DEF 14A of Trex Co Inc
Filed Mar 25, 2024 · FY20230001193125-24-076082
May 7, 2024
| | Page | | Pay Versus Performance Disclosure | 39 | | Pay Ratio Disclosure | 45 | | Retention Agreements | 45 | | Perquisites | 47 | | Additional Information on our Program | 47 | | Report of the Compensation Committee of the Board of Directors of Trex Company, Inc. | 50 | | Summary Compensation Table | 51 | | All Other Compensation Table | 53 | | Grants of Plan-Based Awards | 54 | | Outstanding Equity Awards at Fiscal-Year End | 55 | | 2023 Option / SAR Exercises and Stock Vested | 57 | | Equity Compensation Plan Information | 58 | | Severance and Change in Control Agreements | 59 | | Severance and Change in Control Compensation as of December 31, 2023 | 62 | | The Company’s Compensation Policies and Practices as They Relate to Risk | 64 | | Report of the Audit Committee of the Board of Directors of Trex Company, Inc. | 65 | | Advisory Vote on Executive Compensation | 67 | | Approval of Proposal 2 | 67 | | Ratification of Appointment of Independent Registered Public Accounting Firm for the 2024 Fiscal Year | 68 | | Approval of Proposal 3 | 68 | | Independent Registered Public Accounting Firm | 69 | | Fees | 69 | | Pre-Approval Policy | 69 | | Transactions with Related Persons | 70 | | Stockholder Proposals for the 2025 Annual Meeting | 71 | | Delivery of Documents to Stockholders Sharing an Address | 72 | | Other Matters | 73 |
Board of Directors
Board of Directors The following table provides summary information about each director.
Board of Directors
| Director Occupation | Age | Director since | Board Independent | Other public boards | Committee memberships | | | Up for re-election at current Annual Meeting | | | | | | | AC | CC | NCGC | | | James E. Cline* Retired; Former President and CEO, Trex Company, Inc. | 72 | 2015 | Yes | 1 | | | | Yes | | Gena C. Lovett, Ph.D Former Vice President, Manufacturing, Safety and Quality, Defense, Space and Security of Boeing Company | 61 | 2021 | Yes | 2 | | | | Yes | | Melkeya McDuffie CHRO, Bright Horizons | 50 | 2023 | Yes | 0 | | | | Yes | | Patricia B. Robinson** Retired; Former President of Mead School and Office Products | 71 | 2000 | Yes | 0 | | | | Yes | | Jay M. Gratz Retired; Former Executive Vice President and Chief Financial Officer, Ryerson Inc. | 71 | 2007 | Yes | 0 | | | | No | | Ronald W. Kaplan*** Retired; Former President and CEO, Trex Company, Inc. | 72 | 2008 | Yes | 1 | | | | No | | Gerald Volas Retired; Former CEO, TopBuild Corp. | 69 | 2014 | Yes | 0 | | | | No | | Bryan H. Fairbanks President and CEO, Trex Company, Inc. | 54 | 2020 | No | 0 | | | | No | | Kristine L. Juster CEO, Conair LLC | 60 | 2019 | Yes | 0 | | | | No |
Board of Directors
| * Chairman of the Board |
Board of Directors
| ** Lead Independent Director |
Board of Directors
| *** Vice Chairman of the Board |
Board of Directors
| AC | Audit Committee | | Chair | | CC | Compensation Committee | | Member | | NCGC | Nominating/Corporate Governance Committee | | Financial expert |
Board of Directors
| 2 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Board of Directors
| BOARD OF DIRECTORS |
Election of Directors
Election of Directors
(Proposal 1)
(Proposal 1)
Nominees for Election as Directors
Nominees for Election as Directors The Company’s Restated Certificate of Incorporation, as amended, provides that the Board is to be divided into three classes of directors, with the classes to be as nearly equal in number as possible. The current terms of office of the three current classes of directors expire at this annual meeting, at the annual meeting of stockholders in 2025 and at the annual meeting of stockholders in 2026, respectively. Upon the expiration of the term of office of each class, the nominees for such class will be elected for a term of three years to succeed the directors whose terms of office expire. In accordance with the recommendation of the Nominating/Corporate Governance Committee, Mr. Cline, Ms. Lovett, Ms. McDuffie and Ms. Robinson have been nominated by the Board for election to the class with a three-year term that will expire at the annual meeting of stockholders in 2027. These nominees are incumbent directors.
Approval of Nominees
Approval of Nominees Approval of the nominees requires the affirmative vote of a majority of the votes cast in favor of such nominee at the annual meeting. The term “Majority” for purposes of election of directors means that a nominee receives more votes in favor of such nominee than are cast against such nominee by the holders of shares present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions and broker non-votes will have no effect on the election of directors. Brokers may vote their shares in favor of directors if they have voting instructions from the beneficial owners of the shares. Unless authority to do so is withheld, it is the intention of the persons named in the proxy to vote such proxy FOR the election of each of the nominees. If any of the nominees should become unable or unwilling to serve as a director, the persons named in the proxy intend to vote for the election of such substitute nominee for director as the Board may recommend. It is not anticipated that any of the nominees will be unable or unwilling to serve as a director. The Board unanimously recommends that the stockholders of the Company vote FOR the election of the nominees to serve as directors.
Information About Nominees and Continuing Directors
Information About Nominees and Continuing Directors Biographical information concerning each of the nominees and each of the directors continuing in office is presented below.
Nominees for Election for Three-Year Terms
Nominees for Election for Three-Year Terms
Nominees for Election for Three-Year Terms
| Director | Age | Director Since | | James E. Cline | 72 | 2015 | | Gena C. Lovett | 61 | 2021 | | Melkeya McDuffie | 50 | 2023 | | Patricia B. Robinson | 71 | 2000 |
Nominees for Election for Three-Year Terms
James E. Cline retired as President and Chief Executive Officer of the Company on April 29, 2020 and remains the Chairman. He served as President and Chief Executive Officer of the Company between August 2015 and his retirement in April 2020, as Senior Vice President and Chief Financial Officer between August 2013 and August 2015, and as Vice President and Chief Financial Officer between March 2008 and July 2013. Between July 2005
Nominees for Election for Three-Year Terms
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 9 |
Nominees for Election for Three-Year Terms
and December 2007, he served as the President of Harsco GasServ, a division of Harsco Corporation and a manufacturer of containment and control equipment for the global gas industry. Between January 2008 and February 2008, in connection with the purchase of Harsco GasServ by Taylor-Wharton International LLC, which was owned by Windpoint Partners Company, he served as a consultant to the buyers by providing transition management and financial services. Between April 1994 and June 2005, he served as the Vice President and Controller of Harsco GasServ. He served in various capacities with Huffy Corporation between June 1976 and February 1994, including as the Director of Finance of its True Temper Hardware subsidiary, a manufacturer of lawn care and construction products. He has served as a director of Latham Group, Inc., a manufacturer of swimming pools, since March 2019. He received a B.S.B.A. degree in accounting from Bowling Green State University. Mr. Cline was initially appointed to the Board in August 2015 upon his promotion to President and Chief Executive Officer, and renominated in 2016 and 2018, because the Board believed that the Chief Executive Officer of the Company should serve on the Board, and in 2021, and this year because of his in-depth knowledge and experience as the prior Chief Executive Officer of the Company, his extensive knowledge of the industry in which the Company competes and prior experience as a chief executive officer of a manufacturing company, and because the Board felt it was important to have another member of the Board with significant expertise in this industry. Gena C. Lovett, Ph.D., served as the Vice President, Manufacturing, Safety and Quality, Defense, Space and Security of The Boeing Company, a manufacturer of airplanes, between July 2015 and June 2019. She served as Global Chief Diversity Officer between January 2012 and June 2015, and as Director, Manufacturing, Forging between July 2007 and January 2012 of Alcoa Corporation, a manufacturer of aluminum. She served in numerous roles with Ford Motor Company, a manufacturer of cars and trucks, between April 1992 and June 2007, most recently as Plant Manager, New Model Programs. She has served as a director of AdvanSix, Inc., a leading integrated producer of nylon solutions, chemical intermediates, and plant nutrients, since September 2021, and as a director of QuantumScape Corporation, a developer of next generation battery technology for electric vehicles, since January 2022. She received a B.A. degree in Criminal Justice from The Ohio State University, a M.B.A. degree from Baker Center for Graduate Studies, and a M.S. degree in Organizational Leadership and a Ph.D. in Values-Driven Leadership from Benedictine University. Dr. Lovett was appointed to the Board in March 2021, and renominated in 2021, and this year because the Board believed it was important to find and include an additional member with experience in manufacturing and operations. As a company where manufacturing and operations are critical functions, the Board believes this is important experience to have on the Board. Melkeya McDuffie has served as Chief Human Resources Officer of Bright Horizons (NYSE:BFAM) since June 26, 2023. Prior to this role, from February 2022 to June 2023, Ms. McDuffie was Executive Vice President, Chief Human Resources Officer for Clean Harbors (NYSE:CLH), a leading provider of environmental & industrial services, and from 2020 to June 2022 she was Chief Human Resources Officer at The Wallace Foundation, a large private philanthropic organization. From 2005 to 2020, she held a series of talent management positions at Waste Management, a national leader in Environmental Services, moving up from Regional HR Business Partner to Vice President, Global Organization and Talent Development. Earlier in her career, she held similar positions at Wells Fargo Mortgage, HSBC Finance Corporation, and Quest Diagnostics. Ms. McDuffie received her B.A. in Business and M.B.A. from York St. John University. She also received a certification in Labor Relations from Cornell University and a certification in Global Business from Harvard Business School. She currently is pursuing her Ph.D. in Business Administration at North Central University. Ms. McDuffie was initially appointed to the Board in April 2023, and renominated this year, because of her experience in corporate strategy and focus on inclusive culture and talent development and her professional experience as an executive leading business-focused people strategies at companies in a variety of industries, including environmental services. As a company that continues to elevate its commitment to employee and organizational development, a performance-based and inclusive culture focused on accountability and collaboration, the Board believes this is important experience to have on the Board. Ms. McDuffie’s background and experience strengthen the Board’s collective qualifications, skills and experience.
