equity, and inclusion (DE&I) strategy, actions, and metrics.

As discussed above, with the support and guidance of the ESG sub-committee, we took important steps to set the foundation for an effective oversight of our sustainability practices, including the establishment of processes for collecting and regularly tracking data related to our environmental impacts, our review and selection of sustainability reporting standards, and the creation of business-oriented key performance indicators in alignment with best practice standards.

CERTAIN INFORMATION REGARDING OUR DIRECTORS AND NOMINEES

The name and age of each director and nominee and the positions held by each of them as of the date of this proxy statement are as follows:

 

 

 

 

 

Name

 

  

Age    

 

  

Class    

 

  

Position(s)

 

D. Scott Barbour

  

59

  

Class I

  

Director, President and Chief Executive Officer

Anesa T. Chaibi

 

55

 

Class II

 

Director

Michael B. Coleman

  

66

  

Class I

  

Director

Robert M. Eversole

  

59

  

Class II

  

Director

Alexander R. Fischer

  

54

  

Class II

  

Director

Tanya Fratto

  

60

  

Class I

  

Director

M.A. (Mark) Haney

  

66

  

Class II

  

Director

Ross M. Jones

  

56

  

Class III

  

Director

C. Robert Kidder

  

76

  

Class III

  

Chair of the Board of Directors, Director

Carl A. Nelson, Jr.

  

76

  

Class I

  

Director

Manuel J. Perez de la Mesa

 

64

 

Class III

 

Director

Anil Seetharam1

 

42

 

Class III

 

Director

 

(1) Mr. Seetharam is a nominee for election at the Annual Meeting and is not a current member of our Board.

- 18 -

 


 

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines, which provide the framework for the governance of our Company. Our Board reviews our Corporate Governance Guidelines at least annually. From time to time, the Board may revise our Corporate Governance Guidelines to reflect new regulatory requirements and evolving corporate governance practices. A copy of our Corporate Governance Guidelines is available on our website at www.adspipe.com.

Majority Voting Standard for Directors

In response to growing investor concern about the lack of accountability inherent in plurality voting, and in an effort to increase the accountability of each director to the Company’s stockholders, the Company’s Bylaws were amended in 2020 to implement a majority voting standard for director elections, effective immediately following the 2021 Annual Meeting. Accordingly, in uncontested elections, an incumbent director nominee that receives more votes “AGAINST” than “FOR” his or her election must promptly tender a resignation to the Board. Upon receipt of a tendered resignation, the Board will decide whether to accept or reject the resignation, and must publicly disclose its decision within ninety (90) days of the date of the election. If a director’s resignation is not accepted by the Board, such director will continue to serve on the Board until the next annual meeting and until his or her successor is duly elected or until his or her earlier resignation, removal or death. Under our majority voting standard, a director nominee in an uncontested election that is not an incumbent director and that receives more “AGAINST” votes than “FOR” votes will not be elected as a director of the Company (with abstentions and broker non-votes not counted as a vote cast either for or against that director’s election).

In contested elections, where the number of nominees exceeds the number of seats on the Board up for election, the plurality voting standard will continue to apply and the nominees receiving the most “FOR” votes will be elected as directors.

Codes of Business Conduct and Ethics

Our Board has established a Code of Ethics for Senior Executive and Financial Officers that applies to our senior executive and financial officers, including our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions. We also maintain a Code of Business Conduct and Ethics that governs all of our directors, officers and employees. A copy of the Code of Ethics for Senior Executive and Financial Officers and the Code of Business Conduct and Ethics are available on our website at www.adspipe.com. We will promptly disclose any future amendments to these codes on our website, as well as any waivers from these codes for executive officers and directors. Copies of these codes will also be available in print from our Corporate Secretary, without charge, upon request.

How You May Communicate with Directors

Security holders and other interested parties wishing to communicate with the Board or an individual director may send a written communication to the Board or such director, c/o Advanced Drainage Systems, Inc., 4640 Trueman Boulevard, Hilliard, OH 43026, Attn: Chief Executive Officer.

Each communication will be screened by the Company’s Chief Executive Officer to determine whether it is appropriate for presentation to the Board or such director. Communications determined by the Company’s Chief Executive Officer to be appropriate for presentation to the Board or such director will be submitted to the Board or such director on a periodic basis. Any communications that concern questionable accounting or auditing matters involving the Company will be handled in accordance with the terms of the Company’s code of ethics.

 


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COMPENSATION DISCUSSION AND ANALYSIS

CERTAIN INFORMATION REGARDING OUR EXECUTIVE OFFICERS

The name and age of each non-director executive officer and the positions held by each of them as of the date of this proxy statement are as follows:

 

Name

 

Age    

 

Position(s)

 

Scott A. Cottrill

55

Executive Vice President, Chief Financial Officer and Secretary

Ronald R. Vitarelli

54

Executive Vice President, Engineering 

Robert M. Klein

58

Executive Vice President, Market Management

Roy E. Moore, Jr.

64

Executive Vice President

Kevin C. Talley

49

Executive Vice President and Chief Administrative Officer

Darin S. Harvey

51

Executive Vice President, Supply Chain

Brian W. King

52

Executive Vice President, Product Management and Marketing

Thomas J. Waun, Sr.

54

Senior Vice President, International

Michael G. Huebert

49

Senior Vice President, Sales

 

Executive Officers who are not Directors

Scott A. Cottrill joined us in November 2015 and serves as Executive Vice President, Chief Financial Officer and Secretary. Mr. Cottrill came to the Company with extensive financial reporting, accounting and corporate finance experience. He currently oversees our finance, business development, and information technology functions. From 2012 to November 2014, Mr. Cottrill served as Executive Vice President and Chief Financial Officer of Jeld-Wen, Inc., a leading global manufacturer of windows, doors and treated composite trim and panels, and from November 2014 to February 2015 as an Executive Vice President of Jeld-Wen, Inc. From 1998 to 2012, Mr. Cottrill held various finance and accounting positions with Goodrich Corporation, including from 2005 to 2012 the position of Vice President, Controller and Chief Accounting Officer and from 2002 to 2005 the position of Vice President, Internal Audit. Prior to joining Goodrich, Mr. Cottrill worked at PricewaterhouseCoopers LLP from 1987 to 1998. Mr. Cottrill holds a bachelor’s degree in Accounting from The Pennsylvania State University and is also a Certified Public Accountant (inactive).

