DEF 14A of Motorcar Parts Of America Inc
Filed Jul 28, 2023 · FY20230001140361-23-036724
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS We are asking our shareholders to elect ten members to serve on our Board of Directors for a one-year term of office or until their respective successors are elected and qualified. Our Board of Directors has nominated the ten individuals named below for election as directors. Each nominee has agreed to serve as a director if elected. Each of our nominees, Selwyn Joffe, Joseph Ferguson, Rudolph J. Borneo, Philip Gay, Barbara Whittaker, Jeffrey Mirvis, Dr. David Bryan, Jamy P. Rankin, Patricia (Tribby) W. Warfield, and Douglas Trussler is currently serving as a director, and other than Douglas Trussler, each of our nominees was elected at our last annual meeting of shareholders. Our directors will hold office until the next annual meeting of shareholders, or until their successors are elected and qualified. The persons named as proxies in the accompanying form of proxy have advised us that at the meeting, they will vote for the election of the nominees named below, unless a contrary direction is indicated. If any of these nominees becomes unavailable for election to our Board of Directors for any reason, the persons named as proxies have discretionary authority to vote for one or more alternative nominees designated by our Board of Directors. Pursuant to the Convertible Note Transaction that closed on March 31, 2023, and at the recommendation of the Nominating and Corporate Governance Committee of the Board, the Board appointed Douglas Trussler to the Board, effective immediately, to serve until the Company’s 2024 Annual Meeting of Shareholders and until his successor is duly elected and qualified. The Nominating and Corporate Governance Committee and the Board determined that Mr. Trussler is not independent. The Board of Directors recommends that shareholders vote FOR each of the nominees named below.
Information Concerning our Board of Directors and our Nominees to our Board of Directors
Information Concerning our Board of Directors and our Nominees to our Board of Directors The nominees for election to our Board of Directors, their ages and present positions with the Company, are as follows: Selwyn Joffe, 65, has been our Chairman of the Board of Directors, President and Chief Executive Officer since February 2003. He has been a director of our Company since 1994 and Chairman since November 1999. From 1995 until his election to his present positions, he served as a consultant to us. Prior to February 2003, Mr. Joffe was Chairman and Chief Executive Officer of Protea Group, Inc. a company specializing in consulting and acquisition services. From September 2000 to December 2001, Mr. Joffe served as President and Chief Executive Officer of Netlock Technologies, a company that specializes in securing network communications. In 1997, Mr. Joffe co-founded Palace Entertainment, Inc., a roll-up of amusement parks and served as its President and Chief Operating Officer until August 2000. Prior to the founding of Palace Entertainment, Inc., Mr. Joffe was the President and Chief Executive Officer of Wolfgang Puck Food Company from 1989 to 1996. Mr. Joffe serves on the board of directors of the California, Arizona and Nevada Automotive Wholesaler’s Association (CAWA), an industry trade association. Mr. Joffe was a founding director of MERA (Motor and Equipment Remanufacturers Association). Mr. Joffe is a graduate of Emory University with degrees in both Business and Law and is a Certified Public Accountant. As our most senior executive, Mr. Joffe provides the Board of Directors with insight into our business operations, management and strategic opportunities. His history with our Company and industry experience has led the Board of Directors to conclude that he should serve as a director of our Company. Rudolph J. Borneo, 82, joined our Board of Directors on November 30, 2004. Mr. Borneo chairs our Compensation Committee. Mr. Borneo retired from R.H. Macy’s, Inc. on March 31, 2009. At the time of his retirement, his position was Vice Chairman and Director of Stores of Macy’s West, a division of R.H. Macy’s, Inc. Mr. Borneo served as President of Macy’s California from 1989 to 1992 and President of R.H. Macy’s West from 1992 until his appointment as Vice Chairman and Director of Stores in February 1995. In addition, Mr. Borneo is currently Board Chairman of Smoke Eaters Hot Wings Inc., a privately held company. He earned a Bachelor of Science degree in business administration from Monmouth University. Mr. Borneo’s extensive experience in management of employees, organizational management, general business and retail knowledge and financial acumen have led the Board of Directors to conclude that he should serve as a director of our Company. Dr. David Bryan, 71, joined our Board of Directors on June 9, 2016. Dr. Bryan is a member of our Compensation and Nominating and Corporate Governance Committees. Dr. Bryan currently directs The Center for The Common Good, a joint venture of The Herb Alpert Foundation and New Roads School to incubate creative innovation in business, education and community partnerships. In addition, Dr. Bryan consults privately with several Los Angeles based not-for-profit and for-profit businesses on matters of board and workplace organization, employee training and online education, and generational workplace dynamics. He taught part time in the Economics Department of University of California at Santa Cruz from 2014 to 2020. Dr. Bryan was Co-founder and Founding Head of New Roads School from 1995 to 2013. Dr. Bryan is currently the Chair of the c3 and c4 boards at Los Angeles based Brave New Films. Dr. Bryan received a B.A. from the State University of New York at Stony Brook, an M.S. from the University of California at Los Angeles and a J.D. and Ph.D. from the State University of New York at Buffalo. Dr. Bryan’s extensive experience in the education industry and a variety of businesses, as well as his extensive experience with information security, have led the Board of Directors to conclude that he should serve as a director of our Company. Joseph Ferguson, 56, joined our Board of Directors on June 9, 2016. Mr. Ferguson is our Lead Independent Director, and a member of our Audit Committee. Mr. Ferguson is a Co-Founder and Managing Partner at Vicente Capital Partners, a Los Angeles-based investment firm providing capital to privately held growth companies across North America. Prior to co-founding Vicente in 2009, Mr. Ferguson was a partner at Kline Hawkes & Company, which he joined at the firm’s inception in 1995. Mr. Ferguson began his career as an investment banker for Merrill Lynch & Co where he was a member of the Energy and Natural Resources Group and the General Corporate Finance Group. From 1989 to 1994, he worked on over 30 public and private transactions for numerous emerging growth and middle market companies. Mr. Ferguson currently serves on the board of directors of SMT, Intellectual Technology, Inc., and Global LT each of which is privately held. He also serves on the board of directors of Oaktree Strategic Credit Fund and Oaktree Gardens OLP, each a public closed end fund. Mr. Ferguson is a member of the Board of Trustees for The Wildwood School, the Toigo Board of Directors and a member of the Board of Advisors at UCLA Anderson. Mr. Ferguson received a B.B.A in Finance from Southern Methodist University and an M.B.A from the UCLA Anderson School of Management. Mr. Ferguson’s business skills and experience, leadership expertise, knowledge of complex global business and financial matters have led the Board of Directors to conclude that he should serve as a director of our Company. Philip Gay, 65, joined our Board of Directors on November 30, 2004. He chairs our Audit Committee. Mr. Gay currently serves as Managing Director of Triple Enterprises, a business advisory service firm that assists mid-cap sized companies with financing, mergers and acquisitions and strategic financing, which he had previously managed from March 2000 until June 2004. From April 2018 through January 2020, Mr. Gay served as co-CEO of Giggles N Hugs, Inc., a publicly traded company. From March 2015 to May 2015 Mr. Gay served as a director and chief executive officer at Diego Pellicer Worldwide Inc., a publicly traded company. From July 2006 until June 2010, Mr. Gay served as President, Chief Executive Officer and a Director of Grill Concepts, Inc., a company that operates a chain of upscale casual restaurants throughout the United States. From March 2000 to November 2001, Mr. Gay served as an independent consultant with El Paso Energy from time to time and assisted El Paso Energy with its efforts to reduce overall operating and manufacturing overhead costs. Previously he has served as chief financial officer for California Pizza Kitchen (1987 to 1994) and Wolfgang Puck Food Company (1994 to 1996), and he has held various Chief Operating Officer and Chief Executive Officer positions at Color Me Mine and Diversified Food Group from 1996 to 2000. Mr. Gay formerly a Certified Public Accountant, was an audit manager at Laventhol and Horwath and a graduate of the London School of Economics. Mr. Gay’s leadership experience, general business and public company knowledge, financial literacy and expertise, accounting skills and competency and overall financial acumen have led the Board of Directors to conclude that he should serve as a director of our Company.
