DEF 14A of Builders FirstSource, Inc.
Filed Apr 25, 2024 · FY20230000950170-24-047767
What are your voting choices for director nominees, and what vote is needed to elect directors?
What are your voting choices for director nominees, and what vote is needed to elect directors? For the vote on the election of the Class I director nominees to serve until the 2027 annual meeting, stockholders may: • vote in favor of all nominees, • vote against all nominees, or • vote in favor of specified nominees and against other specified nominees, or abstain from voting on all or certain specified nominees. At the annual meeting in 2024, directors will be elected by a majority of the votes cast in person or by proxy at the annual meeting. Each director nominee in 2024 has submitted an irrevocable resignation that will be effective upon the occurrence of (i) the failure of such director nominee to receive a majority of the votes cast and (ii) the acceptance of that resignation by the Board. Abstentions from voting have no effect on the outcome of such vote because the election of directors is determined on the basis of votes cast and abstentions are not counted as votes cast.
What are your voting choices for director nominees, and what vote is needed to elect directors?
| THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR NOMINEES. |
What are your voting choices for director nominees, and what vote is needed to elect directors?
What are your voting choices on the advisory vote to approve the 2023 compensation of the Corporation’s named executive officers, including the Corporation’s compensation practices and principles and their implementation? In the non-binding vote to approve the 2023 compensation of the Corporation’s named executive officers, including the Corporation’s compensation practices and principles and their implementation, as discussed and disclosed in this Proxy Statement, stockholders may: • vote in favor of the proposal, • vote against the proposal, or • abstain from voting on the proposal. This proposal requires the affirmative vote of a majority of the votes represented and entitled to vote at the annual meeting. Accordingly, abstentions have the effect of a vote “against” Proposal 2. This is an advisory vote, and, as such, is not binding on the Board or the Compensation Committee. However, the Board and the Compensation Committee will consider the results of the vote when setting the compensation of the Corporation’s executive officers in the future. What are your voting choices on the ratification of the appointment of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm, and what vote is needed to ratify their appointment? On the vote on the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year 2024, stockholders may: • vote in favor of the ratification, • vote against the ratification, or • abstain from voting on the ratification. The proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm will require the affirmative vote of a majority of the shares represented and entitled to vote at the annual meeting. Accordingly, abstentions will have the effect of a vote “against” Proposal 3. This vote is not binding on the Board or the Audit Committee.
What if a stockholder does not specify a choice for a matter when returning a proxy card?
What if a stockholder does not specify a choice for a matter when returning a proxy card? Stockholders should specify their choice for each proposal described on the proxy card, if they receive one. However, proxy cards that are signed and returned, but for which no specific instruction is given, will be voted “FOR” all the director candidates listed in Proposal 1, and “FOR” Proposals 2 and 3. If any matters not specifically set forth in this Proxy Statement properly come to a vote at the meeting, either of the members of the Proxy Committee, comprised of Timothy D. Johnson and Peter M. Jackson, will vote regarding those matters in accordance with their best judgments.
What are broker non-votes and how are they counted?
What are broker non-votes and how are they counted? Although your broker is the record holder of any shares that you hold in street name, it must vote those shares pursuant to your instructions. If you do not provide instructions, your broker may exercise discretionary voting power over your shares for “routine” items but not for “non-routine” items. All matters described in this Proxy Statement, except for the ratification of the appointment of our independent auditor, are considered to be non-routine matters. “Broker non-votes” occur with respect to a non-routine matter when shares held of record by a broker are not voted on such matter because the beneficial owner has not provided voting instructions and the broker either lacks or declines to exercise the authority to vote the shares in its discretion. Broker non-votes will be counted as present for purposes of establishing a quorum. Broker non-votes will not have any effect on Proposal 1, since broker non-votes are not votes cast. Broker non-votes will have the effect of a vote “AGAINST” Proposal 2, since broker non-votes are entitled to vote at the annual meeting but are not entitled to vote on “non-routine” items. Brokers have discretionary authority to vote on Proposal 3.
Can I change my mind and revoke or change my proxy?
Can I change my mind and revoke or change my proxy? Yes. A stockholder of record may revoke a proxy or change its vote prior to its exercise at the annual meeting by: • submitting a later-dated vote by telephone or Internet no later than 8:00 a.m. Central Time on June 4, 2024; • signing a valid, later-dated proxy card and submitting it so that it is received before the annual meeting in accordance with the instructions included in the proxy card; • before the annual meeting, signing a written notice of revocation dated later than the date of the proxy and submitting it to our Corporate Secretary so that it is received before the annual meeting; or attending the annual meeting and voting in person. Note that attendance at the annual meeting, by itself, will not revoke your proxy. A street name holder may revoke a proxy given pursuant to this solicitation by following the instructions of the bank, broker, trustee, or other nominee who holds his or her shares. Pursuant to the Corporation’s By-laws, the Board is “classified,” which means it is divided into three classes of directors based on the expiration of their terms. Under the classified Board arrangement, directors are elected to terms that expire on the annual meeting date three years following the annual meeting at which they were elected and the terms are “staggered” so that the terms of approximately one-third of the directors expire each year. The terms of four Class I directors, Cleveland A. Christophe, W. Bradley Hayes, Brett N. Milgrim, and David E. Rush, will expire at the annual meeting in 2024. Accordingly, Proposal 1 seeks the election of four directors to fill the continuing directorships whose terms expire in 2027. The Board of Directors has nominated Messrs. Christophe, Hayes, Milgrim, and Rush, for election to a term that will expire at the annual meeting in 2027.
Can I change my mind and revoke or change my proxy?
| Nominee | Age | Position Held | Independent | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | | Cleveland A. Christophe | 78 | Director | X | | Chair | X | | W. Bradley Hayes | 58 | Director | X | Chair | | | | Brett N. Milgrim | 55 | Director | X | | X | | | David E. Rush | 61 | Director | | | | |
Can I change my mind and revoke or change my proxy?
Unless otherwise indicated, all proxies that authorize the proxy holders to vote for the election of directors will be voted “FOR” the election of the nominees listed below. If a nominee becomes unavailable for election as a result of unforeseen circumstances, it is the intention of the proxy holders to vote for the election of such substitute nominee, if any, as the Board of Directors may propose. As of the date of this Proxy Statement, each of the nominees has consented to serve and the Board is not aware of any circumstances that would cause a nominee to be unable to serve as a director. The background and business affiliations of the director nominees, as well as the qualifications that led the Board to conclude that each nominee should serve as a director of the Corporation, are set forth below:
Class I — Directors with Terms Expiring in 2024
Class I — Directors with Terms Expiring in 2024
Class I — Directors with Terms Expiring in 2024
| Cleveland A. Christophe | | | Director since 2005 Independent 78 years old Compensation Committee (Chair) Nominating and Corporate Governance Committee (Member) | Career Highlights: • President, US&S, Inc., a supplier of services and materials primarily to various agencies of the U.S. Government (2009 – 2013) • Managing Partner, TSG Capital Group, a private equity investment firm, which he founded (1992 – 2008) • Senior Vice President, TLC Group, L.P. (1987 – 1988) • Numerous senior positions, Citibank, N.A. (1971 – 1987) • Chartered Financial Analyst since 1975 Skills and Qualifications: CEO/President Leadership Experience, Operational Responsibility, Finance, Marketing, Business Development and M&A Mr. Christophe has substantial financial and management expertise from his long tenure in the investment and banking industries. He also has significant senior management experience in the commercial and industrial service industry. Additionally, Mr. Christophe’s prior service on other public company boards and audit committees positions him to make valuable contributions to the governance and operation of the Board and its committees. |
Class I — Directors with Terms Expiring in 2024
| W. Bradley Hayes | | | Director since 2019 Independent 58 years old Audit Committee (Chair) | Career Highlights: • Executive Vice President, Chief Financial Officer, Treasurer and other various senior positions, Laboratory Corporation of America Holdings (“LabCorp"), a NYSE listed life sciences company (2005 – 2014) • KPMG Auditor for nine years Other Public Company Boards: • Indaptus Therapeutics, Inc. (2021 – Present) • Patheon, N.V. (2016 – 2018) Skills and Qualifications: Operational Responsibility, Finance, Marketing Mr. Hayes has significant public company financial experience. He has over 15 years of experience in senior and executive management and practiced as a C.P.A. for three decades. Through his previous experience as chief financial officer and chairman of the audit committee of publicly-traded companies, Mr. Hayes brings valuable knowledge to the Board and the Audit Committee of the Corporation. |
Class I — Directors with Terms Expiring in 2024
| Brett N. Milgrim | | | Director since 1999 Independent 55 years old Compensation Committee (Member) | Career Highlights: • Co-Chairman of the Board, Loar Group, Inc., a business specializing in the design and manufacture of aerospace components (2017 – Present) • Managing Director, JLL Partners, Inc., a leading private equity firm (1997 – 2011) Other Public Company Boards: • PGT Innovations, Inc. (2003 – Present) • Horizon Global Corp. (2019 – 2023) Skills and Qualifications: CEO/President Leadership Experience, Building Materials Industry Experience, Business Development and M&A Mr. Milgrim is very knowledgeable regarding all aspects of corporate finance and capital markets. His long tenure on the board of directors of the Corporation, as well as his service on the boards of two other building products companies, gives him in-depth knowledge of the building products industry and the issues faced by the Corporation. |
Class I — Directors with Terms Expiring in 2024
| David E. Rush | | | Director since 2022 61 years old | Career Highlights: • President and CEO, and other senior executive roles including Chief Operating Officer - East, Executive Vice President of the Strategic Management Office, Integration lead for the BMC and ProBuild acquisitions, and Senior Vice President of Strategy and Business Development, Builders FirstSource, Inc. (1999 – Present) Skills and Qualifications: CEO/President Leadership Experience, Building Materials Industry Experience, Operational Responsibility, Finance, Business Development and M&A Mr. Rush is the Corporation’s Chief Executive Officer. That role, along with his extensive knowledge of the Corporation and its operations and finances from his over twenty years with the Corporation, make him an essential Board member. |
Class I — Directors with Terms Expiring in 2024
The background and business affiliations of the Corporation’s other directors, whose terms of service continue beyond 2024, as well as the qualifications that led the Board to conclude that such directors should serve as a director of the Corporation, are set forth below:
Class II — Directors with Terms Expiring in 2025
Class II — Directors with Terms Expiring in 2025
Class II — Directors with Terms Expiring in 2025