Nominees for Election for Three-Year Terms
| 10 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Nominees for Election for Three-Year Terms
Patricia B. Robinson is retired. Ms. Robinson was an independent consultant between 1998 and 2020. Ms. Robinson served in a variety of positions with Mead Corporation, a forest products company, between 1977 and 1998, including President of Mead School and Office Products, Vice President of Corporate Strategy and Planning, President of Gilbert Paper, Plant Manager of a specialty machinery facility and Product Manager for new packaging product introductions. Ms. Robinson received a B.A. degree in economics from Duke University and a M.B.A. degree from the Darden School at the University of Virginia. Ms. Robinson was initially appointed to the Board in November 2000, and renominated in 2003, 2006, 2009, 2012, 2015, 2018, 2021, and this year due to her professional experience as a President of a consumer products company and her experience with strategic planning and new product introductions. As a consumer products company that continues to innovate with new products, the Board believes this is important experience to have on the Board.
Directors Whose Terms Expire in 2025
Directors Whose Terms Expire in 2025
Directors Whose Terms Expire in 2025
| Director | Age | Director Since | | Bryan H. Fairbanks | 54 | 2020 | | Kristine L. Juster | 60 | 2019 |
Directors Whose Terms Expire in 2025
Bryan H. Fairbanks has served as President and Chief Executive Officer of the Company since April 2020. He previously served as Executive Vice President and Chief Financial Officer of the Company between July 2018 and April 2020, and as Vice President and Chief Financial Officer of the Company between August 2015 and July 2018. Between March 2006 and August 2015, he served as Senior Director, Supply Chain, and between September 2012 and August 2015, he concurrently served as Executive Director, International Business Development, with the Company. He served as Director, Financial Planning and Analysis of the Company between May 2004 and March 2006. He served in numerous senior finance roles with the Ford Motor Company, a manufacturer of cars and trucks, between August 1994 and May 2004. He received a B.S. degree in accounting from the University of Dayton and a M.B.A. degree from the University of Pittsburgh. Mr. Fairbanks was appointed to the Board in April 2020 upon his promotion to President and Chief Executive Officer, renominated in 2021, and 2022, because the Board believes it is in the best interest of the Company that the Chief Executive Officer be a member of the Board, he has significant experience in finance, and because the Board determined it was important to have another member of the Board with expertise in this industry. Kristine L. Juster is Chief Executive Officer of Conair LLC, a manufacturer of internationally recognized world-class products in personal care, health and beauty, grooming tools, cookware and kitchen electronics sold through a family of brands including Cuisinart, Conair, Babyliss, Snunci and Waring, since January 2024. Prior to joining Conair LLC, Ms. Juster was Chief Executive Officer, from November 2018 until June 2023, and a director, from April 2016 until 2023, of Kimball International, a leading manufacturer of furnishings sold through a family of brands including Kimball, National, Kimball Hospitality, David Edward and D’style by Kimball Hospitality. Prior to joining Kimball International, Ms. Juster was employed by Newell Brands, Inc., in various positions of increasing responsibility, since 1995. She received a Bachelor of Applied Science degree, Hotel and Restaurant Management from Cornell University. Ms. Juster was initially appointed to the Board in October 2019, and renominated in 2020, and 2022 because of her professional experience as an executive of consumer products companies with strong brands. As a company with a strong consumer brand, the Board believes this is important experience to have on the Board.
Directors Whose Terms Expire in 2025
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 11 |
Directors Whose Terms Expire in 2026
Directors Whose Terms Expire in 2026
Directors Whose Terms Expire in 2026
| Director | Age | Director Since | | Jay M. Gratz | 71 | 2007 | | Ronald W. Kaplan | 72 | 2008 | | Gerald Volas | 69 | 2014 |
Directors Whose Terms Expire in 2026
Jay M. Gratz is retired. Mr. Gratz served as a consultant and director of 10X Technologies, a high technology startup, between April 2017 and December 2018. He served as the Chief Financial Officer of VisTracks, Inc., an application enabling platform service provider, between March 2010 and January 2018, and a director of such company between April 2010 and January 2018. He was a partner in Tatum LLC, a national executive services and consulting firm that focuses on the needs of the Office of the CFO between February 2010 and March 2010. He was an independent consultant between October 2007 and February 2010. He served as Executive Vice President and Chief Financial Officer of Ryerson Inc., a metals processor and distributor, between 1999 and October 2007, and as President of Ryerson Coil Processing Division between November 2001 and October 2007. He served as Vice President and Chief Financial Officer of Inland Steel Industries, a steel company, between 1994 and 1998, and served in various other positions, including Vice President of Finance, within that company since 1975. Mr. Gratz is a Certified Public Accountant. He received a B.A. degree in economics from State University of New York in Buffalo and a M.B.A. degree from Northwestern University Kellogg Graduate School of Management. Mr. Gratz was initially appointed to the Board in 2007, and renominated in 2008, 2011, 2014, 2017, 2020 and 2023, because the Board felt it was important to have a member with extensive financial experience. He is a Certified Public Accountant, served as a chief financial officer of another respected public company, and has experience dealing with a wide range of financial matters that the Board feels is beneficial to the Company. Ronald W. Kaplan retired as President and Chief Executive Officer of the Company on August 17, 2015 and remains the Vice Chairman. He served as Chairman between August 2015 and April 2020. He served as Chairman, President and Chief Executive Officer of the Company between May 2010 and August 2015, and as President and Chief Executive Officer of the Company between January 2008 and May 2010. He served as Chief Executive Officer of Continental Global Group, Inc., a manufacturer of bulk material handling systems, between February 2006 and December 2007. For 26 years prior to this, he was employed by Harsco Corporation, an international industrial services and products company, at which he served in a number of capacities, including as Senior Vice President-Operations, and, between 1994 and 2005, as President of Harsco’s Gas Technologies Group, which manufactures containment and control equipment for the global gas industry. He also serves on the Board of Directors of Caesarstone Sdot-Yam, Ltd., a company engaged in the manufacture and sale of engineered stone surfaces used for kitchen countertops, vanity tops and tiles. He received a B.A. degree in economics from Alfred University and a M.B.A. degree from the Wharton School of Business, University of Pennsylvania. Mr. Kaplan was hired by the Company in January 2008 as its President and Chief Executive Officer. The Board believed that the Company at that time would greatly benefit from someone with prior professional experience as a chief executive officer of manufacturing companies, including experience leading companies through financial and operational “turnarounds”, which the Board felt was important experience for the Company at that time. He was initially appointed to the Board in 2008 because the Board believed that the Chief Executive Officer of the Company should serve on the Board, and renominated in 2011, 2014, 2017, 2020, and 2023, because of his experience as Chief Executive Officer of the Company and prior experience as a chief executive officer of manufacturing companies. He has retired as the Company’s Chief Executive Officer but remains as Vice Chairman of the Board because the Board believes they can benefit from his experience with both the Company and in the industry in which the Company competes, and his experience in the Company’s finances, sales and marketing, and operations, including manufacturing and logistics. Gerald Volas is retired. He served as Chief Executive Officer and a director of TopBuild Corp., a leading installer and distributor of insulation products, between June 2015 and December 2020. He was employed by Masco Corporation, one of the world’s leading manufacturers of brand-name products for the home improvement and
Directors Whose Terms Expire in 2026
| 12 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Directors Whose Terms Expire in 2026
new home construction industries, in various positions of increasing responsibility, between 1982 and June 2015. He served as a Group Executive responsible for almost all of Masco’s operating companies between February 2005 and June 2015. He served as President of Liberty Hardware, a Masco operating company, between April 2001 and February 2005, as a Group Controller supporting a variety of Masco operating companies between January 1996 and April 2001, and in progressive financial roles including Vice President/Controller at BrassCraft Manufacturing Company, a Masco operating company, between May 1982 to January 1996. He is a Certified Public Accountant. He received a Bachelor of Business Administration degree from the University of Michigan. Mr. Volas was initially appointed to the Board in March 2014, and renominated in 2017, 2020, and 2023, because of his professional experience as an executive of a consumer products company, with additional specific experience in the home improvement and new home construction industry. In addition, the Board felt it was important to find a member with extensive financial experience. He is a Certified Public Accountant and has experience dealing with a wide range of financial matters that the Board feels is beneficial to the Company.