Information Concerning our Board of Directors and our Nominees to our Board of Directors
Jeffrey Mirvis, 59, joined our Board of Directors on February 3, 2009. Mr. Mirvis is a member of our Audit, Compensation and Nominating and Corporate Governance Committees. Mr. Mirvis is currently the Chief Executive Officer of MGT Industries, Inc. (“MGT”), a privately held apparel company based in Los Angeles. As Chief Executive Officer of MGT, Mr. Mirvis successfully moved all production and sourcing to Asia. During his twenty-year tenure as chief executive, Mr. Mirvis has gained valuable knowledge of manufacturing in Asia. Prior to joining MGT in 1990, Mr. Mirvis served as a commercial loan officer at Union Bank of California following his completion of the Union Bank of California’s Commercial Lending Program. He earned a Bachelor of Arts degree in economics from the University of California at Santa Barbara. He served as a board member of Wildwood School in Los Angeles, for nine years. Mr. Mirvis’ international business experience, operational and production expertise, leadership experience and organizational management have led the Board of Directors to conclude he should serve as a director of our Company. Jamy P. Rankin, 60, jointed our Board of Directors on December 30, 2020. Ms. Rankin is currently the President and CEO of The Rankin Group, LLC. Ms. Rankin retired from Ford Component Sales, LLC (Ford) having worked there in roles of increasing responsibility from 2001 to 2016. She last served as the President and Chief Executive Officer of Ford from 2012 to 2016. As President and CEO, she led the company through double digit growth for three consecutive years through collaboration, market penetration and product offering expansion while managing four operational divisions and supporting functions including finance, engineering, information technology, and human resources. She also created a strategic plan for international growth in Brazil, China, and Mexico. From 2010 to 2012, she served as Global Director of strategy and vehicle personalization where she created an aggressive strategic plan, which resulted in significant growth in vehicle accessory sales, while reducing costs. Before arriving at Ford, she led marketing and sales organizations at Case New Holland and Navistar. Ms. Rankin currently serves on the boards of Bronner Brothers Inc., and the visiting committee at the University of Pittsburgh, school of industrial engineering. She was previously recognized as one of the top African American women in the automotive industry in On-Wheels magazine. Ms. Rankin received her Bachelor of Science degree in Industrial Engineering from the University of Pittsburgh and her Master of Marketing and Strategy degree from the University of Chicago. Ms. Rankin’s automotive experience, strategic planning and marketing knowledge have led the Board of Directors to conclude that she should serve as a director of Company. Douglas Trussler, 52, joined our Board on March 31, 2023. Mr. Trussler was the co-founder of Bison Capital in 2001 and serves as their General Partner of Funds. Mr. Trussler has been responsible for the management of 6 institutional private equity funds totaling more than $1.0 billion in capital commitments from some of the largest institutional investors in the US. Previously, from 1993 to 2000, Mr. Trussler was at Windward Capital Partners LP and at Credit Suisse First Boston. Mr. Trussler is currently a member of the Board of Directors of Sentinel Offender Services, LLC, Silicon Recycling Services, LLC, FinFit, LLC, TwinMed, LLC, Aqua Expeditions, Pte, Ltd., Curtin Maritime, Ocean Media, LLC and Lapmaster Holdings, LLC, all private companies. In the past ten years, Mr. Trussler was formerly a member of the Board of Directors of General Finance Corporation, KeyTech Limited, Ease Entertainment Services, LLC, MVConnect Holdings, LLC, Clinical Research Laboratories, LLC, Performance Team Freight Systems, Inc., Big Rock Sports, LLC, and Global Benefits Group, Inc. In total, Mr. Trussler has served on more than 30 public and private company board in businesses located around the world. Mr. Trussler earned an Honors in Business Administration (HBA) degree from the Ivey Business School at the University of Western Ontario. Other than set forth in the Certain Relationships and Related Transactions section below, there are no transactions between Mr. Trussler and the Company that would be reportable under Item 404(a) of Regulation S-K. Mr. Trussler’s vast financial experience, worldwide and strategic understanding of the aftermarket auto parts space have led the Board of Directors to conclude that he should serve as a director of the Company. Patricia (Tribby) W. Warfield, 63, joined our Board in January 2022. Ms. Warfield most recently served as the chairman and CEO of APC Automotive Technologies, from 2019 to 2020, overseeing a restructuring and a strategic refocusing on braking and exhaust related products. From 2017 - 2019, she served as SVP, business development and strategy for Nitta Corporation, a Japanese global provider of power transmission and conveyor belting products for Europe, Middle East & Africa. Previously, while from 2014 - 2017, Ms. Warfield held dual positions at Kaman Corporation, as SVP and general manager for Kaman Fluid Power and Kaman Automation. Her career includes 25 years, from 1988 - 2013 with the Gates Corporation including 11 consecutive years in Europe in key senior management and operational positions. Ms. Warfield currently serves on the board of one publicly traded Canadian and two private equity-sponsored global diversified manufacturing portfolio companies. She is an advisor board member of the University of Colorado Denver Business School, and formally served as an adjunct professor and guest lecturer at the Daniels College of Business at the University of Denver, from 2014 to 2016. She is a member of the National Association of Corporate Directors, as well as The Committee of 200, comprised of the world’s most successful women entrepreneurs and corporate innovators. Ms. Warfield graduated cum laude with a bachelor’s degree in Business Administration from National University, San Diego. Ms. Warfield’s automotive and manufacturing experience, strategic understanding of our core customer, and strong understanding of markets outside the United States have led the Board of Directors to conclude that she should serve as a director of Company. Barbara L. Whittaker, 72, joined our Board of Directors on February 21, 2017. Ms. Whittaker chairs our Nominating and Governance Committee. Ms. Whittaker is a business strategist and procurement and supply chain expert with extensive experience in the automotive industry, with both original equipment manufacturers and suppliers, and in the aftermarket. She currently serves on the board of directors of Hall Capital and has also held board of director’s positions for ChannelNet Detroit Manufacturing Systems and Piston Group, each of which is privately held. She also serves on the boards of Care House of Oakland County and the Oakland County Art Authority. In 2010 Ms. Whittaker founded BW Limited LLC, which provides companies business and procurement strategies that lead to improved performance. Previously, Ms. Whittaker worked for the General Motors Corporation and Delphi Automotive in leadership positions of increasing responsibility. Prior to her retirement from General Motors, Ms. Whittaker’s position was Executive Director of Global Purchasing. Ms. Whittaker previously served in Chevrolet’s Division of General Motors Corporation in Production Control and Scheduling, with an emphasis on Supply Chain. Ms. Whittaker holds a Bachelor of Industrial Administration degree
Information Concerning our Board of Directors and our Nominees to our Board of Directors
from General Motors Institute (now Kettering University), MBA degree from Wayne State University, and has also completed the Advanced Management Program at INSEAD in France, and the Executive Development program at University of Michigan. In addition to this formal education, she holds Six Sigma Green Belt certification and is well versed in lean production systems (including General Motors’ Global Manufacturing System). Ms. Whittaker’s automotive experience, supply chain expertise, leadership experience and organizational management have led the Board of Directors to conclude that she should serve as a director of Company. Snapshot of Director Nominees The following tables provide summary information about our director nominees. Additional information about our director nominees can be found above in their biographies.
Information Concerning our Board of Directors and our Nominees to our Board of Directors
| Name | Age | Director Since | Principal Occupation | Independent | Committee Member | Other Public Company Boards | | Selwyn Joffe | 65 | Director 1994, Chairman of the Board 1999 | President and Chief Executive Officer of Motorcar Parts of America, Inc. | | | | | Rudolph J. Borneo | 82 | November 30, 2004 | Retired Vice Chairman and Director of Stores of Macy’s West, a division of R.H. Macy’s, Inc. | ❖ | • Compensation (C) | | | David Bryan | 71 | June 9, 2016 | Directs Center of the Common Good, Co-Founder, Former Head of New Roads School | ❖ | • Compensation • Nominating and Corporate Governance | | | Joseph Ferguson | 56 | June 9, 2016 | Managing Partner of Vicente Capital Partners | ❖ | • Audit | 2 | | Philip Gay | 64 | November 30, 2004 | Managing Director of Triple Enterprises | ❖ | • Audit (C) | | | Jeffrey Mirvis | 59 | February 3, 2009 | Chief Executive Officer of MGT Industries, Inc. | ❖ | • Audit • Compensation • Nominating and Corporate Governance | | | Jamy P. Rankin | 60 | December 30, 2020 | Retired President of Ford Component Sales LLC | ❖ | | | | Douglas Trussler | 52 | March 31, 2023 | Co-founder of Bison Capital and General Partner of their Funds | | | | | Barbara L. Whittaker | 72 | February 21, 2017 | Founder of BW Limited LLC | ❖ | • Nominating and Corporate Governance (C) | | | Patricia (Tribby) W. Warfield | 63 | January 26, 2022 | Recently served as Chairwoman and CEO of APC Automotive Technologies | ❖ | | 1 |
Information Concerning our Board of Directors and our Nominees to our Board of Directors
(C) Committee Chair
Information Concerning our Board of Directors and our Nominees to our Board of Directors
| Gender Diversity | Average Age | Racial/Ethnic Diversity | Average Tenure | Independence | | 33.33% | 64.5 Years | 40% | 10.7 Years | 80% |
Compensation Discussion and Analysis
Compensation Discussion and Analysis A strong commitment to enhancing shareholder value has been a guiding force throughout the Company’s history. Consistent with the overall objective to enhance shareholder value, management consistently strives to communicate the Company’s success in reaching its near and long-term strategic goals. The company has embarked on an aggressive program to become more geographically diversified in where we produce and sell. In addition, we have focused on our strategy to become a full line brake supplier which is expected to pave the way for continued significant revenue growth, enhanced margins, all with technology agnostic products. It is our belief that our footprint expansion and increased diversification into Malaysia and Mexico will allow us to compete more effectively and efficiently. We expect this model will result in increased gross margins as we fully absorb the overhead and grow these product lines. The Company has developed a strategy to add shareholder value by focusing our growth on our new brake products under our Quality-Built® brand name. The national acceptance of Quality-Built® for our brakes will pave the way for our other products to be branded in turn creating significant brand equity. The Company expanded its product offerings with the successful full launch of our brake products and increased our remanufacturing capacity this year. We completed our new footprint last year and now are in position to start maximizing efficiencies and take advantage of this new capacity to increase revenues and margins. In Fiscal 2023, our goals continued to focus on financial targets to benefit the Company and our shareholders. The Company achieved strong Net Sales but suffered relative to EBITDA after adjustments and Net Cash Provided by Operating Activities. In Fiscal 2022, we made a conscious decision to invest cash in inventory, knowing it would hurt profitability and cash flows. At the time we wished to: 1) serve our customers better given the ongoing supply chain issues, 2) launch a new brake-related product line in Fiscal 2023 to maximize growth potential for our brand, revenue and margins. Though these initiatives hurt profitability in the short run, we believe our decision to invest will pay off in the long run. As an example the increased inventory levels in a time of uncertainty with supply chain significantly helped us land new business of approximately $65 million annualized. These inventory levels allowed the customers to be comfortable with our ability to meet the increased demand for our product. Specifically, we secured incremental business for our fast-growing brake rotor, pads and brake caliper businesses. The inventory also made us more competitive to retain our current customers and attract other new business. We have worked diligently to reduce our inventory and expect these levels to facilitate our growth as we move into our new fiscal year We continue to believe that the launch of our full line brake supply will accelerate the growth in shareholder value. In Fiscal 2023, the compensation strategy was meant to incentivize this strategic initiative, paving the way for sustained growth in shareholder value. In the next fiscal years our executive compensation program will continue to drive our strategic initiatives with an increased focus on the generation of cash from operations and total shareholder return (TSR). In response to shareholder feedback these two metrics were emphasized in our Fiscal 2023 executive compensation program. For instance, the equity awards granted to our executive officers in Fiscal 2023 tie to long-term, performance-based goals, including relative TSR, to ensure that executive compensation is significantly tied to long-term shareholder returns, and our annual cash-based incentive plan (the “Annual Cash Incentive Plan”) included a performance goal related to Cash from Operating Activities. This Compensation Discussion and Analysis describes our executive compensation program for our named executive officers for Fiscal 2023. The following discussion and analysis of compensation arrangements of our named executive officers for Fiscal 2023 should be read together with the compensation tables and related disclosures set forth below. We are proud of our accomplishments in achieving the key milestones related to the strategic plan discussed above during Fiscal 2023, including the following:
Compensation Discussion and Analysis
| • | Reward our executive officers for their contribution to our success in building long-term shareholder value; and |
Compensation Discussion and Analysis
| • | Increased the relative shareholder return performance goal weighting for Fiscal 2023 PSU awards from 20% to 30%; |
Compensation Discussion and Analysis
