DEF 14A of Matrix Service Co
Filed Sep 25, 2024 · FY20240001140361-24-041884
Election of Directors
Election of Directors Our organizational documents provide that the number of directors on the Board be fixed from time to time by the Board but shall not be less than three nor more than 15 persons. The Board size is currently fixed at seven members. Directors hold office until the next annual meeting of stockholders or until their successors have been elected and qualified. In accordance with the recommendation of the Nominating and Corporate Governance Committee, the Board has unanimously nominated the seven nominees identified below. The Board recommends that you vote “For” the election of its seven nominees. Proxies solicited by the Board will be voted “For” all seven nominees unless stockholders specify otherwise in their proxies. If, at the time of the Annual Meeting, any nominee is unavailable, the discretionary authority provided in the proxies solicited by the Board may be used to vote for a substitute or substitutes who may be recommended by the Nominating and Corporate Governance Committee and whom the Board may propose to replace such nominee. The Board has no reason to believe that any substitute nominee will be required. Each of our directors possesses a combination of attributes that qualifies him or her for service on the Board. The directors were specifically recruited for these attributes, which include business experience specifically related to the industries in which we operate, knowledge based on specialized education or training such as accounting, legal and finance, and senior executive management experience that demonstrates leadership qualities and a practical understanding of organizations, processes, business strategies, risk management and how to drive change and growth. We believe that the qualifications, skills and experiences of the directors, individually and collectively, have resulted in the Board being highly effective. The specific skills for each director are listed below:
Director Nominee Profiles
Director Nominee Profiles
Director Nominee Profiles
| Age: 60 Director Since: June 2022 Committees: • Audit • Compensation • Nominating and Corporate Governance • Project Risk | Mr. Bustamante served as an Executive Vice President of Business Development & Strategy at Fluor Corporation (“Fluor”) from February 2015 to May 2020. Before that, Mr. Bustamante served as Senior Vice President of Business Development, Marketing and Strategic Planning - Energy & Chemicals Business at Fluor from 2013 until June 2015. From 2009 to 2013, he served as Head of Middle East Operations in Abu Dhabi at Fluor and led Business Development for Europe, Africa and Middle East Regions. He joined Fluor in 1990 and served Fluor in a number of executive assignments and international locations, including Spain, the United Kingdom, United States of America, Puerto Rico, Chile, Brazil, Nigerian and the United Arab Emirates. While working for Fluor, Mr. Bustamante gained more than 30 years of experience in sales and operations in the engineering and construction industry, focused on oil, gas, chemicals, mining, industrial and infrastructure. Most recently, since August 2023, Mr. Bustamante has served as an Expert Consultant for Boston Consulting Group. Prior to that, he served as Country Manager for ESAsolar from January 2021 to May 2022. His previous Board memberships include Fluor Arabia Ltd (FAL) and Fluor Kuwait. Mr. Bustamante received a Bachelor's degree in Economics and Business Studies from C.U.N.E.F., Universidad Complutense, Madrid, Spain; a Masters degree in Business Administration from the University of Houston, Texas and is a graduate of the Thunderbird University International Management Program. Skills and Qualifications: Mr. Bustamante's extensive leadership positions of increasing responsibility with a large multi-national industrial EPC contractor led to the conclusion that Mr. Bustamante should serve as a Director. Mr. Bustamante has significant international operational experience and a thorough understanding of the challenges and risks that face industrial construction contractors. Mr. Bustamante is also knowledgeable on the business development and strategy for many of the key markets that we serve. |
Martha Z. Carnes
Martha Z. Carnes
Martha Z. Carnes
| Age: 64 Director Since: July 2017 Committees: • Audit (Chair) • Compensation • Nominating and Corporate Governance | Ms. Carnes retired from PricewaterhouseCoopers LLP (“PwC”) in June 2016, where she had a thirty-four year career with the firm. She was an assurance partner serving large, publicly traded companies in the energy industry. Ms. Carnes held a number of leadership positions with PwC including the Houston office Managing Partner. She also served as PwC's Energy and Mining leader in the United States where she led the firm's energy and mining assurance, tax, and advisory practices. Ms. Carnes also served as one of PwC's Risk Management Partners and was PwC's United States representative on the firm's Global Communities Board. She also serves on the Board and is the Lead Independent Director and Chair of the Audit Committee of Core Laboratories Inc., a company that provides reservoir description and production enhancement services to the oil and gas industry. In addition, she is a member of the Board of Directors and Chair of the Audit Committee of SunCoke Energy, Inc., whose principal businesses are cokemaking and logistics. Ms. Carnes is also a Member Representative of Ohio Valley Midstream LLC, a member managed limited liability corporation, and she is a member of the Board of Trustees at Texas Children's Hospital and the Board of the Barbara Bush Houston Literacy Foundation. From September 2017 to June 2019, she was a member of the Board of Directors and served on both the audit and conflicts committees of SunCoke Energy Partners GP LLC, the general partner of SunCoke Energy Partners LP. Ms. Carnes received her B.B.A. in accounting from the University of Texas at Austin and is a certified public accountant. Skills and Qualifications: The specific experience, qualifications, attributes or skills that led to the conclusion Ms. Carnes should serve as a Director include her extensive expertise in financial oversight and financial reporting, and her broad accounting knowledge gained from working with and auditing public companies in the energy industry and her operational and leadership experience at PwC. The Board has determined that Ms. Carnes qualifies as a financial expert as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002. |
John D. Chandler
John D. Chandler
John D. Chandler
| Age: 54 Director Since: June 2017 Board Chair | Mr. Chandler served as Senior Vice President and Chief Financial Officer for The Williams Companies, Inc. (“Williams”) from August 2017 to December 2021. Beginning in January 2022, he served as an advisor to the CFO before retiring from Williams on March 31, 2022. Mr. Chandler served as a director for WPZ GP LLC, the general partner of Williams Partners LP, from September 2017 to August 2018 when Williams Partners LP became a wholly-owned subsidiary of Williams. Mr. Chandler previously served as a director and as chair of the audit committee of USA Compression GP, LLC, the general partner of USA Compression Partners, LP. He also previously served on the board of directors and the audit committee of CONE Midstream GP, LLC, the general partner of CONE Midstream Partners LP, and on the board of directors and audit committee of Green Plains Holdings LLC, the general partner of Green Plains Partners LP. From 2009 until his retirement in March 2014, Mr. Chandler served as Senior Vice President and Chief Financial Officer of Magellan GP, LLC, the general partner of Magellan Midstream Partners, LP. From 2003 until 2009, he served in the same capacities for the general partner of Magellan Midstream Holdings, L.P. From 1999 to 2002, Mr. Chandler was Director of Financial Planning and Analysis and Director of Strategic Development for a subsidiary of Williams. From 1992 to 1999, Mr. Chandler held various accounting and finance positions with MAPCO Inc. Mr. Chandler received his B.S. and B.A. in accounting and finance from the University of Tulsa. Skills and Qualifications: The specific experience, qualifications, attributes or skills that led to the conclusion Mr. Chandler should serve as a Director include his long history of service in senior corporate leadership positions, his extensive experience in the energy industry, his extensive financial oversight expertise and his understanding of complex financial matters gained from his experience as a CFO of two large publicly traded companies. The Board has determined that Mr. Chandler qualifies as a financial expert as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002. |
Carlin G. Conner
Carlin G. Conner
Carlin G. Conner