Directors Whose Terms Expire in 2026
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 13 |
Corporate Governance
Corporate Governance
Board of Directors
Board of Directors The Board currently consists of nine directors. Michael F. Golden, who served as a Board member since February 2013, passed away on June 4, 2023, and there is currently a vacancy on the Board. The Board has three standing committees: the Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee. During the Company’s 2023 fiscal year, the Board held five meetings, the Audit Committee held four meetings, the Compensation Committee held five meetings, and the Nominating/Corporate Governance Committee held five meetings. During 2023, each director attended at least 75% of the aggregate of the total number of meetings of the Board and of each committee of the Board on which such director served. It is the Company’s policy that all directors should attend annual meetings of the Company’s stockholders. All of the directors attended the annual meeting in May 2023. The Board does not have a strict retirement age for directors. However, the Board does believe that once a director attains a certain age, the Board should carefully consider whether such director’s continued service on the Board is in the best interests of the Company. The Company’s Corporate Governance Principles provide that at the adjournment of each annual meeting of stockholders, any director who is then age 75 or older shall tender his or her resignation to the Board, at which time the Board may elect to either accept such resignation or request that such director continue to serve on the Board.
Non-Employee Director Compensation
Non-Employee Director Compensation Non-employee directors of the Company receive cash and stock-based compensation under the Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors (“Outside Director Plan”). The Outside Director Plan is administered by the Nominating/Corporate Governance Committee of the Board. The Outside Director Plan provides that all equity grants issued under such Plan are issued pursuant to the 2023 Stock Incentive Plan, which was approved by stockholders at the Company’s 2023 annual meeting. The Nominating/Corporate Governance Committee is responsible for making recommendations to the Board regarding non-employee director compensation. In accordance with this authority, the Nominating/Corporate Governance Committee utilizes the Compensation Committee’s independent compensation consultant, Korn/Ferry International (“KF”), to advise the Nominating/Corporate Governance Committee on matters related to director compensation. The Company’s director compensation program was reviewed by KF in February 2021 and February 2022, and by the Nominating/Corporate Governance Committee in July 2022 relative to the Company’s peer group. The Company’s peer group is reviewed by KF prior to each compensation review, and in July 2022, KF provided the Nominating/Corporate Governance Committee (with respect to director compensation) and the Compensation Committee (with respect to officer compensation) a set of considerations for change, including proposed additions and deletions to the peer group. (See discussion in Compensation Discussion and Analysis under the “How Do We Determine Executive Pay?” for further discussion on the changes to the Company’s peer group.) The peer group approved by the Nominating/Corporate Governance Committee, and utilized for the director compensation review, was as follows:
Non-Employee Director Compensation
| AAON, Inc. | Lennox International Inc. | | A. O. Smith Corporation | Martin Marietta Materials, Inc. | | Allegion PLC | RH | | Armstrong World Industries, Inc. | Simpson Manufacturing, Inc. | | Cavco Industries, Inc. | The Azek Company Inc. | | Eagle Materials, Inc. | Vulcan Materials Company | | Floor & Decor Holdings, Inc. | Yeti Holdings, Inc. | | Helen of Troy LTD | |
Non-Employee Director Compensation
The review conducted by the Nominating/Corporate Governance Committee in July 2022 indicated that the non-employee directors’ total annual compensation (consisting of cash and equity-based compensation) was approximately 97% of the median of the peer group (assuming a hypothetical director serves as a member of the Audit Committee and the Compensation Committee). The Nominating/Corporate Governance Committee, desiring that non-employee directors’ total annual compensation be aligned with the peer group, recommended no changes in compensation to the Board. For the hypothetical director referred to above, the total annual compensation was maintained at $222,500, which equated to approximately 97% of the median of the peer group. The elements of the non-employee director compensation package under the Outside Director Plan are as follows: ∎ Upon initial appointment to the Board, non-employee directors receive awards of options, stock appreciation rights (“SARs”), restricted shares, restricted stock units or any combination thereof (as determined by the Nominating/Corporate Governance Committee) valued at $55,000. ∎ For service on the Board, each non-employee director receives an annual fee of $82,500, and an annual award of options, SARs, restricted shares, restricted stock units or any combination thereof (as determined by the Nominating/Corporate Governance Committee) valued at $120,000. ∎ Any non-employee director who serves as Chairman of the Board will receive an additional $85,000 annually, as Vice Chairman of the Board will receive an additional $55,000 annually, and as Lead Independent Director will receive an additional $25,000 annually.
Non-Employee Director Compensation
| 22 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Non-Employee Director Compensation
| NON-EMPLOYEE DIRECTOR COMPENSATION |
Non-Employee Director Compensation
∎ The chairman of each committee receives an annual committee fee of $20,000, unless such committee chairman also serves as Lead Independent Director, in which case such committee chairman shall receive only the Lead Independent Director fee. ∎ Each member of a committee other than the chairman receives an annual committee fee of $10,000. ∎ The annual director fee and the annual committee fees are paid in four equal quarterly installments in arrears on the first business day following each quarter of the fiscal year in which the eligible director completes board or committee service. Such fees are paid in the form of cash, provided that a director may elect to receive all or any portion of such fees in the form of a grant of options, SARs, restricted shares, restricted stock units or any combination thereof (as determined by the Nominating/Corporate Governance Committee). The fiscal year of the Outside Director Plan is July 1 through June 30. ∎ The annual grants of equity are made in arrears on the date of the first regularly scheduled Board meeting after June 30 of each year. ∎ All grants of restricted shares or restricted stock units vest one year after grant provided that the grants will immediately vest in the event of death, disability, retirement, or termination in connection with a change in control. All grants of SARs or stock options vest immediately upon grant and have a term of ten years (provided that the term is extended for one year if the director dies during the tenth year of the SAR or stock option term). Upon the termination of a non-employee director’s service for any reason (other than for cause), the director will have the right, at any time within five years after the date of termination of service and before the termination of the SAR or stock option, to exercise any SAR or stock option held by the director on the service termination date. ∎ All fees described above paid in arrears are pro-rated for any partial periods served. The Nominating/Corporate Governance Committee has elected to use restricted stock units as the form of equity described above. The Outside Director Plan is designed to deliver compensation approximately 46% in cash and 54% in equity (assuming a director does not elect to receive additional equity in lieu of cash, as described above), with the objective of appropriately balancing the pay of non-employee directors for their service while linking their compensation closely to returns to stockholders through the potential for enhanced value from future stock price appreciation. Directors are also reimbursed for actual travel expenses. The Company does not provide pensions, medical benefits or other benefit programs to non-employee directors. In 2013, the Board adopted Stock Ownership Guidelines applicable to non-employee directors, pursuant to which each non-employee director is required to own and hold, as a minimum, that number of shares of the Company’s common stock having a market value of at least 3 times the director’s annual cash retainer. For purposes of the guidelines, common stock includes shares of common stock no matter how acquired (i.e., vesting of restricted shares or restricted stock units, or purchased on the open market), and unvested restricted shares and restricted stock units. Directors have 5 years from becoming a director, whichever occurs later, to comply with the ownership requirements. Other than Ms. McDuffie who joined the Board on in April, 2023 each director meets the current minimum requirements. In 2013, the Board also adopted, on a voluntary basis and in advance of final Dodd-Frank Act hedging rules, an Anti-Hedging and Anti-Pledging Policy that applies to non-employee directors. This policy prohibits our directors from purchasing any financial instrument or entering into any transaction that is designed to hedge or offset any decrease in the market value of Company equity (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds), or pledging, hypothecating, or otherwise encumbering Company equity as collateral for indebtedness. (See discussion in Compensation Discussion and Analysis under the “Stock Ownership Guidelines” and “Anti-Hedging and Anti-Pledging Policy” sections under “Additional Information on Our Program” for discussion of the Stock Ownership Guidelines and Anti-Hedging and Anti-Pledging Policy as applicable to our named executive officers.)