| • | Capped individual performance goal payout under the Annual Cash Incentive Plan to the achievement of Company performance goals; meaning that if the Company does not reach at least 80% of its total goals then no individual will receive any incentive regardless of their individual performance; |
Compensation Discussion and Analysis
| • | Determined that, though the Company had record sales in Fiscal 2023, the Company met only one of its three metrics under the Annual Cash Incentive Plan, and as such no annual incentive payments were paid out, thus reinforcing pay and performance alignment; |
Compensation Discussion and Analysis
| • | Determined that the third-year tranche of the performance-based stock options, granted in Fiscal 2021, did not vest and were forfeited due to the applicable stock price target not being met, reinforcing pay for performance alignment; .and |
Compensation Discussion and Analysis
| • | Determined that Mr. Joffe’s restricted stock award granted in Fiscal 2023 vested in 27,058 shares out of a possible 100,000 shares, as he met 90.2% of the Net Sales after adjustments target. Pay for performance alignment was further reinforced as the Company did not meet the Adjusted EBITDA or Cash from Operating Activities threshold goals that applied to the restricted stock award, and as such our CEO was not credited any shares for these metrics. |
Compensation Discussion and Analysis
| • | Extended Mr. Joffe’s Employment Agreement, without including a guaranteed annual equity grant, instead giving the Compensation Committee flexibility to determine the size and parameters of any annual grant. |
Compensation Discussion and Analysis
| • | Approved an increase in Mr. Joffe’s, as well as our other executive officers’, Fiscal 2024 performance-based equity weighting to 100% of their equity compensation opportunity to place greater emphasis on shareholder value creation and to better reflect shareholders’ expectation that the company should strive to create return greater than its peers; |
Compensation Discussion and Analysis
| • | Approved stock price performance goals, 100% based on stock appreciation for Fiscal 2024 PSU awards consisting of the achievement of a $10 price target (49.7% increase from stock price at grant), a $15 price target (124.5% increase from stock price at grant), and a $20 price target (199.4% increase from stock price at grant), which may be met over a three-year performance period and the last tranche of the award is eligible to vest between 50% and 150% of the total tranche by achieving between a $17.50 and $25 price target (this and all price targets must be met for thirty consecutive trading days); |
Compensation Discussion and Analysis
| • | Made all equity long term with rigorous and challenging targets to allow any vesting; |
Compensation Discussion and Analysis
Compensation Components and Key Elements. With our compensation objectives in mind, as further described below, our executive officer compensation program consists of five primary elements: Base Salary. Base salary is the “fixed” component of our executive compensation intended to meet the objective of attracting and retaining the executive officers of superior talent that are necessary to manage and lead our Company. Annual Cash Incentive Plan. We use a cash-based incentive plan to motivate the achievement of key short-term pre-determined financial and individual performance goals meant to enhance shareholder value. With respect to our Annual Cash Incentive Plan, the individual performance metrics employed in recent years focused on the transformation of our business including the launch of our new full line brake program, consolidation of our operations into low-cost countries, and electric vehicle and aerospace initiatives. In Fiscal 2023, we continued to invest in infrastructure and production processes needed for long term growth of the MPA franchise while investing more cash in inventory to assist in our long-term business objectives. Notwithstanding the effects of continuing supply chain issues, we believe our investments are bearing, and will continue to bear fruit in the coming periods. The following table includes the target cash-based incentive compensation for each named executive officer in Fiscal 2023:
Compensation Discussion and Analysis
Long-term, Equity-Based Incentive Plan. Equity awards are a part of our overall executive compensation program to align the interests of our executives with those of shareholders while rewarding individual performance and ensuring we offer competitive compensation levels. In Fiscal 2023, half of the value of the equity awards granted to our named executive officers (not including Mr. Joffe’s performance-based restricted stock award) were performance based and included PSUs requiring three years of performance to vest. In Fiscal 2024, 100% of the long-term equity-based incentives are performance based and tied to stock price performance goals. Deferred Compensation Benefits. We offer participation in a non-qualified deferred compensation plan to selected executive officers which provides unfunded, non-tax qualified deferred compensation benefits. We believe this program helps promote the retention of our senior executives. Participants may elect to contribute a portion of their cash compensation to the plan. In Fiscal 2023 we made matching contributions of 100% of each participant’s elective contributions to the plan up to 3% of the participant’s cash compensation until February 2023, when the Company temporarily halted the Company’s matching contributions. Employee Benefits. All of our full-time employees, including our named executive officers, are eligible to participate in our health and welfare plans. The Company does not provide pension benefits, other than matching contributions under the Company’s 401(k) retirement plan, which were temporarily halted effective February 5, 2023. We believe that a significant portion of executive officer compensation should be at-risk and dependent upon the achievement of measurable and objective performance metrics tied to increased shareholder value. In Fiscal 2023, the awards under the Annual Cash Incentive Plan for all named executive officers were based on the achievement of pre-determined objective metrics of the Company, including Net Sales after adjustments, EBITDA after adjustments and Cash from Operating Activities, which were weighted, 30%, 30% and 40%, respectively, as well as pre-determined objective metrics for each individual named executive officer. Our Annual Cash Incentive Plan requires the Company to hit at least 80% of the total target goals to pay out any bonus. In Fiscal 2023, the Company met 122.5% of its Net Sales after adjustments goal, but did not meet threshold performance for EBITDA after adjustments or Cash from Operating Activities; and as such no cash bonuses were paid to the named executive officers, members of our Executive Team or bonus eligible employees throughout the Company. Approximately 67% of the Chief Executive Officer’s total direct Fiscal 2023 compensation is comprised of equity awards (the “Equity Component”), including PSUs and performance-based restricted stock awards. This percentage compares with an Equity Component percentage (as compared to total direct compensation) of approximately 55% in Fiscal 2022, 68% in Fiscal 2021, and 50% in Fiscal 2020. A majority of Mr. Joffe’s Equity Component consists of performance-based awards focused on achievement of goals that we believe enhance shareholder value, even better aligning his compensation with the interests of our shareholders. As discussed above, in Fiscal 2024, 100% of the equity awards granted to the named executive officers and other employees throughout the Company are PSUs that are 100% dependent on increasing the value of Company common stock. Additionally, in Fiscal 2023, the Company granted to our named executive officers long-term cliff vesting PSUs which are tied to the achievement of EBITDA after adjustments, Relative TSR against the Russell 3000, excluding financial and real estate companies and Net Sales after adjustments. Appendix A shows how EBITDA and Net Sales, each after certain adjustments was calculated in Fiscal 2023. Moreover, we believe that the executive compensation program should serve the interests of shareholders. Accordingly, we have adopted various policies and practices that we believe are in shareholders’ interests, including:
Compensation Discussion and Analysis
| What We Do | What We Don’t Do | | Align pay with performance | No “single-trigger” equity acceleration in connection with a change in control | | Formulaic cash-based incentive program, with 80% of total cash-based annual incentive award opportunity tied to objective financial performance goals | Do not provide above-market interest rates on deferred compensation | | Maintain significant stock ownership requirements: 3x base salary (CEO) and 2x base salary (other named executive officers) | Do not re-price or exchange stock options without shareholder approval | | Maintain a clawback policy (see “Governance Policies and Guidelines—Clawback Policy” above) | Do not allow hedging or pledging of our equity securities | | Annual say-on-pay vote | | | Seek and respond to input from our shareholders regarding executive compensation | | | Compensation Committee receives advice from an independent compensation consultant | |
Compensation Discussion and Analysis
As discussed above under “Governance Policies and Guidelines—Stock Ownership Guidelines,” we have also adopted stock ownership guidelines, pursuant to which each of our directors and executive officers are required to hold a certain number of shares of our common stock, within a specified timeframe. Say on Pay Vote. At the Annual Meeting held on September 8, 2022, 75% of the votes cast by our shareholders approved the non-binding advisory vote related to executive compensation. As a result, we engaged and expect to continue to engage our shareholders to understand their concerns with our executive compensation program, and with the goal of enhancing our shareholder communications. Please see Engagement of Shareholders section below for further details. In Fiscal 2023, we held discussions with nearly all of our major shareholders, representing a majority of the holders of Company common stock, regarding executive compensation and other governance and business performance issues. In response to the feedback we received in these meetings, we continued to enhance our incentive compensation goals of focusing on fulfilling our long-term strategic objectives and building shareholder value. The Annual Cash Incentive Plan for Fiscal 2023 employs Company and individual based objective metrics focused on building shareholder value and return. The equity granted in Fiscal 2023 and beyond include long term PSUs with cliff vesting three-year performance metrics for all Executive Committee members, including the named executive officers and a restricted stock grant to the CEO that vests upon the achievement of objective financial metrics intended to increase shareholder value and return. In Fiscal 2024, the Compensation Committee determined to make 100% of the equity granted to employees company-wide both long-term and vesting based 100% on an increase in shareholder value. Our Executive Committee is a group of worldwide senior staff, including our named executive officers, who meet weekly and are responsible for management and oversight of the Company, including our subsidiaries. All members of the Executive Committee were given objective metrics focused on building shareholder value to align our entire management team. In Fiscal 2023, the Company did not meet 80% of its total target performance goals and thus no annual incentive awards were paid to the named executive officers or any employee, regardless of individual performance. In Fiscal 2022, the Company completed a multi-year investment program to support its expanded non-discretionary automotive product lines. The Company’s brake-related products, including brake calipers, brake rotors and its comprehensive line of brake pads for the professional market were formally launched in Fiscal 2022, and gained significant momentum with exciting commitments and interest in the products in Fiscal 2023. These products were launched under our own brand name “Quality Built Powered by MPA”, with a national distributor who is one of the largest providers of brake products to the professional installer market. It is our belief that as these products are used and embraced by the professional installer that this branding will further enhance our opportunity to launch other products on a national basis. We are seeing early success in consumer demand and acceptance of this brand, supporting our goal of developing a national brand. We also believe that having an accepted national brand will further enhance shareholder value. This will also result in continuing growth and profitability in our hard parts business. As these product lines grow, the Company’s entire manufacturing, distribution and organizational footprint should leverage fixed costs. Equally important, for the long-term success of the company is the management team. Retention and growth are critical components to maintaining and building one of the industry’s most respected management teams, especially in challenging times. The Company was able to recruit leading sales experts in our industry to accelerate our growth to the professional installer market. This team’s skill and reputation enhance the Company’s ability to expand and build our Quality-Built® brand. The Company is confident our investments will prove to be lucrative in producing long term returns. These factors, combined with favourable long-term industry dynamics, will support the Company’s growth and profitability targets, and enhance shareholder value. The Company is well situated today to take advantage of increased capacity, products and management to grow the business top and bottom line for a number of years. In the short term the Company has suffered due to the fast escalating interest rates associated with supply chain receivable financing, which is a critical part of doing business with the industry’s large chains and severely smaller ordering patterns from a major customer. We continue to work to through each and believe the strategies we are implementing will improve each issue. In addition, the Company’s D&V subsidiary continued to gain traction in Fiscal 2023 with a series of global wins for its cutting-edge EV technology, significant traction for its bench top alternator and starter tester as well as the ramp up of its Detroit Technical Centre to support innovative and cost-effective solutions for electric vehicle manufacturers. We believe that while we are investment spending on this business that the opportunities for exceptional returns exist as the electrification market for all types of products continues to evolve. As important to the sustainability of our business is the retention of the key senior management players that the company deems critical to our long-term success. While we have reduced compensation and have implemented long term incentive based compensation tied to shareholder value, the company must ensure that macro-economic industry causes do not cause us to sacrifice key management. To date our policies have enabled us to retain key people and we expect our policies should continue to allow us to accomplish this. We will continue to evaluate this.