| Age: 56 Director Since: August 2020 Committees: • Audit • Compensation (Chair) • Nominating and Corporate Governance | Since March 2021, Mr. Conner has served as Chief Executive Officer of International Matex Tank Terminals, Inc. Previously, from April 2020 to March 2021, Mr. Conner served as senior advisor of Riverstone Holdings. He was president, chief executive officer, and a director of SemGroup Corp. (“SemGroup”), a publicly-traded company engaged in gathering, transportation, storage, distribution, marketing and other midstream services primarily in the U.S. and Canada, from April 2014 until January 2020. He also served as chair of the board of directors, president and chief executive officer of the general partner of Rose Rock Midstream, L.P. (“Rose Rock”), a publicly traded master limited partnership and subsidiary of SemGroup, which owned and operated a diversified portfolio of midstream energy assets, from 2014 until September 2016. From 2000 to 2014, Mr. Conner served in various leadership roles with Oiltanking GmbH and affiliates (“Oiltanking”), a German-based independent worldwide storage provider of crude oil, refined petroleum products and liquid chemicals. During his nearly 14 years with Oiltanking, he focused on international business development, operations and strategy. From 2012 to 2014, Mr. Conner served as global managing director of Oiltanking, and he served as chair of the board of directors of the general partner of Oiltanking Partners, L.P., a publicly traded master limited partnership engaged in independent terminaling, storage and transportation of crude oil, refined petroleum products and liquefied petroleum gas, from 2011 to 2014. From 2012 to 2014, Mr. Conner also served as an executive board member of Marquard & Bahls, AG, the parent company of Oiltanking, where he was instrumental in defining a new strategy for the energy supply, trading, and logistics business across Europe, the Americas, Asia, and Africa. Mr. Conner holds a bachelor's degree in environmental science from McNeese State University. Skills and Qualifications: Mr. Conner provides more than 28 years of experience in the midstream industry and executive level experience gained through his services with SemGroup and Oiltanking and their affiliates as described above. He also has substantial board experience related to management and oversight of a publicly-traded master limited partnership. His industry knowledge and board experience allow him to be a valuable contributor to the Board. |
John R. Hewitt
John R. Hewitt
John R. Hewitt
| Age: 66 Director Since: May 2011 Committees: • Project Risk | Mr. Hewitt is our President and CEO. He has spent his entire career in the engineering, procurement, and construction industry. Prior to joining Matrix in May 2011, Mr. Hewitt worked for approximately 25 years for various operating businesses of Aker Solutions ASA (“Aker”) and its predecessor companies, which provide engineering and construction services, technology products, and integrated solutions to the energy and process industries worldwide. Up until his appointment with the Company, Mr. Hewitt served as Vice President of Aker Solutions, where he was responsible for providing executive oversight on major capital projects in the power and liquefied natural gas industries. He also served as President, United States Operations at Aker Solutions E&C US, Inc. from 2007 to 2009 where he was responsible for managing all construction services in North America. Prior to that, he served as President of Aker Construction Inc. where he had full profit and loss responsibility for a multi-disciplined direct hire industrial construction business operating throughout North America. Mr. Hewitt holds a finance degree from Stetson University and an engineering degree from the Florida Institute of Technology. Mr. Hewitt is a member of the board of directors of the Philbrook Museum of Art, the Tulsa Community College Foundation, the Tulsa Regional Chamber, the Committee of One Hundred - Tulsa and the Tulsa Boys Home. Skills and Qualifications: As President and CEO, Mr. Hewitt provides a management representative on the Board with extensive knowledge of day-to-day operations. As a result, he can facilitate the Board’s access to timely and relevant information and its oversight of management’s strategy, planning and performance. In addition, Mr. Hewitt brings to the Board considerable management and leadership experience, extensive knowledge of the energy industry and our business, and significant experience with mergers and acquisitions. |
John R. Hewitt
| Age: 67 Director Since: June 2018 Committees: • Audit • Compensation • Nominating and Corporate Governance (Chair) | Ms. Hinrichs served as a member of the Executive Committee and as Senior Vice President, General Counsel and Corporate Secretary for McDermott International, Inc. from October 2008 until her retirement in August 2017. Previously, she served as McDermott's Vice President, General Counsel and Corporate Secretary from January 2007 to September 2008; Corporate Secretary and Associate General Counsel, Corporate Compliance and Transactions from January 2006 to December 2006; Associate General Counsel, Corporate Compliance and Transactions, and Deputy Corporate Secretary from June 2004 to December 2005; Assistant General Counsel, Corporate Secretary and Transactions from October 2001 to May 2004; and Senior Counsel from May 1999 to September 2001. Prior to joining McDermott in 1999, she was a partner in a New Orleans law firm. Ms. Hinrichs has also served as an independent arbitrator since 2021. Ms. Hinrichs received a Master of Law degree in Securities Regulation from Georgetown University Law Center and a J.D. from Tulane School of Law. Skills and Qualifications: Ms. Hinrichs brings a combination of boardroom experience, executive leadership and general counsel credentials in the international engineering and construction industry. Her deep experience and expertise in governance, enterprise risk management, compliance, international issues, operations, financial oversight and strategy ensure advocacy for best practices and contribute to the Board's deliberations on some of today's most critical issues. |
John R. Hewitt
| Age: 69 Director Since: May 2014 Committees: • Audit • Compensation • Nominating and Corporate Governance • Project Risk (Chair) | Mr. Miller is currently a consultant for Philly Shipyard Inc. In addition, Mr. Miller has served as the sole director of Kvaerner U.S. with oversight and fiduciary responsibility for all U.S.-based operations since November 2017 and as a consultant for Seajay Consulting L.L.C. since October 2018. From June 2011 to April 2014, Mr. Miller served as Board Chair for Aker Philadelphia Shipyard ASA (re-named Philly Shipyard ASA in 2015) and re-assumed that position from February 2016 to April 2020. From June 2011 to October 2017, Mr. Miller was Executive Vice President - Americas of Kvaerner U.S. From June 2008 to June 2011, Mr. Miller served as Chief Executive Officer & President of Aker Philadelphia Shipyard. Prior to the shipyard, Mr. Miller was President of Aker Solutions Process & Construction Americas and before that was President of Aker Construction, Inc., which was one of the largest union construction companies in North America. He previously served on the Board of Directors of San Juan Construction, a multi-disciplined full-service general contractor. Mr. Miller graduated from the University of Edinboro in Pennsylvania with a Bachelors of Arts degree. Skills and Qualifications: Mr. Miller's extensive progressive leadership positions with a large multi-national industrial construction contractor led to the conclusion that Mr. Miller should serve as a Director. Mr. Miller has significant operational experience and a thorough understanding of the challenges and risks that face industrial construction contractors. He is experienced with merger and acquisition activity, partnering with other companies, and the management of large multi-year construction projects. Mr. Miller is also knowledgeable in many of our key markets including power generation and heavy industry projects. |
John R. Hewitt
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” ALL OF THE ABOVE-NAMED NOMINEES FOR ELECTION.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Fiscal 2024 Director Compensation
Fiscal 2024 Director Compensation The compensation earned by each of our non-employee directors in fiscal 2024 is summarized in the table below:
Fiscal 2024 Director Compensation
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | Total ($) | | Jim W. Mogg | 60,000(4) | — | 17,324 | 77,324 | | John D. Chandler | 135,625(5) | 83,826 | — | 219,451 | | Jose L. Bustamante | 85,000(6) | 83,826 | 957 | 169,783 | | Martha Z. Carnes | 100,000(7) | 83,826 | — | 183,826 | | Carlin G. Conner | 91,250(8) | 83,826 | — | 175,076 | | Liane K. Hinrichs | 92,500(9) | 83,826 | — | 176,326 | | James H. Miller | 90,000(10) | 83,826 | 6,399 | 180,225 |
Fiscal 2024 Director Compensation
| (1) Includes retainer fees earned in fiscal 2024 but paid subsequent to the completion of the fiscal year and fees earned in fiscal 2024 but deferred under the Deferred Fee Plan. |
Fiscal 2024 Director Compensation