Non-Employee Director Compensation
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 23 |
2023 Non-Employee Director Compensation
2023 Non-Employee Director Compensation The table below shows compensation paid to the non-employee directors for their service in 2023.
2023 Non-Employee Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | SAR Awards ($) | Non-Equity Incentive Plan Compensation ($) | Changes in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | James C. Cline (2) | 167,500 | 120,000 | — | — | — | — | 287,500 | | Michael F. Golden (3) | 54,634 | 111,456 | — | — | — | — | 166,090 | | Jay M. Gratz (4) | 112,500 | 120,000 | — | — | — | — | 232,500 | | Kristine L. Juster (5) | 102,500 | 120,000 | — | — | — | — | 222,500 | | Ronald W. Kaplan (6) | 137,500 | 120,000 | — | — | — | — | 257,500 | | Gena C. Lovett (7) | 102,500 | 120,000 | — | — | — | — | 222,500 | | Melkeya McDuffie (8) | 63,504 | 84,396 | — | — | — | — | 147,900 | | Patricia B. Robinson (9) | 114,663 | 120,000 | — | — | — | — | 234,663 | | Gerald Volas (10) | 112,500 | 120,000 | — | — | — | — | 232,500 |
2023 Non-Employee Director Compensation
| (1) Amounts represent the grant date fair value of restricted stock units granted in 2023 determined in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 14, Stock-based Compensation, to the Company’s audited Consolidated Financial Statements in the 2023 Form 10-K, as filed with the SEC. |
2023 Non-Employee Director Compensation
| (2) Mr. Cline has served as a non-executive Chairman since his retirement on April 28, 2020. Mr. Cline did not elect to receive any of his cash compensation in the form of equity. On December 31, 2023, Mr. Cline held 1,730 outstanding unvested restricted stock units and 27,846 stock appreciation rights. |
2023 Non-Employee Director Compensation
| (3) Mr. Golden served as Lead Independent Director and as a member of the Compensation Committee and the Nominating/Corporate Governance Committee until his death on June 4, 2023. Mr. Golden did not elect to receive any of his cash compensation in the form of equity. |
2023 Non-Employee Director Compensation
| (4) Mr. Gratz served as chairman of the Compensation Committee and as a member of the Audit Committee during 2023. Mr. Gratz did not elect to receive any of his cash compensation in the form of equity. On December 31, 2023, Mr. Gratz held 1,730 outstanding unvested restricted stock units. |
2023 Non-Employee Director Compensation
| (5) Ms. Juster served as a member of the Compensation Committee and the Nominating/Corporate Governance Committee during 2023. Ms. Juster did not elect to receive any of her cash compensation in the form of equity. On December 31, 2023, Ms. Juster held 1,730 outstanding unvested restricted stock units. |
2023 Non-Employee Director Compensation
| (6) Mr. Kaplan served as a non-executive Vice Chairman during 2023. Mr. Kaplan did not elect to receive any of his cash compensation in the form of equity. On December 31, 2023, Mr. Kaplan held 1,730 outstanding unvested restricted stock units. |
2023 Non-Employee Director Compensation
| (7) Ms. Lovett served as a member of the Audit Committee and the Nominating/Corporate Governance Committee during 2023. Ms. Lovett did not elect to receive any of her cash compensation in the form of equity. On December 31, 2023, Ms. Lovett held 1,730 outstanding unvested restricted stock units. |
2023 Non-Employee Director Compensation
| (8) Ms. McDuffie served as a member of the Audit Committee and the Compensation Committee since her appointment to the Board on April 24, 2023. Ms. McDuffie elected to receive $7,040 of her cash compensation in the form of restricted stock units. Ms. McDuffie also received a grant of restricted stock units in the amount of $55,000 upon her appointment to the Board in April 2023. On December 31, 2023, Ms. McDuffie held 1,389 outstanding unvested restricted stock units. |
2023 Non-Employee Director Compensation
| (9) Ms. Robinson served as chairwoman of the Nominating/Corporate Governance Committee during 2023, as a member of the Audit Committee until July 24, 2023, and as a member of the Compensation Committee and as Lead Independent Director since July 25, 2023. Ms. Robinson did not elect to receive any of her cash compensation in the form of equity. On December 31, 2023, Ms. Robinson held 1,730 outstanding unvested restricted stock units. |
2023 Non-Employee Director Compensation
| (10) Mr. Volas served as chairman of the Audit Committee during 2023, as a member of the Compensation Committee until July 24, 2023 and as a member of the Nominating/Corporate Governance Committee since July 25, 2023. Mr. Volas did not elect to receive any of his cash compensation in the form of equity. On December 31, 2023, Mr. Volas held 1,730 outstanding unvested restricted stock units. |
2023 Non-Employee Director Compensation
| 24 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
What person or group is responsible for determining the compensation levels of named executive officers?
by the Board. Additionally, the Compensation Committee administers the Company’s employee benefit programs, including its 2023 Stock Incentive Plan, 2014 Stock Incentive Plan, 1999 Employee Stock Purchase Plan, annual cash incentive plan, and other incentive compensation plans, benefit plans and equity-based plans. The Role of Consultants. The Compensation Committee has the authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from internal and external legal, accounting and other advisers. The Compensation Committee has the authority to compensate its outside advisers without obtaining approval of the Board. In accordance with this authority, the Compensation Committee retained Korn/Ferry International (“KF”) in 2023 as the committee’s independent compensation consultant to advise the Compensation Committee on matters related to CEO and other officer compensation. The Compensation Committee assessed KF’s work as required under rules of the SEC and concluded that it did not raise any conflicts of interest and that KF was independent within the NYSE’s listing standards. The consultant’s assignments are determined by the chairman of the Compensation Committee. At the request of the chairman, the current consultant assists in developing the peer group of companies and compensation surveys to be used for the competitive analyses, prepares the market analysis of named executive officer compensation, prepares a financial analysis of the Company’s performance vis-à-vis the peer group and analyzes the relationship between CEO pay and company performance, constructs market competitive ranges of pay opportunity for base salaries, annual cash incentive compensation targets, and long-term equity incentive awards for named executive officers, and reviews the annual cash incentive compensation and long-term equity incentive plans for linkage to key business objectives and company performance. The consultant advises the Compensation Committee as to the compensation of executive officers of the Company, but does not recommend any specific pay level changes for executive officers. Total fees paid to KF for services performed during 2023 relating to executive compensation were $89,000. The Role of Executives. The Company’s CEO, Senior Vice President, Chief Legal Officer and Secretary (“CLO”), and Senior Vice President, Chief Human Resources Officer (“CHRO”) are actively involved in the executive compensation process. Historically, the CEO reviews the performance of each of the named executive officers (other than his own performance) and, within the defined program parameters, recommends to the Compensation Committee base salary increases and annual cash incentive compensation and long-term equity incentive awards for such individuals. He provides the Compensation Committee with both annual and long-term recommended financial performance goals for the Company that are used to link pay with performance. The CEO also provides his views to the Compensation Committee with respect to the executive compensation program’s ability to attract, retain and motivate the level of executive talent necessary to achieve the Company’s business goals. The CLO and CHRO work with the CEO to develop the recommended base salary increases, annual cash incentive compensation levels and long-term equity incentive awards and provide analysis on the ability of the executive compensation program to attract, retain, and motivate the Company’s executive team and potential executive hires. The CEO, CLO, and CHRO attend the meetings of the Compensation Committee, but do not participate in the Compensation Committee’s executive sessions.
What are the Company’s executive compensation principles and objectives?
| ∎ | Pay-for-performance: The Compensation Committee structures executive compensation programs to balance annual and long-term corporate objectives, including specific measures which focus on financial performance, with the goal of fostering stockholder value creation in the short- and long-term. |
What are the Company’s executive compensation principles and objectives?
| ∎ | Create an ownership culture: The Compensation Committee believes that using equity compensation to instill an ownership culture effectively aligns the interests of management and the stockholders. To promote this alignment, the Compensation Committee granted equity-based compensation in 2023, which was comprised of time-based restricted stock units, performance-based restricted stock units and stock appreciation rights, to provide incentives for named executive officers to enhance stockholder value. |
What are the Company’s executive compensation principles and objectives?
| ∎ | Utilize a total compensation perspective: The Compensation Committee considers all of the compensation components — base salary, annual cash incentive compensation, long-term equity incentive compensation, and benefits and perquisites — in total. |
How Do We Determine Executive Pay?