Engagement with Shareholders
Engagement with Shareholders We openly encourage direct dialogue between management and shareholders, and try at least on a quarterly basis to make contact with our shareholder base. We host an open conference call to discuss earnings and have a “no restriction” question and answer session for our participants. In addition we actively engage with our shareholders in person, by phone, and through written correspondence. During Fiscal 2023, we met via conference call / video and in person with most of our largest shareholders and many other shareholders. We consider the shareholders’ feedback offered during those meetings and continue to improve our corporate governance, communication and executive compensation practices. Shareholders expressed a desire that a majority of equity awards granted to our named executive officers be based on metrics directly related to enhancing shareholder value. Starting in Fiscal 2022, of the equity awards granted to our named executive officers (other than Mr. Joffe’s restricted stock award) approximately fifty percent (50%) of the value of such awards were granted as restricted stock units (RSUs) that vest ratably over a three-year period subject to continued service, and approximately fifty percent (50%) of the value of such awards were granted as PSUs that are eligible to vest at the end of a three-year period based on the Company’s achievement of financial performance metrics tied to our projected budget for Fiscal 2024, at the time of grant. We continued the same program in Fiscal 2023 with slight changes to the weighting of each PSU performance measure tied to our projected budget in Fiscal 2025, at the time of the grant (increasing TSR from 20% to 30% and decreasing EBITDA, after adjustments from 50% to 40%) to the PSU performance metrics. These metrics were: 1) EBITDA after certain adjustments (40% weighting), 2) Relative Total Shareholder Return (TSR) to Russell 3000, with financial and real estate companies excluded (30% weighting), and 3) Net Sales after adjustments (30% weighting), each of which, the Company believes focuses on driving shareholder value. Each metric, other than TSR which is defined above, is defined in Appendix A. These three metrics are viewed as key indicators of our performance that our CEO, CFO and VP Investor Relations discussed with most of our shareholders. In Fiscal 2024, we modified the long-term equity program to make it 100% performance based, with PSUs vesting based on the achievement of stock price increases of between 49.7% and 199.4% of the stock price on the date of grant. With respect to our Fiscal 2023 Annual Cash Incentive Plan for executive officers, we chose three key metrics for the portion of the award based on the achievement of Company performance objectives: 1) Cash from Operating Activities (40% weighting), 2) EBITDA, after adjustments (30% weighting), and 3) Net Sales after adjustments (30% weighting), each as explained in Appendix A. These three metrics are viewed as key indicators of our performance that our CEO, CFO and VP Investor Relations discussed with most of our shareholders. The Compensation Committee deemed that these key executable metrics in Fiscal 2023 were critical to the future success of the Company and would directly translate to building shareholder value. Additionally, the CEO’s Fiscal 2023 performance based restricted stock grant was tied to the following goals which we believe focus on increasing shareholder value: 1) Cash from Operating Activities, 2) EBITDA, after adjustments, and 3) Net Sales after adjustments. Each metric was weighted the same as the Company portion of the Annual Cash Incentive Plan, as the Compensation Committee believes the CEO is ultimately responsible for the attainment of the Company goals. Each of these measures is contained in the Company’s 8-K filing, of the press release to our earnings release made on June 13, 2023. In Fiscal 2022, the Company utilized a great deal of cash, completing its historical multi-year capital investments made in inventory and other projects, to put the Company in a position to win new business, including the launch of a new product line, hoping such investment will positively impact our overall sales, allowing continued sustained growth and profitably, in the brake line as well as our full product line. Unfortunately the Company did not meet the goals related to the generation of cash or EBITDA after adjustments The Company met 90.2% of the Net Sales metric. When talking to shareholders in Fiscal 2022 we received input that shareholders wanted incentive-based compensation based on the generation of positive cash flow from operations and as a result we included such metric in our Fiscal 2023 incentive plans. In Fiscal 2023, we have continued to emphasize our focus on shareholder value and return by adding Net Cash Provided by Operating Activities as the largest portion of the performance metric in our short term incentive plan, as well as in the CEO’s restricted stock grant, as the Compensation Committee and the Board emphasized the ever increasing importance of positive cash flow in today’s fiscal environment. In Fiscal 2024 we continued this trend by increasing the weighting of positive cash flow to 50% for the Company portion of our Annual Cash Incentive Plan metrics. In Fiscal 2023, the CEO, General Counsel, Investor Relations and the Lead Independent Director reached out to shareholders — representing more than 60 percent of ownership and receiving feedback from most. They exchanged perspectives with the shareholders and listened carefully to their concerns. The portion of the dialog that focused on incentive compensation, wanted it directly tied to shareholder returns and fiscal results, and the blueprint to implement ESG disclosure to better capture the benefits of remanufacturing in general and MPA specifically. As a direct result of shareholder feedback:
Engagement with Shareholders
| (a) sharpened the requirement of shareholder return metrics utilized in the Company and individual portion of our Annual Cash Incentive Plan in Fiscal 2022, and increased the weighting of such shareholder focused return metrics in Fiscal 2023 as well as Fiscal 2024; |
Engagement with Shareholders
| (b) made stock price performance goals the only metrics for all the Fiscal 2024 grants of long-term PSUs vesting over three years; and |
Engagement with Shareholders
| (c) gave the Committee more flexibility in granting the CEO equity by not extending the required Restricted Stock grants with Employment Agreement extension. |
Engagement with Shareholders
Determination of Compensation Decisions. The Compensation Committee is responsible for establishing, developing and maintaining our executive compensation program. The role of the Compensation Committee is to oversee our compensation and benefits plans and policies, administer our equity incentive plans and review and approve all compensation decisions relating to all executive officers and directors. For the Compensation Committee to perform its function, the following process for determining executive compensation decisions has been followed. Engagement of Compensation Committee Consultant. In Fiscal 2023, the Compensation Committee continued to retain WTW to review the Board’s overall compensation. Please see Director Compensation below for a full discussion. In Fiscal 2021, in response to comments from our shareholders, the Compensation Committee retained WTW to assist the Compensation Committee complete an overview of our compensation process and metrics, including: the review of our peer group, short and long-term equity incentive plan as well as overall compensation levels of our Executive Committee. Such work was completed and implemented in the compensation metrics utilized in Fiscal 2022, as our grants and metrics are set at the beginning of each fiscal year. WTW has assisted the Company to respond to our shareholders, focusing our incentive compensation on shareholder return metrics. WTW does not perform any other consulting work or any other services for our Company, other than valuation work related to Monte Carlo simulations for the Fiscal 2022 and Fiscal 2023 relative TSR metrics in the PSUs and Pay for Performance and CAP calculations for Fiscal 2023, reports directly to the Compensation Committee, and takes direction from the Chair of the Compensation Committee. The Compensation Committee has assessed the independence of WTW pursuant to the rules prescribed by the SEC and has concluded that no conflict of interest existed or currently exists that would prevent WTW from serving as an independent consultant to the Compensation Committee. The Compensation Committee considered analysis and advice from WTW when making compensation decisions for the Chief Executive Officer and other senior executives with regard to Fiscal 2023 compensation, including WTW’s input on performance-based metrics for the annual cash and equity awards made, as well as the use of long term cliff vesting performance-based stock units. In Fiscal 2024, WTW gave advice on the performance based equity granted as well as around the calculation and disclosures relative to the new Pay vs. Performance and Compensation Actually Paid (CAP) requirements. Peer Group. WTW reviewed our peer group in Fiscal 2021 and determined that there were no meaningful changes that would improve our peer group, due to the lack of other public companies of similar market capitalization providing a similar product mix. As such the following peer group was maintained from Fiscal 2021 through Fiscal 2023, other than Horizon Global Corporation which was removed as it merged into another company: Dorman Products Inc., Fox Factor Holding Corp., Modine Manufacturing Co., Myers Industries, Inc., Shyft Group Inc., Standard Motor Products Inc., Stoneridge Inc., Strattec Security Corp., Gentherm, Inc., Superior Industries International Inc. and Voxx International Corporation. Given the limitations of our peer group, WTW recommended that we assess compensation in relation to our peer group as well as other companies with similar revenue to obtain a more fulsome view of the market. Though the Compensation Committee does not itself undertake a formalized benchmarking process, it did engage WTW to perform such a review detailing the competitiveness of our executive compensation relative to that of a peer group and survey data of other companies with similar revenue. Fiscal 2023 Total Executive Compensation Review. In reaching its executive compensation decisions for Fiscal 2023, the Committee considered analysis and advice contained in the WTW Fiscal 2022 review regarding the competitiveness of our executive compensation program in comparison to our peer group and compensation surveys. The Compensation Committee believes that executive compensation, in aggregate, was within a competitive range around the market 50th percentile for base salary, target total cash and target total direct both inclusive and exclusive of the CEO with variation by individual. The compensation levels assessed by WTW were based on actual base salary, target bonus and fair value of our most recent long-term incentives. When managing executive compensation towards our compensation philosophy, we focus on competitiveness in the aggregate with the understanding and expectation of individual variation relative to market. Though some of our named executive officers were well below the 50th percentile, given the current financial climate no base salary or target bonus adjustments were made, though additional equity was given in Fiscal 2023 to get certain individual named executive officers closer to the 50th percentile target. Determining Executive Compensation. Base Salaries. Our general policy is to initially set the base salaries of our named executive officers at levels that are competitive with our peers, and we generally only increase salaries in the case of promotions or significant increases to an officer’s duties and responsibilities. In Mr. Joffe’s case, his employment agreement provides for review of his base salary from time to time. Any increases to base salaries are reviewed by the Compensation Committee on a case-by-case basis. Mr. Joffe, Mr. Lee, Mr. Mochulsky and Ms. Stone did not receive a base salary increase in Fiscal 2023. Mr. Schooner received a base salary increase from $408,240 to $424,570, as of April 11, 2022. The Compensation Committee believes this increase was reasonable and meant to keep that officer closer to the target compensation percentile (50th for all named executive officers except the CEO who has a target of 75th percentile). The following table sets forth the Fiscal 2023 base salaries for each named executive officer:
Engagement with Shareholders
Annual Cash Incentive Plan. Each year we administer a cash-based incentive compensation program that aims to reward our named executive officers for the achievement of key financial (80%) and individual (20%) performance goals. In Fiscal 2023, the Company performance-based metrics (and their weightings as part of the company/financial component to the annual cash incentive program) included: (1) Cash from Operating Activities (40%), (2) EBITDA after adjustments, (30%), which is calculated as earnings before interest expense, income tax expense, depreciation and amortization and other adjustments described in our earnings releases attached as exhibits to the Company’s Reports on Form 8-K reporting the Company’s results of operations and financial condition for the applicable fiscal year as filed with the SEC, and (3) Net Sales after adjustments, shall mean the Company’s net sales as calculated including items impacting the results as described in the Company’s earnings releases filed with the SEC on Form 8-K (30%) (collectively, the “Company Performance Goals”) and an individualized set of quantitative goals for each individual officer (the “Individual Goals” and, together with the Company Performance Goals, the “Performance Goals”). The Company Performance Goals were established by the Compensation Committee following its review of the Company’s strategic initiatives and budget, and are shown in the chart below. Achievement of these goals represented 80% of the named executive officers’ annual cash-based incentive opportunity.