| (2) The amounts shown represent the grant date fair value for awards granted during fiscal 2024 determined in accordance with the applicable accounting guidance for equity-based awards. For further information on the valuation of these awards, see Notes 1 and 10 to the Consolidated Financial Statements included in our fiscal 2024 Annual Report on Form 10-K. The number of RSUs awarded in fiscal 2024 was determined by dividing the target value of $95,000 by the average share price over the 20-day period ending five days prior to the grant date. The grant date fair value was determined by multiplying the closing share price on the grant date by the RSUs awarded. For services provided as a member of the Board in fiscal 2024, Messrs. Chandler, Bustamante, Conner and Miller and Mmes. Carnes and Hinrichs each received an award of 7,991 RSUs with a grant date fair value of $83,826. As of June 30, 2024, Messrs. Chandler, Bustamante, Conner and Miller and Mmes. Carnes and Hinrichs each held 7,991 unvested RSUs. |
Fiscal 2024 Director Compensation
| (3) A non-employee director may defer all or part of director fees earned into the Deferred Fee Plan and earn interest on any deferred fees. The amounts shown represent interest earned under the plan in excess of a market rate. For fiscal 2024, the market rate for the deferrals was 4.344% as compared to the actual average rate earned of 8.0% and 9.5% for the first six months and last six months of fiscal 2024, respectively. |
Fiscal 2024 Director Compensation
| (4) Represents fees earned by Mr. Mogg, including fees earned for his service as Board Chair, from July 1, 2023 through his retirement date of November 14, 2023. Mr. Mogg's fees were paid in cash. |
Fiscal 2024 Director Compensation
| (5) Mr. Chandler's fees represent his annual retainer of $85,000, plus the pro-rated additional retainer of $3,750 for his service as Chair of the Compensation Committee from July 1, 2023 to November 14, 2023, plus the pro-rated additional retainer of $46,875 for his service as Board Chair for the remainder of fiscal 2024. Mr. Chandler's fees were paid in cash. |
Fiscal 2024 Director Compensation
| (6) Mr. Bustamante's fees represent his annual retainer of $85,000. Mr. Bustamante received $72,500 in cash and deferred $12,500 of these fees under the Deferred Fee Plan. |
Fiscal 2024 Director Compensation
| (7) Ms. Carnes' fees represent her annual retainer of $85,000, plus the additional retainer of $15,000 for her service as Chair of the Audit Committee. Ms. Carnes' fees were paid in cash. |
Fiscal 2024 Director Compensation
| (8) Mr. Conner's fees represent his annual retainer of $85,000, plus the pro-rated additional retainer of $6,250 for his service as Chair of the Compensation Committee. Mr. Conner's fees were paid in cash. |
Fiscal 2024 Director Compensation
| (9) Ms. Hinrichs' fees represent her annual retainer of $85,000, plus the additional retainer of $7,500 for her service as Chair of the Nominating and Corporate Governance Committee. Ms. Hinrichs' fees were paid in cash. |
Fiscal 2024 Director Compensation
| (10) Mr. Miller's fees represent his annual retainer of $85,000, plus the pro-rated additional retainer of $5,000 for his service as Chair of the Project Risk Committee. Mr. Miller received $62,500 in cash, deferred $17,500 and purchased shares with the value of $10,000 through our 2011 Employee Stock Purchase Plan. |
Executive Summary
| • | Fiscal 2024 Short-Term Incentive Compensation Targets: No changes were made to the target bonus opportunity for the Named Executive Officers. The fiscal 2024 plan metrics continue to be based on the achievement of financial and safety goals. For a financial bonus to be paid to any of our NEOs, 100% of budgeted operating income must be earned. For all of our NEOs eligible for short-term incentives, adjusted operating income is measured at the consolidated level. |
Executive Summary
| • | Fiscal 2024 Short-Term Incentive Compensation Payout: The required level of adjusted operating income at the consolidated level was not achieved. Therefore, no fiscal 2024 short-term incentive compensation was paid. |
Executive Summary
| • | Fiscal 2024 Vesting of Long-Term Incentive Performance Share Units (“PSUs”) Award: The vesting of this award was based on our relative Total Shareholder Return for our performance period beginning July 1, 2022 and ending June 30, 2024 in comparison to a group of peer companies. Our actual performance was in the 27th percentile, which was slightly above threshold performance; therefore, these PSUs vested at 28.25% of target on August 30, 2024. |
Executive Summary
| • | Fiscal 2024 Long-Term Incentive Awards: The actual long-term incentive awards for fiscal 2024 for the Named Executive Officers were comprised of the following: |
Executive Summary
| • | For the CEO, three-fifths of the award consisted of PSUs. For the other NEOs, one-half of the award consisted of PSUs. Award recipients may receive anywhere from zero to two shares of our common stock for each PSU on the third anniversary of the date of the award depending on our relative Total Shareholder Return in comparison to the Total Shareholder Return of a peer group of companies over a performance period consisting of fiscal years 2024, 2025 and 2026; |
Executive Summary
| • | For the CEO, one-fifth of the award consisted of service-based RSUs that settle in stock. For the other NEOs, one-fourth of the award consisted of service-based RSUs that settle in stock. Restrictions on the RSUs lapse in four equal annual installments, subject to continued employment with us. In addition, the award agreements contain a provision that accelerates vesting for retirement eligible participants and participants that become retirement eligible during the vesting period. However, the award is forfeited if a participant retires before the first anniversary of the award. Settlement still occurs on the normal vesting schedules; and |
Executive Summary
| • | For the CEO, one-fifth of the award consisted of service-based RSUs that settled in cash. For the other NEOs, one-fourth of the award consisted of service-based RSUs that settle in cash. Restrictions on the RSUs lapse in four equal installments, subject to continued |
Executive Summary
employment with us. In addition, the award agreements contain a provision that accelerates vesting for retirement eligible participants and participants that become retirement eligible during the vesting period. However, the award is forfeited if a participant retires before the first anniversary of the award. Settlement still occurs on the normal vesting schedules. The cash payout is determined by our closing stock price for each vesting date, multiplied by the number of RSUs vesting. The following graphs illustrate the allocation of the fiscal 2024 target compensation opportunity for our Chief Executive Officer, Mr. Hewitt, and the weighted average of our other Named Executive Officers:
Compensation Philosophy and Objectives
| • | Support Business Objectives, Strategy and Values – Ultimately our compensation program is designed to drive the achievement of short and long-term business objectives, support the creation of long-term value for our stockholders, and promote and encourage behavior consistent with our core values and guiding principles. |
Compensation Philosophy and Objectives
| • | Integrated Approach – We look at compensation in total and strive to achieve an appropriate balance of short and long-term compensation components, with the ultimate goal of aligning executive compensation with the creation of long-term stockholder value. |
Key Elements of Executive Compensation
| • | Annual/Short-Term Cash Incentive Compensation; |
Key Elements of Executive Compensation
| • | Long-Term Incentive Compensation; |
Key Elements of Executive Compensation
| • | Change of Control/Severance Agreements. |
Key Elements of Executive Compensation
The Compensation Committee engaged Meridian in 2023 to ensure that our compensation package is consistent with that of our competitors. Meridian was engaged exclusively by the Committee and does not provide other services to us or senior management. The Committee has assessed the independence of Meridian pursuant to SEC rules and concluded that Meridian is independent from the Company and Meridian's work for the Committee does not raise any conflict of interest. In May 2023, Meridian evaluated and recommended the compensation benchmarking and Total Shareholder Return (“TSR”) peer groups and discussed general trends in executive compensation. Meridian’s executive compensation practices analysis included a review of general industry survey data, proxy information and other public filings for the following companies:
Key Elements of Executive Compensation
Additionally, effective August 28, 2023, the Committee approved a base salary increase for Shawn P. Payne, President, Matrix Service Inc., from $410,000 to $439,000, and the Committee approved a base salary increase for Glyn R. Rodgers, President, Matrix PDM Engineering, from $375,000 to $390,000. These salary increases were related to Mr. Payne's and Mr. Rodgers' critical leadership roles in securing significant project awards for the company. Annual/Short-Term Incentive Compensation Our annual/short-term incentive compensation plan is designed to offer the opportunity for annual cash incentive awards for delivering outstanding performance. Generally, rewards under our short-term incentive compensation plan are based on overall Company, business unit and individual performance, as compared to pre-established objectives that are tied to enhancement of stockholder value. Our short-term incentive compensation objectives are designed to:
Key Elements of Executive Compensation