How Do We Determine Executive Pay? Benchmarking: Benchmarking in comparison to a peer group of companies (the “peer group”) is one of several factors considered in the compensation process but is not in and of itself determinative. The relative position of individual named executive officers in comparison to the peer group is based on their respective competencies, experience and performance. While the Company does not establish executive pay based solely on benchmarking data, we believe that our pay levels and practices should be within a range of competitiveness with our peer group and benchmarking provides us with an assessment of reasonableness and competitiveness. However, each individual’s actual compensation is based on numerous factors including the individual’s level of experience in the role and the annual and long-term performance of both the Company and the individual. The Compensation Committee benchmarks target total direct compensation, which consists of base salary, target annual cash incentive compensation, and the value of long-term equity incentives, to the peer group. The Compensation Committee benchmarks its named executive officer compensation because the Compensation Committee believes this is the best way to determine whether such compensation is competitive with the Company’s labor market for executive talent. Shareholder Engagement: As referenced above, in the Shareholder Engagement section of this Proxy, the Company proactively engages with shareholders and other stakeholders throughout the year. During 2023, no concerns were raised by shareholders regarding executive compensation. Peer Group: The Compensation Committee (with respect to officer compensation) and Nominating/Corporate Governance Committee (with respect to director compensation) take into account a number of factors for each potential peer group company including, but not limited to, size (revenues, market capitalization and number of employees), nature of business (business comparators and similar customer base), organizational complexity and business model (span and scope of the organization), growth over the last one and three years in revenue and EBITDA, competition for executive talent (organizations from which executives may be recruited to and from) and location. While all of the aforementioned factors are taken into account, the Compensation Committee and Nominating/Corporate Governance Committee consider the most important factors to be size, nature of business and competition for executive talent as these provide the most meaningful insight into competitive practices.
How Do We Determine Executive Pay?
In July 2022, the Compensation Committee and the Nominating/Corporate Governance Committee requested that KF review the Company’s existing peer group in light of the Committees’ observation that, although the median yearly revenues of the existing peer group were aligned with the Company, the median market capitalization of the peer group was substantially lower than the Company’s, and there were a number of companies in the peer group that were not branded consumer product businesses. The Committees asked KF to consider modifications to the peer group in light of this observation. In response, KF provided the Committees with a set of considerations for change, including proposed additions and deletions to the peer group. In July 2022, with input from KF, the Compensation Committee and Nominating/Corporate Governance Committee identified a publicly-traded peer group consisting of the following companies:
How Do We Determine Executive Pay?
In July 2023, the Company removed Martin Marietta Materials and Vulcan Materials Company from the Peer Group because their revenue and market capitalization are well above the typical size average and added Advanced Drainage Systems, Inc., Fortune Brands Innovation, Inc., Griffon Corporation, Hayward Holdings, Inc. and Louisiana-Pacific Corporation, because all of them are within the revenue and market capitalization criteria and operate in the residential or commercial building products industry. As a result of such changes, the new peer group consists of the following companies:
How Do We Determine Executive Pay?
Executive Compensation Benchmarking Study: In October 2023 KF completed an executive compensation benchmarking study. KF assessed the Company’s executive compensation program against the peer group both with respect to competitiveness and mix of the elements of compensation. KF compared the following elements of compensation of the Company against the peer group (based on the most recently-filed proxy statement for each peer company at that time, the majority of which reflect 2022 compensation): (1) base salary; (2) target total cash compensation (base salary plus target annual cash incentive compensation); and (3) target total direct compensation (base salary plus target annual cash incentive compensation plus the value of long-term equity incentive compensation). Based on such comparison, KF determined that the Company’s respective elements of target compensation compared against the peer group (as a weighted average of the named executive officers) were as follows:
Elements of Executive Compensation
Elements of Executive Compensation Base Salary Base salary is annual fixed cash compensation, and is a standard element of compensation, necessary to attract and retain talent, and provides fixed compensation that an employee can rely upon for his or her ordinary living expenses. Base salary is the principal non-variable element of the Company’s total compensation program. Base salaries reflect each named executive officer’s responsibilities, the impact of each named executive officer’s position, and the contributions each named executive officer delivers to the Company. Base salaries are determined by competitive levels in the market, based on the Company’s peer group and the results of executive compensation surveys, for executives with comparable responsibilities and job scope. Base salary increases, if any, are based on individual performance, market conditions and company performance. To gauge market conditions, the Compensation Committee evaluates the peer group and market data compiled by its consultant. Base salaries are set following review of this data upon consideration of the named executive officer’s experience, tenure, performance, and potential. In October 2023, as described above, the Compensation Committee approved increases in the base salaries for the named executive officers for 2024. The base salaries of the named executive officers are as follows:
Elements of Executive Compensation
Annual Cash Incentive Compensation The annual cash incentive plan provides named executive officers with the opportunity to gain financially from the Company’s financial results that they help to generate annually. The annual cash incentive plan provides for a cash payment based on the achievement of annual corporate financial goals. We believe that it is necessary to provide annual cash incentive compensation, because short-term incentives provide an immediate benefit paid in cash based on the achievement of immediate results, thereby promoting the achievement of short-term goals. A performance-based incentive motivates management to focus on the short-term (one fiscal year) financial goals in specific targeted areas determined at the beginning of each year. For the named executive officers, the Company provides an annual cash incentive payment based 75% on achievement of a certain pretax income target, and 25% on achievement of a certain operating cash flow target, in each case excluding any items determined by the Compensation Committee to be extraordinary and not considered in the establishment of such targets. Operating cash flow is defined as net cash provided by operating activities. The pretax income and operating cash flow financial performance metrics were chosen because the Compensation Committee determined that they would best measure the Company’s financial performance for the fiscal year and align managements’ financial incentives to those of its stockholders. Management deems pre-tax earnings to be the key factor to increasing shareholder value, which is indicative of its 75% weighting toward the annual cash incentive plan. Management believes that operating cash flow complements pre-tax earnings to ensure the Company’s operating and strategic objectives are being adequately funded as a result of meeting its profit objectives, which is indicative of its 25% weighting towards the annual cash incentive plan. The operating cash flow financial metric also serves as a guideline to meeting management’s target capital structure. The Compensation Committee uses a sliding scale to determine both the pretax income portion of the annual cash incentive and the operating cash flow portion of the annual cash incentive. The minimum threshold for any payment under both the pretax income element and the operating cash flow element of the annual cash incentive plan for 2023 was 80% of the respective targets, which would result in a payout of 25% of the target payment, performance at target would result in a payout of 100% of the target payment, and the maximum payout was capped at 200% of the target payment if 112.5% or more of the target was achieved. Numbers falling within the ranges above are interpolated on a straight-line basis. These performance ranges were selected based upon the Company’s business judgment while acknowledging the potential variability in results given some of the unique challenges in our business. Each year, the Company determines its performance ranges based upon the best available information and makes an informed decision as to where the threshold, target and maximum performance levels should be set. As explained in more detail below, these performance ranges were established for the 2023 plan year. Target awards are expressed as a percentage of the named executive officer’s base salary. Cash incentive targets for 2023 were 115% for the CEO, and 70% to 80% for the other named executive officers. The total award to any single named executive officer was capped at 200% of the named executive officer’s targeted percentage of salary. Determination of Target Levels. The Compensation Committee believes that using pretax income and operating cash flow financial targets as the basis for the executive annual cash incentive plan effectively aligns executive interests with the interests of the Company’s stockholders. An annual cash incentive can be earned if the Company meets its financial goals as measured using pretax income and operating cash flow as adjusted to reflect core operating performance. The annual financial objectives are contained within the Company’s annual financial plan, which is approved by the Board each December prior to the start of the new fiscal year. The Company’s financial-metric based approach established for the annual cash incentive plan applies to the broader management team as well as the named executive officers and other employees to ensure that there is consistency with the essence of the “pay-for-performance” structure of the incentive plan.