| Mark A. Alexander | | | Director since 2021 Independent 65 years old Audit Committee (Member) | Career Highlights: • Founder, Chairman and Chief Executive Officer, Landmark Property Group, a property management and real estate redevelopment company (2009 – Present) • Chief Executive Officer, President, and Director, Suburban Propane Partners, a multibillion-dollar publicly-traded energy services company (1996 – 2009) • Senior Vice President, Business Development, Hanson Industries, the U.S. arm of Hanson plc (1984 – 1996) Other Public Company Boards: • W.P. Carey Inc. (2016 – Present) Skills and Qualifications: CEO/President Leadership Experience, Operational Responsibility, Logistics, Manufacturing, Finance, Business Development and M&A Mr. Alexander possesses significant executive and financial expertise and experience gained from previous management positions. Additionally, his current service on another public company board and its audit committee enables him to provide invaluable guidance and knowledge to our Board and its committees. |
Class II — Directors with Terms Expiring in 2025
| Dirkson R. Charles | | | Director since 2022 Independent 60 years old Audit Committee (Member) | Career Highlights: • Founder and Chief Executive Officer, Loar Group, Inc., a business specializing in the design and manufacture of aerospace components (2012 – Present) • Chairman, Doncasters Group Limited, a privately-held leading international manufacturer of high-precision alloy components (2020 – Present) • Executive Vice President, McKechnie Aerospace (2007 – 2012) • Executive Vice President and Chief Financial Officer, K&F Industries, a leading manufacturer of aviation wheels, brakes, fuel tanks and brake control systems (Prior to 2012) Skills and Qualifications: CEO/President Leadership Experience, Operational Responsibility, Finance, Business Development and M&A Mr. Charles has significant corporate executive experience through his current roles as a CEO and chairman and in prior high-level leadership positions. Additionally, he possesses critical accounting skills as a licensed C.P.A. and from his prior experience in public accounting. Mr. Charles’s qualifications and accomplishments will provide a crucial perspective for the Board. |
Class III — Directors with Terms Expiring in 2026
Class III — Directors with Terms Expiring in 2026
Class III — Directors with Terms Expiring in 2026
| Paul S. Levy | | | Director since 1998 Independent 76 years old Chairman of the Board | Career Highlights: • Founder and Managing Director, JLL Partners, Inc., a leading private equity firm (1988 – Present) • Director, Loar Group, Inc., a business specializing in the design and manufacture of aerospace components (2017 – Present) Other Public Company Boards: • Patheon, Inc. (2011 – 2017) • PGT Innovations, Inc. (2006 – 2013) Skills and Qualifications: Building Materials Industry Experience, Finance, Legal, Business Development and M&A Mr. Levy has vast experience investing in and managing a wide variety of businesses, including other building products companies. He has served on the boards of directors of several public companies. Mr. Levy has also been the CEO of a large company, general counsel of another company, and a practicing lawyer, bringing further breadth to his contributions to the Board. |
Class III — Directors with Terms Expiring in 2026
| Cory J. Boydston | | | Director since 2021 Independent 65 years old Nominating and Corporate Governance Committee (Member) | Career Highlights: • Director, Audit Committee Member and ESG Committee Member, The New Home Company, a privately held homebuilding company (2023 – Present) • Director and Compensation Committee Member, Roseburg Forest Products, a privately held provider of wood products and owner of timberlands (2023 – Present) • Chief Financial Officer, Ashton Woods USA L.L.C., the largest private homebuilder in the United States (2009 – 2022) • Senior Vice President, Chief Financial Officer and Partner, Starwood Land Ventures, LLC, a real estate investment firm that engages in residential land acquisition, development and financing (2008 – 2009) • Senior Vice President, Finance and Treasury, Beazer Homes USA, Inc. (1998 – 2008) • Chief Financial Officer and other senior executive roles, Lennar Corporation (1987 – 1997) Skills and Qualifications: Building Materials Industry Experience, Finance, Business Development and M&A Ms. Boydston possesses substantial public company accounting and finance experience through her more than 30 years of service in senior and executive management and as a C.P.A. Most of her experience is in the homebuilding industry, our primary end-market, which qualifies Ms. Boydston to make critical contributions to the Corporation and our Board. |
Class III — Directors with Terms Expiring in 2026
| James O’Leary | | | Director since 2021 Independent 61 years old Compensation Committee (Member) | Career Highlights: • Chairman, Kinematics Manufacturing Company (2015 – Present) • Director, Sentient Science, a software company that provides digital twin technology to predict the life of mechanical systems (2014 – Present) • Director, ProSource Plumbing Supply, a plumbing supply company in North Carolina and South Carolina (2022 – Present) • Chairman and Chief Executive Officer, WireCo Worldgroup, Inc., a leading global manufacturer of engineered wire, steel rope, and synthetic rope (2017 – 2019) • Chairman and Chief Executive Officer, Kaydon Corporation, Inc., a diversified global manufacturer of precision industrial goods (2007 – 2013) Other Public Company Boards: • DMC Global, Inc. (2023 – Present) Skills and Qualifications: CEO/President Leadership Experience, Building Materials Industry Experience, Operational Responsibility, Manufacturing, Finance, Business Development and M&A Mr. O’Leary has a depth of business, operations, and financial experience gained from serving as a chief executive officer for multiple manufacturing companies, including a publicly-traded company. He also brings valuable accounting experience to our Board as a licensed C.P.A. (currently inactive in New York). |
Class III — Directors with Terms Expiring in 2026
| Craig A. Steinke | | | Director since 2006 Independent 67 years old Audit Committee (Member) Nominating and Corporate Governance Committee (Chair) | Career Highlights: • Chief Executive Officer and Director, Service Logic LLC, a private equity owned company that specializes in energy management and HVAC services for office buildings, hospitals, data centers, and other commercial buildings on a national scale (2013 – Present) • Operating Partner, Sterling Investment Partners, a leading private equity firm (2008 – 2017) • Director and Operating Adviser, Lazer Spot Inc., which specialized in providing logistics support to Fortune 500 companies (2010 – 2015) • President and Chief Executive Officer, GPX International Tire Corporation, an international manufacturer and distributor of branded industrial and off road equipment tires (2007 – 2013) • President and Chief Executive Officer, Eagle Family Foods, Inc., a private equity owned consumer products company in the food industry. (2001 – 2007) Skills and Qualifications: CEO/President Leadership Experience, Building Materials Industry Experience, Operational Responsibility, Manufacturing, Finance, Marketing, Business Development and M&A Mr. Steinke’s extensive experience at the senior executive management level, including as a Chief Executive Officer, allows him to make significant contributions to the development of the Corporation’s business strategy. He also brings a broad knowledge of accounting and experience as a C.P.A. to the Board’s discussions. Mr. Steinke has also served as a director on numerous boards. |
Compensation of Directors
Compensation of Directors The following table sets forth the cash and other compensation paid by the Corporation to the members of the Board of Directors of the Corporation for all services in all capacities during 2023.
Compensation of Directors
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | Mark A. Alexander | 119,843(2) | 174,966 | 294,809 | | Cory J. Boydston | 119,843(2) | 174,966 | 294,809 | | Dirkson R. Charles | 119,843(2) | 174,966 | 294,809 | | Cleveland A. Christophe | 140,000 | 174,966 | 314,966 | | W. Bradley Hayes | 144,789(2) | 174,966 | 319,755 | | Paul S. Levy | 252,219(2) | 174,966 | 427,185 | | Brett N. Milgrim | 119,843(2) | 174,966 | 294,809 | | James O’ Leary | 119,843(2) | 174,966 | 294,809 | | David R. Rush(3) | — | — | — | | Craig A. Steinke | 137,235(2) | 174,966 | 312,201 |
Compensation of Directors
1. Reflects the aggregate grant date fair value of restricted stock unit awards granted in 2023. The fair value of these awards was determined in accordance with the Compensation – Stock Compensation topic of the Financial Accounting Standards Board Accounting Standards Codification. The fair value of the restricted stock unit awards was equal to the closing price of our Common Stock on the grant date. 2. As described below under “Director Compensation Program,” Messrs. Alexander, Charles, Hayes, Levy, Milgrim, O’Leary, and Steinke and Ms. Boydston each took their annual cash retainers and any fees for serving on committees in Common Stock for the full year in 2023. Amounts include the grant date fair value of these stock awards. 3. As an employee of the Corporation, Mr. Rush did not receive any compensation for his service as a director in 2023. As a named executive officer, the compensation Mr. Rush received as an employee during 2023 is set forth in “Executive Compensation and Other Information” below. The following table shows the total number of shares of Common Stock underlying restricted stock units held by the members of the Board of Directors of the Corporation (excluding executive officers) as of December 31, 2023:
Compensation of Directors
| Name | Number of Shares Underlying Restricted Stock Units | | Mark A. Alexander | 1,446 | | Cory J. Boydston | 1,446 | | Dirkson R. Charles | 1,446 | | Cleveland A. Christophe | 1,446 | | W. Bradley Hayes | 1,446 | | Paul S. Levy | 1,446 | | Brett N. Milgrim | 1,446 | | James O’Leary | 1,446 | | Craig A. Steinke | 1,446 |
Director Compensation Program
Director Compensation Program Under the Amended and Restated Director Compensation Policy, directors are entitled to compensation for their service on the Board if they are not concurrently employed in any capacity by the Corporation or any of its subsidiaries ("Eligible Directors"). Following a review of director compensation by Meridian Compensation Partners, LLC, the Corporation's compensation consultant, the Board approved, upon recommendation from the Nominating and Corporate Governance Committee, amendments to the Amended and Restated Director Compensation Policy effective June 1, 2023. The amendments increased (i) the annual cash retainer from $100,000 to $120,000, (ii) the grant date fair market value of the annual grant of restricted stock units from $150,000 to $175,000, (iii) the annual cash retainer for the Chair of the Nominating and Corporate Governance Committee from $10,000 to $20,000, and (iv) the annual cash retainer for the Chair of the Board from $100,000 to $150,000. All annual cash retainers are payable quarterly in advance. Directors receive annual fees for serving on the Board’s committees, but do not receive separate per meeting fees for attending Board or committee meetings. The annual fees for serving on the Board’s committees are as follows:
Director Compensation Program
| Committee | Chair Fee | Member Fee (non-Chair) | | Audit Committee | $30,000 | $5,000 | | Compensation Committee | $20,000 | $5,000 | | Nominating and Corporate Governance Committee | $20,000 | $5,000 |
Director Compensation Program
Eligible Directors also receive annual grants of restricted stock units. In 2023, the number of shares underlying these awards is determined by dividing a dollar value ($175,000 per year) by the fair market value of our Common Stock on the date of grant. These awards vest in full on the earlier of the first anniversary of the grant date or upon such director’s cessation of service due to death, disability, or retirement. If a new Eligible Director joins the Board, or if an existing director’s status changes to allow him or her to qualify as an Eligible Director, that director will receive a grant of restricted stock units on a pro-rated basis for the remainder of the current director compensation year, which is the year from the date of the prior annual meeting of stockholders to the date of the next annual meeting of stockholders. In lieu of receiving cash retainers, an Eligible Director may elect to receive fully vested shares of Common Stock having a value on the first day of the service quarter for which they are issued approximately equal to the amount of the cash retainer payment he or she would otherwise receive. Such stock grants in lieu of cash retainer payments will be awarded on a quarterly basis at the same time cash retainer payments would be made. Eligible Directors may only elect to receive fully vested shares of Common Stock in lieu of cash retainers during an open trading window and such election does not take effect until the following year. We do not compensate directors for any period of service in which they are not Eligible Directors.