| • | No financial incentives are paid to our NEOs if the Company does not achieve 100% of budgeted fiscal 2024 operating income. Limited payouts for the achievement of safety metrics may be paid if at least $2 million of adjusted operating income is earned. |
Key Elements of Executive Compensation
| • | Payouts of short-term financial incentives attributable to Messrs. Hewitt, Updyke, Cavanah, Payne and Rodgers are based on our consolidated performance. |
Key Elements of Executive Compensation
| • | Payouts of short-term safety incentives for Messrs. Hewitt, Updyke and Cavanah are based on consolidated performance. For Mr. Payne, the payout of short-term safety incentives is based on the performance of our operating subsidiary, Matrix Service Inc. |
Key Elements of Executive Compensation
| • | For the payout of short-term safety incentives for Mr. Rodgers, since the risk of safety incidents involving engineering personnel is low, TRIR is based on consolidated performance, but QHSE Corrective Action Completion is based on the performance of our operating subsidiary, Matrix PDM Engineering. |
Key Elements of Executive Compensation
| Name | Target Bonus as Percentage of Salary | Target Bonus Amount ($) | | John R. Hewitt | 100% | 800,000 | | Alan R. Updyke | 75% | 378,750 | | Kevin S. Cavanah | 75% | 356,250 | | Shawn P. Payne | 75% | 329,250 | | Glyn A. Rodgers | 75% | 292,500 |
Key Elements of Executive Compensation
Financial incentive targets and actual performance For any financial incentive to be paid to our NEOs, the Company had to achieve 100% of budgeted operating income, which was $14.6 million for fiscal 2024. For target bonus amounts to be paid to our NEOs, the Company had to achieve adjusted operating income of approximately $33 million. In fiscal 2024, actual consolidated adjusted operating income was below the budgeted amount. Therefore, our NEOs earned no financial incentives. Safety incentive targets and actual performance For TRIR, which represented 50% of the short-term safety incentive opportunity, the target metric was 0.50 or lower. For QHSE Corrective Action Completion, which represented the other 50% of the short-term safety incentive opportunity, the target percentage was 90% or greater. In fiscal 2024, we achieved a consolidated TRIR of 0.91 while Matrix Service Inc. achieved a TRIR of 1.07. Also, the QHSE Corrective Action Completion percentages achieved by Matrix Service Company, Matrix Service Inc. and Matrix PDM Engineering were 93%, 94% and 100%, respectively. While the QHSE Corrective Action Completion safety metric was achieved, no incentives were paid with respect to the safety portion of our annual/short-term incentive plan due to our fiscal 2024 operating loss. Performance measures are established shortly after the beginning of the fiscal year and do not include the impact of any acquisitions, positive or negative, completed within the fiscal year. The Committee will evaluate any acquisitions which may be completed during the fiscal year on a case-by-case basis to determine their impact on the plan and adjust performance measures appropriately. In addition, the Committee has authority with respect to actual payout of annual short-term incentive awards and can reduce awards regardless of whether performance targets are achieved. The Committee reviews and evaluates the Annual/Short-Term Incentive Compensation Plan periodically to ensure that it meets our objectives and may be modified, discontinued or replaced based on our changing objectives and requirements. Long-Term Incentive Compensation We provide long-term incentive compensation to executive officers to tie executive rewards directly to the enhancement of long-term stockholder value and our profitability. Offering the opportunity for executive officers and other key members of management to earn an ownership position in the Company along with a long-term cash incentive enables us to remain competitive and attract, retain and motivate top executive and management talent. We believe that long-term incentive awards help to create and maintain a long-term perspective among executive officers and provide a direct link between executive compensation and our long-term growth and profitability. The Committee reviews and evaluates long-term incentive awards periodically to ensure that they continue to meet our objectives and may be modified, discontinued or replaced based on our changing objectives and requirements. The Committee's most recently completed review, which occurred in August 2023, carefully considered the Meridian study, trends of our peer companies, compensation objectives of retention and value creation, and the objective of conserving shares available for grant under our equity incentive plan and reducing earnings dilution. The Committee concluded that a combination of service-based RSUs and performance units are the most appropriate forms of equity awards to achieve our stated objectives. Service-based RSUs strongly and directly link management and stockholder interests and are an excellent tool to promote retention. As a full value award, service-based stock-settled RSUs are less dilutive to stockholders than stock options, since we are able to issue fewer shares in order to attain the desired level of equity compensation for our executive officers and key leaders. Service-based cash-settled RSUs prevent dilution in our earnings per share, promote employee retention and align management and stockholder interests. Performance units with performance criteria link the realized value of the equity reward to achievement of stockholder value. Under the long-term incentive program, all awards are issued on an annual basis. Specific, individual grants vary by level and role in the organization. The amount of each award corresponds to the respective salary grade for each executive officer and is based on market data. The Committee approved the following structure for the fiscal 2024 long-term incentive grant for NEOs:
Key Elements of Executive Compensation
| • | A portion of the grant (three-fifths for the CEO and one-half for the other NEOs) was in the form of PSUs. The PSUs cliff vest on the third anniversary of the grant. The shares of our common stock received can vary from zero to two for each performance unit based on the relative Total Shareholder Return (“TSR”) of our common stock as compared to the TSR of a group of peer companies over the performance period. The potential award levels were as follows: |
Key Elements of Executive Compensation
| Shareholder Return Goal | Total Shareholder Return | Shares of Common Stock for Each Performance Unit | | Threshold | 25th percentile of Peer Group | 0.25 | | Above Threshold | 35th percentile of Peer Group | 0.50 | | Target | 50th percentile of Peer Group | 1.00 | | Above Target | 75th percentile of Peer Group | 1.50 | | Maximum | 90th percentile of Peer Group | 2.00 |
Key Elements of Executive Compensation
| • | A portion of the grant (one-fifth for the CEO and one-fourth for the other NEOs) consisted of service-based RSUs settled in stock. Vesting will continue to occur evenly over a four-year period beginning on the first anniversary of the grant date. In addition, the award agreements contain a provision that accelerates vesting for retirement eligible participants and participants who become retirement eligible during the vesting period. However, the award is forfeited if a participant retires before the first anniversary of the award. Settlement still occurs on the normal vesting schedules. |
Key Elements of Executive Compensation
| • | The remaining portion of the grant (one-fifth for the CEO and one-fourth for the other NEOs) consisted of service-based RSUs settled in cash. Vesting will occur evenly over a four-year period beginning on the first anniversary of the grant date. In addition, the award agreements contain a provision that accelerates vesting for retirement eligible participants and participants who become retirement eligible during the vesting period. However, the award is forfeited if a participant retires before the first anniversary of the award. Settlement still occurs on the normal vesting schedules. |
Key Elements of Executive Compensation
| • | We provide long-term disability to all administrative employees. Under this plan, the employee may receive disability payments of up to 60% of their base salary subject to a maximum of $12,000 per month. Additionally, we provide a fully portable supplemental executive long-term disability plan to the Named Executive Officers. Under this plan, the Named Executive Officers may receive additional disability payments of up to 60% of the sum of their base salary and the average of their prior two years short-term incentive cash bonuses, subject to a maximum of $15,000 per month. The combined plans may provide a long-term disability benefit up to a maximum of $27,000 per month for the Named Executive Officers. |
Key Elements of Executive Compensation
Change of Control/Severance Agreements We have entered into Change of Control/Severance Agreements with each of our Named Executive Officers and other executive officers. These agreements are designed to promote stability, continuity and focus for key members of leadership during periods of uncertainty that may be created by change of control situations. Additionally, the use of such agreements is a competitive practice that enhances our ability to attract and retain leadership talent. For further details regarding our Change of Control/Severance Agreements, see the discussion under the caption “Potential Payments Upon Termination or Change of Control.”