Elements of Executive Compensation
Calculations of Pretax Income Target and Payout for 2023. For the 2023 fiscal year, the Compensation Committee set target pretax income at $172,162,000. The Compensation Committee considered this target challenging given the set of circumstances including the macro-economic and competitive environments known at the time. As stated above, the Compensation Committee specifically agreed to exclude from the actual pretax income calculation any items determined by the Committee to be extraordinary and not considered in the establishment of the pretax income target. For 2023, the Compensation Committee approved an exclusion of a $3,800,000 gain associated with a release of the surface flaking reserve, because this gain was not anticipated in the 2023 Financial Plan which was approved by the Board in December 2022. For additional information regarding the release of the surface flaking reserve see “Note 19. Commitments and Contingencies” in the Company’s Notes to Consolidated Financial Statements for the Year Ended December 31, 2023, which is incorporated herein by reference. The net effect of the adjustment described in the preceding paragraph was to decrease pretax income for 2023 for incentive purposes by $3,800,000 from $276,200,000 to $272,400,000. This equated to 158.22% of target, which resulted in a payment multiple of 200%. This percentage was then multiplied by 75%, which is the percent weight given to the target pretax income portion of the annual cash incentive, to equal 150% for pretax income achievement. Calculations of Operating Cash Flow Target and Payout for 2023. For the 2023 fiscal year, the Compensation Committee set target operating cash flow at $224,182,000. The Committee felt that this target was reasonable. As stated above, the Compensation Committee specifically agreed to exclude from the actual operating cash flow calculation any items determined by the Committee to be extraordinary and not considered in the establishment of the operating cash flow target. For 2023, the Committee decreased operating cash flow by $807,000 representing payments lower than planned for surface flaking claims and increased operating cash flow by $969,000 representing payments higher than planned for tax obligations related to the release of the surface flaking reserve discussed above with respect to the pretax income exclusion. The Committee made these adjustments because they were not anticipated in the 2023 Financial Plan which was approved by the Board in December 2022. The net effect of the adjustments described in the preceding paragraph was to increase operating cash flow for 2023 for incentive purposes by $162,000 from $389,419,000 to $389,581,000. This equated to 173.78% of target, which resulted in a payment multiple of 200%. This percentage was then multiplied by 25%, which is the percent weight given to the target cash flow portion of the annual cash incentive, to equal 50% for cash flow achievement. Total Cash Incentive Payout Percentage. As a result of the above calculations, the cash incentive for 2023 was paid to the executive officers at a rate of 200%, because the Pretax income achievement and the Operating cash flow achievement were both above the 112.5% performance threshold, as summarized below:
Elements of Executive Compensation
| Executive Officer | 2023 Base Salary | Target Annual Cash Incentive (as a % of Base Salary) | Target Annual Cash Incentive | Annual Cash Incentive Payout Percentage | 2023 Annual Cash Incentive | | Bryan H. Fairbanks | $747,000 | 115% | $859,050 | 200% | $1,718,100 | | Adam D. Zambanini | $484,000 | 80% | $387,200 | 200% | $774,400 | | Brenda Lovcik (1) | $103,562 | — | — | — | $200,000 | | Amy M. Fernandez | $420,000 | 70% | $294,000 | 200% | $588,000 | | William R. Gupp (2) | $155,423 | 70% | $108,796 | 200% | $217,592 | | Dennis C. Schemm (3) | $198,838 | — | — | — | — |
Elements of Executive Compensation
Plan Structure and Target Levels for 2024 Annual Cash Incentive Plan. In December 2023, the Compensation Committee established the financial targets for 2024 consistent with the Company’s internal Financial Plan approved by the Board in December 2023, with pretax income being weighted at 75% and operating cash flow being weighted at 25%. The program mechanics for the 2024 annual cash incentive plan will be the same as they were for the 2023 annual cash incentive plan, which is discussed in detail above. Long-Term Equity Incentive Compensation We believe that long-term equity incentive compensation provides appropriate motivational tools to achieve certain long-term company goals. The long-term equity incentive compensation plan is designed to align named executive officers’ interests with those of stockholders, motivate the named executive officer team to achieve key financial goals and reward superior performance. The design of the program helps to reduce turnover and to retain the knowledge and skills of the Company’s valued employees. In structuring the amount of long-term equity incentive compensation awards, the Compensation Committee seeks to balance such awards and the interests of the Company’s stockholders under a policy that moderates the dilutive effects of annual equity-based awards against the need to provide attractive and competitive incentive compensation. The Compensation Committee regularly makes its annual long-term equity incentive grants to named executive officers at its February meeting, with the grant date being the date of the Compensation Committee meeting at which such equity grants are approved. The Company does not time the grant of equity awards in coordination with the release of material non-public information. Under the long-term equity incentive compensation plan of the Company, grants consist of 35% time-based restricted stock units, 50% performance-based restricted stock units, and 15% stock appreciation rights. For the 2023 grants, the target levels for long-term equity incentive compensation grants for the named executive officers were $3,275,000 for the CEO and $651,000 to $1,235,000 for the other named executive officers. For the 2024 grants, the Compensation Committee set the target levels at $3,854,000 for the CEO and $788,000 to $1,403,000 for the other named executive officers. The Compensation Committee retains discretion to adjust the target award based upon each named executive officer’s current performance and anticipated future contribution to the Company’s results, as well as upon the amount and terms of equity-based awards previously granted to the named executive officer by the Company. The Compensation Committee did not make any discretionary adjustments to a named executive officer’s target award in 2023 or 2024 and has not done so for any of the named executive officers in any of the years reflected in the Summary Compensation Table. Elements of Long-Term Equity Incentive Compensation: Time-Based Restricted Stock Units. Time-based restricted stock units are similar to time-based restricted shares, with the principal difference being that with restricted stock units, the shares are not actually issued until vesting. The restricted stock units have a three-year vesting period, vesting one-third each year. The number of restricted stock units issued is based on the approved target dollar amount of the award, divided by the fair market value of the Company’s common stock on the date of the grant. Upon vesting, each restricted stock unit will equal the right to receive one share of Company stock. Time-based restricted stock units facilitate retention by providing value if the named executive officer remains with the Company over the vesting period. In addition, time-based restricted stock units provide alignment with stockholders through stock ownership, and the potential for future growth. Performance-Based Restricted Stock Units. Performance-based restricted stock units are similar to their time-based counterparts, but the number of units that will vest each year, if any, is based on Company financial performance. The performance-based restricted stock units have a three-year vesting period, vesting one-third each year based on performance against target earnings before interest, taxes, depreciation and amortization (“EBITDA”) for 1 year, cumulative 2 years and cumulative 3 years, respectively, in each case excluding any items determined by the Compensation Committee to be extraordinary and not considered in the establishment of such targets.
Elements of Executive Compensation
Actual awards to each named executive officer of long-term equity incentive compensation in February 2023 and February 2024, split 35% in time-based restricted stock units, 50% in performance-based restricted stock units, and 15% in SARs, are set forth as follows:
Elements of Executive Compensation
| Executive Officer | Value of 2023 Long-Term Equity Awards | Value of 2024 Long-Term Equity Awards | | Bryan H. Fairbanks | $3,275,000 | $3,854,000 | | Adam D. Zambanini | $1,235,000 | $1,403,000 | | Brenda Lovcik (1) | $300,000 | $1,107,000 | | Amy M. Fernandez | $651,000 | $788,000 | | Dennis C. Schemm (2) | $986,000 | — | | William R. Gupp (3) | $696,000 | — |
Elements of Executive Compensation
| (1) Ms. Lovcik’s first day of employment was October 23, 2023. On that date, she received an award of time-based restricted stock units valued at $300,000 which vest over a three-year period in three equal installments. |
Elements of Executive Compensation
Vesting of Previously Granted Performance-Based Restricted Stock Units Based upon 2023 Performance. In February 2024, (a) one-third of performance-based restricted stock units granted in 2021 vested based on actual EBITDA performance in 2021, 2022 and 2023 (cumulative) against the EBITDA target, (b) one-third of performance-based restricted stock units granted in 2022 vested based on actual EBITDA performance in 2022 and 2023 (cumulative) against the EBITDA target, and (c) one-third of performance-based restricted stock units granted in 2023 vested based on actual EBITDA performance in 2023 against the EBITDA target. The following is a summary with respect to the vesting of performance-based restricted stock units granted in each of 2021, 2022 and 2023. Calculation of EBITDA for 2023 With respect to EBITDA for 2023, as stated above, the Compensation Committee specifically agreed to exclude from the actual EBITDA calculation any items determined by the Committee to be extraordinary and not considered in the establishment of the EBITDA target. For 2023, the Compensation Committee approved an exclusion of $3,800,000 which reflects the gain from a release of the surface flaking reserve, because this gain was not anticipated in the 2023 Financial Plan which was approved by the Board in December 2022. For additional information regarding the release of the surface flaking reserve, see “Note 19. Commitments and Contingencies” in the Company’s Notes to Consolidated Financial Statements for the Year Ended December 31, 2023, which is incorporated herein by reference. The net effect of the adjustment described above was to decrease EBITDA for 2023 for purposes of the grants of performance-based restricted stock units in 2021, 2022 and 2023 by $3,800,000 from $326,394,000 to $322,594,000. Performance-Based Restricted Stock Units Granted in 2021 As stated above, with respect to the performance-based restricted stock units granted in 2021, one-third of such units vested in February 2024 based upon actual EBITDA performance in 2021, 2022 and 2023 cumulatively against target. The target was $1,036,610,000 which was based upon target EBITDA of $313,175,000 in 2021 (established in December 2020), with 10% year over year growth for 2022 ($344,493,000) and 2023 ($378,942,000). As stated above, adjusted EBITDA for 2023 was $322,594,000. As reported in the Company’s 2022 Proxy Statement, EBITDA for 2021 adjusted for extraordinary items was $365,567,000. As reported in the Company’s 2023 Proxy Statement, EBITDA for 2022 adjusted for extraordinary items was $307,251,000. Adding these numbers together, this resulted in a cumulative adjusted EBITDA for 2021, 2022 and 2023 of $995,412,000, which equated to 96.03% of target EBITDA of $1,036,610, which resulted in a payment multiple of 85.10%.