Director Compensation Program
| Name | Board of Directors | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | | Paul S. Levy | Chair | | | | | Mark A. Alexander | X | X | | | | Cory J. Boydston | X | | | X | | Dirkson R. Charles | X | X | | | | Cleveland A. Christophe | X | | Chair | X | | W. Bradley Hayes | X | Chair | | | | Brett N. Milgrim | X | | X | | | James O’Leary | X | | X | | | David E. Rush | X | | | | | Craig A. Steinke | X | X | | Chair |
2023 Executive Compensation Process
2023 Executive Compensation Process Role of the Compensation Committee. Under its charter, the Compensation Committee is responsible for (i) reviewing and approving our executive compensation program, (ii) administering our long-term incentive plan, (iii) reviewing the Company’s compensation programs in light of best practices and good corporate governance, (iv) reviewing and approving the Compensation Discussion and Analysis section of our proxy statement, and (v) monitoring the Company’s compensation-related risk. As part of its evaluation process relating to NEO compensation, the Compensation Committee reviewed information compiled by our compensation consultant as well as data compiled by the Company. At meetings held in October 2022 and February 2023, the Compensation Committee approved, and recommended to our Board of Directors for its ratification, the 2023 executive compensation program for executive officers, which included setting 2023 base salaries, approving the 2023 Corporate Incentive Plan, and approving equity incentive awards to be granted in 2023. Role of Executives. Our CEO, General Counsel, and Chief People Officer, as well as members of our Legal, Human Resources, and Finance Departments, assisted the Compensation Committee and the Board in gathering the information needed for their respective reviews of our 2023 executive compensation program. The Compensation Committee and the Board also considered our CEO’s recommendations for our executive officers (other than himself) with respect to the 2023 executive compensation program. Role of the Board of Directors. The Board of Directors is responsible for reviewing and ratifying the decisions and recommendations of the Compensation Committee regarding our executive compensation program. In February 2023, after considering the decisions and recommendations of the Compensation Committee, the Board ratified the 2023 executive officer compensation program. Role of Compensation Consultants. Under its charter, the Compensation Committee is authorized to engage independent outside advisors to assist it in discharging its responsibilities relating to executive compensation. The Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”) to perform a comprehensive review of our executive compensation program and to conduct market compensation comparisons for our executive officers to assist the Compensation Committee in designing our 2023 executive compensation program. The Compensation Committee determined that Meridian is independent under applicable SEC rules. While the Compensation Committee takes Meridian’s advice on compensation matters into consideration, the Compensation Committee has the authority and responsibility to make final decisions on our executive compensation program. Market Comparisons. The Compensation Committee periodically examines the competitiveness of our executive compensation program to determine how our compensation levels compare to our overall philosophy and target markets. The Compensation Committee retained Meridian to assist in updating our Peer Group (defined below) for purposes of reviewing market compensation comparisons. In our case, peer selection is somewhat difficult due to the lack of publicly-traded companies with whom we compete and the absence of available data for privately-held competitors. In July 2022, Meridian recommended changes to the Company's compensation Peer Group so that it more closely aligns with our increased revenue. Specifically, Meridian recommended removing two smaller distribution companies and adding five new companies with revenues ranging from $16-25 billion. The Compensation Committee agreed with and implemented Meridian’s recommendation. For purposes of the Compensation Committee review of market compensation comparisons for 2023, the primary peer group (“Peer Group”) included the following 20 companies:
2023 Executive Compensation Process
| Peer Group Companies | | | Ball Corporation | Owens Corning | | Beacon Roofing Supply, Inc. | PPG Industries, Inc. | | Carrier Global Corporation | PulteGroup, Inc. | | Fortune Brands Home & Security, Inc. | Stanley Black & Decker, Inc. | | Genuine Parts Company | The Sherwin-Williams Company | | Johnson Controls | Trane Technologies plc | | LKQ Corporation | Univar Solutions Inc. | | Lennar Corporation | W.W. Grainger, Inc. | | Masco Corporation | WESCO International, Inc. | | Mohawk Industries, Inc. | Whirlpool Corporation |
Elements of our Compensation Program
| | Plan | Purpose | Relevant Performance Metric and Description | | | | Base Salary | To provide fair and competitive compensation for individual performance and level of responsibility of position held. | Individual Performance | | | | 2023 Corporate Annual Incentive Plan | To provide performance-based annual cash awards for Company and divisional performance to motivate and reward key employees for achieving our short-term business objectives and to drive performance. | Mix of metrics, including: • Adjusted EBITDA • Working Capital • Safety (RIR Reduction) • RIC Training • Sustainability Milestone Modifier | | | | 2023 Long-Term Incentive Plan: Performance Stock Units (50%) (“PSUs”) | To provide performance-based equity compensation in the form of restricted stock units to maximize stockholder value and retain key employees. | Awards vest at the end of a three-year performance period based on achievement of goals tied to return on invested capital, +/- 10% TSR modifier compared to the Dow Jones U.S. Construction & Materials Index. | | | | 2023 Long-Term Incentive Plan: Restricted Stock Units (50%) (“RSUs”) | To enhance the program’s ability to retain participants and drive long-term behavior by allowing for time-based awards. | The RSUs are time-vested awards that generally vest in equal annual installments on the first three anniversaries of the grant date, subject to the recipient’s continued employment by the Company. | |
Annual Cash Incentives
Annual Cash Incentives We provide annual cash incentive opportunities to our executive officers that are designed to reward the achievement of financial results measured over the current fiscal year. The Compensation Committee selects the financial performance goals applicable to the annual incentive program, which are based on key financial metrics that are deemed critical to the Company’s near-term success. 2023 Corporate Annual Incentive Plan. For 2023, the Compensation Committee implemented an annual cash incentive program for our corporate office leaders, including our NEOs. Under the 2023 Corporate Incentive Plan, a target bonus opportunity for each participant was set as a percentage of base salary determined by their position. Actual bonus amounts that could be earned by our NEOs ranged from 0% (for performance below threshold levels) to a maximum of 200% (for performance at or above maximum levels) of their respective target bonus amounts. The 2023 Plan also included the ability to earn an additional 5% if certain sustainability milestones were met. Under the 2023 Plan, 85% of a NEO’s bonus potential was based solely on the Company’s achievement of financial goals, while the remaining 15% was based on achievement of Corporate Social Responsibility ("CSR") objectives, together with an additional 5% modifier that could be earned based on achieving key sustainability milestones. The bonus amounts paid to our NEOs under the 2023 Corporate Incentive Plan are included later in this Compensation Discussion and Analysis section and in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” in this Proxy Statement. Additionally, the following table summarizes the metrics, payout targets, achievements, and actual payouts under the 2023 Corporate Incentive Plan for our NEOs:
Annual Cash Incentives
| | | Payout Targets | | | | | | | | Metric | Weighting | Threshold | Target | Maximum | Achievement | | Payout (% of Total Target Amount) | | | Corporate Adjusted EBITDA(1) | 70% | $1.46 billion | $1.83 billion | $2.20 billion or greater | $2.9 billion | | 140% | | | Working Capital as a Percentage of Sales | 15% | 12.6% | 10.5% | 8.4% or below | 9.2% | | 24.59% | | | Safety Goal | 10% | 2.21 RIR | 1.99 RIR | 1.79 RIR | 1.54 | | 20% | | | RIC Training | 5% | — | 85% Trained | 100% Trained | 99.9% for Corporate team members | 99.8% for West Division team members | 9.98% for Messrs. Rush, Jackson, Herron and Johnson | 9.96% for Mr. Robins | | Sustainability Modifier | Additional 5% | — | — | — | Released 2023 CSR report, including Scopes 1 and 2 GHG emission data, as well as related disclosures in 2023 Proxy Statement and on Company website | | 5% | | | Total Payout | | | | | | | 199.57% for Messrs. Rush, Jackson, Herron and Johnson | 199.55% for Mr. Robins |
Annual Cash Incentives
35% of the Adjusted EBITDA bonus component for Mr. Robins was based on the amount of Adjusted EBITDA earned in 2023 by the West Division, which he oversees. Divisional Adjusted EBITDA targets are competitively sensitive information and not disclosed herein. The Compensation Committee chose Adjusted EBITDA (as defined below) and Working Capital as a Percentage of Sales as the financial performance goals under the 2023 Plan because it believes these metrics provide an effective incentive to maximize financial performance and closely align management awards with Company performance and the financial interests of stockholders. Adjusted EBITDA Metric. The 2023 Plan provided that 70% of the bonuses for Messrs. Rush, Jackson and Johnson and 35% of the bonus for Mr. Robins were based on the amount of Adjusted EBITDA earned by the Company for the year as compared to the budgeted target amount of Adjusted EBITDA included in the Company’s 2023 AOP. The other 35% of the Adjusted EBITDA bonus component for Mr. Robins was based on the amount of Adjusted EBITDA earned in 2023 by the West Division, for which Mr. Robins is operationally responsible, as compared to the 2023 AOP. Because Mr. Herron was the East Division President from January 1, 2023 to March 20, 2023 and the Chief Operating Officer beginning on March 21, 2023, his performance was weighted between two metrics. While he was East Division President, 35% of the bonus for Mr. Herron was based on the amount of Adjusted EBITDA earned by the Company and the other 35% was based on the amount of Adjusted EBITDA earned in 2023 by the East Division, for which Mr. Herron was operationally responsible. Since his appointment as Chief Operating Officer, 70% of the bonus for Mr. Herron was based on the amount of Adjusted EBITDA earned by the Company for the year as compared to the budgeted target amount of Adjusted EBITDA included in the Company’s 2023 AOP. “Adjusted EBITDA” is calculated as earnings before interest, taxes, depreciation, and amortization, as adjusted for other non-recurring and/or non-cash items. The 2023 Plan provided that no bonuses would be earned under the Adjusted EBITDA component unless the Company achieved more than 80% of its Adjusted EBITDA target in the 