Ronald R. Vitarelli joined us in November 1988 and has served as Executive Vice President, Engineering since March 2018. From November 2011 until March 2018, Mr. Vitarelli served as Executive Vice President & Co-Chief Operating Officer. Mr. Vitarelli joined us as a Sales Representative and was promoted to Regional Sales Manager in December 1995. In July 2003, he was named General Manager of StormTech LLC, a manufacturer of underground storm water retention and detention systems that was a 50/50 joint venture of ours with Infiltrator Systems, Inc. Upon our acquisition of the remaining 50% interest in StormTech from Infiltrator in November 2009, Mr. Vitarelli rejoined us and continued to lead the StormTech business until March 2010, when he was named Vice President, Storm & Sanitary Markets. He currently oversees our product research, development, commercialization and product approval efforts. Mr. Vitarelli holds a bachelor's degree in Marketing from Providence College.  

Robert M. Klein joined us in June 1992 and has served as Executive Vice President, Market Management since September 1, 2020. Upon joining us, Mr. Klein held several leadership positions in operations including Manager, Regional Manufacturing, Manager, Distribution Yards, Director, Purchasing and was named Vice President, Manufacturing Services in January 1999. In July 2001, he was named Vice President, Sales and Marketing and began providing leadership to our field sales, corporate account sales, marketing, customer service, and market analysis functions. In February 2006, he was named Executive Vice President, Sales. Prior to joining us, he spent seven years at The Gerstenslager Company in manufacturing management positions. Mr. Klein holds a bachelor’s degree in Business Administration from Ashland College.

Roy E. Moore, Jr. joined us in August 2019 and serves as Executive Vice President. Mr. Moore came to the Company with 39 years’ experience in the plastics industry. From 2005 to 2019, Mr. Moore served as Chief Executive Officer of Infiltrator. He joined Infiltrator Water Technologies in 1987, and, during his 31 years at the company, he led, at various times, manufacturing, sales, marketing, engineering, research and development, and government affairs. Prior to his time at Infiltrator, Mr. Moore led the manufacturing operations of a major building products supplier and has specialized in the

- 20 -

 


 

molding of plastic products since 1979. Mr. Moore attended Georgia Tech, majoring in Industrial Management with course work in Civil Engineering.

Kevin C. Talley joined us in October 2011 and has served as Executive Vice President & Chief Administrative Officer since August 2016. Mr. Talley joined us as Vice President, Human Resources providing overall leadership to our compensation, benefit, and talent management programs. He currently oversees our human resources, legal, office services and aviation functions. Effective February 2019, Mr. Talley joined the Advisory Board for Kimball Midwest, a family-owned distributor of maintenance and repair operating supplies. Prior to joining us, he spent seventeen years at The Scotts Miracle-Gro Company in increasingly responsible human resources leadership positions, most recently as Vice President, Human Resources. Mr. Talley holds a bachelor’s degree in Employment Relations and Organizational Behavior from Miami University.

Darin S. Harvey joined us in October 2018 and serves as Executive Vice President, Supply Chain. Mr. Harvey came to the Company with over 20 years of experience in leading complex global supply chains, delivering results in continuous improvement, driving lean manufacturing and delivering change management. From 2014 to October 2018, Mr. Harvey served as Vice President of Integrated Supply Chain at Forum Energy Technologies, Inc., a Houston, Texas-based company that designs, manufactures and distributes equipment and solutions for the oil and gas industry. Prior to Mr. Harvey’s role at Forum, he held global supply chain leadership positions at Honeywell, Foster Wheeler and Danaher Corporation. He holds an MBA in Global Supply Chain from the University of Tennessee and a BS in Marketing and Supply Chain Management from Florida State University. He is also a Six Sigma Black Belt and Lean Expert.

Brian W. King joined us in September 2020 and serves as Executive Vice President, Product Management and Marketing. Mr. King came to the Company with over 25 years of product management and marketing experience in both consumer and commercial businesses. From 2013 to September 2020, Mr. King worked at Owens Corning, a Toledo, Ohio-based company that develops and produces insulation, roofing and fiberglass composites and related materials, serving as Vice President, Strategic Marketing from 2016 to 2020 and Director of Strategic Marketing from 2015 to 2016. Prior to Mr. King’s role at Owens Corning, he held leadership positions at The Stanley Works, Elmer’s Products Inc., and Avery Dennison Corporation. He holds a Bachelor of Commerce from McMaster University. He has received certifications in Marketing Management and Executive Education from York University and the University of North Carolina respectively.

Thomas J. Waun, Sr. joined us in June 2020 and serves as Senior Vice President, International. Mr. Waun came to the Company with over 30 years of management experience. From 2017 to 2020, Mr. Waun served as Vice President and General Manager, Consulting, at Emerson Electric Corporation, a St. Louis, Missouri-based company that designs and manufactures a wide range of electrical equipment and software. From 2015 to 2017, Mr. Waun served as President, Power Management at Emerson. Prior to 2015, Mr. Waun held a variety of roles of increasing responsibility at Emerson. Prior to Mr. Waun’s time at Emerson, he held leadership positions at IBM Corporation. Mr. Waun holds a Bachelor of Science in Electrical Engineering from the University of Michigan.

Michael G. Huebert joined us in September 1998 and has served as Senior Vice President, Sales since September 2020. Mr. Huebert currently oversees field sales and engineering, national accounts and retail sales teams. Mr. Huebert previously served as Vice President of Field Sales from 2018 to 2020, and Vice President of Allied Products and Stormwater Management from 2013 to 2018. Prior to these roles, Mr. Huebert served in a variety of leadership positions within the Company, including Director of Strategic Markets, Director of Retail, Onsite and Turf and Irrigation and Director of Logistics and Molded Products. Mr. Huebert holds a Bachelor of Business Administration (B.B.A.) Degree in Marketing from Fresno State University.

EXECUTIVE COMPENSATION HIGHLIGHTS – FISCAL YEAR 2021

We ended Fiscal 2021 with $1.98 billion in revenue and $567 million of Adjusted EBITDA, up 19% and 57% year-over-year, respectively. Our growth has been driven, in part, by the continued success of our material conversion and water management solutions strategies as well as a favorable demand environment throughout the year. From a profitability perspective, our Adjusted EBITDA margin expanded by 700 basis points to 28.6%, driven by strong sales growth, favorable pricing and material costs, as well as contributions from our operational productivity initiatives and synergy programs. Our growth and profitability improvement were also driven by the incremental benefit from a full year of results from the Infiltrator Water Technologies business, as compared to eight months of results in the prior year due to the timing of the acquisition.