Compensation Program as it Relates to Risk
| • | Components of Compensation: We use a mix of compensation elements including base salary, short-term incentives and long-term incentives to avoid placing too much emphasis on any one component of compensation. |
Compensation Program as it Relates to Risk
| • | Short-term Incentive Compensation: Our short-term incentive compensation plan does not allow for unlimited payouts. For fiscal 2024, short-term incentive payments cannot exceed 200% of target levels. |
Compensation Program as it Relates to Risk
| • | Long-term Incentive Awards: Our service-based long-term incentive awards drive a long-term perspective and vest over a period of four years. Our performance-based long-term incentive awards, which may vest after a period of three years, are capped and cannot exceed 200% of target levels. |
Compensation Program as it Relates to Risk
| • | Committee Oversight: The Committee reviews and administers all awards under short- and long-term incentive plans and engages a compensation consultant on an annual basis to ensure that our compensation package is consistent with that of our competitors. |
Compensation Program as it Relates to Risk
| • | Performance Measures: Our performance goal setting process is aligned with our business strategy and the interests of our stockholders. |
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($) | Total ($) | | John R. Hewitt Chief Executive Officer | 2024 | 800,000 | — | 3,264,777 | — | 32,510(5) | 4,097,287 | | | 2023 | 800,000 | — | 1,565,141 | — | 36,852 | 2,401,993 | | | 2022 | 793,846(1) | — | 2,629,879 | — | 35,378 | 3,459,103 | | Alan R. Updyke Chief Operating Officer | 2024 | 505,000 | — | 1,105,672 | — | 25,733(5) | 1,636,405 | | | 2023 | 505,000 | — | 535,943 | — | 27,583 | 1,068,526 | | | 2022 | 503,058(1) | — | 898,096 | — | 22,001 | 1,423,155 | | Kevin S. Cavanah | 2024 | 475,000 | — | 1,039,996 | — | 23,585(5) | 1,538,581 | | Chief Financial Officer | 2023 | 475,000 | — | 504,107 | — | 24,308 | 1,003,415 | | | 2022 | 473,174(1) | — | 844,746 | — | 18,758 | 1,336,678 | | Shawn P. Payne | 2024 | 433,423(2) | — | 686,554 | — | 19,211(5) | 1,139,188 | | President—Matrix Service Inc. | 2023 | 397,769 | — | 310,799 | — | 18,646 | 727,214 | | Glyn A. Rodgers President—Matrix PDM Engineering | 2024 | 387,115(2) | — | 609,916 | — | 22,341(5) | 1,019,372 | | | 2023 | 375,000 | — | 284,275 | — | 26,395 | 685,670 | | | 2022 | 373,558(1) | — | 476,371 | — | 21,942 | 871,871 |
Summary Compensation Table
| (1) 2022 salary includes the impact of temporary salary reductions voluntarily taken as a result of the economic impact of the COVID-19 pandemic and the challenging business environment it created. |
Summary Compensation Table
| (2) The base salary of Mr. Payne for fiscal 2024 represents 10 months of his current base salary of $439,000 and two months of his prior base salary. The base salary of Mr. Rodgers for fiscal 2024 represents 10 months of his current base salary of $390,000 and two months of his prior base salary. |
Summary Compensation Table
| (3) The amounts shown represent the grant date fair value for awards of RSUs to be settled in stock, RSUs to be settled in cash and performance units granted during the period determined in accordance with FASB Accounting Standards Codification ASC Topic 718 – Compensation – Stock Compensation (“ASC718”). A portion of the awards that were granted in fiscal years 2022, 2023 and 2024 are subject to certain market conditions; accordingly, the grant date fair value of these awards is based upon the probable outcome of those conditions. For further information on the assumptions used in the valuation of these awards see Notes 1 and 10 included in the Notes to Consolidated Financial Statements included in our fiscal 2024 Annual Report on Form 10-K. |
Summary Compensation Table
| (4) Represents amounts payable to the Named Executive Officer under the annual/short-term incentive compensation plan for the applicable fiscal year's performance. In fiscal 2024, no amounts were paid under the annual/short-term incentive compensation plan. |
Summary Compensation Table
| (5) Represents amounts paid by us on behalf of the Named Executive Officer for life insurance and disability premiums and matching contributions to the Named Executive Officer’s account in our qualified 401(k) plan. Life insurance and disability premiums in fiscal 2024 totaled $18,922, $12,533, $10,385, $5,431 and $8,841 for Messrs. Hewitt, Updyke, Cavanah, Payne and Rodgers, respectively. Matching contributions to our 401(k) plan in fiscal 2024 totaled $13,588, $13,200, $13,200, $13,780 and $13,500 for Messrs. Hewitt, Updyke, Cavanah, Payne and Rodgers, respectively. |
Grants of Plan-Based Awards During Fiscal 2024
Grants of Plan-Based Awards During Fiscal 2024
Grants of Plan-Based Awards During Fiscal 2024
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | John R. Hewitt | 8/29/2023 | 291,182 | 800,000 | 1,600,000 | — | — | — | — | — | | | 8/29/2023 | — | — | — | 44,577 | 178,306 | 356,612 | 118,870 | 3,264,777 | | Alan R. Updyke | 8/29/2023 | 137,856 | 378,750 | 757,500 | — | — | — | — | — | | | 8/29/2023 | — | — | — | 13,132 | 52,526 | 105,052 | 52,526 | 1,105,672 | | Kevin S. Cavanah | 8/29/2023 | 129,667 | 356,250 | 712,500 | — | — | — | — | — | | | 8/29/2023 | — | — | — | 12,352 | 49,406 | 98,812 | 49,406 | 1,039,996 | | Shawn P. Payne | 8/29/2023 | 111,923 | 329,250 | 658,500 | — | — | — | — | — | | | 8/29/2023 | — | — | — | 8,154 | 32,615 | 65,230 | 32,616 | 686,554 | | Glyn A. Rodgers | 8/29/2023 | 102,369 | 292,500 | 585,000 | — | — | — | — | | | | 8/29/2023 | — | — | — | 7,244 | 28,975 | 57,950 | 28,974 | 609,916 |
Grants of Plan-Based Awards During Fiscal 2024
| (1) The amounts shown are the potential cash incentive compensation awards for each Named Executive Officer under our annual/short-term incentive compensation plan described above under the caption “Compensation Discussion and Analysis”. Actual payouts to the Named Executive Officers for the applicable fiscal year are reported in the Summary Compensation Table as a portion of the amount shown under the column “Non-Equity Incentive Plan Compensation.” |
Grants of Plan-Based Awards During Fiscal 2024
| (2) Represents the number of shares which may be issued pursuant to fiscal 2024 performance unit awards to the Named Executive Officers that cliff vest three years after the grant date. The number of shares of common stock received upon vesting of the performance units will range between 0% and 200% of the number of performance units awarded as determined by the three-year Total Shareholder Return on our common stock when compared to the Total Shareholder Return on the common stock of a group of peer companies selected by the Compensation Committee of the Board. The fiscal 2024 performance unit awards are described above under the caption “Compensation Discussion and Analysis”. |
Grants of Plan-Based Awards During Fiscal 2024
| (3) Amounts shown represent service-based RSUs granted to the Named Executive Officers in fiscal 2024. The awards vest in four equal annual installments beginning one year after the grant date subject to the Named Executive Officer's continued employment with us. Half of the RSUs will be settled in stock while the other half will be settled in cash. |
Grants of Plan-Based Awards During Fiscal 2024
| (4) Amounts shown are calculated based upon the grant date fair value calculated in accordance with ASC718. The grant date fair value of the service-based RSUs is calculated by multiplying the number of RSUs awarded by the closing stock price on the date of grant. The grant date fair value of the performance units is calculated using a Monte Carlo model. The model estimated the fair value of the award based on approximately 100,000 simulations of the future prices of our common stock compared to the future prices of our peer companies based on historical volatilities. The model also took into account the expected dividends over the performance period for the peer companies which pay cash dividends. See Notes 1 and 10 of the Notes to the Consolidated Financial Statements included in our fiscal 2024 Annual Report on Form 10-K for a full discussion of our stock-based compensation accounting policies. The specific grant date fair values are as follows: |
Grants of Plan-Based Awards During Fiscal 2024
| | Service-Based Awards | | | Performance-Based Awards | | | | | Name | Service-Based Awards (#) | Value per Share ($) | Grant Date Fair Value ($) | Shares at Target (#) | Value per Share ($) | Grant Date Fair Value ($) | Total Grant Date Fair Value ($) | | John R. Hewitt | 118,870 | 8.22 | 977,111 | 178,306 | 12.83 | 2,287,666 | 3,264,777 | | Alan R. Updyke | 52,526 | 8.22 | 431,764 | 52,526 | 12.83 | 673,908 | 1,105,672 | | Kevin S. Cavanah | 49,406 | 8.22 | 406,117 | 49,406 | 12.83 | 633,879 | 1,039,996 | | Shawn P. Payne | 32,616 | 8.22 | 268,104 | 32,615 | 12.83 | 418,450 | 686,554 | | Glyn A. Rodgers | 28,974 | 8.22 | 238,166 | 28,975 | 12.83 | 371,750 | 609,916 |