2023 AOP, as set by the Board of Directors. Any performance between levels was calculated based on the linear interpolation between such levels. The Adjusted EBITDA target included in the 2023 AOP was $1.83 billion. As noted above, the Company achieved Adjusted EBITDA of $2.9 billion for fiscal year 2023, nearly 60% above the 2023 AOP target. Additionally, Adjusted EBITDA for the West Division for fiscal year 2023 was 23% above target. Each of our NEOs earned the maximum payout of 200% of the Adjusted EBITDA metric, or 140% of total target bonus payout. The Adjusted EBITDA-related bonus amounts paid to our NEOs for 2023 are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” in this Proxy Statement. Working Capital Metric. Working capital is a measurement of the Company’s operating liquidity and includes funds invested in accounts receivable, product inventories, and accounts payable. The Compensation Committee set the Working Capital as a Percentage of Sales target under the 2023 Plan for the NEOs at 10.5%, which matched the Company’s budgeted working capital target included in the 2023 AOP. This working capital target included both working capital managed at the corporate level (e.g., checks outstanding, corporate accruals, and prepaid assets) and regional working capital results. If the actual working capital percentage for the year was lower than the target, the bonus payment would increase. If the actual working capital percentage was higher than the target, the bonus payment would decrease. Under the 2023 Plan, the Company had to achieve at least 80% of the 2023 working capital target (or a maximum of 12.6% Working Capital as a Percentage of Sales) to trigger any payment. Any performance between levels was calculated based on the linear interpolation between such levels. The Company achieved a 9.2% Working Capital as a Percentage of Sales result for 2023, approximately 12% above the 2023 AOP target. For purposes of this component of the 2023 Plan, the performance of all NEOs was determined based on results of the entire Company. Each of our NEOs earned a payout of 163.9% of the Working Capital metric, or 24.6% of total target bonus payout. Safety Component. The safety of the Company’s employees is one of the Company’s core values, and the Compensation Committee believes it is a critical component of the Company’s success. Therefore, in addition to the Adjusted EBITDA and Working Capital metrics described above, the Compensation Committee decided that the 2023 Plan should include the reduction of the Company’s RIR as a component of our 2023 Plan. The Compensation Committee set a RIR target under the 2023 Plan at 1.99, representing a 10% reduction from the Company’s prior year RIR, and a 2.21 RIR threshold to trigger any payment under the 2023 Plan, which was the Company’s 2022 RIR performance. Any performance between levels was calculated based on the linear interpolation between such levels. The Compensation Committee, in consultation with our CEO, set this objective on a company-wide basis. For purposes of this component of the 2023 Plan, the performance of Messrs. Rush, Jackson and Johnson was determined based on the RIR target for the overall performance of the entire Company during 2023. The Company’s RIR in 2023 was 1.54, a 30% improvement from the prior year. Mr. Robins' performance was based on the RIR of the West Division and he exceeded his target by 32%. While he was East Division President, Mr. Herron's performance was based on the RIR of the East Division and his performance was based on overall performance for the remainder the year while he was Chief Operating Officer. Each of our NEOs earned the maximum payout of 200% of the Safety metric, or 20% of total target bonus payout. RIC Training Component. The Compensation Committee recognizes the importance of fostering a respectful and inclusive environment for the Company’s team members. Accordingly, the Compensation Committee included in the 2023 Plan RIC training for the Company’s workforce as a component of our NEO bonus program. For 2023, the Compensation Committee set an 85% training target to trigger any payment under the 2023 Plan. Any performance between levels was calculated based on the linear interpolation between such levels. For purposes of this component of the 2023 Plan, the performance of Messrs. Rush, Jackson and Johnson was determined based on the percentage of all Company team members trained during 2023. While he was East Division President, Mr. Herron's performance was based on the percentage of all team members trained during 2023 in the East Division and his performance was based on overall team member training percentage for the remainder of the year while he was Chief Operating Officer. The performance of Mr. Robins was determined based on the percentage of all team members trained during 2023 in the West Division. In 2023, 99.8% of all Company team members completed RIC training, which resulted in a 9.99% total target bonus payout to Messrs. Rush, Jackson, Herron and Johnson. 99.8% of all West Division team members competed RIC training, resulting in a 9.96% total target bonus payout to Mr. Robins.
Annual Cash Incentives
Sustainability Modifier. In an effort to enhance and highlight for key stakeholders the Company’s progress on CSR matters, the Compensation Committee provided NEOs with the ability to earn an additional 5% bonus if two key CSR milestones were met in 2023. Specifically, the 2023 Plan provided that NEOs could earn a 5% bonus, or 2.5% for each milestone, if the Company released a 2023 CSR report, including Scopes 1 and 2 greenhouse gas (GHG) emission data, and included related disclosures in its 2023 Proxy Statement and on the Company's website. Both milestones were achieved, and all NEOs earned the additional 5% bonus. Overall Payout. As a result of the Company’s 2023 financial performance, as well as the substantial achievement by our executive team of the operational objectives described above, our NEOs received aggregate bonuses as follows:
Annual Cash Incentives
| Name | 2023 Target Bonus (percentage of salary) | 2023 Target Amount | Percentage of 2023 Target Bonus Earned | | David E. Rush | 150% | $1,500,000 | 199.6% | | Peter M. Jackson | 100% | $679,291 | 199.6% | | Stephen J. Herron | 100% | $597,796 | 199.6% | | Scott L. Robins | 100% | $566,057 | 199.6% | | Timothy D. Johnson | 100% | $516,767 | 199.6% |
Annual Cash Incentives
The bonus amounts paid to our NEOs for 2023 are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” in this Proxy Statement. The target amounts reflect the weighted salaries of our NEOs during 2023.
Long-Term Equity Incentives
Long-Term Equity Incentives 2023 LTIP Grants. A key component of our executive compensation program consists of equity-based incentives to reward long-term strategic accomplishments and enhance long-term stockholder value. We believe that long-term incentive compensation performs an essential role in attracting and retaining talented executives and providing them with incentives to maximize stockholder value. In 2023, the Compensation Committee decided to grant PSUs and RSUs, consistent with our practice in recent years. These award vehicles were selected by the Compensation Committee due to their retention value and the performance link to our stock price. Effective March 15, 2023, the Compensation Committee and the Board approved equity awards to key managers, including our NEOs, in order to promote retention and provide incentive to management to maximize the Company’s financial performance over an extended period. 50% of the awards were RSUs and 50% were PSUs, as described below: • Time-Vesting. The RSUs vest over three years in equal annual installments. • Performance-Vesting. The PSUs vest in full on the third anniversary of the grant date based on the Company’s achievement of annual and three-year ROIC targets, with the payout subject to a modifier if the Company’s TSR significantly outperforms or underperforms the TSR of our Peer Group over the three-year measurement period. The Compensation Committee chose the foregoing performance metrics for the PSU grants to each NEO to (i) incentivize our executive team to grow the Company’s ROIC in conjunction with the Adjusted EBITDA and Working Capital financial metrics utilized in our 2023 Corporate Incentive Plan and (ii) ensure that our NEOs’ financial interests are aligned with those of our stockholders over an extended period. The Compensation Committee determined that 50% of the award to each NEO should be RSUs that vest based on continued employment with the Company because it views retention of key management talent as a critical function of our long-term equity incentive program. In connection with Mr. Herron's appointment as Chief Operating Officer in March 2023, the Compensation Committee granted to Mr. Herron a promotion award with an approximate grant date fair value of $900,000 (the "Herron Promotion Award"). $700,000 of the Herron Promotion Award vests in full on November 22, 2024. Of the remaining $200,000 of the Herron Promotion Award, 50% of the award was granted as RSUs that vest in one-third increments on each of March 15, 2024, 2025 and 2026 and 50% was granted as PSUs that cliff vest on March 15, 2026 based on the same performance metrics as the other PSUs granted to NEOs in 2023 and described here. Additionally, the Compensation Committee granted to Mr. Johnson a one-time retention RSU award of 5,000 RSUs, of which 2,000 RSUs vest on March 15, 2025 and 3,000 RSUs vest on March 15, 2026 (the "Johnson Retention Award"). The grant date fair value of the Johnson Retention Award was $743,700. The target value of the RSU and PSU awards made to each NEO for 2023 was as follows:
Long-Term Equity Incentives
| Name | Value of Award | | David E. Rush | $4,000,000 | | Peter M. Jackson | $1,500,000 | | Stephen J. Herron | $1,900,000 | | Scott L. Robins | $1,000,000 | | Timothy D. Johnson | $1,743,700 |
Long-Term Equity Incentives
The restricted stock unit awards granted to our NEOs in 2023 are reflected in the “2023 Grants of Plan-Based Awards” table later in this Proxy Statement. Performance Measurement – ROIC Component. The Compensation Committee believes that ROIC is an effective metric to measure the Company’s efficiency at allocating capital and generating returns for stockholders. In establishing a long-term performance goal, the Compensation Committee and management believe it is appropriate to incentivize immediate and continued performance against pre-established goals. Additionally, as we operate in a cyclical industry, it is important to mitigate large swings in performance (either up or down). As such, the ROIC incentive plan was designed to reward for three individual performance years based on continual improvement from prior year results as well as the achievement against a pre-set three-year objective. This provides the appropriate balance between year-over-year improvement and long-term sustained performance. ROIC is defined as:
Long-Term Equity Incentives
| Adjusted EBIT | | (Total Debt + Finance and Operating Lease Obligations – Cash and Cash Equivalents + Stockholders’ Equity) * |
Long-Term Equity Incentives
* Calculated based on trailing four quarter average for each of the annual tranches ROIC performance is measured over four separate measurement tranches: an annual ROIC measurement for each of 2023-2025 and a cumulative ROIC measurement for performance over the three-year period.