- 21 -

 


 

Business Performance Highlights:

 

Total Net sales increased 18.5% to $1,982.8 million, driven by our material conversion strategy, complete water management solutions and focus on key sales programs, as well as incremental benefit from a full year of results from the Infiltrator Water Technologies business, as compared to eight months of results in the prior year due to the timing of the acquisition.

 

Adjusted EBITDA increased 56.7% to $567.0 million, primarily driven by favorable pricing and material cost; increases in both pipe and allied product sales; and operational improvements offsetting inflationary costs, as well as incremental benefit from a full year of results from the Infiltrator Water Technologies business.

 

Execution on our working capital initiatives, growth and improved profitability led to a 56.6% improvement in free cash flow generation to $373.5 million.

The following summarized our strong performance over the past several years:

We believe our compensation practices and our overall level of executive compensation are competitive when compared to our peer group and reflect our commitment to shareholder alignment and performance-based pay. The majority of each NEO’s target compensation has been and continues to be at-risk. Consistent with this policy, the compensation delivered to our executives in fiscal 2021 is indicative of our strong performance in the market and as compared to our peer group.

Record Setting Financial Performance Aligned with Above Target Executive Compensation in Fiscal 2021

 

There were no base salary increases provided to the NEO’s during fiscal 2021.

 

Cash payments to the NEO’s for the financial metrics in the fiscal 2021 Annual Cash Incentive Plans were 200% of target, which is the maximum possible attainment under our program.

 

Performance based awards to the NEO’s based on the Company’s first ever three-year performance period under the ADS Long Term Incentive Plan (April 1, 2018 – March 31, 2021) were 200% of target, which is the maximum possible attainment under our program.

Stockholder Feedback:

 

“Say on Pay” received majority support (99%).

 

The Board and our Compensation Committee appreciate and value the views of our stockholders. Going forward, the Committee will continue to review stockholder advisory votes on executive compensation and take them into consideration when making future executive compensation decisions).

- 22 -

 


 

COVID-19 Mitigation Actions Impacting NEO Compensation

Facing the undetermined impact of COVID-19 on the Company, in April 2020 the Board approved specified cash compensation contingency actions impacting executive management, including the NEO’s. These actions were designed to further protect the company’s financial position as well as to demonstrate leadership to the rest of the Company at a time of great uncertainty. Beginning in August 2020 based on the strong performance of the company fiscal year to date, the Board approved the discontinuance of certain of these contingency actions as well as applicable restorative treatment. A summary of the final impact of the actions taken is as follows:

 

For 24 members of the executive team including the NEO’s, base pay was reduced by 10% from April 2020 through October 2020. In November 2020, the base pay reduction was discontinued and a one-time restorative payment was made representing the amount of the cumulative base pay reduction.

 

For the 10 officers of the company, including the NEO’s, no base pay increases were approved in fiscal 2021

 

For Mr. Barbour and seven (7) Executive Vice Presidents, including the other NEO’s, the portion of the earned payment from the fiscal year 2020 Annual Cash Incentive Plan representing performance exceeding the target performance levels was delayed from June 2020 until August 2020.

After review of all existing programs, consideration of current market and competitive conditions, and alignment with our overall compensation objectives and philosophy, we believe that the total compensation program for our NEO’s is appropriately focused on enhancing corporate performance and increasing value for stockholders.

NAMED EXECUTIVE OFFICERS

The Compensation Discussion and Analysis provides information regarding our compensation philosophy and the material elements of our fiscal year 2021 compensation program for our “named executive officers,” also referred to as the “NEOs.” Our NEOs for fiscal year 2021 are:

 

 

NEO Name

 

  

Primary Position

 

 

 

D. Scott Barbour

 

  

President & Chief Executive Officer

 

 

 

Scott A. Cottrill

 

  

Executive Vice President, Chief Financial Officer

 

 

 

Ronald R. Vitarelli

 

  

Executive Vice President, Engineering and Business Development

 

 

 

Robert M. Klein

 

  

Executive Vice President, Sales

 

 

 

Roy E. Moore, Jr.

 

  

Executive Vice President

 

EXECUTIVE COMPENSATION PROGRAM OVERVIEW

The following pages summarize the design and components of the executive compensation programs in place during fiscal 2021.

Linking Pay to Stockholder Value Creation

Aligning executive compensation to stockholder value creation as well as attracting and retaining top talent are core to the design of our executive pay programs. Through our short-term and long-term compensation plans, the Compensation Committee strives to achieve these objectives. We believe that stockholder value is foundationally created by sales and profitability growth as well as delivering strong free cash flow and returns on invested capital through the leadership of our NEO’s. Accordingly, our incentive compensation programs for fiscal year 2021 continued the combined use of these metrics, directly linking the pay of our executive team to these critical drivers of stockholder value creation over both the

- 23 -

 


 

short-term and long-term. Our NEO’s are therefore aligned and invested in the delivery of the success of the business, as most of their compensation is impacted in a similar manner to which stockholders are impacted through their return on investment.

Executive Compensation Philosophy and Objectives

 

Philosophy

 

 

 

Link the equity compensation of our executives to the sustained value they create for our stockholders

 

Place greater emphasis on variable pay versus fixed pay

 

Performance should predominantly drive compensation

 

In establishing compensation levels, we consider the competitive range for similar executive roles and largely view the competitive market range as between the 25th percentile and the 75th percentile of our Compensation Peer Group.  As a general rule, we strive to position total compensation levels within this market range while also recognizing the individual performance, experience, and skills of our NEO’s drive our compensation decisions.