Outstanding Equity Awards at Fiscal Year-End for 2024
Outstanding Equity Awards at Fiscal Year-End for 2024
Outstanding Equity Awards at Fiscal Year-End for 2024
| | Stock Awards | | | | | Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | John R. Hewitt | 238,712 | 2,370,410 | 519,817 | 5,161,783 | | Alan R. Updyke | 105,480 | 1,047,416 | 153,130 | 1,520,581 | | Kevin S. Cavanah | 99,214 | 985,195 | 144,034 | 1,430,258 | | Shawn P. Payne | 58,354 | 579,455 | 91,189 | 905,507 | | Glyn A. Rodgers | 57,060 | 566,606 | 83,452 | 828,678 |
Outstanding Equity Awards at Fiscal Year-End for 2024
| (1) Based on the closing price of our common stock on June 28, 2024 of $9.93 per share. |
Outstanding Equity Awards at Fiscal Year-End for 2024
The stock awards vest according to the following schedule:
Outstanding Equity Awards at Fiscal Year-End for 2024
| | Number of Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | | | Name | Shares | Vest Date | Shares | Vest Date | | John R. Hewitt | 16,978 | 8/24/2024(1) | 31,274(2) | 8/30/2024 | | | 29,718 | 8/29/2024(1) | 131,931(2) | 8/30/2025 | | | 18,450 | 8/30/2024(1) | 356,612(2) | 8/29/2026 | | | 21,988 | 8/30/2024(1) | | | | | 29,718 | 8/29/2025(1) | | | | | 18,450 | 8/30/2025(1) | | | | | 21,988 | 8/30/2025(1) | | | | | 29,718 | 8/29/2026(1) | | | | | 21,988 | 8/30/2026(1) | | | | | 29,716 | 8/29/2027(1) | | | | Alan R. Updyke | 7,502 | 8/24/2024(1) | 9,213(2) | 8/30/2024 | | | 13,132 | 8/29/2024(1) | 38,865(2) | 8/30/2025 | | | 8,152 | 8/30/2024(1) | 105,052(2) | 8/29/2026 | | | 9,716 | 8/30/2024(1) | | | | | 13,132 | 8/29/2025(1) | | | | | 8,152 | 8/30/2025(1) | | | | | 9,716 | 8/30/2025(1) | | | | | 13,132 | 8/29/2026(1) | | | | | 9,716 | 8/30/2026(1) | | | | | 13,130 | 8/29/2027(1) | | | | Kevin S. Cavanah | 7,056 | 8/24/2024(1) | 8,666(2) | 8/30/2024 | | | 12,352 | 8/29/2024(1) | 36,556(2) | 8/30/2025 | | | 7,668 | 8/30/2024(1) | 98,812(2) | 8/29/2026 | | | 9,140 | 8/30/2024(1) | | | | | 12,352 | 8/29/2025(1) | | | | | 7,668 | 8/30/2025(1) | | | | | 9,138 | 8/30/2025(1) | | | | | 12,352 | 8/29/2026(1) | | | | | 9,138 | 8/30/2026(1) | | | | | 12,350 | 8/29/2027(1) | | | | Shawn P. Payne | 2,784 | 8/24/2024(1) | 3,421(2) | 8/30/2024 | | | 8,154 | 8/29/2024(1) | 22,538(2) | 8/30/2025 | | | 3,026 | 8/30/2024(1) | 65,230(2) | 8/29/2026 | | | 5,634 | 8/30/2024(1) | | | | | 8,154 | 8/29/2025(1) | | | | | 3,026 | 8/30/2025(1) | | | | | 5,634 | 8/30/2025(1) | | | | | 8,154 | 8/29/2026(1) | | | | | 5,634 | 8/30/2026(1) | | | | | 8,154 | 8/29/2027(1) | | | | Glyn A. Rodgers | 3,978 | 8/24/2024(1) | 4,887(2) | 8/30/2024 | | | 7,244 | 8/29/2024(1) | 20,615(2) | 8/30/2025 | | | 4,324 | 8/30/2024(1) | 57,950(2) | 8/29/2026 | | | 5,154 | 8/30/2024(1) | | | | | 7,244 | 8/29/2025(1) | | | | | 4,324 | 8/30/2025(1) | | | | | 5,154 | 8/30/2025(1) | | | | | 7,244 | 8/29/2026(1) | | | | | 5,152 | 8/30/2026(1) | | | | | 7,242 | 8/29/2027(1) | | |
Outstanding Equity Awards at Fiscal Year-End for 2024
| (1) Represents 50% vesting of stock-settled RSUs and 50% vesting of cash-settled RSUs. |
Outstanding Equity Awards at Fiscal Year-End for 2024
| (2) Represents fiscal 2022, 2023 and 2024 performance unit awards to the Named Executive Officers that cliff vest three years after the grant date. If at least threshold performance is achieved, the performance units are paid out in the form of our common stock upon vesting. The number of shares of common stock received for each performance unit will vary from zero to two based on the Total Shareholder Return on our common stock when compared to Total Shareholder Return on common stock of peer companies selected by the Compensation Committee of the Board. The Total Shareholder Return Goals are as follows: |
Outstanding Equity Awards at Fiscal Year-End for 2024
| Shareholder Return Goal | Total Shareholder Return | Shares of Common Stock for Each Performance Unit | | Threshold | 25th percentile of Peer Group | 0.25 | | Above Threshold | 35th percentile of Peer Group | 0.50 | | Target | 50th percentile of Peer Group | 1.00 | | Above Target | 75th percentile of Peer Group | 1.50 | | Maximum | 90th percentile of Peer Group | 2.00 |
Outstanding Equity Awards at Fiscal Year-End for 2024
The performance period (fiscal 2022, 2023 and 2024) for the fiscal 2022 performance unit award has been completed. In August 2024, the Compensation Committee certified that our relative Total Shareholder Return for the performance period resulted in an award of 0.2825 shares for each performance unit granted. Accordingly, the number of shares presented for the fiscal 2022 performance unit award is equal to the number of shares actually earned for that period. Based on our relative Total Shareholder Return for fiscal 2023 and 2024 (two-thirds of the performance period for the fiscal 2023 award), the fiscal 2023 award is presented at the Target performance level. Based on our relative Total Shareholder Return for fiscal 2024 (one-third of the performance period for the fiscal 2024 award), the fiscal 2024 award is presented at the Maximum performance level.
Options Exercised and Stock Vested During Fiscal 2024
Options Exercised and Stock Vested During Fiscal 2024
Options Exercised and Stock Vested During Fiscal 2024
| | Stock Awards | | | Name | Number of Shares or Units of Stock Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) | | John R. Hewitt | 66,461 | 550,892 | | Alan R. Updyke | 34,322 | 282,863 | | Kevin S. Cavanah | 26,870 | 222,972 | | Shawn P. Payne | 12,637 | 105,334 | | Glyn A. Rodgers | 15,151 | 125,726 |
Options Exercised and Stock Vested During Fiscal 2024
| (1) Both stock-settled RSUs and cash-settled RSUs were acquired. The number of stock-settled RSUs acquired in fiscal 2024 totaled 37,752, 21,637, 14,938, 6,912 and 8,423 for Messrs. Hewitt, Updyke, Cavanah, Payne and Rodgers, respectively. The number of cash-settled RSUs acquired in fiscal 2024 totaled 28,709, 12,685, 11,932, 5,725 and 6,728, which resulted in cash payouts of $239,455, $105,802, $99,522, $47,943 and $56,117 for Messrs. Hewitt, Updyke, Cavanah, Payne and Rodgers, respectively. |
Options Exercised and Stock Vested During Fiscal 2024
| (2) The value realized is the closing sales price of the common stock on the vesting date, multiplied by the number of shares for which the restrictions lapsed. The stock awards that vested in fiscal 2024 relate to service-based and performance-based awards and were as follows: |
Options Exercised and Stock Vested During Fiscal 2024
| | Service-Based Awards | | Performance-Based Awards | | Total | | | Name | Shares or Units of Stock (#) | Value ($) | Shares or Units of Stock (#) | Value ($) | Shares or Units of Stock (#) | Value ($) | | John R. Hewitt | 66,461 | 550,892 | — | — | 66,461 | 550,892 | | Alan R. Updyke | 34,322 | 282,863 | — | — | 34,322 | 282,863 | | Kevin S. Cavanah | 26,870 | 222,972 | — | — | 26,870 | 222,972 | | Shawn P. Payne | 12,637 | 105,334 | — | — | 12,637 | 105,334 | | Glyn A. Rodgers | 15,151 | 125,726 | — | — | 15,151 | 125,726 |
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control In September 2021, the Board of Directors approved a General Severance Protection Plan for all Officers that aligns with the market, our peers and best practice. The updated Change of Control and Severance benefits for NEOs are included in the table below:
Potential Payments Upon Termination or Change of Control
| | General Severance | | Change of Control | | | | Executive | Payout Multiple | Payout Definition | Protection Window | Payout Multiple | Payout Definition | | CEO | 2x | Base | 24 months | 2x | (Base + Target Bonus) | | COO | 1.5x | Base | 24 months | 2x | (Base + Target Bonus) | | CFO | 1.5x | Base | 24 months | 2x | (Base + Target Bonus) | | Business President | 1.5x | Base | 24 months | 1.5x | (Base + Target Bonus) |
Potential Payments Upon Termination or Change of Control
Under these agreements, payment of benefits may occur under two circumstances:
Potential Payments Upon Termination or Change of Control
| • | If we experience a “Change of Control” and the executive voluntarily incurs separation from service for “Good Reason” or is terminated without “Cause,” either on the date of the Change of Control or within 24 months following the Change of Control date; or |
Potential Payments Upon Termination or Change of Control
| • | The executive is terminated from employment at any time for reasons other than Cause. |
Potential Payments Upon Termination or Change of Control