Long-Term Equity Incentives
| Measurement Tranche | Weight | | 2023 ROIC | 25% | | 2024 ROIC | 25% | | 2025 ROIC | 25% | | 3-year Avg. ROIC (2023-2025) | 25% |
Long-Term Equity Incentives
For each tranche, payout would begin at 50% of the target award for achievement of the threshold performance goal, would increase to 100% of the target award for achievement of the target performance goal, and would be capped at 200% of the target award for achievement of the maximum performance goal. There will be no payout for a tranche where the minimum goal is not met. Payout percentages between targets would be determined by linear interpolation. The payout scale is set forth in the following table.
Long-Term Equity Incentives
| Tranche | Minimum (50% Payout) | Full Payout (100% Payout) | Maximum (200% Payout) | | 2023 ROIC | 15% less than 2023 AOP ROIC Target | 2023 AOP ROIC Target | 2023 AOP ROIC Target + 40% Improvement | | 2024 ROIC | 2023 Actual ROIC | 2023 Actual ROIC + 15% Improvement | 2023 Actual ROIC + 40% Improvement | | 2025 ROIC | 2024 Actual ROIC | 2024 Actual ROIC + 15% Improvement | 2024 Actual ROIC + 40% Improvement | | 3-year Avg. ROIC | 2023 AOP ROIC Target | 2023 AOP ROIC Target + 15% Improvement | 2023 AOP ROIC Target + 40% Improvement |
Long-Term Equity Incentives
As mentioned above, the Company’s TSR measured over the three-year vesting period of the awards will be used as a modifier rather than a primary metric. TSR performance is measured against the companies that comprise the Dow Jones U.S. Construction & Materials Index. If the Company’s TSR is in the bottom 25% percentile of the companies in the index, the payout based on the ROIC percentage will be reduced by 10%. If the Company’s TSR is in the top 25% percentile of that group, the payout based on the ROIC percentage will be increased by 10%. Any payouts generated by the 2023 and 2024 tranches are subject to additional time-based vesting requirements such that they would vest upon the conclusion of the three-year performance period, provided that our NEOs remain employed by the Company for the full three-year period of the grant. Vesting of 2021 PSUs. In March 2021, the Compensation Committee granted PSUs to Messrs. Jackson, Herron, Robins and Johnson which paid out based on the scales set forth in the following table:
Long-Term Equity Incentives
| Tranche | Minimum (50% Payout) | Target Payout (100% Payout) | Maximum (200% Payout) | | 2021 ROIC | 2020 Pro-Forma ROIC(1) | 2020 Pro-Forma ROIC + 12.5% Improvement | 2020 Pro-Forma ROIC + 25% Improvement | | 2022 ROIC | 2021 Actual ROIC | 2021 Actual ROIC + 12.5% Improvement | 2021 Actual ROIC + 25% Improvement | | 2023 ROIC | 2022 Actual ROIC | 2022 Actual ROIC + 12.5% Improvement | 2022 Actual ROIC + 25% Improvement | | 3-year Avg. ROIC | 2021 Target Payout + 12.5% Improvement | 3-year Avg. Minimum Target + 12.5% Improvement | 3-year Avg. Minimum Target + 25% Improvement |
Long-Term Equity Incentives
1. When used as a target to calculate 2021 ROIC, actual ROIC for 2020 was calculated on a combined pro forma basis for the Company and BMC Stock Holdings, Inc. Payout percentages between targets are linear. Additionally, the awards were subject to a TSR modifier. If the Company’s TSR was in the bottom two of a selected peer group, the payout based on the ROIC percentage would be reduced by 10%. If the Company TSR was in the top two of the selected peer group, the payout based on the ROIC percentage would be increased by 10%. The performance period for the PSUs concluded on December 31, 2023. The Company achieved the following ROIC metrics set forth in the following, which resulted in a maximum payout for all four performance measures:
Long-Term Equity Incentives
| Tranche | Target Payout | Actual | Weighted Percentage Payout | | 2021 ROIC | 11% (proforma adjusted ROIC) | 32.4% | 50% | | 2022 ROIC | 37% | 44.3% | 50% | | 2023 ROIC | 49.8% | 27.9% | 0% | | 3-year Average ROIC | 12.3% (proforma adjusted ROIC) | 34.9% | 50% | | Total Payout | | | 150% |
Long-Term Equity Incentives
Additionally, the Company’s TSR over the three-year period was 309.1%, which ranked first within the selected peer group. Accordingly, the 150% ROIC attainment percentage increased by 15% (10% of the 150% ROIC attainment percentage) for a total payout of 165% of target amounts for each of Messrs. Jackson, Herron, Robins and Johnson. Actual share payout amounts are reflected in the “2023 Outstanding Equity Awards at Year-End” table of this Proxy Statement.
Post-Termination Compensation
Post-Termination Compensation The Board believes that severance benefits are necessary in order to attract and retain the caliber and quality of executive that the Company needs in its most senior positions. The Compensation Committee began consideration of an executive severance plan in 2022 to more closely align with updated market practices. With the advice of Meridian, the Compensation Committee assessed an appropriate severance plan over multiple meetings and recommended the adoption of a new executive severance plan to the Board of Directors in February 2023. On February 24, 2023, the Board of Directors approved and adopted the Builders FirstSource, Inc. Executive and Key Employee Severance Plan (the “Severance Plan”), which provides for severance payments and benefits to certain key employees of the Company if their employment is involuntary terminated under certain circumstances. Under the Severance Plan, participants are grouped into three tiers of benefits, as selected and designated by the Compensation Committee. The Compensation Committee designated the following named executive officers to participate in the Severance Plan: Dave Rush, as a Tier I Participant; and Peter M. Jackson, Stephen J. Herron, Scott L. Robins, and Timothy D. Johnson, as Tier II Participants. Upon acknowledgment by such named executive officers of their participation in the Severance Plan, any existing employment agreement between the Company and such named executive officer was terminated. As a condition to participating in the Severance Plan, a participant must enter into a restrictive covenant agreement that includes non-competition, customer non-solicitation and employee non-recruitment provisions, that will apply for a period of 24 months, in the case of a Tier I Participant, or 18 months, in the case of a Tier II Participant, following the participant’s termination of employment and subject in each case to applicable limitations under state law. The Board determined that implementation of the Severance Plan is in the best interests of the Company insofar as it permits the Company to achieve its goals of attracting and retaining the best possible executive talent while obtaining post-employment non-competition and non-solicitation covenants from executive officers. Under the Severance Plan, if a participating executive’s employment is terminated by the Company without cause or by the participant for good reason (as such terms are defined in the Severance Plan), and the termination does not occur within the 3-month period prior to or the 24-month period following a change in control of the Company, the participant will be entitled to certain severance payments and benefits (“Regular Severance Benefits”). The Regular Severance Benefits include cash payments of the following amounts: (1) a pro rata annual bonus (based on actual results for the full fiscal year), (2) a severance payment equal to 2.0 times, in the case of a Tier I Participant, or 1.5 times, in the case of a Tier II Participant, the participant’s base salary and target annual bonus, and (3) a payment equal to the cost to provide group health benefits to the participant (less the active-employee rate for such coverage) for 24 months, in the case of a Tier I Participant, or 18 months, in the case of a Tier II Participant (based on group health benefits sponsored by the Company and maintained by the participant as of the termination date). In addition, the participant’s outstanding stock options, restricted stock units and other stock awards with time-based vesting restrictions will become vested and exercisable as to a pro rata portion of the number of awards that otherwise would have become vested on the award's next regularly scheduled vesting date, and a pro rata portion of the participant’s outstanding performance-based stock awards will be deemed vested and earned based on the actual level of achievement of all relevant performance measured as of the end of the regular performance period. If a participating executive’s employment is terminated by the Company without cause or by the participant for good reason, and the termination occurs within the 3-month period prior to or the 24-month period following a change in control of the Company, the participant will be entitled to certain severance payments and benefits (“Change in Control Severance Benefits”). The Change in Control Severance Benefits include lump sum cash payments of the following amounts: (1) a pro rata target annual bonus, (2) a severance payment equal to 2.5 times, in the case of a Tier I Participant, or 2.0 times, in the case of a Tier II Participant, the participant’s base salary and target annual bonus, and (3) a payment equal to the cost to provide group health benefits to the participant (less the active-employee rate for such coverage) for 30 months, in the case of a Tier I Participant, or 24 months, in the case of a Tier II Participant (based on group health benefits sponsored by the Company and maintained by the participant as of the termination date). In addition, the level of achievement of all performance goals relating to the participant’s outstanding performance-based stock awards will be based on (i) the greater of an assumed level of achievement at “target” level or actual level of achievement measured as of the termination date for performance periods that had commenced but were not completed prior to the termination date, and (ii) an assumed level of achievement at “target” level for performance periods that had not commenced prior to the termination date.