 

 

 

 

Objectives

 

 

 

Attract, retain, and motivate top talent

 

Drive the performance culture as well as Company values

 

Reward sustained performance

 

Align compensation with stockholders’ interests

 

Link compensation to company, functional, and individual accomplishment

 

Key Groups in Determining Executive Compensation

The following key groups are involved in making executive compensation decisions:

 

 

Compensation & Management Development Committee

 

 

 

Responsible for the design and implementation of our executive compensation policies and programs

 

Annually reviews and approves the corporate goals and objectives relevant to CEO compensation

 

Reviews CEO’s performance, and with insight from the executive compensation consultant, recommends CEO’s compensation package to the Board for approval

 

Determines the compensation (base salary, incentives, etc.) and mix for the other NEO’s consistent with the terms of their employment agreements

 

Administers the annual and long-term incentive plans and equity program

 

 


- 24 -

 


 

 

 

Outside Executive Compensation Consultant

 

 

 

During fiscal year 2021, with the consent of the Committee, management continued to engage the services of Willis Towers Watson, an independent executive compensation consultant

 

Willis Towers Watson consulted with the Committee regarding: competitive pay levels for management and the Board; trends, regulatory developments, and incentive plan design

 

Willis Towers Watson did not provide any services to, or receive any payments from, the Company other than in their capacity described above

 

Willis Towers Watson has been consulting with the Committee since the Company went public in 2014. The Committee has considered the factors cited by the SEC as key determinants of an advisor’s independence and determined that the work performed does not present any conflicts of interest.

 

 

 

 

ADS Management

 

 

 

Our human resources department, in partnership with the Committee, supports the design and implementation of all executive compensation programs

 

Our finance department supports the process by providing financial analysis as part of the review of program design

 

Except with respect to his own compensation, our CEO has final management-level review of any compensation program before it is sent to the Committee for consideration and approval

 

Management frequently consults with the Committee during the design process to provide direction and feedback on how the design of our executive compensation programs supports our overall strategy

 

 

Executive Compensation Benchmarking Peer Group

The Company uses a customized compensation peer group, developed in collaboration with its executive compensation consultant, to provide insight into prevalent program design and compensation levels. Each year, the peer group is reviewed by the Committee. For fiscal year 2021, the Committee determined the existing peer group was appropriate and continues to be a reasonable group for informing compensation decisions.  

- 25 -

 


 

Tables below summarize our customized peer group.  

 

A. O. Smith Corporation

American Woodmark Corporation

Apogee Enterprises, Inc.

Armstrong World Industries, Inc.

Atkore International Group Inc

Cornerstone Building Brands, Inc.

Forterra, Inc.  

Graco Inc.  

Griffon Corporation

JELD-WEN Holding, Inc.  

 

 

  

Louisiana-Pacific Corporation

Masonite International Corporation

Mueller Water Products, Inc.

Patrick Industries, Inc.

Simpson Manufacturing Co., Inc.

Summit Materials, Inc.

Trex Company, Inc.

U.S. Concrete, Inc.

Watts Water Technologies, Inc.

In general, these companies come from the building products, machinery, or construction materials industries and are likely to be attracting and retaining talent with similar experience and skills to that of our Company. The median annual revenue of these companies ($1.6 billion) reflects a range of $0.9 to $4.6 billion.

Components of Executive Compensation – Fiscal Year 2021

The Committee has responsibility for determining all elements of compensation granted to the NEOs and reviews each element of compensation, as well as the relative mix and weighting of elements, on an annual basis.

Key Executive Pay Elements – Fiscal Year 2021

The chart below summarizes the key pay elements for our NEOs during fiscal year 2021. Each element is described in further detail below on the following pages.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base Pay

The base salary element of our compensation program is designed to be competitive with compensation paid to similarly-situated, competent, and skilled executives. This element of pay serves as the foundation for the executive compensation program. Our NEOs are covered by employment agreements and, accordingly, we pay annual base salaries initially as set forth in these agreements.

- 26 -

 


 

On an annual basis, the Committee reviews base salaries for the NEOs using the following factors in its determination of changes:

 

Performance relative to the pre-established goals and objectives in the executive’s areas of responsibility;

 

Competitive base salary levels of similar positions in the compensation peer group;

 

Trends in base salary increases in the compensation peer group;

 

Executive’s overall contribution to the business strategy and our growth objectives, individual performance and potential for future contributions; and

 

Current economic environment.

The CEO, with input from the human resources department, proposes base salary increases, if any, for all NEOs, excluding himself, based on the above criteria. His proposal is subject to review and approval (with or without modifications) by the Committee. Changes to the CEO’s base salary are initiated and approved by the Committee directly, subject to the review and final approval of our Board.

The base salaries of each of our NEO’s for fiscal 2021 were unchanged and remained as follows as of March 31, 2021:

 

 

Named Executive Officer

 

Annual Salary

March 31, 2020

 

Annual Salary

March 31, 2021

 

Annual Salary

Increase ($)

 

Annual Salary

Increase (%)

 

 

 

 

 

 

 

 

 

D. Scott Barbour

 

$ 870,000

 

$ 870,000

 

$ -

 

- %

 

 

 

 

 

 

 

 

 

Scott A. Cottrill

 

$ 520,000

 

$ 520,000

 

$ -

 

- %

 

 

 

 

 

 

 

 

 

Roy E. Moore, Jr.

 

$ 495,591

 

$ 495,591

 

$ -

 

- %

 

 

 

 

 

 

 

 

 

Ronald R. Vitarelli

 

$ 385,000

 

$ 385,000

 

$ -

 

- %

 

 

 

 

 

 

 

 

 

Robert M. Klein

 

$ 385,000

 

$ 385,000

 

$ -

 

- %

 

- 27 -

 


 

 

ADS Annual Incentive Compensation

Our annual incentive program provides cash incentive opportunities for our NEOs based on the Company’s financial performance as well as individual performance. The Committee believes the following measures and weighting reflect key value drivers for purposes of establishing payouts under the Annual Incentive Plan:

 

Adjusted EBITDA - EBITDA before stock based compensation expense, non-cash charges and certain other expenses

 

Total Net Sales - Sales after cash discounts, product returns, and freight rebills

 

Individual Performance - Performance of the executives in relation to their annual performance objectives and demonstrated leadership

By tying a significant portion of the executive’s total annual cash compensation to annual variable pay we believe we are further reinforcing our pay for performance culture and focusing our executives on critical short-term financial and operational objectives, which also supports our long-term financial goals.

Establishing Annual Incentive Target Payouts

Under the Annual Incentive Plan, target payouts for each NEO are reviewed on an annual basis and compared against the compensation peer group. The CEO, with input from the human resources department, proposes annual targets for all NEOs, excluding himself, based on the performance measures. His proposal is subject to review and approval (with or without modifications) by the Committee. Changes to Mr. Barbour’s targeted payout from the Annual Incentive Plan are initiated and approved by the Committee directly, subject to the review and final approval of our Board.