Elements of Executive Compensation
As stated above, with respect to the performance-based restricted stock units granted in 2022, one-third of such units vested in March 2024 based upon actual EBITDA performance in 2022 and 2023 cumulatively against target. The target was $921,900,000, which was based upon target EBITDA of $439,000,000 in 2022 (established in December 2021), with 10% year over year growth for 2023 ($482,900,000). As stated above, adjusted EBITDA for 2023 was $322,594,000. As reported in the Company’s 2023 Proxy Statement, EBITDA for 2022 adjusted for extraordinary items was $307,251,000. Adding these numbers together, this resulted in a cumulative adjusted EBITDA for 2022 and 2023 of $629,845,000, which equated to 68.32% of target EBITDA of $921,900,000 which resulted in a payment multiple of 0%. Performance-Based Restricted Stock Units Granted in 2023 As stated above, with respect to the performance-based restricted stock units granted in 2023, one-third of such units vested in March 2024 based upon actual EBITDA performance in 2023 against target. The target was $226,370,000 (established in December 2022). As stated above, adjusted EBITDA for 2023 was $322,594,000, which equated to 142.51% of target EBITDA of $226,370,000, which resulted in a payment multiple of 200%. The following table presents the number of performance-based restricted stock units granted in 2021, 2022 and 2023 that vested in February/March 2024 for each named executive officer:
Elements of Executive Compensation
| Executive Officer | 2021 | | | 2022 | | | 2023 | | | | | Target # of Shares | Payout % | Shares Vesting | Target # of Shares | Payout % | Shares Vesting | Target # of Shares | Payout % | Shares Vesting | | Bryan H. Fairbanks | 2,440 | 85.1% | 2,076 | 5,081 | 0 | 0 | 9,610 | 200% | 19,220 | | Adam D. Zambanini | 1,050 | 85.1% | 894 | 1,681 | 0 | 0 | 3,624 | 200% | 7,248 | | Brenda Lovcik (1) | — | — | — | — | — | — | — | — | — | | Amy M. Fernandez | — | — | — | 711 | 0 | 0 | 1,910 | 200% | 3,820 | | Dennis C. Schemm (2) | 936 | — | — | 1,453 | — | — | 2,894 | — | — | | William R. Gupp | 901 | 85.1% | 767 | 1,279 | 0 | 0 | 2,042 | 200% | 4,084 |
Elements of Executive Compensation
| (1) Ms. Lovcik’s first day of employment was October 23, 2023. She did not receive any performance-based restricted stock units in 2023. |
Elements of Executive Compensation
| (2) Mr. Schemm’s last day of employment was June 9, 2023. His unvested performance-based restricted stock units were forfeited on that date. |
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure Under Item 402(v) of the SEC’s Regulation S-K, which was adopted in 2022, the Company is required to disclose annually information concerning “pay versus performance.” The purpose of this disclosure is to show the relationship between executive compensation actually paid to the principal executive officer (“PEO”) and other named executive officers and the financial performance of the Company. Item 402(v) also requires disclosure of the cumulative total shareholder return (“TSR”) of the Company’s peer group, the Company’s net income, and an additional financial performance measure chosen by the Company. Disclosure under Item 402(v) is required for the Company’s last five completed fiscal years. Notwithstanding, there is a transitional rule which provides that for the first filing after approval of the new requirement in 2023 the Company only needed to disclose information for the last three completed fiscal years and to add one additional year of disclosure during the following two years.
Pay Versus Performance Disclosure
| Year | Summary Comp. Table Total for First PEO ($) (1) | Summary Comp. Table Total for Second PEO ($) (1) | Comp. Actually Paid to First PEO ($) (2) | Comp. Actually Paid to Second PEO ($) (3) | Average Summary Comp. Table Total for non- PEO NEOs ($) (4) | Average Comp. Actually Paid to non- PEO NEOs ($) (4) | Value of Initial Fixed $100 Investment Based On: | | Net Income ($,000) | Pretax Net Income ($,000) (6) | | | | | | | | | Total Shareholder Return ($) | Peer group Total Shareholder Return ($) (5) | | | | 2023 | 5,773,779 | | 10,660,712 | | 1,635,584 | 2,692,413 | 184.22 | 194.48 | 205,384 | 276,200 | | 2022 | 3,255,722 | | -1,889,888 | | 1,348,892 | -2,279,976 | 94.19 | 129.71 | 184,626 | 236,056 | | 2021 | 4,079,676 | | 7,700,955 | | 1,624,059 | 4,676,692 | 300.47 | 156.66 | 208,737 | 329,637 | | 2020 | 1,918,792 | 1,716,354 | 4,301,083 | 2,195,157 | 1,284,572 | 3,068,390 | 186.29 | 126.06 | 175,631 | 241,114 | | 2019 | | | | | | | 100.00 | 100.00 | | |
Pay Versus Performance Disclosure
| (1) During 2020, Mr. Cline, the Company’s current Chairman of the Board, served as President and Chief Executive Officer between January 1, 2020 and April 28, 2020, his retirement date. Mr. Fairbanks has served as President and Chief Executive Officer since April 29, 2020. In the table above, Mr. Fairbanks is the “First PEO” and Mr. Cline is the “Second PEO.” |
Pay Versus Performance Disclosure
| (2) The dollar amounts reported in this column represent the amount of “compensation actually paid” to Mr. Fairbanks, computed in accordance with item 402(v) of Regulation S-K. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Fairbanks’ total compensation, as reported in the Summary Compensation Table for each year, to determine “compensation actually paid.” For Mr. Fairbanks: for 2020, the amount of $518,765 was deducted for stock awards and the amount of $91,547 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $1,091,191 was added for stock awards granted in 2020, the amount of $1,334,538 was added for stock awards granted in prior fiscal years that were unvested at the end of 2020, the amount of $81,010 was added for stock awards granted in prior fiscal years that vested in 2020, the amount of $265,274 was added for SAR awards granted in 2020, the amount of $191,233 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2020, and the amount of $29,357 was added for SAR awards granted in prior fiscal years that vested in 2020; for 2021, the amount of $1,301,563 was deducted for stock awards and the amount of $229,688 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $2,669,543 was added for stock awards granted in 2021, the amount of $1,087,441 was added for stock awards granted in prior fiscal years that were unvested at the end of 2021, the amount of $773,036 was added for stock awards granted in prior fiscal years that vested in 2021, the amount of $289,078 was added for SAR awards granted in 2021, the amount of $229,702 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2021, and the amount of $103,729 was added for SAR awards granted in prior fiscal years that vested in 2021; for 2022, the amount of $2,125,000 was deducted for stock awards and the amount of $375,000 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $451,619 was added for stock awards granted in 2022, the amount of $1,826,069 was deducted for stock awards granted in prior fiscal years that were unvested at the end of 2022, the amount of $906,975 was deducted for stock awards granted in prior fiscal years that vested in 2022, the amount of $141,372 was added for SAR awards granted in 2022, the amount of $290,428 was deducted for SAR awards granted in prior fiscal years that were unvested at the end of 2022, and the amount of $215,156 was deducted for SAR awards granted in prior fiscal years that vested in 2022; and for 2023, the amount $2,783,750 was deducted for stock awards and the amount $491,250 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $6,444,456 was added for stock awards granted in 2023, the amount $389,839 was added for stock awards granted in prior fiscal years that were unvested at the end of 2023, the amount of $159,732 was added for stock awards granted in prior fiscal years that vested in 2023, the amount of $884,560 was added for SAR awards granted in 2023, the amount of $241,258 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2023, and the amount of $42,088 was added for SAR awards granted in prior fiscal years that vested in 2023. For purposes of clarification, the “compensation actually paid” for 2022 for Mr. Fairbanks is a negative number due to the aggregate decrease in fair value of his stock awards and SAR awards in 2022. |
Pay Versus Performance Disclosure
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 39 |
Pay Versus Performance Disclosure
| Furthermore, Mr. Fairbanks’ “compensation actually paid” for 2023 is due in part to the increase in value of our common stock from December 31, 2022 to December 31, 2023 and actual realization of this amount of compensation is, of course, dependent on actual future financial performance and the Company’s common stock value. |
Pay Versus Performance Disclosure
| (3) The dollar amounts reported in this column represent the amount of “compensation actually paid” to Mr. Cline, computed in accordance with item 402(v) of Regulation S-K. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Cline’s total compensation, as reported in the Summary Compensation Table for each year, to determine “compensation actually paid.” For Mr. Cline, for 2020: the amount of $1,275,000 was deducted for stock awards and the amount of $225,000 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $350,593 was added for stock awards granted in prior fiscal years that vested in 2020, the amount of $1,212,310 was added for stock awards that were granted and that vested in 2022, the amount of $133,293 was added for SAR awards granted in prior fiscal years that vested in 2020, and the amount of $282,607 was added for SAR awards that were granted and that vested in 2022. |
Pay Versus Performance Disclosure