Summary Compensation Table
Summary Compensation Table The following table sets forth the cash and other compensation that we paid to our NEOs, or that was otherwise earned by our NEOs, for their services in all capacities during 2023, 2022, and 2021.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Bonus ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | David E. Rush | | | | | | | | | Chief Executive Officer and | 2023 | 1,000,000 | 4,102,537(1) | — | 2,993,554(2) | 9,900(4) | 8,105,991 | | President | 2022 | 586,589 | 499,990 | 150,000 | 1,214,970 | 9,200 | 2,460,749 | | | 2021 | 525,000 | 2,999,984 | 1,650,000 | — | 5,800 | 5,180,784 | | Peter M. Jackson | | | | | | | | | Executive Vice President and | 2023 | 685,785 | 1,539,730(1) | — | 1,355,658(2) | 9,900(4) | 3,591,073 | | Chief Financial Officer | 2022 | 655,000 | 3,018,612 | 150,000 | 1,202,273 | 9,150 | 5,035,035 | | | 2021 | 625,000 | 1,513,224 | — | 1,021,669 | 5,800 | 3,165,693 | | Stephen J. Herron | | | | | | | | | Chief Operating Officer(3) | 2023 | 595,763 | 1,925,801(1) | — | 1,193,036(2) | 17,054(5) | 3,731,654 | | Scott L. Robins | | | | | | | | | President – West Division | 2023 | 570,350 | 1,026,458(1) | — | 1,129,543(2) | 9,900(4) | 2,736,251 | | | 2022 | 550,000 | 1,809,898 | 150,000 | 1,009,470 | 9,200 | 3,528,568 | | | 2021 | 525,000 | 807,059 | — | 858,202 | 5,800 | 2,196,061 | | Timothy D. Johnson | | | | | | | | | Executive Vice President, General | 2023 | 521,250 | 1,770,158(1) | — | 1,031,310(2) | 9,900(4) | 3,332,618 | | Counsel and Corporate Secretary | 2022 | 500,000 | 1,759,284 | 150,000 | 917,765 | 14,661 | 3,341,710 | | | 2021 | 450,000 | 2,004,364 | — | 735,602 | 9,750 | 3,199,716 |
Summary Compensation Table
1. Unless otherwise noted, reflects the aggregate grant date fair value of restricted stock unit awards, which for 2023 included both time-based vesting and performance-based vesting RSUs. The fair value of these awards was determined in accordance with the Compensation – Stock Compensation topic of the Financial Accounting Standards Board Accounting Standards Codification. The grant date fair value of time-based vesting RSUs was equal to the closing price of our Common Stock on the grant date. The grant date fair value of the performance-based vesting RSUs, utilizing an annual return on invested capital (“ROIC”) measurement for each of 2023-2025 individually and a cumulative ROIC measurement for performance over that three-year period, and subject to a total shareholder return modifier, was determined using the Monte Carlo simulation model, which is based on a number of factors. If achievement of the highest level of performance conditions is assumed, the grant date fair value of the awards to Messrs. Rush, Jackson, Herron, Robins and Johnson would increase by $2,442,854, $947,715, $750,986, $631,743 and $631,743, respectively. The weighted average assumptions used in determining the grant date fair value of these awards are set forth in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. 2. Reflects cash incentive awards earned under the 2023 Corporate Annual Incentive Plan. For information regarding our 2023 Corporate Annual Incentive Plan, see the discussion in the “Compensation Discussion and Analysis” section above. 3. Mr. Herron was appointed Chief Operating Officer on March 21, 2023. 4. Amount reflects $9,900 in employer contributions to executive’s 401(k) plan. Amount reflects $7,454 in employer contributions to Mr. Herron’s 401(k) plan and $9,600 in auto allowance payments.
2023 Grants of Plan-Based Awards
2023 Grants of Plan-Based Awards The following table below sets forth the individual grants of plan-based awards made to each of our NEOs during 2023.
2023 Grants of Plan-Based Awards
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Award(2) | | | All Other Stock Awards: Number of Shares of Stock | Grant Date Fair Value of Stock and Option | | Name | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#) | Awards ($)(3) | | David E. Rush | | | | | | | | | | | | 2023 Plan | | | 37,500 | 1,500,000 | 3,000,000 | | | | | | | RSU | 3/15/23 | 2/15/23 | | | | | | | 25,988(4) | $2,066,826 | | PSU | 3/15/23 | 2/15/23 | | | | 2,734 | 24,307 | 53,475 | | $2,035,711 | | Peter M. Jackson | | | | | | | | | | | | 2023 Plan | | | 16,982 | 679,291 | 1,358,582 | | | | | | | RSU | 3/15/23 | 2/15/23 | | | | | | | 9,430(5) | $749,968 | | PSU | 3/15/23 | 2/15/23 | | | | 1,060 | 9,430 | 20,746 | | $789,763 | | Stephen J. Herron | | | | | | | | | | | | 2023 Plan | | | 14,945 | 597,796 | 1,195,592 | | | | | | | RSU | 3/15/23 | 2/15/23 | | | | | | | 6,287(5) | $500,005 | | RSU | 3/21/23 | 3/20/23 | | | | | | | 9,497(6) | $799,932 | | PSU | 3/15/23 | 2/15/23 | | | | 707 | 6,286 | 13,829 | | $526,453 | | PSU | 3/21/23 | 3/20/23 | | | | 133 | 1,187 | 2,611 | | $99,411 | | Scott L. Robins | | | | | | | | | | | | 2023 Plan | | | 14,151 | 566,057 | 1,132,114 | | | | | | | RSU | 3/15/23 | 2/15/23 | | | | | | | 6,287(5) | $500,005 | | PSU | 3/15/23 | 2/15/23 | | | | 707 | 6,286 | 13,829 | | $526,453 | | Timothy D. Johnson | | | | | | | | | | | | 2023 Plan | | | 12,919 | 516,767 | 1,033,534 | | | | | | | RSU | 3/15/23 | 2/15/23 | | | | | | | 6,287(5) | $500,005 | | RSU | 9/1/23 | 8/17/23 | | | | | | | 5,000(7) | $743,700 | | PSU | 3/15/23 | 2/15/23 | | | | 707 | 6,286 | 13,829 | | $526,453 |
2023 Grants of Plan-Based Awards
1. Represents threshold, target, and maximum payout levels for 2023 performance under the 2023 Corporate Annual Incentive Plan. The threshold amount for each of Messrs. Rush, Jackson, Herron, Robins and Johnson represents the minimum amount that could be paid under the 2023 Corporate Annual Incentive Plan, which would occur if the Company only achieved the minimum payout under the Safety metric (2.5% of total target bonus). For more information regarding the 2023 Corporate Annual Incentive Plan, see the discussion in the “Compensation Discussion and Analysis” section above. 2. Reflects awards of performance-based vesting RSUs under the 2014 Incentive Plan. Each award vests on the third anniversary of the grant date based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2023-2025 and a cumulative ROIC measurement for performance over that three-year period. For 2023, (i) minimum payout requires achieving no more than a 15% reduction of the 2023 ROIC target set forth in the 2023 AOP, (ii) full payout requires achieving the 2023 ROIC target set forth in the 2023 AOP, and (iii) maximum payout requires achieving a 40% improvement over the 2023 ROIC target set forth in the 2023 AOP. For each of 2024 and 2025, (i) minimum payout requires achieving the actual ROIC performance for the prior year, (ii) full payout requires achieving the actual ROIC performance for the prior year plus a 15% improvement, and (iii) maximum payout requires achieving a 40% improvement over the actual ROIC performance for the prior year. For the three-year average tranche, (i) minimum payout requires achieving 2023 ROIC target set forth in the 2023 AOP, (ii) the full payout target is a 15% increase over that minimum target, and (iii) the maximum target is a 40% increase above the minimum payout threshold. The specific targets are set forth in the discussion in the “Compensation Discussion and Analysis” section above. Additionally, the awards are subject to a total shareholder return (“TSR”) modifier. If the Company’s TSR is in the bottom 25% percentile of the companies in the Dow Jones U.S. Construction & Materials Index, the payout based on the ROIC percentage will be reduced by 10%. If the Company’s TSR is in the top 25% percentile of that group, the payout based on the ROIC percentage will be increased by 10%. 3. Reflects the aggregate grant date fair value of restricted stock unit awards granted in 2023. The fair value of these awards was determined in accordance with the Compensation — Stock Compensation topic of the Financial Accounting Standards Board Accounting Standards Codification. For time-based vesting RSUs, the grant date fair value of such RSUs is equal to the closing price of our Common Stock on the grant date. The grant date fair value of performance-based vesting RSUs was determined using the Monte Carlo simulation model, which is based on a number of factors. The weighted average assumptions used in determining the grant date fair value of these awards are set forth in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. 4. Reflects awards of time-based vesting RSUs under the 2014 Incentive Plan. 24,308 of the RSUs vest in three equal annual installments on March 15, 2024, 2025, and 2026 and 1,680 RSUs immediately vested and were withheld to satisfy withholding taxes on the grant date. 5. Reflects awards of time-based vesting RSUs under the 2014 Incentive Plan. Each award vests in three equal annual installments on March 15, 2024, 2025, and 2026. 6. Reflects awards of time-based vesting RSUs under the 2014 Incentive Plan. 1,187 of the RSUs vest in three equal annual installments on March 15, 2024, 2025, and 2026 and 8,310 RSUs vest in full on November 22, 2024. Reflects awards of one-time retention time-based vesting RSUs under the 2014 Incentive Plan. 2,000 RSUs vest on March 15, 2025 and 3,000 RSUs vest on March 15, 2026. For more information regarding this award, see the discussion in the “Compensation Discussion and Analysis” section above.
2023 Outstanding Equity Awards at Year-End
2023 Outstanding Equity Awards at Year-End The following table provides information concerning equity awards that are outstanding as of December 31, 2023 for each of our NEOs.