Our established targets enhance the alignment of our pay-for-performance and stockholder alignment principles. The Annual Incentive targets for fiscal year 2021 as a percentage of salary were unchanged and remained as follows:

 

Named Executive Officer

 

Target Incentive Opportunity

(% of Base Salary)

 

 

 

D. Scott Barbour

 

100%

 

 

 

Scott A. Cottrill

 

75%

 

 

 

Roy E. Moore, Jr.

 

65%

 

 

 

Ronald R. Vitarelli

 

75%

 

 

 

Robert M. Klein

 

65%

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Business Performance Levels in Annual Incentive Plan – Messrs. Barbour, Cottrill, Vitarelli, Klein

As reflected in the table below, threshold, target, and maximum performance levels were established based on the Committee’s assessment of performance targets that appropriately drive and reward achievement of growth versus our prior year performance levels. The performance levels established for the non-individual metrics in the Plan for fiscal 2021 were as follows:

 

Target performance levels, which earn a 100% payout, reflect a 22% and 9% improvement versus fiscal year 2020 actual results for Adjusted EBITDA and total net sales, respectively; and

 

Threshold performance levels, which earn a 50% payout, reflect a 12% and 5% improvement over the fiscal year 2020 actual results for Adjusted EBITDA and total net sales, respectively; and

 

Maximum performance levels, which earn a 200% payout, reflect a 38% and 15% improvement versus fiscal year 2020 actual results for Adjusted EBITDA and total net sales, respectively.

 

 

 

 

 

Business Performance Levels – FY21 (000’s)

 

 

 

 

 

 

 

 

 

Business

Performance Measures

 

Measure

Weighting

 

Threshold

 

Target

 

Max

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

60%

 

$ 404,000

 

$ 440,000

 

$ 500,000

 

 

 

 

 

 

 

 

 

Total Net Sales

 

20%

 

$ 1,765,000

 

$ 1,825,000

 

$ 1,929,000

 

 

 

 

 

 

 

 

 

 

 

Payout %’s

 

50%

 

100%

 

200%

Annual Incentive Plan Funding Trigger

For Messrs. Barbour, Cottrill, Vitarelli, Klein, the Annual Incentive Plan includes a funding trigger that requires the achievement of the established threshold performance level for Adjusted EBITDA for any potential payout based on the Adjusted EBITDA as well as Total Net Sales or Individual Goal Achievement measures. For fiscal year 2021, the Adjusted EBITDA funding trigger was set at $404 million to receive a threshold payout for Adjusted EBITDA along with earned incentive from the other measures as described above. This requirement was met for fiscal year 2021.

Business Performance Levels in Annual Incentive Plan – Mr. Moore

As reflected in the table below, threshold, target, and maximum performance levels were established for the Infiltrator Adjusted EBITDA metric based on national housing statistics provided by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. While this relational incentive feature is unique to Infiltrator, the Committee believes this plan design, in place at the time of the acquisition, continues to reflect a key value driver for purposes of establishing annual cash incentive opportunity for Mr. Moore.

 

 

 

 

 

 

Business Performance Levels – FY21 (000’s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business

Performance Measures

 

Measure

Weighting

 

 

Threshold

 

 

Target

 

 

Max

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infiltrator EBITDA

 

70%

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Decline < 3%

 

 

 

 

 

$ 107,000

 

 

$ 118,000

 

 

$ 127,000

 

Market Outlook + / -  3%

 

 

 

 

 

$ 118,227

 

 

$ 133,000

 

 

$ 138,000

 

Market Growth > 3%

 

 

 

 

 

$ 126,000

 

 

$ 135,000

 

 

$ 156,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADS Adjusted EBITDA

 

10%

 

 

$ 404,000

 

 

$ 440,000

 

 

$ 500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payout %’s

 

 

50%

 

 

100%

 

 

200%

 

- 29 -

 


 

 

Role of Individual Performance in Annual Incentive

Individual performance is measured through a combination of objective and subjective performance assessments of each NEO as compared to the annual performance objectives, as well as demonstrated leadership. It represents 20% of an executive’s incentive opportunity. This incentive design provides the CEO, the Committee, and our Board the opportunity to distinguish individual performance. This design component allows for individual differentiation based on each NEO's performance versus individual goals and demonstrated leadership.

Listed below are the performance objectives of each NEO in fiscal year 2021. No specific weightings are attached to any of the following individual objectives. These performance objectives serve as a general guide for the Committee in determining whether the individual goals for each NEO have been achieved.

 

D. Scott Barbour

President & CEO

 

 

 

 

 

 

 

Safety performance and culture;

COVID-19 market and operational response;  

Execution of priorities from the strategic growth plan;  

Financial performance and integration of IWT;

Organizational model and talent to enhance strategic execution; and

Key external relationships

 

 

 

 

 

 

 

 

Scott A. Cottrill

Executive Vice President, Chief Financial Officer

 

 

 

 

 

 

 

Financial priorities as part of the COVID-19 response plan;

Capital deployment strategies, priorities, and capabilities;

Internal controls around financial reporting;

Key external relationships; and  

Leadership and talent.

 

 

 

 

 

 

 

 

Roy E. Moore, Jr.

Executive Vice President

 

 

 

 

 

 

 

Safety performance and culture;

Financial and internal control performance;

Operational performance targets;

Innovation strategy and performance; and;

Leadership and talent

 

 

 

 

 

 

 

 

Ronald R. Vitarelli

Executive Vice President, Engineering and Business Development

 

 

 

 

 

 

 

Product development process and deliverables;

Approvals and engineering sales support programs;

Optimization of acquired assets; and

Leadership and talent

 

 

 

 

 

 

 

 

Robert M. Klein

Executive Vice

President, Sales

 

 

 

 

 

 

Canadian strategy and performance;

Agriculture strategy and performance;

Public market strategy and performance;

Allied Products strategy and performance; and

Corporate Accounts strategy and performance 

 

 

 

 

 


 

 

 

Annual Incentive Performance Payouts – Messrs. Barbour, Cottrill, Vitarelli, Klein

- 30 -

 


 

Fiscal year 2021 included record financial performance in both the legacy ADS business and Infiltrator Water Technologies. The performance levels for the non-individual metrics in the ADS Annual Incentive Plan for fiscal year 2021 are listed below.