Company Performance Goal
| | % of Company Performance Goal Target Bonus | Threshold (50%) | Target (100%) | Maximum (150%) | | EBITDA after Adjustments | 30% weight | $90,296,000 | $93,776,000 | $97,709,000 | | Net Sales after Adjustments | 30% weight | $680,930,000 | $691,084,000 | $713,595,000 | | Cash from Operating Activities | 40% weight | $27,475,000 | $32,836,000 | $37,989,000 |
Company Performance Goal
| | % of Company Performance Goal Target Bonus | Actual | % of Target Reached | Bonus | | EBITDA after Adjustments | 30% weight | $71,186,000 | 0% | 0% | | Net Sales after Adjustments | 30% weight | $701,236,000 | 122.5% | 0% | | Cash from Operating Activities | 40% weight | $(21,754,000) | 0% | 0% |
Company Performance Goal
The named executive officers did not receive a payout of their annual cash bonus during Fiscal 2023, as the Company only met 36.8% of the Company Performance Goals which is below the required 80% threshold to allow any payout. In a year where the Company meets at least 80% of the Company Performance Goals, each named executive officer is eligible to receive payment with respect to a Company Performance Goal provided the Company achieved that goal at the threshold amount or above (the “Threshold Goal”). If the Company’s actual performance was lower or higher than the target amount established for the relevant metric the bonus earned with respect to that goal was interpolated between either the threshold and the target amounts (50% and 100%) or the target amount and the maximum amount (100% and 150%) for each goal, multiplied by the percentage weighting for that goal. Twenty percent (20%) of our Annual Cash Incentive Plan is tied to the attainment of individual performance goals, which in conjunction with and approval by the Board, are established for each named executive officer at the beginning of the fiscal year. The Board reviews and approves the overall Company strategy, as well as the individual goals and strategies used to achieve our overarching goals and long-term plans. The Compensation Committee established the Individual Performance Goals for Mr. Joffe using the same performance metrics underlying the Company Performance Goals. The Individual Goals established for Fiscal 2023 for each named executive officer are detailed in the tables below. The Individual Performance Goals were each specifically focused on reaching the three Company Performance Goals and were weighted accordingly. The performance management process employed to establish individual goals, included three steps: 1) develop SMART goals that are specific, measurable, attainable, realistic, and time-bound, and specifically tied to each of the three Company Performance Goals, 2) weight the goals, equivalent to each Company Performance Goal and to equal a total of 100%, and 3) score the goals. To receive credit for an individual bonus the named executive officer must achieve an overall score of “meets most” of the total of metrics or at least 80%. A “meets all” will pay out at 100% of target, and an “EPICQ” pays out between 100% to the maximum of 150% credit. Achievement of a score between the levels results in a payout based on straight line interpolation. The maximum payout for the individual goals is set by the Company performance to best align pay rigor and pay and performance alignment, for instance in Fiscal 2023, the Company met 36.8% of the Company Performance Goals, so each named executive officer was not eligible for a bonus as the 80% threshold was not met. In order for any monies to be paid out under the Annual Cash Incentive Plan, the Company must meet at least 80% of the Company goals, once that threshold is met, individual goals can be scored as discussed above. The Compensation Committee reviewed the performance of each of the named executive officers and assessed their accomplishments against the pre-set goals for each executive, as discussed above. Mr. Joffe assists the Committee in reviewing each of the named executive officers, other than his own performance. At the end of each fiscal year, the Compensation Committee reviews the performance of each named executive officer and assesses each of their accomplishments against their respective Individual Goals. Mr. Joffe assists the Committee in reviewing each of the named executive officers, other than his own performance. Based on its review and evaluation, the Compensation Committee makes the final determination of the appropriate percentage of each of their Individual Goals that they have met. The Committee may exercise negative discretion or positive discretion if a named executive officer meets a measurable stretch goal in the execution of their performance metrics. The Company believes that the strategic initiatives supported by each of the Individual Goals has an immediate positive impact and, more importantly, will be critical to achievement of the Company’s five-year revenue growth and shareholder value targets. The Individual Goals established for each named executive officer and actual achievement of those goals are as follows:
Juliet Stone, Vice President, Secretary and General Counsel
Equity-Based Incentive Program. The goal of our long-term, equity-based incentive awards is to align the interests of our named executive officers with the interests of our shareholders. Because vesting is generally based on continued service, in addition to performance-based metrics in most cases, our equity-based incentives also encourage the retention of our named executive officers during the award vesting period. In determining the mix of equity and size of awards to be granted to our named executive officers, we consider the value of equity awards issued by peer group companies, the total value of the compensation opportunity afforded to each named executive officer, and the individual’s position, scope of responsibility, and ability to affect profits and shareholder value. In Fiscal 2020, the last year the Company granted stock options, those issued to the then named executive officers had a performance requirement to increase their alignment with shareholders. The performance stock options granted in Fiscal 2020 exceeded the performance requirement in Fiscal 2021 and the first third of the stock options vested; however, in Fiscal 2022 and Fiscal 2023 the performance requirements were not met and the second and third tranche of the stock options granted in Fiscal 2020 did not vest and were forfeited permanently. The performance stock options required that the stock price increase from its initial grant price of $15.12, by 8% in the first year ($16.33), 12% by the second year ($16.93) and 16% by the third year ($17.54). In line with shareholder recommendations, WTW recommended including in the total equity awards granted to our named executive officers in Fiscal 2022, and beyond, a multi-year performance-based equity award. Accordingly, in Fiscal 2023 the Company granted three-year cliff vesting PSUs to the named executive officers to align the Company’s financial performance with each named executive officer’s equity incentive compensation in addition to awards of RSUs that vest upon continued service. They also recommended increased grants to the CFO and General Counsel to bring their equity compensation more in line with our peers.
Fiscal 2023 Equity Grants
Fiscal 2023 Equity Grants In Fiscal 2023, the Company granted to all of our named executive officers RSUs that vest upon continued service and long-term PSUs, and, to Mr. Joffe, performance based restricted stock. The following table sets forth the number of shares and grant date fair value of the equity awards granted to the named executive officers in Fiscal 2023.
Fiscal 2023 Equity Grants
| Named Executive Officer | Restricted Stock Units | Grant Date Fair Value of Restricted Stock Units | Long-term Performance- based Restricted Stock Units | Grant Date Fair Value of Long-term Performance- based Restricted Stock Units | Performance- based Restricted Stock | Grant Date Fair Value of Performance- based Restricted Stock | | Selwyn Joffe | 38,061 | $500,122 | 38,061 | $533,005 | 66,667 | $876,004 | | David Lee | 12,476 | $163,935 | 12,476 | $174,714 | — | $— | | Richard Mochulsky | 3,948 | $51,877 | 3,947 | $55,274 | — | $— | | Doug Schooner | 4,738 | $62,257 | 4,737 | $66,337 | — | $— | | Juliet Stone | 7,738 | $101,677 | 7,737 | $108,349 | — | $— |
Fiscal 2023 Equity Grants
Each RSU award listed above vests annually over a three-year period, subject to continued employment. The PSUs vest upon the attainment of the following performance metrics at the conclusion of a three-year performance period: 1) EBITDA after adjustments (See Appendix A for FY23 example), (40% weighting), 2) Relative TSR to Russell 3000 with financial and real estate companies excluded (30% weighting), and 3) Net Sales after adjustments (30% weighting). The Compensation Committee believes these metrics promote profitability, aligning performance with shareholder value. The Compensation Committee chose to compare TSR because the Company was a member of the index but excluded financial and real estate companies because their financials differ from the Company’s. The PSUs will be eligible to vest with respect to 0% - 150% of the target number of PSUs granted. In addition, in accordance with the terms of the Third Amendment to his employment agreement, Mr. Joffe waived his right to receive 75,000 shares of time-vesting restricted stock for Fiscal Year 2020 and instead agreed to receive annual grants of 100,000 shares of restricted stock which vest upon the attainment of performance goals, for each of Fiscal 2021, Fiscal 2022 and Fiscal 2023. Each performance period is tied to the Company’s fiscal year. Mr. Joffe’s performance based Fiscal Year 2023 restricted stock award, granted on June 20, 2022, vested below the target of 66,667 shares, at 27.058% of the maximum, and 27,508 shares of stock vested on June 20, 2023.
June 20, 2022, Performance Based Restricted Stock Goals for CEO
June 20, 2022, Performance Based Restricted Stock Goals for CEO
June 20, 2022, Performance Based Restricted Stock Goals for CEO
| | | | Threshold | Target | Maximum | Actual Achievement | | | Weighting | 0% | 33% | 67% | 100.0% | | | EBITDA after Adjustments | 30% | <$90,296,000 | $90,296,000 | $93,776,000 | >$97,709,000 | $71,186,000 | | Net Sales after Adjustments | 30% | <$680,930,000 | $680,930,000 | $691,084,000 | >$705,529,000 | $701,236,000 | | Cash from Operating Activities | 40% | <$27,475,000 | $27,475,000 | $32,836,000 | >$37,989,000 | $(21,754,000) |
Accounting Considerations
Accounting Considerations ASC Topic 718, Compensation-Stock Compensation, or ASC Topic 718 requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of stock options and restricted stock under our equity incentive award plans are accounted for under ASC Topic 718. The Compensation Committee regularly considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
Compensation Practices Modifications in Fiscal 2023
Compensation Practices Modifications in Fiscal 2023 Compensation Structure for 2023. In designing our compensation program for Fiscal 2023, we sustained our focus on creating and increasing shareholder value in the long and short term. Our incentive-based compensation employed quantitative metrics tied to enhanced shareholder value for all equity and cash-based programs. As such the Compensation Committee set metrics to reward the named executive officers for accomplishing substantive financial metrics and increased shareholder value. We continue to provide opportunities to our named executive officers to realize increases in their overall compensation if their efforts prove successful in generating growth and shareholder value while, at the same time, de-emphasizing those elements of compensation that are not directly related to our performance. For example, in Fiscal 2024, 100% of the equity awards granted to our named executive officers were performance-based and included performance goals focused on increasing shareholder value. Improved Mix of Long-Term and Performance-Based Equity Compensation in 2023. In response to shareholder comments, the Compensation Committee increased the percentage of performance-based awards in Fiscal 2023 and even more so in Fiscal 2024 for the Executive Committee members and continued awards of long-term PSUs while also eliminating grants of stock options. Importantly, all performance-based equity awards granted in Fiscal 2023 utilized quantitative metrics including those focused on improved shareholder value, such as relative TSR. Grants were also slightly increased for the named executive officers other than the CEO to improve their total compensation relative to peer and market survey, if the Company and their performance meets the quantitative metrics required. We hope to use the mix of equity vehicles to support our long-term compensation philosophy as well as emphasize performance and alignment of executives with our shareholders. Advancement of ESG Items. Our Company’s very business structure as a remanufacturer has always been concerned with the importance of environmental stewardship, as remanufacturing saves more than 90% of raw materials, energy and water to create a product that is at least, if not better made than a new part. In Fiscal 2023 we continue to focus on additional granularity about our process and effect on the environment, as well as the steps we take to create a positive work environment worldwide. We also care deeply about and are committed to providing a positive environment for our employees and practice best practices relative to corporate governance practices.
Summary Compensation Table
Summary Compensation Table The following table sets forth information concerning Fiscal 2023, 2022, and 2021 compensation of our named executive officers.