2023 Outstanding Equity Awards at Year-End
| | Stock Awards | | | | | Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | David E. Rush | | | | | | 2023 RSU | 24,308(2) | 4,057,978 | | | | 2023 PSU | | | 48,614(3) | 8,115,621 | | Peter M. Jackson | | | | | | 2021 RSU | 5,317(4) | 887,620 | | | | 2021 PSU | | | 26,317(5) | 4,393,360 | | 2022 RSU | 7,242(6) | 1,208,979 | | | | 2022 PSU | | | 21,722(7) | 3,626,271 | | 2022 RSU | 18,604(8) | 3,105,752 | | | | 2023 PSU | | | 18,860(3) | 3,148,488 | | 2023 RSU | 9,430(2) | 1,574,244 | | | | Stephen J. Herron | | | | | | 2021 RSU | 2,304(4) | 384,630 | | | | 2021 PSU | | | 11,403(5) | 1,903,642 | | 2022 RSU | 3,862(6) | 644,722 | | | | 2022 PSU | | | 11,584(7) | 1,933,833 | | 2023 PSU | | | 12,572(3) | 2,098,770 | | 2023 RSU | 6,287(2) | 1,049,552 | | | | 2023 PSU | | | 2,374(9) | 396,316 | | 2023 RSU | 1,187(10) | 198,158 | | | | 2023 RSU | 8,310(11) | 1,387,271 | | | | Scott L. Robins | | | | | | 2021 RSU | 2,836(4) | 473,442 | | | | 2021 PSU | | | 14,036(5) | 2,343,170 | | 2022 RSU | 3,862(6) | 644,722 | | | | 2022 PSU | | | 11,584(7) | 1,933,833 | | 2022 RSU | 12,403(8) | 2,070,557 | | | | 2023 PSU | | | 12,572(3) | 2,098,770 | | 2023 RSU | 6,287(2) | 1,049,552 | | | | Timothy D. Johnson | | | | | | 2021 RSU | 1,773(4) | 295,985 | | | | 2021 PSU | | | 8,771(5) | 1,464,298 | | 2021 RSU | 11,151(12) | 1,861,548 | | | | 2022 RSU | 3,621(6) | 604,490 | | | | 2022 PSU | | | 10,860(7) | 1,812,968 | | 2022 RSU | 12,403(8) | 2,070,557 | | | | 2023 RSU | 6,287(2) | 1,049,552 | | | | 2023 PSU | | | 12,572(3) | 2,098,770 | | 2023 RSU | 5,000(13) | 834,700 | | |
2023 Outstanding Equity Awards at Year-End
Reflects the value as calculated using the closing market price of our Common Stock as of December 29, 2023 ($166.94). 2. Restricted stock units awarded to the executive on March 15, 2023 under the 2014 Incentive Plan. The restricted stock units vest in three equal annual installments on each of March 15, 2024, 2025, and 2026. Each restricted stock unit converts into one share of common stock upon vesting. 3. Restricted stock units awarded to the executive on March 15, 2023 under the 2014 Incentive Plan. The award vests on March 15, 2026 based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2023-2025 and a cumulative ROIC measurement for performance over that three-year period. For 2023, (i) minimum payout requires achieving no more than a 15% reduction of the 2023 ROIC target set forth in the 2023 AOP, (ii) full payout requires achieving the 2023 ROIC target set forth in the 2023 AOP, and (iii) maximum payout requires achieving a 40% improvement over the 2023 ROIC target set forth in the 2023 AOP. For each of 2024 and 2025, (i) minimum payout requires achieving the actual ROIC performance for the prior year, (ii) full payout requires achieving the actual ROIC performance for the prior year plus a 15% improvement, and (iii) maximum payout requires achieving a 40% improvement over the actual ROIC performance for the prior year. For the three-year average tranche, (i) minimum payout requires achieving 2023 ROIC target set forth in the 2023 AOP, (ii) the full payout target is a 15% increase over that minimum target, and (iii) the maximum target is a 40% increase above the minimum payout threshold. Payout percentages between targets are linear. Additionally, the awards are subject to a total shareholder return (“TSR”) modifier. If the Company’s TSR is in the bottom 25% percentile of the companies in the Dow Jones U.S. Construction & Materials Index, the payout based on the ROIC percentage will be reduced by 10%. If the Company’s TSR is in the top 25% percentile of that group, the payout based on the ROIC percentage will be increased by 10%. The amounts reflected assume maximum payouts excluding any TSR modifier. 4. Restricted stock units awarded to the executive on March 15, 2021 under the 2014 Incentive Plan. The restricted stock units vested in three equal annual installments on each of March 15, 2022, 2023, and 2024. Each restricted stock unit converted into one share of common stock upon vesting. 5. Restricted stock units awarded to the executive on March 15, 2021 under the 2014 Incentive Plan. The award vested on March 15, 2024 based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2021-2023 and a cumulative ROIC measurement for performance over that three-year period. For each of the annual tranches, (i) minimum payout requires achieving the actual ROIC performance for the prior year, (ii) full payout requires achieving the actual ROIC performance for the prior year plus a 12.5% improvement, and (iii) maximum payout requires achieving a 25% improvement over the actual ROIC performance for the prior year. When used as a target to calculate 2021 ROIC, actual ROIC for 2020 is calculated on a combined pro forma basis for the Company and BMC Stock Holdings, Inc. For the three-year average tranche, (i) minimum payout requires achieving pro forma 2020 ROIC plus a 12.5% improvement, (ii) the full payout target is a 12.5% increase over that minimum target, and (iii) the maximum target is a 25% increase above the minimum payout threshold. Payout percentages between targets are linear. Additionally, the awards are subject to a total shareholder return (“TSR”) modifier. If the Company’s TSR is in the bottom two of a selected peer group, the payout based on the ROIC percentage will be reduced by 10%. If the Company’s TSR is in the top two of the selected peer group, the payout based on the ROIC percentage will be increased by 10%. The performance period has been completed and the amounts reflected are the actual amounts earned. 6. Restricted stock units awarded to the executive on February 17, 2022 under the 2014 Incentive Plan. The restricted stock units vest in three equal annual installments on each of February 17, 2023, 2024, and 2025. Each restricted stock unit converts into one share of common stock upon vesting. 7. Restricted stock units awarded to the executive on February 17, 2022 under the 2014 Incentive Plan. The award vests on February 17, 2025 based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2022-2024 and a cumulative ROIC measurement for performance over that three-year period. For each of the annual tranches and the three-year average tranche, target payout aligns with ROIC targets in the Company’s LRP. For 2022, (i) minimum payout requires achieving a 23.7% ROIC, (ii) full payout requires achieving a 25.7% ROIC, and (iii) maximum payout requires achieving a 29.7% ROIC. For 2023, (i) minimum payout requires achieving a 17.9% ROIC, (ii) full payout requires achieving a 19.9% ROIC, and (iii) maximum payout requires achieving a 23.9% ROIC. For 2024, (i) minimum payout requires achieving a 19.9% ROIC, (ii) full payout requires achieving a 21.9% ROIC, and (iii) maximum payout requires achieving a 25.9% ROIC. For the three-year average tranche, (i) minimum payout requires achieving a 20.5% ROIC, (ii) full payout requires achieving a 22.5% ROIC, and (iii) maximum payout requires achieving a 26.5% ROIC. Additionally, the awards are subject to a total shareholder return (“TSR”) modifier. If the Company’s TSR is in the bottom 25% percentile of the companies in the Dow Jones U.S. Construction & Materials Index, the payout based on the ROIC percentage will be reduced by 10%. If the Company’s TSR is in the top 25% percentile of that group, the payout based on the ROIC percentage will be increased by 10%. The amounts reflected assume maximum payouts excluding any TSR modifier. 8. Restricted stock units awarded to the executive on November 23, 2022 under the 2014 Incentive Plan. Each award vests 25% on November 22, 2023, 25% on May 22, 2024, and 50% on November 22, 2024. Each restricted stock unit converts into one share of common stock upon vesting. 9. Restricted stock units awarded to Mr. Herron on March 21, 2023 under the 2014 Incentive Plan in connection with his appointment as Chief Operating Officer. The restricted stock units vest on the schedule described in Footnote 3 above. 10. Restricted stock units awarded to Mr. Herron on March 21, 2023 under the 2014 Incentive Plan in connection with his appointment as Chief Operating Officer. The restricted stock units vest on the schedule described in Footnote 2 above. 11. Restricted stock units awarded to Mr. Herron on March 21, 2023 under the 2014 Incentive Plan in connection with his appointment as Chief Operating Officer. The restricted stock units vest in full on November 22, 2024. 12. Restricted stock units awarded to Mr. Johnson on June 24, 2021 under the 2014 Incentive Plan. The restricted stock units vested in three equal annual installments on each of March 15, 2022, 2023, and 2024. Each restricted stock unit converted into one share of common stock upon vesting. Restricted stock units awarded to Mr. Johnson on September 1, 2023 under the 2014 Incentive Plan. 2,000 RSUs vest on March 15, 2025 and 3,000 RSUs vest on March 15, 2026. Each restricted stock unit converts into one share of common stock upon vesting. For more information regarding this award, see the discussion in the “Compensation Discussion and Analysis” section above.
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested The following table provides information regarding the vesting of restricted stock awards held by our NEOs in 2023. The NEOs did not exercise any stock options in 2023.
2023 Option Exercises and Stock Vested
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | David E. Rush | 113,522 | 8,786,327 | | Peter M. Jackson | 84,858 | 7,524,715 | | Stephen J. Herron | 21,186 | 2,031,032 | | Scott L. Robins | 50,732 | 4,522,118 | | Timothy D. Johnson | 18,867 | 1,727,051 |
2023 Option Exercises and Stock Vested
1. Reflects the value as calculated by multiplying the number of shares of stock by the closing market price of our Common Stock on the date of vesting.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control As described in the "Compensation Discussion and Analysis" section above, our Board of Directors adopted the Severance Plan on February 24, 2023. The Compensation Committee designated Mr. Rush as a Tier I Participant; and Messrs. Jackson, Herron, Robins and Johnson as Tier II Participants. The key terms of the Severance Plan are described above in the section titled "Post-Termination Compensation" in the Compensation Discussion & Analysis, including a summary of the payments in the event of termination by the Company without cause, by the executive for good reason or upon a change in control, and the restrictive covenants that bound the executives. While the Severance Plan does not provide for any payments in the event of a death or disability, all of an executive's unvested RSUs accelerate upon death or disability and unvested PSUs accelerate and vest on the stated vesting date as if the executive remained continuously employed, in each case pursuant to the terms of their respective award agreements. Additionally, the award agreements provide for the acceleration of all unvested RSUs and PSUs in the event of a change in control. In addition, the terms of Mr. Rush’s appointment as interim CEO provided for the acceleration of the RSUs and PSUs granted to him on March 15, 2023 if he is terminated without cause or for good reason, or if he retires.