 

 

 

 

 

Business Performance – FY21 (000’s)

Business

Performance Measures

 

Measure

Weighting

 

Threshold

 

Target

 

Max

 

Fiscal

Year 2021

 

Payout %

of Target

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

60%

 

$ 404,000

 

$ 440,000

 

$ 500,000

 

$ 567,000

 

200%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Net Sales

 

20%

 

$ 1,765,000

 

$ 1,825,000

 

$ 1,929,000

 

$ 1,982,800

 

200%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payout %’s

 

50%

 

100%

 

200%

 

 

 

 

Annual Incentive Performance Payouts – Mr. Moore

The national housing completion statistics provided by the U.S. Census Bureau and U.S. Department of Housing and Urban Development were above 3%. The chart below reflects the applicable performance levels and financial performance for the Infiltrator Adjusted EBITDA metric in the Plan.

 

 

 

 

 

 

Business Performance – FY21 (000’s)

 

Business

Performance Measures

 

Measure

Weighting

 

 

Threshold

 

 

Target

 

 

Max

 

 

Fiscal

Year 2021

 

Payout %

of Target

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infiltrator Adjusted EBITDA

 

70%

 

 

$ 126,000

 

 

$ 135,000

 

 

$ 156,000

 

 

$ 164,000

 

200%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADS Adjusted EBITDA

 

10%

 

 

$ 404,000

 

 

$ 440,000

 

 

$ 500,000

 

 

$ 567,000

 

200%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payout %’s

 

 

50%

 

 

100%

 

 

200%

 

 

 

 

 

 

 

The table below summarizes the approved annual incentive payouts paid to the NEOs based upon the overall business/financial performance and the assessment of their individual performance during fiscal year 2021.

Named Executive

Officer

 

Overall

Target

Annual

Incentive

Award ($)

 

FY21

Business

Performance

Payout ($)

 

FY21

Individual

Performance

Payout ($)

 

FY21 Total

Annual

Incentive

Payout ($)

 

Approved

Payout %

vs.

Target

 

 

 

 

 

 

 

 

 

 

 

D. Scott Barbour

 

$ 870,000

 

$1,392,000

 

$ 308,000

 

$1,700,000

 

195%

 

 

 

 

 

 

 

 

 

 

 

Scott A. Cottrill

 

$ 390,000

 

$ 624,000

 

$ 98,280

 

$ 722,280

 

185%

 

 

 

 

 

 

 

 

 

 

 

Roy E. Moore, Jr.

 

$ 322,135

 

$ 257,708

 

$ 85,043

 

$ 600,458

 

186%

 

 

 

 

 

 

 

 

 

 

 

Ronald R. Vitarelli

 

$ 288,750

 

$ 462,000

 

$ 52,553

 

$ 514,533

 

178%

 

 

 

 

 

 

 

 

 

 

 

Robert M. Klein

 

$ 250,250

 

$ 400,400

 

$ 65,566

 

$ 465,966

 

186%

Long-Term Incentive Compensation

Our long-term incentive compensation program is an integral part of an executive’s total compensation and provides awards for creating and delivering long-term value for our stockholders.

 

Ensure NEOs’ financial interests are aligned with our stockholders’ interests;

 

Motivate decision-making that drives long-term value;

 

Recognize and reward superior financial performance of our company; and

 

Provide a retention element to our compensation program.

- 31 -

 


 

 

Since fiscal year 2019, the long-term incentive program design has included three equity components; performance-based award, non-qualified stock options and time-based restricted stock. The table below outlines the weighting of these three design elements.

 

Long-Term Equity Component

 

Weighting

 

 

 

Performance-Based Award

 

50%

 

 

 

Restricted Stock

 

25%

 

 

 

Non-Qualified Stock Options

 

25%

The Compensation Committee believes the blend of performance and time-based awards represents a balanced method of motivating and rewarding executives and further strengthens the alignment with the market and our stockholders.

Establishing Long-Term Incentive Target Payouts

In determining the value of the long-term incentive award for an executive, the Committee considers prevalent market data from our peer group provided by the executive compensation consultant, as well as the subjective assessment of each NEO’s overall contribution to the business performance, strategic importance to our growth objectives, and individual performance and potential for future contributions.

The CEO, with input from the human resources department, proposes long-term incentives, if any, for our NEOs, excluding himself, based on the criteria described above. His proposal is subject to review and approval (with or without modifications) by the Committee. The long-term incentive, if any, for the CEO is initiated and approved by the Committee directly, subject to the review and final approval of our Board.

The long-term incentive awards granted in fiscal year 2021 are listed in the Summary Compensation Table.

Long-Term Incentive Plan - Performance Based Awards

The performance-based awards under the long-term incentive plan are based upon the company’s actual financial business performance for the designated three-year performance period versus the performance targets approved by the Compensation Committee. The business performance targets are structured with a threshold, target and maximum level.

The incentive opportunities for the participant under the long-term incentive performance-based awards are outlined below.

 

Target performance earns a 100% payout; and

 

Threshold performance earns a 50% payout; and

 

Maximum performance earns a 200% payout

If the performance level falls between threshold and target or between target and maximum, the award is linearly interpolated. Earned incentives, if any, are made in a reasonable time following the approval by the Compensation Committee. Calculation of company results and attainment of performance measures are made solely by the Compensation Committee based upon the Company’s consolidated financial statements.

The Compensation Committee determines appropriate changes and adjustments and may make adjustments for other unusual or non-recurring events, including, without limitation, changes in tax and accounting rules and regulations, extraordinary gains and losses, one-time mergers and acquisitions, and purchases or sales of substantial assets, etc.

For the three-year performance period ending on March 31, 2023, the Compensation Committee approved Free Cash Flow and Return on Invested Capital as the performance measures. These are two key measures of the company’s long-term value creation strategy.

- 32 -

 


 

 

Free Cash Flow – For the three-year performance period ending March 31, 2023, performance in Free Cash Flow will be based upon actual cumulative Free Cash Flow over the three-year performance period against the targets approved by the Compensation Committee.

 

Return on Invested Capital – For the three-year performance period ending March 31, 2023, performance in Return on Invested Capital will be based upon the average Return on Invested Capital over the three-year performance period against the targets approved by the Compensation Committee.

At the beginning of each fiscal year, the Compensation Committee reviews whether to change the performance-based incentive component (e.g., transition from performance share units to performance cash) and/or the business performance measures (e.g., Free Cash Flow, etc.) used under the long-term incentive performance award with input from management and the compensation consultant.

Long-Term Incentive Plan - Performance Based Awards for Three-Year Period Ending March 31, 2021

The period spanning April 1, 2018 to March 31, 2021 was the company’s first three-year performance period under the Long-Term Incentive Plan implemented in fiscal 2019. The awards were approved by the Committee on May 19, 2021. Target and actual performance levels for the two measures for three-year period ending on March 31, 2021 are summarized below.