Summary Compensation Table
| Name & Principal Position | Fiscal Year | Salary(1) | Bonus(2) | Stock Awards(3) | Options Awards | Non-Equity Incentive Plan Compensation | All Other Compensation(4) | Total | | Selwyn Joffe Chairman of the Board, President and CEO | 2023 | $828,256 | $100 | $1,909,131 | $— | $— | $93,264 | $2,830,752 | | | 2022 | 809,722 | 100 | 2,396,227 | — | 1,011,408 | 117,191 | 4,334,649 | | | 2021 | 596,036 | 100 | 2,512,204 | 662,343 | 795,233 | 108,914 | 4,674,829 | | David Lee Chief Financial Officer | 2023 | $361,746 | $100 | $338,649 | $— | $— | $83,874 | $784,370 | | | 2022 | 334,913 | 100 | 353,117 | — | 200,200 | 76,857 | 965,188 | | | 2021 | 285,873 | 100 | 118,692 | 110,857 | 180,326 | 70,057 | 765,904 | | Richard Mochulsky SVP, Sales and Marketing | 2023 | $292,215 | $100 | $107,150 | $— | $— | $57,150 | $456,616 | | | 2022 | 284,722 | 100 | 155,986 | — | 118,497 | 57,433 | 616,739 | | | 2021 | 249,400 | 100 | 49,881 | 46,578 | 106,383 | 60,813 | 513,155 | | Doug Schooner Chief Manufacturing Officer, SVP, Operations Under-the-Car Product Lines | 2023 | $423,628 | $100 | $128,594 | $— | $— | $85,513 | $637,835 | | | 2022 | 404,427 | 100 | 192,950 | — | 145,411 | 78,935 | 821,824 | | | 2021 | 348,425 | 100 | 49,881 | 46,578 | 144,749 | 75,434 | 665,167 | | Juliet Stone Vice President, Secretary and General Counsel | 2023 | $344,500 | $100 | $210,026 | $— | $— | $90,390 | $645,016 | | | 2022 | 327,250 | 100 | 186,264 | — | 102,763 | 84,614 | 700,991 | | | 2021 | 291,250 | 100 | 49,881 | 46,578 | 99,605 | 78,217 | 565,632 |
Summary Compensation Table
| (1) Salaries reflect actual amounts earned and paid with respect to services in Fiscal 2023. Mr. Joffe’s salary includes $24,000 to pay for disability insurance, as discussed in his CEO Employment Agreement. |
Summary Compensation Table
| (2) Amounts in the “Bonus” column include a $100 bonus paid to each of the Company’s employees during December of each year, including the named executive officers, as a holiday gift to buy groceries. |
Summary Compensation Table
| (3) Amounts for 2023 reflect the grant date fair value of time-based RSUs and PSUs awarded in Fiscal 2023 to each named executive officer (and, with respect to Mr. Joffe, a restricted stock award), each calculated in accordance with FASB ASC Topic 718, rather than the amounts paid to or realized by the named executive officer. The grant date values relating to time-vested RSUs are $500,122, $163,935, $51,877, $62,257, and $101,677 for Messrs. Joffe, Lee, Mochulsky, and Schooner, and Ms. Stone, respectively. The PSUs are subject to both performance and market conditions. With respect to the portion of the PSUs subject to performance conditions, the amounts in the table represent the grant date fair value based on the probable outcome of results, which is the target value, in the following amounts: $350,089, $114,752, $36,306, $43,572, and $71,166 for Messrs. Joffe, Lee, Mochulsky, and Schooner, and Ms. Stone, respectively. With respect to the portion of the PSUs subject to market conditions, the amounts in the table represent the grant date fair value calculated using a Monte Carlo simulation, in the following amounts: $182,916, $59,963, $18,968, $22,764, and $37,182 for Messrs. Joffe, Lee, Mochulsky, and Schooner, and Ms. Stone, respectively. The grant date fair value of the portion of the PSU award subject to performance conditions, as of the grant date, assuming the maximum level of performance, is $525,134, $172,127, $54,459, $65,358, and $106,749 for Messrs. Joffe, Lee, Mochulsky, and Schooner, and Ms. Stone, respectively. Additionally, the 2023 amount for Mr. Joffe includes a restricted stock award that vests upon the attainment of performance conditions, with a grant date fair value of $876,004, representing the probable outcome of results, which is the target value. The grant date fair value of Mr. Joffe’s restricted stock award, as of the grant date, assuming the maximum level of performance, is $1,314,000. We provide information regarding the assumptions used to calculate the value of stock awards made to the named executive officers in Notes 2 and 18 to the Company’s consolidated financial statements contained in its Annual Report on Form 10-K filed on June 14, 2023. For more detail on these awards, see “Compensation Discussion and Analysis—Determining Executive Compensation—Equity-Based Incentive Programs.” |
Summary Compensation Table
| (4) The following chart is a summary of the items that are included in the “All Other Compensation” totals for Fiscal 2023: |
Summary Compensation Table
| Name | Automobile Expenses | Insurance Premiums(1) | 401K Employer's Contribution | Deferred Compensation Plan Employer’s Contribution | Total | | Selwyn Joffe | $18,000 | $50,354 | $2,929 | $21,981 | $93,264 | | David Lee | $— | $74,274 | $9,600 | $— | $83,874 | | Richard Mochulsky | $— | $49,395 | $1,012 | $6,744 | $57,150 | | Doug Schooner | $— | $74,274 | $11,239 | $— | $85,513 | | Juliet Stone | $— | $73,315 | $9,125 | $7,950 | $90,390 |
Summary Compensation Table
For all our named executive officers, these premiums include premiums for health insurance.
Fiscal 2023 Grants of Plan-Based Awards
Fiscal 2023 Grants of Plan-Based Awards
Fiscal 2023 Grants of Plan-Based Awards
| | | Estimated future payouts under non-equity incentive plan awards | | | Estimated future payouts under equity incentive plan awards(1) | | | | | | Name | Grant Date | Threshold (50% of Target) | Target | Maximum (150% of Target) | Threshold (50% of Target) | Target | Maximum (150% of Target) | All Other Stock Awards: Number of Shares of Stock or Units(2) | Grant Date Fair Value of Stock and Option Awards(3) | | Selwyn Joffe | 6/20/2022 | | | | 19,031 | 38,061 | 57,092 | | $533,005 | | Selwyn Joffe | 6/20/2022 | | | | | | | 38,061 | $500,122 | | Selwyn Joffe(4) | 6/20/2022 | | | | 33,333 | 66,667 | 100,000 | | $876,004 | | Selwyn Joffe | 6/7/2022 | $496,954 | $993,907 | $1,490,861 | | | | | | | David Lee | 6/20/2022 | | | | 6,238 | 12,476 | 18,714 | | $174,714 | | David Lee | 6/20/2022 | | | | | | | 12,476 | $163,935 | | David Lee | 6/7/2022 | $99,480 | $198,960 | $298,440 | | | | | | | Richard Mochulsky | 6/20/2022 | | | | 1,974 | 3,947 | 5,921 | | $55,274 | | Richard Mochulsky | 6/20/2022 | | | | | | | 3,948 | $51,877 | | Richard Mochulsky | 6/7/2022 | $58,443 | $116,886 | $175,329 | | | | | | | Doug Schooner | 6/20/2022 | | | | 2,369 | 4,737 | 7,106 | | $66,337 | | Doug Schooner | 6/20/2022 | | | | | | | 4,738 | $62,257 | | Doug Schooner | 6/7/2022 | $74,300 | $148,600 | $222,900 | | | | | | | Juliet Stone | 6/20/2022 | | | | 3,869 | 7,737 | 11,606 | | $108,349 | | Juliet Stone | 6/20/2022 | | | | | | | 7,738 | $101,677 | | Juliet Stone | 6/7/2022 | $51,675 | $103,350 | $155,025 | | | | | |
Fiscal 2023 Grants of Plan-Based Awards
| (1) Except as otherwise noted, represents awards of PSUs that vest upon the achievement of pre-determined performance metrics following the conclusion of a three-year performance period. For more information, see Compensation Discussion and Analysis—Determining Executive Compensation—Equity-Based Incentive Program. |
Fiscal 2023 Grants of Plan-Based Awards
| (2) Represents awards of RSUs that vest over a three-year period, subject to continued employment. For more information see Compensation Discussion and Analysis—Determining Executive Compensation—Equity-Based Incentive Program. |
Fiscal 2023 Grants of Plan-Based Awards
| (3) Amounts shown represent the grant date fair value calculated in accordance with ASC 718. The assumptions used with respect to the valuation of the equity awards are set forth in Notes 2 and 18 to the consolidated financial statements included in our Annual Report on Form 10-K, filed with the SEC on June 14, 2023. The PSUs are subject to both performance and market conditions. For the portion of the PSUs subject to performance-based conditions, the amounts shown represent the probable outcome of results, which is the target value. With respect to the portion of the PSUs subject to market conditions, the amounts in the table represent the grant date fair value calculated using a Monte Carlo simulation. |
Fiscal 2023 Grants of Plan-Based Awards
| (4) Represents an award of restricted stock that vests upon the attainment of pre-determined performance metrics over a one-year performance period. For more information see Compensation Discussion and Analysis—Determining Executive Compensation—Equity-Based Incentive Program. |
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End The following table summarizes information regarding equity awards granted to our named executive officers that remain outstanding as of March 31, 2023.
Outstanding Equity Awards at Fiscal Year End
| | Option Awards | | | | | Stock Awards | | Stock Awards | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable Vested | Number of Securities Underlying Unexercised Options (#) Unexercisable Unvested | Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock Unvested (#) | Market Value of Shares or Units of Stock Unvested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, or Other Rights That Have Not Vested ($) | | Selwyn Joffe | | | | | | | | | | | | — | — | — | $— | | | | | | | | — | — | — | $— | | | | | | | | 83,700 | — | — | $9.32 | 9/2/2023 | | | | | | | 26,200 | — | — | $31.13 | 9/3/2025 | | | | | | | 51,200 | — | — | $28.68 | 6/23/2026 | | | | | | | 54,800 | — | — | $27.40 | 6/19/2027 | | | | | | | 83,400 | — | — | $19.00 | 6/17/2028 | | | | | | | 88,875 | — | | $19.93 | 7/01/2029 | | | | | | | 33,791 | 33,791(1) | | $15.12 | 6/16/2030 | | | | | | | | | | | | 15,635(1) | $116,324 | | | | | | | | | | 13,367(2) | $99,450 | | | | | | | | | | 38,061(3) | $283,174 | | | | | | | | | | | | 100,000(4) | $744,000 | | | | | | | | | | 20,050(5) | $149,172 | | | | | | | | | | 38,061(6) | $283,174 | | David Lee | | | | | | | | | | | | — | — | — | $— | | | | | | | | 20,900 | — | — | $9.32 | 9/2/2023 | | | | | | | 9,300 | — | — | $22.93 | 6/21/2024 | | | | | | | 6,500 | — | — | $31.13 | 9/3/2025 | | | | | | | 10,800 | — | — | $28.68 | 6/23/2026 | | | | | | | 9,200 | — | — | $27.40 | 6/19/2027 | | | | | | | 14,000 | — | — | $19.00 | 6/17/2028 | | | | | | | 14,875 | — | | $19.93 | 7/1/2029 | | | | | | | 5,656 | 5,656(1) | | $15.12 | 6/16/2030 | | | | | | | | | | | | 2,617(1) | $19,470 | | | | | | | | | | 5,178(2) | $38,524 | | | | | | | | | | 12,476(3) | $92,821 | | | | | | | | | | | | 7,767(5) | $57,786 | | | | | | | | | | 12,476(6) | $92,821 | | Richard Mochulsky | | | | | | | | | | | | — | — | — | $— | | | | | | | | 9,400 | — | — | $9.32 | 9/2/2023 | | | | | | | 4,200 | — | — | $22.93 | 6/21/2024 | | | | | | | 2,900 | — | — | $31.13 | 9/3/2025 | | | | | | | 5,900 | — | — | $28.68 | 6/23/2026 | | | | | | | 3,300 | — | | $27.40 | 6/19/2027 | | | | | | | 5,000 | — | | $19.00 | 6/17/2028 | | | | | | | 6,250 | — | | $19.93 | 7/1/2029 | | | | | | | 2,376 | 2,376(1) | | $15.12 | 6/16/2030 | | | | | | | | | | | | 1,100(1) | $8,184 | | | | | | | | | | 2,287(2) | $17,015 | | | | | | | | | | 3,948(3) | $29,373 | | | | | | | | | | | | 3,431(5) | $25,527 | | | | | | | | | | 3,947(6) | $29,366 |
Outstanding Equity Awards at Fiscal Year End
| | Option Awards | | | | | Stock Awards | | Stock Awards | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable Vested | Number of Securities Underlying Unexercised Options (#) Unexercisable Unvested | Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock Unvested (#) | Market Value of Shares or Units of Stock Unvested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, or Other Rights That Have Not Vested ($) | | Doug Schooner | | | | | | | | | | | | 6,400 | — | — | $22.93 | 6/21/2024 | | | | | | | 5,600 | — | — | $31.13 | 9/3/2025 | | | | | | | 9,000 | — | — | $28.68 | 6/23/2026 | | | | | | | 7,100 | — | — | $27.40 | 6/19/2027 | | | | | | | 5,000 | — | — | $19.00 | 6/17/2028 | | | | | | | 6,250 | — | | $19.93 | 7/1/2029 | | | | | | | 2,376 | 2,376(1) | | $15.12 | 6/16/2030 | | | | | | | | | | | | 1,100(1) | $8,184 | | | | | | | | | | 2,829(2) | $21,048 | | | | | | | | | | 4,738(3) | $35,251 | | | | | | | | | | | | 4,244(5) | $31,575 | | | | | | | | | | 4,737(6) | $35,243 | | Juliet Stone | | | | | | | | | | | | 14,300 | — | — | $17.12 | 9/10/2029 | | | | | | | 4,753 | 2,376(7) | | $15.12 | 6/16/2030 | | | | | | | | | | | | 1,100(7) | $8,184 | | | | | | | | | | 2,731(2) | $20,319 | | | | | | | | | | 7,738(3) | $57,571 | | | | | | | | | | | | 4,097(5) | $30,482 | | | | | | | | | | 7,737(6) | $57,563 |
Outstanding Equity Awards at Fiscal Year End