Chief Executive Officer Pay Ratio Disclosure
Chief Executive Officer Pay Ratio Disclosure Below is: (i) the 2023 annual total compensation of our CEO; (ii) the 2023 annual total compensation of our median employee; (iii) the ratio of the annual total compensation of our CEO to that of our median employee; and (iv) the methodology we used to calculate our CEO pay ratio:
Chief Executive Officer Pay Ratio Disclosure
| CEO Pay Ratio | | | CEO Annual Total Compensation | $8,122,791 | | Median Employee Annual Total Compensation | $68,736 | | Median Employee Pay Ratio | 118:1 |
Chief Executive Officer Pay Ratio Disclosure
To determine our median employee’s pay, we chose total cash compensation paid through our payroll system in 2023 as our consistently applied compensation measure. That amount does not include any 401(k) match. We then annualized base salary for those employees who commenced work during 2023 and any employees who were on an unpaid leave of absence for a portion of 2023. As of December 31, 2023, we had approximately 28,874 employees. Using this methodology, we identified the median employee as of December 31, 2023. That median employee’s total annual compensation in 2023 includes total cash compensation paid through our payroll system in 2023, the value of company-paid cost of health insurance, and the value of company-paid contributions to the employee’s 401(k) plan, if any. Mr. Rush’s total annual compensation includes his base salary, long-term equity incentive awards, non-equity incentive plan bonus, company-paid contributions to his 401(k) plan, and the value of company-paid cost of health and life insurance. The value of company-paid health insurance is not included for Mr. Rush in the Summary Compensation Table above because that benefit is available to all full-time employees regardless of annual compensation amount. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
Pay Versus Performance
Pay Versus Performance Item 402(v) of the SEC’s Regulation S-K requires disclosure of information that demonstrates the relationship between “compensation actually paid” to NEOs, calculated pursuant to SEC rules (referred to herein as “CAP”) and our financial performance for 2023, 2022, 2021, and 2020.
Pay Versus Performance Table
Pay Versus Performance Table
Pay Versus Performance Table
| | | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | SCT Total Compensation for PEO (Dave Rush) ($)(1) | Compensation Actually Paid to PEO (Dave Rush) ($)(2)(3) | SCT Total Compensation for PEO (Dave Flitman) ($)(4) | Compensation Actually Paid to PEO (Dave Flitman) ($)(2)(3) | SCT Total Compensation for PEO (Chad Crow) ($)(5) | Compensation Actually Paid to PEO (Chad Crow) ($)(2)(3) | Average SCT Total Compensation for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($)(2)(3) | Total Shareholder Return | Peer Group Total Shareholder Return(11) | Net Income ($) (in thousands) | Adjusted EBITDA ($) (in thousands) | | (a) | (b) | (c) | (b) | (c) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | 8,105,991 | 13,901,950 | — | — | — | — | 3,347,899(6) | 11,327,474 | 686.99 | 200.45 | 1,540,555 | 2,899,300 | | 2022 | 4,110,749 | 1,074,763 | 6,377,169 | (9,262,135) | — | — | 3,821,105(7) | 2,088,793 | 255.33 | 132.74 | 2,749,369 | 4,376,600 | | 2021 | — | — | 10,129,559 | 15,889,432 | 257,915 | 22,894,748 | 2,947,160(8) | 7,229,729 | 337.31 | 158.74 | 1,725,416 | 3,060,300 | | 2020 | — | — | — | — | 5,309,819 | 12,160,766 | 2,173,216(9) | 3,718,790 | 160.61 | 127.17 | 484,800(9) | 1,071,900(10) |
Pay Versus Performance Table
1. Dave Rush was appointed as Interim Chief Executive Officer effective November 18, 2022. The amount for 2022 reflects Mr. Rush’s total compensation for 2022. 2. The dollar amounts represent the amount of “compensation actually paid,” or CAP, to the CEO and Other Non-CEO NEOs, respectively, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to the CEO or other NEOs, respectively, during the applicable year. 3. For purposes of calculating CAP: a. For 2023 and 2022, the Total Compensation of Dave Rush as reported in the Summary Compensation Table (“SCT”) was reduced by $4,102,537 and $499,990, respectively; for 2022 and 2021, the Total Compensation of Dave Flitman as reported in the SCT was reduced by $5,315,326 and $6,842,350, respectively; for 2021 and 2020, the Total Compensation of Chad Crow as reported in the SCT was not adjusted and reduced by $3,031,035, respectively; and the SCT Total Compensation of the other NEOs for 2023, 2022, 2021 and 2020 was reduced, on average, by $1,565,537, $2,099,424, $1,601,168 and $990,232, respectively, reflecting the grant date fair values of stock awards granted in the applicable year. b. For 2023 and 2022, the SCT Total Compensation of Dave Rush was increased by $8,477,476 and $488,352, respectively; for 2022 and 2021, the SCT Total Compensation for Dave Flitman was not adjusted and increased by $12,612,223, respectively; for 2021 and 2020, the SCT Total Compensation of Chad Crow was not adjusted and increased by $5,391,001, respectively; and the SCT Total Compensation of the other NEOs for 2023, 2022, 2021, and 2020 was increased, on average, by $3,125,543, $2,286,140, $3,009,696 and $1,763,298, respectively, reflecting the fair value as of December 31 of each applicable year of all stock awards granted during that year that are outstanding and unvested as of such date. c. For 2023 and 2022, the SCT Total Compensation of Dave Rush was not adjusted and decreased by $2,422,441, respectively; for 2022 and 2021, the SCT Total Compensation of Dave Flitman was not adjusted for either year; for 2021 and 2020, the SCT Total Compensation of Chad Crow was increased by $21,952,801 and $4,808,382, respectively; and the SCT Total Compensation of the other NEOs for 2023, 2022, 2021 and 2020 was, on average, increased by $5,317,269, decreased by $1,369,868, increased by $2,792,369 and increased by $850,585, respectively, reflecting the change in fair value from December 31 of the prior year to December 31 of the applicable year of any awards granted in a prior year that are outstanding and unvested as of December 31 of the applicable year. d. For 2023 and 2022, the SCT Total Compensation of Dave Rush was increased by $1,421,019 and decreased by $601,907, respectively; for 2022 and 2021, the SCT Total Compensation of Dave Flitman was decreased by $385,221 and not adjusted, respectively; for 2021 and 2020, the SCT Total Compensation of Chad Crow was increased by $684,032 and decreased by $317,401, respectively; and for 2023, 2022, 2021 and 2020, the SCT Total Compensation of the other NEOs was on average, increased by $1,102,300, decreased by $549,161, increased by $81,672 and decreased by $78,077, reflecting the change in fair value from December 31 of the prior year to the vesting date of any awards granted in any prior year as to which all vesting conditions were satisfied during the applicable year. e. For 2022, the SCT Total Compensation of Dave Flitman was reduced by $9,938,757, reflecting the fair value as of December 31 of the prior year of any awards granted in any prior year as to which vesting conditions failed to be met during the applicable year. For purposes of the foregoing, the fair value of the stock awards at all applicable dates was calculated using the same methodology (including applicable assumptions) as used to account for share-based payments in the Company’s financial statements. The assumptions used in calculating the fair value of awards at the applicable dates did not differ in any material respect from the assumptions used to calculate the grant date fair value of the awards as reported in the Summary Compensation Table for the applicable year, except that (i) for 2023 CAP, the fair value calculations for PSUs granted in 2021 assumed a payout at 165% (based on actual payout amount as of the completion of all performance periods), the fair value calculations for the PSUs granted in 2022 and 2023 assumed a payout at 200%, which was the probable outcome of the applicable performance conditions as of December 31, 2023, compared to the grant date fair value calculations of such PSUs, which assumed a payout at target, (ii) for 2022 CAP, the fair value calculations for PSUs granted in 2020 assumed a payout at 220% (based on a maximum performance payout of 200% plus a 10% TSR modifier), the fair value calculations for the PSUs granted in 2021 assumed a payout at 150% for all NEOs except Mr. Rush, and the fair value calculations for the PSUs granted in 2021 to Mr. Rush assumed a payout at 120%, which was the probable outcome of the applicable performance conditions as of December 31, 2022, compared to the grant date fair value calculations of such PSUs, which assumed a payout at target, and (iii) for 2021 CAP, the fair value calculations for PSUs granted in 2020 assumed a payout at 200%, which was the probable outcome of the applicable performance conditions as of December 31, 2021, compared to the grant date fair value calculations of such PSUs, which assumed a payout at target. For a discussion of the assumptions used to estimate the fair value of stock awards, please refer to the “Stock-Based Compensation” in Notes 2 and 10 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Dave Flitman was appointed as President effective January 1, 2021, and as Chief Executive Officer effective April 1, 2021. The amount for 2021 reflects Mr. Flitman’s total compensation in 2021. 5. Chad Crow served as President and Chief Executive Officer during the entirety of 2020, and as Chief Executive Officer from January 1, 2021 to March 31, 2021, and thereafter continued to serve as a consultant to the Company. The amount for 2021 reflects Mr. Crow’s total compensation for 2021. 6. The non-PEO NEOs in 2023 were Peter Jackson, Executive Vice President and Chief Financial Officer, Steve Herron, Chief Operating Officer, Scott Robins, President – West Division, and Tim Johnson, Executive Vice President, General Counsel and Corporate Secretary. 7. The non-PEO NEOs in 2022 were Peter Jackson, Executive Vice President and Chief Financial Officer, Scott Robins, President – West Division, Mike Hiller, President – Central Division, and Tim Johnson, Executive Vice President, General Counsel and Corporate Secretary. 8. The non-PEO NEOs in 2021 were Peter Jackson, Executive Vice President and Chief Financial Officer, Scott Robins, President – West Division, Mike Farmer, President – Commercial Operations, and Tim Johnson, Executive Vice President, General Counsel and Corporate Secretary. 9. The non-PEO NEOs in 2020 were Peter Jackson, Senior Vice President and Chief Financial Officer, Scott Robins, Senior Vice President and Chief Operating Officer – West, Dave Rush, Senior Vice President and Chief Operating Officer – East, and Don McAleenan, Senior Vice President and General Counsel. 10. Pro forma net income for the twelve months ended December 31, 2020 of Builders FirstSource, Inc. and BMC Stock Holdings, Inc. 11. Pro forma Adjusted EBITDA for the twelve months ended December 31, 2020 of Builders FirstSource, Inc. and BMC Stock Holdings, Inc.
Pay Versus Performance Table
We selected the S&P 600® Building Products Index (referred to herein as the “Index”) as our peer group for purposes of this disclosure. We also use the Index for purposes of the performance graph required by Item 201 of Regulation S-K included in our Annual Report on Form 10-K for the year ended December 31, 2023.