“Change of Control” means (i) the acquisition by any “person” or “group” (as defined pursuant to Section 13(d) under the Securities Exchange Act) of “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act) of in excess of 35% of the combined voting power of the outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Voting Securities”); (ii) during any one (1) year period, individuals who at the beginning of such period constituted the Board of the Company (the “Board”) (together with any new directors whose election by the Board or nomination for election by our stockholders was approved by a vote of at least two-thirds (2/3) of our directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved (but excluding, for purposes of this definition, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) cease for any reason to constitute a majority of the members of the Board; (iii) consummation of a merger, consolidation, recapitalization or reorganization of the Company, other than a merger, consolidation, recapitalization or reorganization which would result in our Voting Securities outstanding immediately prior thereto continuing to represent, either by remaining outstanding or by being converted into voting stock of the surviving entity (or if the surviving entity is a subsidiary of another entity, then of the parent entity of such surviving entity), more than fifty percent (50%) of the total voting power represented by the voting stock of the surviving entity (or parent entity) outstanding immediately after such merger, consolidation, recapitalization or reorganization; or (iv) our stockholders approve a plan of complete liquidation or an agreement for our sale or disposition (in one transaction or a series of related transactions) of all or substantially all of our assets to any Person. “Cause” means, with reference to a severance event, that the executive has been severed from employment with us because of the executive’s theft of our property, embezzlement or dishonesty that results in harm to us; continued gross or willful neglect of his or her job responsibilities after receiving written warnings regarding such neglect; conviction of a felony or pleading nolo contendere to a felony charged under state or federal law; or willful violation of Company policy. A determination by our Board that an event constituting “Cause” under this Agreement has occurred is binding. “Good Reason” means a separation from service initiated by the executive on account of any one or more of the following actions or omissions that, unless otherwise specified, occurs following a Change of Control: (i) a material reduction in the rate of annual base compensation or a material reduction in target annual incentive compensation; (ii) a change in the location of the executive’s principal place of employment by more than thirty-five (35) miles from the location where the executive was principally employed immediately prior to the date on which a Change of Control occurs; (iii) a material adverse reduction in the nature or scope of the executive’s office, position, duties, functions, responsibilities or authority (including reporting responsibilities and authority) from those immediately prior to the date on which a Change of Control occurs; or (iv) the failure at any time of the successor company explicitly to assume and agree to be bound by the Plan. In the event payment of benefits is triggered under these agreements, the executive officer will be paid in the manner outlined below. All benefits paid under these agreements are conditioned upon the executive executing waiver and release in form and substance satisfactory to us, within sixty (60) days after separation from service. Failure to execute such an agreement prior to the payment date is considered an absolute forfeiture of the severance benefit. In the event an executive officer is terminated for Cause, all benefits and payments under the agreement are forfeited. In the event an executive is terminated from employment for reasons other than Cause or voluntarily separates from service for Good Reason during a period that commences 180 days prior to the Change of Control and expires on the two (2) year anniversary of the Change of Control, benefits are paid as follows:
Potential Payments Upon Termination or Change of Control
| • | Messrs. Hewitt, Updyke and Cavanah – Paid an amount equal to two years of base salary plus annual target bonus. All forms of long-term incentive awards vest and restrictions on such benefits lapse in accordance with the change of control vesting provisions set forth in the award agreements governing such long-term incentive awards. |
Potential Payments Upon Termination or Change of Control
| • | Messrs. Payne and Rodgers – Paid an amount equal to one and one-half years of base salary plus annual target bonus. All long-term incentive awards vest and restrictions on such benefits lapse in accordance with the change of control vesting provisions set forth in the award agreements governing such long-term incentive awards. |
Potential Payments Upon Termination or Change of Control
Beginning with the fiscal 2021 equity awards, accelerated vesting of awards will occur only upon a double-trigger consisting of either (i) a Change of Control and one of several other occurrences, including the termination of a Named Executive Officer not for Cause or if the Named Executive Officer suffers an adverse event in connection with or within two years of the Change of Control or (ii) a Change of Control in which the successor company elects not to assume or replace the award with an award of equal value. In the absence of a Change of Control, in the event an executive is terminated from employment for reasons other than Cause, benefits are paid as follows:
Potential Payments Upon Termination or Change of Control
| • | Mr. Hewitt – Paid an amount equal to two years of base salary. |
Potential Payments Upon Termination or Change of Control
| • | Messrs. Updyke, Cavanah, Payne and Rodgers – Paid an amount equal to one and one-half years of base salary. |
Potential Payments Upon Termination or Change of Control
Benefits will be paid in the calendar year the triggering event occurs and, generally, within sixty days of the date of the triggering event. In no case shall the payment of the severance benefits be paid later than December 31 of the second calendar year following the calendar year in which the separation from service occurs. The following table shows potential payments to our Named Executive Officers under existing contracts, agreements, plans or arrangements, whether written or unwritten for various scenarios involving a termination of each of such Named Executive Officers, assuming a June 30, 2024 termination date and, where applicable, using the closing price of our common stock on June 28, 2024 of $9.93. These amounts are estimates only. The actual amounts to be paid can only be determined at the time of such executive officer’s separation from our employment.
Potential Payments Upon Termination or Change of Control
| | Change of Control with Termination for Reasons Other than Cause | | | | Termination by the Company at any Time for Reasons Other than Cause | Retirement | Death or Disability | | Name | Salary Severance ($)(1) | Annual/ Short-Term Incentive Plan Severance ($)(2) | Value Realized on Acceleration of Vesting ($)(3) | Total ($) | Salary Severance ($)(4) | Value Realized on Acceleration of Vesting ($)(5) | Value Realized on Acceleration of Vesting ($)(3) | | John R. Hewitt | 1,600,000 | 800,000 | 6,550,325 | 8,950,325 | 1,600,000 | 3,522,439 | 6,550,325 | | Alan R. Updyke | 1,010,000 | 378,750 | 2,278,756 | 3,667,506 | 757,500 | 1,213,198 | 2,278,756 | | Kevin S. Cavanah | 950,000 | 356,250 | 2,143,381 | 3,449,631 | 712,500 | — | 2,143,381 | | Shawn P. Payne | 658,500 | 329,250 | 1,247,357 | 2,235,107 | 658,500 | — | 1,247,357 | | Glyn A. Rodgers | 585,000 | 292,500 | 1,230,794 | 2,108,294 | 585,000 | 646,582 | 1,230,794 |
Potential Payments Upon Termination or Change of Control
| (1) Represents payment of two years of base salary for Messrs. Hewitt, Updyke and Cavanah or one and one-half years of base salary for Messrs. Payne and Rodgers for the event specified based on base salary as of June 30, 2024. |
Potential Payments Upon Termination or Change of Control
| (2) Represents payment of annual/short-term incentive severance for the event specified based on the annual target bonus compensation. |
Potential Payments Upon Termination or Change of Control
| (3) Represents the value the Named Executive Officer would realize upon the lapsing of restrictions on RSUs settled in stock, RSUs settled in cash and PSUs due to the specified event. The value shown is the number of unvested RSUs and PSUs, assuming a target performance level, at June 30, 2024 multiplied by the market price of common stock at the close of business on June 28, 2024. |
Potential Payments Upon Termination or Change of Control
| (4) Represents payment of two years of base salary for Mr. Hewitt or one and one-half years of base salary for Messrs. Updyke, Cavanah, Payne and Rodgers for the event specified based on base salary as of June 30, 2024. |
Potential Payments Upon Termination or Change of Control
| (5) Represents the value Messrs. Hewitt, Updyke and Rodgers would realize upon the lapsing of restrictions on RSUs settled in stock, RSUs settled in cash and PSUs due to their retirement. The value shown is the value of RSUs settled in stock that would vest, the value of RSUs settled in cash that would vest and the value of PSUs that would vest (assuming a target performance level). For RSUs settled in stock, RSUs settled in cash and PSUs, the value represents the shares received multiplied by the market price of common stock at the close of business on June 28, 2024. Messrs. Cavanah and Payne were not eligible for retirement at June 30, 2024. |
Potential Payments Upon Termination or Change of Control
There are no other agreements, arrangements or plans that entitle the Named Executive Officers to severance, perquisites or other enhanced benefits upon their termination of employment.