| (1) This award vests in three equal annual installments beginning on the first anniversary of the June 17, 2020 grant date, subject to continued employment through each such date and the increase in stock price of at least 8%, 12% and 16% on each of the first, second and third anniversaries of the grant date respectively, for Mr. Joffe, Mr. Lee, Mr. Schooner and Mr. Mochulsky. The performance measurement for the second installment was not met and thus did not vest on June 17, 2022, and such stock options were permanently forfeited. Additionally, the performance measurement for the third installment was not met and thus did not vest on June 17, 2023, and such stock options were permanently forfeited. |
Outstanding Equity Awards at Fiscal Year End
| (2) This award vests in three equal annual installments beginning on the first anniversary of the June 18, 2021 grant date, subject to continued employment through the applicable vesting dates. |
Outstanding Equity Awards at Fiscal Year End
| (3) This award vests in three equal annual installments beginning on the first anniversary of the June 20, 2022 grant date, subject to continued employment through the applicable vesting dates. |
Outstanding Equity Awards at Fiscal Year End
| (4) Represents shares of restricted stock that will vest upon the attainment of pre-determined performance measures on June 20, 2023 In accordance with SEC rules, the number of shares of restricted stock shown represents the number that may be earned based on maximum performance. 27,508 shares of restricted stock vested on June 20, 2023. |
Outstanding Equity Awards at Fiscal Year End
| (5) Represents PSUs granted on June 18, 2021 that will vest upon the attainment of pre-determined performance metrics at the conclusion of a three-year performance period, subject to continued employment. In accordance with SEC rules, the number of PSUs shown represents the number of PSUs that may be earned based on target performance. We are currently estimating that this award will vest at 100%. |
Outstanding Equity Awards at Fiscal Year End
| (6) Represents PSUs granted on June 20, 2022 that will vest upon the attainment of pre-determined performance metrics at the conclusion of a three-year performance period, subject to continued employment. In accordance with SEC rules, the number of PSUs shown represents the number of PSUs that may be earned based on target performance. We are currently estimating that this award will vest at 100%. |
Outstanding Equity Awards at Fiscal Year End
| (7) This award vests in three equal annual installments beginning on the first anniversary of the June 17, 2020 grant date, subject to continued employment through the applicable vesting dates. |
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table sets forth information regarding stock awards vested during Fiscal Year 2023 for the named executive officers:
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | | Selwyn Joffe | 233,200 | $1,761,952 | 100,007 | $1,463,735 | | David Lee | 30,900 | $247,192 | 7,190 | $94,708 | | Richard Mochulsky | 4,700 | $31,642 | 3,077 | $40,523 | | Doug Schooner | — | $— | 3,348 | $44,054 | | Juliet Stone | — | $— | 2,465 | $32,240 |
Option Exercises and Stock Vested
Nonqualified Deferred Compensation Plan We maintain the Motorcar Parts of America, Inc. Amended and Restated Executive Deferred Compensation Plan (the “DCP”), an unfunded, non-qualified deferred compensation plan for a select group of management or highly compensated employees, including our named executive officers. Participants in the plan may elect to defer up to 100% of their gross cash compensation. We made matching contributions of 100% of each participant’s elective contributions to the plan, up to 3% of the participant’s compensation for the plan year. The Company temporally halted the Company match of deferred compensation as of February 5, 2023. The plan is designed to defer taxation to the participant on contributions and notional earnings thereon until distribution thereof in accordance with a participant’s previously made distribution elections. Insurance annuity contracts provide funding for the plan; however, the annuity contracts are owned by us and remain subject to claims of our general creditors. The following table sets forth certain information regarding contributions, earnings and account balances under our DCP, which provides for the deferral of compensation on a basis that is not-tax qualified, for each of the named executive officers for Fiscal 2023. Plan participants may elect to receive distributions under the DCP as lump sums or in installments. Mr. Joffe has elected to receive lump sum distributions in the case of death, disability or separation of service. Mr. Mochulsky has elected to receive payments over an eight year period starting when he turns 65 years of age. Ms. Stone has elected to receive payments over a two year period when she turns 55 years of age. A description of the other material terms and conditions of the DCP follows. Messrs. Lee and Schooner have elected not to participate in the DCP.
Option Exercises and Stock Vested
| Name | Executive Contributions in Last FY(1) | Registrant contribution in last FY(2) | Aggregate Earnings in Last FY(3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FY | | Selwyn Joffe | $23,892 | $21,981 | $(15,450) | $(297,122) | $9,571 | | David Lee | $— | $— | $— | $— | $— | | Richard Mochulsky | $67,434 | $6,744 | $(48,334) | $— | $749,745 | | Doug Schooner | $— | $— | $— | $— | — | | Juliet Stone | $31,800 | $7,950 | $(11,893) | $— | $163,533 |
Option Exercises and Stock Vested
| (1) Executive Contributions in Last FY, shows the amount that the named executive officer elected to defer in Fiscal 2023 under the DCP. These amounts represent compensation earned by the named executive officers in Fiscal 2023 and are therefore also reported in the appropriate column in the Summary Compensation Table above. |
Option Exercises and Stock Vested
| (2) Registrant Contributions in Last FY, shows the amounts credited in Fiscal 2023 as company contributions to the accounts of our named executive officers under the DCP. These amounts are also reported in the Summary Compensation Table above. |
Option Exercises and Stock Vested
| (3) Aggregate Earnings in Last FY, shows the net amounts credited to the DCP accounts of our named executive officer as a result of the performance of the investment vehicles in which their accounts were deemed invested, as more fully described in the narrative disclosure below. These amounts do not represent above-market earnings, and thus are not reported in the Summary Compensation Table. |
Potential Payments Upon Termination or Change in Control Table
Potential Payments Upon Termination or Change in Control Table The following table provides an estimate of the potential payments available to each named executive officer upon a change in control, assuming they were terminated on March 31, 2023, the last business day of Fiscal 2023.
Potential Payments Upon Termination or Change in Control Table
| Benefit | Termination by Company for Cause(1) | Death(2) | Disability(3) | Voluntary Termination by Mr. Joffe for Good Reason or Termination by Company w/o Cause(4) | After Change in Control: Voluntary Termination by Mr. Joffe for Good Reason or Termination w/o Cause(5) | Change in Control with Involuntary Termination | | Selwyn Joffe | | | | | | | | Salary Contribution | $— | $— | $— | $5,176,600 | $5,176,600 | $— | | Bonus | $— | $— | $— | $3,034,224 | $3,034,224 | $— | | Executive Awards(6) | $— | $1,678,702 | $1,678,702 | $1,678,702 | $1,678,702 | $— | | Healthcare | $— | $— | $— | $277,594 | $277,594 | $— | | Automobile Allowance(7) | $— | $— | $— | $112,500 | $112,500 | $— | | Equity(8) | $— | $— | $— | $— | $— | $1,678,702 | | David Lee | | | | | | | | Equity(8) | $— | $— | $— | $— | $— | $343,505 | | Richard Mochulsky | | | | | | | | Equity(8) | $— | $— | $— | $— | $— | $127,142 | | Doug Schooner | | | | | | | | Equity(8) | $— | $— | $— | $— | $— | $131,301 | | Juliet Stone | | | | | | | | Equity(8) | $ — | $— | $— | $— | $— | $174,118 |
Potential Payments Upon Termination or Change in Control Table
| (1) Upon a termination for cause, Mr. Joffe will be entitled to his accrued salary, bonus, if any, reimbursable expenses, and benefits owing to him through the day of his termination. |
Potential Payments Upon Termination or Change in Control Table
| (2) Mr. Joffe’s employment term will end on the date of his death. Upon such event, Mr. Joffe’s estate will be entitled to receive his accrued salary, bonus, if any, benefits (including accrued but unused vacation time) and reimbursable expenses, owing to Mr. Joffe through the date of his death, and vested but undistributed shares of restricted stock granted. In addition, Mr. Joffe’s estate will assume Mr. Joffe’s rights under our equity incentive plans and certain of his rights under his Amended Employment Agreement. |
Potential Payments Upon Termination or Change in Control Table
| (3) If during the employment term, Mr. Joffe is terminated by us as a result of his physical or mental illness or incapacity as determined in accordance with the procedures set forth in the Amended Employment Agreement, Mr. Joffe will be entitled to receive his accrued salary, bonus, if any, reimbursable expenses, benefits owing to Mr. Joffe through the date of termination, and vested but undistributed shares of restricted stock granted. In addition, Mr. Joffe will be entitled to receive the benefits payable pursuant to a disability insurance policy purchased by Mr. Joffe with the Disability Insurance Payment. |
Potential Payments Upon Termination or Change in Control Table
| (4) Upon a termination by Mr. Joffe for good reason or by us without cause, Mr. Joffe will be entitled to receive through two years after the termination date: (i) his salary at the annual rate as in effect immediately prior to the termination date; (ii) his average bonus earned for the two years immediately prior to the year in which his employment agreement is terminated (or if such termination occurs within the first three months of our fiscal year, for the second and third years preceding the year in which such termination occurs); (iii) the Benefits; (iv) reimbursable expenses, and (v) vested but undistributed shares of common stock granted. |
Potential Payments Upon Termination or Change in Control Table
| (5) If a change in control occurs and Mr. Joffe voluntarily terminates his employment agreement for good reason or Mr. Joffe’s employment is terminated by us without cause within two years following a change in control, then Mr. Joffe will be entitled to receive either the severance benefit as described in the next sentence of this footnote or the benefits described in the immediately preceding footnote, whichever is more favorable to Mr. Joffe, and we will pay Mr. Joffe any reimbursable expenses owed to him through the termination date and vested but undistributed shares of restricted stock granted. The severance benefit will be equal to (i) two times Mr. Joffe’s salary at the annual rate in effect immediately prior to the date of the change in control plus (ii) two times Mr. Joffe’s average bonus earned for the two years immediately prior to the year in which the change in control occurs. |
Potential Payments Upon Termination or Change in Control Table
| (6) Upon the termination of his employment agreement, for any reason other than termination by us for cause or termination by Mr. Joffe without good reason, (i) any equity awards made pursuant to Paragraph 5(f) of the Amended Employment Agreement (“Executive Awards”) which are not fully vested will immediately vest and remain exercisable by Mr. Joffe for a period of two years or, if shorter, until the ten year anniversary of the date of grant of each such Executive Award and (ii) any restricted stock awards contemplated by Paragraph 5(g) of the |
Potential Payments Upon Termination or Change in Control Table
Amended Employment Agreement (such awards, together with the Executive Awards, the “Equity Awards”) (a) will vest in full based on the target level of performance for the shares granted for the then current Performance Cycle. The inherent value shown in the table is the fair value of all Equity Awards which were not fully vested at March 31, 2023. Executive Awards include incentive stock options and nonqualified stock options, restricted stock, RSUs, performance awards, dividend equivalent rights, stock payments, deferred stock, deferred stock units, SARs and cash awards.