 

 

 

 

 

 

Business Performance – FY21 (000’s)

 

Business

Performance Measures

 

Measure

Weighting

 

 

Threshold

 

 

Target

 

 

Max

 

 

Fiscal

Year 2021

 

Payout % of

Target

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

50%

 

 

$ 406,989

 

 

$ 431,723

 

 

$ 458,706

 

 

$ 720,237

 

200%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Invested Capital

 

50%

 

 

8.9%

 

 

9.7%

 

 

10.5%

 

 

14.3%

 

200%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payout %’s

 

 

50%

 

 

100%

 

 

200%

 

 

 

 

 

 

 

The table below outlines the approved performance equity awarded to the eligible NEOs based upon the performance vs. targets for the three-year period ending March 31, 2021.

Named Executive Officer

 

Overall Target

Performance

Share Unit Award

(Shares)

 

FY19-21

Performance

Award Earned (Shares)

 

Approved

Payout %

vs.

Target

 

Dividend Equivalent Shares

 

FY19-21

Total Equity Awarded (Shares)

 

 

 

 

 

 

 

 

 

 

 

D. Scott Barbour

 

48,544

 

97,088

 

200%

 

5,955

 

103,043

 

 

 

 

 

 

 

 

 

 

 

Scott A. Cottrill

 

13,592

 

27,184

 

200%

 

1,668

 

28,852

 

 

 

 

 

 

 

 

 

 

 

Ronald R. Vitarelli

 

7,767

 

15,534

 

200%

 

952

 

16,486

 

 

 

 

 

 

 

 

 

 

 

Robert M. Klein

 

7,767

 

15,534

 

200%

 

952

 

16,486

- 33 -

 


 

 

Executive Stock Ownership Guidelines

The Company has defined stock ownership guidelines in place for executives. These guidelines are intended to further align the interests of our executives with stockholders’ interests and represent another opportunity to promote a long-term focus for our senior leaders. The guidelines listed below specify the value of stock the participants are expected to own.

 

CEO

 

CFO / EVPs / SVPs

 

Select Members of Management

 

  

 

 

 

 

 

 

5x annual base salary  

 

3x annual base salary  

 

1x annual base salary  

 

 

 

 

 

 

 

 

 

 

 

 

 



Each covered executive is expected to attain the target level of stock ownership within five years from the later of July 1, 2018 or the date he or she is appointed or elected to a position covered by these guidelines.

Stock ownership will be reviewed by the Compensation Committee on an annual basis. Ownership levels will be assessed using the trailing 12-month average stock price as of the annual assessment date or such other method of valuing ownership in the discretion of the Compensation Committee.

Once an individual subject to these Guidelines satisfies the guideline for his or her current role as of the annual review date, so long as the shares held at that review date are retained and the individual remains subject to the same guideline level, there is generally no obligation under these Guidelines to purchase additional shares of common stock as a result of short-term fluctuations in the Company’s stock price, absent an affirmative determination by the Compensation Committee otherwise.

The Compensation Committee shall have the authority to interpret, develop, oversee and administer the implementation of and compliance with these Guidelines, as well as determine any action necessary to address any noncompliance with these Guidelines.

The minimum stock ownership requirement may be waived or otherwise modified, at the discretion of the Compensation Committee, if compliance would create hardship based upon individual circumstances.

As of March 31, 2021, the majority of the covered executives have achieved their target ownership level, while the others are on a trajectory to achieve their target level within the required timeframe.

BENEFITS AND EXECUTIVE PERQUISITES

The benefits provided to our NEOs are generally the same as those provided to our other salaried associates and include:

 

Medical, dental and vision benefits;

 

Life, accidental death and disability insurance;

 

Retirement plan; and

 

Employee Stock Ownership Plan (ESOP)

Employee Stock Ownership Plan (ESOP)

Messrs. Barbour, Cottrill, Vitarelli, and Klein participate in our tax-qualified ESOP that covers employees who meet certain service requirements. Mr. Moore does not participate in the ESOP. See “Equity-Based Incentive Plans Employee Stock Ownership Plan” and “Employee Stock Ownership Plan” for additional information regarding the ESOP.

- 34 -

 


 

Mr. Moore’s Retirement Program

During fiscal year 2021, Mr. Moore and all eligible Infiltrator employees participated in the Infiltrator Water Technologies, LLC 401(k) Plan and Trust, which effective January 1, 2021, was merged with the Advanced Drainage Systems, Inc. Profit Sharing Retirement plan. The plan merger maintained the Infiltrator legacy employer matching contribution benefit that is discretionary and reviewed on an annual basis. Mr. Moore’s employer match earnings are included in the Other Compensation category in the “Summary Compensation Table for Fiscal Year 2021”.

Executive Perquisites

We provide certain ADS NEOs with select perquisites. These perquisites are summarized below.

 

Reimbursement of country club or fitness membership dues; and

 

Pre-approved personal use of the Company aircraft when it is not being used for business purposes at the cost to the executive as described below.

In determining the total compensation payable to our NEOs, the Committee considers perquisites in the context of the total compensation which our NEOs are eligible to receive. However, given the fact that perquisites represent a relatively small portion of the NEO’s total compensation, the availability of these perquisites does not materially influence the decisions made by the Committee with respect to other elements of the total compensation to which our NEOs are entitled or to which they are awarded.

Personal Use of Company Aircraft

Certain NEOs are also permitted to make pre-approved personal use of Company aircraft when not required for business travel. Consistent with guidance issued in 2010 from the Federal Aviation Administration, the Company may be reimbursed up to the pro rata cost of owning, operating, and maintaining the aircraft when used for routine personal travel by certain individuals whose position with the Company requires them to routinely change travel plans within a short time period. Accordingly, personal use of the Company aircraft by NEOs is subject to reimbursement to the Company by multiplying the aircraft flight time (hours) by the variable cost of the aircraft for all eligible occupied flight hours associated with routine personal usage.