CEO Pay Ratio
CEO Pay Ratio For the year ended June 30, 2024, our last completed fiscal year:
CEO Pay Ratio
| • | the median of the annual total compensation of all employees (other than our CEO) was $105,413; |
CEO Pay Ratio
| • | the annual total compensation of our CEO was $4,097,287; and |
CEO Pay Ratio
| • | based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 39 to 1. |
CEO Pay Ratio
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, the methodology and the material assumptions, adjustments, and estimates that we used are described below. We determined that, as of June 30, 2024, our employee population consisted of 2,064 individuals working at the Company and its consolidated subsidiaries, 1,846 of whom were U.S. employees and 218 of whom were non-U.S. employees. As permitted under SEC rules, for purposes of identifying our median employee, we excluded 36 non-U.S. employees, or approximately 1.7% of our total employee population. Six of the excluded employees were located in Australia, one was located in Dubai, and 29 were located in South Korea. After this adjustment, our employee population consisted of 2,028 individuals. Using a consistently applied compensation measure, which included base pay, overtime, and short-term incentives but excluded the value of health and welfare benefits, we ranked our employees from the highest paid to the lowest paid. Our employee population was evaluated as of June 30, 2024, and reflects compensation paid from July 1, 2023 through June 30, 2024. We applied a Canadian to U.S. dollar exchange rate to the compensation elements paid in Canadian currency to our Canadian employees. We did not use any cost-of-living adjustments. Where allowed under SEC rules, we have annualized compensation through June 30, 2024 for employees newly hired after July 1, 2023. The resulting ratio of 39:1 is a reasonable estimate calculated in a manner consistent with SEC rules using the data and assumptions summarized above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pay Versus Performance
Pay Versus Performance Pay Versus Performance Table The following table presents certain information regarding compensation paid to our CEO and our non-CEO NEOs, and certain measures of financial performance, for the three fiscal years ended June 30, 2024. The amounts shown below are calculated in accordance with Item 402(v) of Regulation S-K. In this table, executive pay is presented in two ways: (1) total compensation as disclosed in the Summary Compensation Table (“SCT”) for the relevant year and (2) “compensation actually paid” (“CAP”) for the same year. “Compensation actually paid,” calculated as required by SEC rules, reflects the adjustments to unvested and vested equity awards during the years shown in the table below, and does not reflect the actual amount of compensation earned by or paid to our CEO and our non-CEO NEOs during a relevant year. “Compensation actually paid” generally fluctuates due to increases or decreases in our stock price.
Pay Versus Performance
| Year | Summary Compensation Table Total for CEO ($)(1) | Compensation Actually Paid to CEO ($)(2) | Average Summary Compensation Table Total for non-CEO NEOs ($)(3) | Average Compensation Actually Paid to non-CEO NEOs ($)(2) | Value of Initial Fixed $100 Investment Based on Company TSR ($)(4) | Net Income/(Loss) (in thousands) ($)(5) | | 2024 | 4,097,287 | 5,631,542(6) | 1,133,387 | 1,724,764(6) | 94.57 | (24,976) | | 2023 | 2,401,993 | 1,753,594(7) | 842,893 | 696,381(7) | 56.10 | (52,361) | | 2022 | 3,459,103 | (231,017)(8) | 1,147,962 | 182,977(8) | 48.19 | (63,900) |
Pay Versus Performance
| (1) The amounts in this column are the amounts of total compensation reported for Mr. Hewitt for each corresponding year in the “Total” column of the Summary Compensation Table on page 35. |
Pay Versus Performance
| (2) In calculating the “compensation actually paid” amounts reflected in these columns, the fair value or change in fair value, as applicable, of the equity award adjustments included in such calculations was computed in accordance with ASC718. The valuation assumptions used to calculate such fair values, such as assumed volatility and risk-free rate differ from those used at the time of grant due to the fluctuation in the stock price and the corresponding Monte Carlo Value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. |
Pay Versus Performance
| (3) The amounts in this column represent the average amounts reported for our NEOs as a group (excluding Mr. Hewitt) in the “Total” column of the Summary Compensation Table in each applicable year. The names of our NEOs (excluding Mr. Hewitt) included for the purposes of calculating the average amounts in each applicable year are as follows: (i) for 2024, Messrs. Cavanah, Payne, Rodgers and Updyke; (ii) for 2023, Messrs. Cavanah, Payne, Rinehart, Rodgers and Updyke; (iii) for 2022, Messrs. Cavanah, Rinehart, Rodgers and Updyke. |
Pay Versus Performance
| (4) Our Company TSR reflected in this column for each applicable fiscal year is calculated based on a fixed investment of $100 at the applicable measurement point on the same cumulative basis as is used in Item 201(e) of Regulation S-K. |
Pay Versus Performance
| (5) The amounts represent net income (loss) reflected in our audited GAAP financial statements for each applicable fiscal year. |
Pay Versus Performance
| (6) For fiscal year 2024, the “compensation actually paid” to our CEO and the “average compensation actually paid” to our non-CEO NEOs reflect each of the following adjustments made to the total compensation amounts reported in the Summary Compensation Table for fiscal year 2024, computed in accordance with Item 402(v) of Regulation S-K. |
Pay Versus Performance
| | CEO ($) | Average Non- CEO NEOs ($) | | Total Compensation Reported in 2024 SCT | 4,097,287 | 1,333,387 | | Less: Grant Date Fair Value of Stock Awards Reported in the 2024 SCT | (3,264,777) | (860,535) | | Plus: Year-End Fair Value of Awards Granted in 2024 that are Outstanding and Unvested | 3,755,118 | 996,258 | | Plus: Change in Fair Value of Awards Granted in Prior Years that are Outstanding and Unvested | 884,477 | 202,454 | | Plus: Vesting Date Fair Value of Awards Granted in 2024 that Vested in 2024 | — | — | | Plus: Change in Fair Value of Awards Granted in Prior Years that Vested in 2024 | 159,437 | 53,200 | | Less: Prior Year-End Fair Value of Awards Forfeited in 2024 | — | — | | Total Adjustments | 1,534,255 | 391,377 | | Compensation Actually Paid for Fiscal Year 2024 | 5,631,542 | 1,724,764 |
Pay Versus Performance
| (7) For fiscal year 2023, the “compensation actually paid” to our CEO and the “average compensation actually paid” to our non-CEO NEOs reflect each of the following adjustments made to the total compensation amounts reported in the Summary Compensation Table for fiscal year 2023, computed in accordance with Item 402(v) of Regulation S-K. |
Pay Versus Performance
| | CEO ($) | Average Non- CEO NEOs ($) | | Total Compensation Reported in 2023 SCT | 2,401,993 | 842,893 | | Less: Grant Date Fair Value of Stock Awards Reported in the 2023 SCT | (1,565,141) | (327,025) | | Plus: Year-End Fair Value of Awards Granted in 2023 that are Outstanding and Unvested | 1,251,585 | 271,532 | | Less: Change in Fair Value of Awards Granted in Prior Years that are Outstanding and Unvested | (375,984) | (95,820) | | Plus: Vesting Date Fair Value of Awards Granted in 2023 that Vested in 2023 | — | — | | Plus: Change in Fair Value of Awards Granted in Prior Years that Vested in 2023 | 41,141 | 12,179 | | Less: Prior Year-End Fair Value of Awards Forfeited in 2023 | — | (7,378) | | Total Adjustments | (648,399) | (146,512) | | Compensation Actually Paid for Fiscal Year 2023 | 1,753,594 | 696,381 |
Pay Versus Performance
| (8) For fiscal year 2022, the “compensation actually paid” to our CEO and the “average compensation actually paid” to our non-CEO NEOs reflect each of the following adjustments made to the total compensation amounts reported in the Summary Compensation Table for fiscal year 2022, computed in accordance with Item 402(v) of Regulation S-K. |
Pay Versus Performance
| | CEO ($) | Average Non- CEO NEOs ($) | | Total Compensation Reported in 2022 SCT | 3,459,103 | 1,147,962 | | Less: Grant Date Fair Value of Stock Awards Reported in the 2022 SCT | (2,629,879) | (686,816) | | Plus: Year-End Fair Value of Awards Granted in 2022 that are Outstanding and Unvested | 693,354 | 198,264 | | Less: Change in Fair Value of Awards Granted in Prior Years that are Outstanding and Unvested | (1,782,722) | (483,725) | | Plus: Vesting Date Fair Value of Awards Granted in 2022 that Vested in 2022 | — | — | | Plus: Change in Fair Value of Awards Granted in Prior Years that Vested in 2022 | 29,127 | 7,292 | | Less: Prior Year-End Fair Value of Awards Forfeited in 2022 | — | — | | Total Adjustments | (3,690,120) | (964,985) | | Compensation Actually Paid for Fiscal Year 2022 | (231,017) | 182,977 |
Pay Versus Performance
Relationship Disclosure to Pay Versus Performance Table As described in more detail above under “Key Elements of Executive Compensation,” our executive compensation program reflects a performance-driven compensation philosophy and we generally seek to incentivize long-term performance, and therefore do not specifically align our performance measures with “compensation actually paid” (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table. Compensation Actually Paid and Performance Measures The following charts show, for the past three years, the relationship between the compensation actually paid to our CEO and the average compensation actually paid to our non-CEO NEOs to (i) our cumulative TSR; and (ii) our net income.
Pay Versus Performance
| (1) Cumulative TSR is calculated based on the value of an initial fixed investment of $100 on June 30, 2021. |
Pay Versus Performance
All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference in any filing by the Company under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.