Potential Payments Upon Termination or Change in Control Table
| (7) Mr. Joffe is entitled to receive an automobile allowance in the amount of $1,500 per month for two years, payable monthly. In addition, all costs of operating the automobile, including fuel, oil, insurance, repairs, maintenance and other expenses, are our responsibility. |
Potential Payments Upon Termination or Change in Control Table
| (8) Under the 2022 Plan and the Company’s Fourth Amended and Restated 2010 Incentive Award Plan (the “2010 Plan”), if a holder of equity suffers an Involuntary Termination after a Change in Control, all equity awards outstanding under such plan will vest, with performance-based awards vesting at target. |
Pay Ratio
Pay Ratio Pursuant to SEC rules, we are providing the following disclosure about the relationship of the annual total compensation of our median employee to the annual total compensation of our Chief Executive Officer. Ratio for Fiscal 2023 The annual total compensation of our median employee (among all employees except for our Chief Executive Officer) was $10,676. Our Chief Executive Officer’s annual total compensation, as reported in the Total column of the 2023 Summary Compensation Table, was $2,830,752. Based on this information, a reasonable estimate of the ratio of the annual total compensation of our Chief Executive Officer to the annual total compensation of our median employee (other than our Chief Executive Officer) was approximately 265:1. Identification of Median Employee We completed an analysis including, all Company subsidiaries, all over the world, including Asia. The population used for the pay ratio analysis was the entire global employee population as of March 31, 2023. We considered a total of 3,385 United States and non-United States employees in determining the median employee. For purposes of identifying the median employee, we utilized actual total cash compensation (as reflected in our payroll records) as the consistently applied compensation measure for all employees. All global compensation amounts were converted to USD using an average currency exchange rate over Fiscal 2023. We used a valid statistical sampling of employees that constitute a range of +/-1% around the median employee to select the actual employee represented in the ratio above. Every employee in this range worked at our Tijuana, Mexico facility.
Pay Versus Performance Table
Pay Versus Performance Table The following table sets forth information concerning the compensation of our named executive officers (NEOs) for each of the fiscal years ended March 31, 2021, 2022 and 2023, and our financial performance for each such fiscal year:
Pay Versus Performance Table
| Year | Summary Compensation Table Total for PEO ($) | Compensation Actually Paid to PEO ($)(1)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($)(1)(2) | Value of Initial Fixed $100 Investment Based on: | | Net Income ($M) | EBITDA after adjustments ($M)(4) | | | | | | | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($)(3) | | | | 2023 | $2,830,752 | $69,201 | $630,959 | $364,826 | $59 | $234 | ($4) | $71 | | 2022 | $4,334,649 | $3,535,526 | $776,186 | $677,328 | $142 | $222 | $7 | $82 | | 2021 | $4,674,829 | $4,715,471 | $627,465 | $800,010 | $179 | $179 | $21 | $77 |
Pay Versus Performance Table
| (1) Amounts represent compensation actually paid to our PEO and the average compensation actually paid to our remaining NEOs for the relevant fiscal year, as determined under SEC rules (and described below), which includes the individuals indicated in the table below for each fiscal year: |
Pay Versus Performance Table
| Year | PEO | Non-PEO NEOs | | 2023 | Selwyn Joffe | David Lee, Richard Mochulsky, Doug Schooner, and Juliet Stone | | 2022 | Selwyn Joffe | David Lee, Richard Mochulsky, Doug Schooner, and Juliet Stone | | 2021 | Selwyn Joffe | David Lee, Richard Mochulsky, Doug Schooner, and Juliet Stone |
Pay Versus Performance Table
Compensation actually paid to our NEOs represents the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year, as adjusted as follows:
Pay Versus Performance Table
| | 2021 | | 2022 | | 2023 | | | Adjustments | PEO | Average Non- PEO NEOs | PEO | Average Non- PEO NEOs | PEO | Average Non- PEO NEOs | | Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table for Applicable FY | ($3,174,547) | ($129,732) | ($2,396,227) | ($222,079) | ($1,909,131) | ($196,105) | | Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Remain Unvested as of Applicable FY End, determined as of Applicable FY End | $2,164,394 | $204,725 | $2,105,830 | $175,733 | $728,950 | $102,821 | | Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Vested during Applicable FY, determined as of Vesting Date | — | — | — | — | — | — | | Increase/deduction for Awards Granted during Prior FY that were Outstanding and Unvested as of Applicable FY End, determined based on change in ASC 718 Fair Value from Prior FY End to Applicable FY End | $814,424 | $75,482 | ($510,196) | ($49,517) | ($733,322) | ($125,082) | | Increase/deduction for Awards Granted during Prior FY that Vested During Applicable FY, determined based on change in ASC 718 Fair Value from Prior FY End to Vesting Date | $236,371 | $22,070 | $1,470 | ($2,995) | ($848,048) | ($47,767) | | Deduction of ASC 718 Fair Value of Awards Granted during Prior FY that were Forfeited during Applicable FY, determined as of Prior FY End | — | — | — | — | — | — | | Increase based on Dividends or Other Earnings Paid during Applicable FY prior to Vesting Date | — | — | — | — | — | — | | Increase based on Incremental Fair Value of Options/SARs Modified during Applicable FY | — | — | — | — | — | — | | Deduction for Change in the Actuarial Present Values reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column of the Summary Compensation Table for Applicable FY | — | — | — | — | — | — | | Increase for Service Cost and, if applicable, Prior Service Cost for Pension Plans | — | — | — | — | — | — | | TOTAL ADJUSTMENTS | $40,642 | $172,545 | ($799,123) | ($98,858) | ($2,761,551) | ($266,123) |
Pay Versus Performance Table
| (2) Fair value or change in fair value, as applicable, of equity awards in the “Compensation Actually Paid” columns was determined by reference to (i) for solely service-vesting RSU awards, the closing price per share on the applicable year-end date(s) or, in the case of vesting dates, the closing price per share on the applicable vesting date(s); (ii) for performance-based RSU/RS awards (excluding any market-based awards), the same valuation methodology as RS/RSU awards above except that the year-end values are multiplied by the probability of achievement of the applicable performance objective as of the applicable date; (iii) for market-based awards, the fair value calculated by a Monte Carlo simulation model as of the applicable year-end date(s), which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objective established for the award, including the expected volatility of our stock price relative to the applicable comparative index and a risk-free interest rate derived from linear interpolation of the term structure of Treasury Constant Maturities yield rates for the applicable period and (iv) for stock options, a Black Scholes value as of the applicable year-end or vesting date(s), determined based on the same methodology as used to determine grant date fair value but using the closing stock price on the applicable revaluation date as the current market price and with an expected life set equal to the remaining life of the award in the case of underwater stock options and, in the case of in the money options, an expected life equal to the original ratio of expected life relative to the ten year contractual life multiplied times the remaining life as of the applicable revaluation date, and in all cases based on volatility and risk free rates determined as of the revaluation date based on the expected life period and based on an expected dividend rate of 0%. For additional information on the assumptions used to calculate the valuation of the awards, see the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and prior fiscal years. |
Pay Versus Performance Table
| (3) For the relevant fiscal year, represents the cumulative TSR (the “Peer Group TSR”) of the Zacks Retail and Wholesale Auto Parts Index |
Pay Versus Performance Table
| (4) EBITDA after adjustments is a non-GAAP measure. An explanation of how the Company determines EBITDA after adjustments is included in Appendix A and ties to the Company’s 8-K filing, of the press release to our earnings release made on June 14, 2023. |
Narrative Disclosure to Pay Versus Performance Table
Narrative Disclosure to Pay Versus Performance Table
Pay Versus Performance Tabular List
Pay Versus Performance Tabular List We believe the following performance measures represent the most important financial performance measures used by us to link compensation actually paid to our NEOs for the fiscal year ended March 31, 2023:
Pay Versus Performance Tabular List
| • | EBITDA after adjustments; |
Pay Versus Performance Tabular List
| • | Relative Shareholder Return; |
Pay Versus Performance Tabular List
| • | Net Sales after adjustments; and |
Pay Versus Performance Tabular List
| • | Cash from Operating Activities. |
2023 Director Compensation
2023 Director Compensation We use a combination of cash and equity incentives to compensate our non-employee directors. Directors who are also our employees received no compensation for their service on our Board of Directors in Fiscal 2023. To determine the appropriate level of compensation for our non-employee directors, we take into consideration the significant amount of time and dedication required by the directors to fulfill their duties on our Board of Directors and Board of Directors committees as well as the need to continue to attract highly qualified candidates to serve on our Board of Directors. The information provided in the following table reflects the compensation received or earned by our directors for their service on our Board of Directors in Fiscal 2023.
2023 Director Compensation
| Name | Fees Earned or Paid in Cash | Stock Awards(1) | Total | | Rudolph Borneo | $77,500 | $100,000 | $177,500 | | David Bryan | $75,000 | $100,000 | $175,000 | | Joseph Ferguson | $92,500 | $100,000 | $192,500 | | Philip Gay | $82,500 | $100,000 | $182,500 | | Jeffrey Mirvis | $85,000 | $100,000 | $185,000 | | Jamy P. Rankin | $62,500 | $100,000 | $162,500 | | Douglas Trussler | $— | $— | $— | | Patricia Warfield | $62,500 | $100,000 | $162,500 | | Barbara L. Whittaker | $72,500 | $100,000 | $172,500 |
2023 Director Compensation
| (1) Award amounts represent the aggregate grant date fair value of the awards during Fiscal 2023. We provide information regarding the assumptions used to calculate all awards made to non-employee directors in Note 2 to the Company’s consolidated financial statements contained in its Annual Report on Form 10-K filed on June 14, 2023. These awards vest in three equal annual installments, commencing on the anniversary date of the grant. As of March 31, 2023, (i) each of the non-employee directors, other than Mr. Trussler who held 0, Ms. Rankin who held 8,763 and Ms. Warfield who held 6,596, held 7,971 unvested shares subject to stock awards and (ii) none of the non-employee directors held unvested option awards. |
2023 Director Compensation
In Fiscal 2022, the Compensation Committee engaged WTW to complete an assessment of our Board of Director compensation package and they made certain recommendations as to changes in cash and equity which we implemented. Starting on September 13, 2021, each of our non-employee directors received annual compensation of $62,500 with no additional fees for attending Board of Directors or committee meetings. In addition, we paid: (i) Mr. Gay an additional $20,000 per year as Chair of our Audit Committee, (ii) Mr. Borneo an additional $15,000 per year as Chair of our Compensation Committee, (iii) Ms. Whittaker an additional $10,000 per year as Chair of our Nominating and Corporate Governance Committee, and (iv) Mr. Ferguson an additional $20,000 per year as lead independent director. Non-Chair members of each committee receive the following retainer for their annual membership: Audit Committee: $10,000, Compensation Committee: $7,500 and Nominating and Corporate Governance Committee: $5,000. In addition, each director is reimbursed for reasonable out-of-pocket expenses incurred to attend Board of Directors or Board of Directors committee meetings. As of September 13, 2021, the Company no longer grants equity to directors upon their appointment to the Board of Directors, but increased the annual grant of RSUs from a grant date fair value of $65,000 to $100,000 for each year of service on our Board of Directors.