The incremental cost of personal use of Company aircraft is calculated based on the variable operating cost per hour flown, which includes actual aircraft fuel expense, crew travel expenses, hangar and parking fees, per-flight landing fees, average hourly aircraft maintenance expense and other actual incremental costs. Fixed costs that do not change based on usage such as hangar rental, aircraft lease payments, insurance and certain administrative expenses are excluded from the incremental cost calculation. If an aircraft flies empty before picking up or after dropping off a passenger flying for personal reasons, this “deadhead” segment is included in the incremental cost of the personal use and reported in the “All Other Compensation” column of our Summary Compensation Table below. If a NEO is traveling on business utilizing Company aircraft and there is otherwise room available on the aircraft for the NEO’s spouse and/or child(ren) to accompany the NEO, the spouse and/or child(ren) are permitted to do so in accordance with IRS rules. To the extent any use of corporate aircraft results in imputed income to an executive, the Company does not provide tax gross-ups on such income.

For a description of the perquisites received by the NEOs during fiscal year 2021, see the “All Other Compensation” column of our Summary Compensation Table.

OTHER EXECUTIVE COMPENSATION POLICIES AND PRACTICES

Risk in Relation to Compensation Programs

Our compensation programs do not reward employees, including our NEOs and executive officers, for taking excessive or unnecessary risks that would have an adverse effect on the Company. Our management team assessed the program carefully to make this determination. They reached this conclusion in part due to the balance of fixed and variable compensation, balance of short and long-term incentives, design features of the plans, and the oversight and administration of the Committee.

- 35 -

 


 

Recoupment of Incentive Compensation Policy

Under our Recoupment of Incentive Compensation policy, if, in the opinion of the independent directors of the Board, financial results are materially mis-stated due in whole or in part to intentional fraud or misconduct by one of more of the Company’s executive officers, the independent directors have the discretion to use their best efforts to remedy the fraud or misconduct and prevent its recurrence, by enforcing the clawback described herein. The independent directors may, for up to five years following such mis-statement, direct that the Company recover all or a portion of any bonus or incentive compensation paid, or cancel any stock-based awards granted, to the executive officer(s). In addition, the independent directors may, for up to five years following such mis-statement, also seek to recoup any gains realized with respect to equity-based awards, including stock options and restricted stock units.

The independent directors are entitled to exercise remedies pursuant to this policy, including the clawbacks described above, if each of the following conditions have been met:

 

1.

Bonus or incentive compensation to be recouped was calculated based upon the financial results that were restated;

 

2.

One or more executive officers engaged in the intentional misconduct, and

 

3.

Bonus or incentive compensation calculated under the restated financial results is less than amount actually paid or awarded.

Annual Stockholder “Say-on-Pay” Vote

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company provides stockholders with the opportunity to cast an annual advisory vote to approve the compensation of the NEOs. At the Company’s 2020 annual meeting of stockholders, approximately 99% of the votes cast on the “say-on-pay” resolution were in favor of the compensation of the NEOs for fiscal year 2020 as disclosed in the Company’s 2020 proxy statement. Consistent with the Company’s commitment to have the executive compensation programs serve the best interests of the Company and its stockholders, the Compensation and Management Development Committee will continue to review the design of the executive compensation program considering future “say-on-pay” votes and developments in executive compensation.

Insider Trading Policy

The Board has adopted a Policy Regarding Insider Trading, Tipping and Other Wrongful Disclosures and Guidelines with Respect to Certain Transactions in Securities of Advanced Drainage Systems, Inc. to assist the Company’s employees and directors in complying with certain securities laws and avoiding even the appearance of improper conduct. Under this policy, employees, officers, directors, consultants and contractors of the Company (collectively, “Covered Persons”) are prohibited from engaging in certain transactions relating to Company securities held by them, including any short sales and hedging transactions, short-term trading, and transactions in publicly traded options. Covered Persons are also required to obtain prior written approval from the Chief Financial Officer before holding securities issued by the Company in a margin account or pledging them as collateral for a loan. To date, there have been no requests by, and thus no approvals for, Covered Persons to hold Company securities in a margin account or to pledge Company securities as collateral for a loan.

ACCOUNTING AND TAX CONSIDERATIONS

While the accounting and tax treatment of compensation generally has not been a consideration in determining the amounts of compensation for our executive officers, the Committee and management have taken into account the accounting and tax impact of various program designs to balance the potential cost to us with the value to the executive.

Federal income tax law prohibits publicly held companies, such as the Company, from deducting certain compensation paid to a NEO that exceeds $1 million during the tax year. Prior to the adoption of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), to the extent that compensation was based upon the attainment of performance goals set by the Committee pursuant to plans approved by the stockholders, the compensation was not included in the $1 million limit. The Tax Act repealed this exemption, and now compensation paid to NEOs in excess of $1 million in tax years commencing on and

- 36 -

 


 

after April 1, 2018, is no longer be deductible, even if performance-based. The Compensation Committee intends to continue to use performance metrics in compensation when it is in the best interests of the Company and its stockholders.

The expenses associated with executive compensation issued to our executive officers and other key associates are reflected in our financial statements. We account for stock-based programs in accordance with the requirements of ASC Topic 718, which requires companies to recognize in the income statement the grant date value of equity-based compensation issued to associates over the vesting period of such awards.

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT

The Compensation and Management Development Committee has reviewed and discussed with the Company’s management the Compensation Discussion & Analysis set forth above. Based on such review and discussions, the Compensation and Management Development Committee has recommended to the Board that the Compensation Discussion & Analysis be included in this proxy statement and incorporated into the Company’s Annual Report on Form 10-K for the year ended March 31, 2021.

 

Respectfully submitted,

 

Carl A. Nelson, Jr. (Chair)

C. Robert Kidder

M.A. (Mark) Mark Haney

Manuel J. Perez de la Mesa


- 37 -

 


 

COMPENSATION OUTCOMES FOR 2021

Summary Compensation Table for Fiscal Year 2021

The following table summarizes the total compensation earned by each of our NEOs for fiscal years noted:

Name and

Principal Position

 

Fiscal

Year

 

Salary

$(1)

 

Bonus

$(2)

 

Stock

Awards

$(3)

 

Option

Awards

$(4)

 

Non-Equity

Incentive Plan

Compensation

$(5)

 

All Other

Compensation

$(6)

 

Total

$

D. Scott Barbour

 

2021

 

870,000

 

 

2,604,423

 

782,175

 

1,700,000

 

122,266

 

6,078,864

President & Chief Executive Officer

 

2020

 

870,000

 

 

2,062,528

 

687,504

 

1,700,000

 

454,991

 

5,775,023

 

 

2019

 

825,000

 

 

1,875,012

 

625,034

 

1,000,000

 

58,969

 

4,384,015