| (4) For 2020, 2021, and 2022, the named executive officers other than the PEO were Mr. Zambanini, Mr. Schemm and Mr. Gupp and for 2023, the named executive officers other than the PEO were Mr. Zambanini, Mr. Schemm from January 1, 2023 until June 9, 2023, Mr. Gupp from January 1, 2023 until May 5, 2023, Ms. Fernandez since October 25, 2023 and Ms. Lovcik since October 23, 2023. The dollar amounts reported in this column represent the amount of “compensation actually paid” to the above-referenced named executive officers other than the PEO, computed in accordance with item 402(v) of Regulation S-K. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to these named executive officers’ total compensation, as reported in the Summary Compensation Table for each year, to determine “compensation actually paid.” |
Pay Versus Performance Disclosure
For Mr. Zambanini: for 2020, the amount of $518,765 was deducted for stock awards and the amount of $91,547 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $1,091,191 was added for stock awards granted in 2020, the amount of $1,223,945 was added for stock awards granted in prior fiscal years that were unvested at the end of 2020, the amount of $73,813 was added for stock awards granted in prior fiscal years that vested in 2020, the amount of $265,274 was added for SAR awards granted in 2020, the amount of $184,533 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2020, and the amount of $26,764 was added for SAR awards granted in prior fiscal years that vested in 2020; for 2021, the amount of $559,938 was deducted for stock awards and the amount of $98,813 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $1,148,430 was added for stock awards granted in 2021, the amount of $1,941,035 was added for stock awards granted in prior fiscal years that were unvested at the end of 2021, the amount of $260,798 was added for stock awards granted in prior fiscal years that vested in 2021, the amount of $124,347 was added for SAR awards granted in 2021, the amount of $229,702 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2021, and the amount of $99,700 was added for SAR awards granted in prior fiscal years that vested in 2021; and for 2022, the amount of $702,950 was deducted for stock awards and the amount of $124,050 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $149,383 was added for stock awards granted in 2022, the amount of $1,133,967 was deducted for stock awards granted in prior fiscal years that were unvested at the end of 2022, the amount of $2,289,237 was deducted for stock awards granted in prior fiscal years that vested in 2022, the amount of $46,762 was added for SAR awards granted in 2022, the amount of $197,757 was deducted for SAR awards granted in prior fiscal years that were unvested at the end of 2022, and the amount of $187,546 was deducted for SAR awards granted in prior fiscal years that vested in 2022; and for 2023, the amount of $1,049,750 was deducted for stock awards and the amount of $185,250 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $2,430,300 was added for stock awards granted in 2023, the amount of $168,831 was added for stock awards granted in prior fiscal years that were unvested at the end of 2023, the amount of $105,047 was added for stock awards granted in prior fiscal years that vested in 2023, the amount of $333,564 was added for SAR awards granted in 2023, the amount of $83,408 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2023, and the amount of $24,746 was added for SAR awards granted in prior fiscal years that vested in 2023. For Mr. Schemm, for 2020, the amount of $340,000 was deducted for stock awards and the amount of $60,000 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $847,793 was added for stock awards granted in 2020, and the amount of $191,208 was added for SAR awards granted in 2020; for 2021, the amount of $499,163 was deducted for stock awards and the amount of $88,088 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $1,023,797 was added for stock awards granted in 2021, the amount of $554,371 was added for stock awards granted in prior fiscal years that were unvested at the end of 2021, the amount of $1,578,168 was added for stock awards granted in prior fiscal years that vested in 2021, the amount of $110,843 was added for SAR awards granted in 2021, the amount of $102,225 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2021, and the amount of $20,595 was added for SAR awards granted in prior fiscal years that vested in 2021; and for 2022, the amount of $607,750 was deducted for stock awards and the amount of $107,250 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $129,149 was added for stock awards granted in 2022, the amount of $952,118 was deducted for stock awards granted in prior fiscal years that were unvested at the end of 2022, the amount of $348,099 was deducted for stock awards granted in prior fiscal years that vested in 2022, the amount of $40,436 was added for SAR awards granted in 2022, the amount of $62,294 was deducted for SAR awards granted in prior fiscal years that were unvested at the end of 2022, and the amount of $73,207 was deducted for SAR awards granted in prior fiscal years that vested in 2022, and for 2023, the amount of $838,100 was deducted for stock awards and the amount of $147,900 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $1,940,349 was added for stock awards granted in 2023, the amount of $147,958 was added for stock awards granted in prior fiscal years that were unvested at the end of 2023, the amount of $85,853 was added for stock awards granted in prior fiscal years that vested in 2023, the amount of $266,293 was added for SAR awards granted in 2023, the amount of $72,540 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2023, and the amount of $19,361 was added for SAR awards granted in prior fiscal years that vested in 2023.
Pay Versus Performance Disclosure
| 40 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Pay Versus Performance Disclosure
For Mr. Gupp, for 2020, the amount of $459,230 was deducted for stock awards and the amount of $81,041 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $965,863 was added for stock awards granted in 2020, the amount of $1,472,040 was added for stock awards granted in prior fiscal years that were unvested at the end of 2020, the amount of $96,231 was added for stock awards granted in prior fiscal years that vested in 2020, the amount of $234,801 was added for SAR awards granted in 2020, the amount of $193,861 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2020, and the amount of $34,720 was added for SAR awards granted in prior fiscal years that vested in 2020; for 2021, the amount of $480,675 was deducted for stock awards and the amount of $84,825 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $985,854 was added for stock awards granted in 2021, the amount of $2,089,191 was added for stock awards granted in prior fiscal years that were unvested at the end of 2021, the amount of $283,081 was added for stock awards granted in prior fiscal years that vested in 2021, the amount of $106,733 was added for SAR awards granted in 2021, the amount of $204,443 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2021, and the amount of $106,090 was added for SAR awards granted in prior fiscal years that vested in 2021; and for 2022, the amount of $534,905 was deducted for stock awards and the amount of $94,395 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $113,698 was added for stock awards granted in 2022, the amount of $3,013,721 was deducted for stock awards granted in prior fiscal years that were unvested at the end of 2022, the amount of $632,643 was deducted for stock awards granted in prior fiscal years that vested in 2022, the amount of $35,592 was added for SAR awards granted in 2022, the amount of $173,063 was deducted for SAR awards granted in prior fiscal years that were unvested at the end of 2022, and the amount of $166,671 was deducted for SAR awards granted in prior fiscal years that vested in 2022; and for 2023 the amount of $591,600 was deducted for stock awards and the amount of $104,400 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $1,369,595 was added for stock awards granted in 2023, the amount of $135,651 was added for stock awards granted in prior fiscal years that were unvested at the end of 2023, the amount of $91,545 was added for stock awards granted in prior fiscal years that vested in 2023, the amount of $188,006 was added for SAR awards granted in 2023, the amount of $64,994 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2023, and the amount of $21,038 was added for SAR awards granted in prior fiscal years that vested in 2023. For Ms. Lovcik, for 2023, the amount of $300,000 was deducted for stock awards reflecting the amount in the Summary Compensation Table, and the amount of $446,569 was added for stock awards granted in 2023. For Ms. Fernandez, for 2023 the amount of $553,350 was deducted for stock awards and the amount of $97,650 was deducted for SAR awards reflecting amounts in the Summary Compensation Table, and the amount of $1,281,010 was added for stock awards granted in 2023, the amount of $82,296 was added for stock awards granted in prior fiscal years that were unvested at the end of 2023, the amount of $4,019 was added for stock awards granted in prior fiscal years that vested in 2023, the amount of $175,815 was added for SAR awards granted in 2023, the amount of $28,669 was added for SAR awards granted in prior fiscal years that were unvested at the end of 2023, and the amount of $2,575 was added for SAR awards granted in prior fiscal years that vested in 2023. For purposes of clarification, the “compensation actually paid” for 2022 for the named executive officers other than the PEO is a negative number due to the decrease in fair value of their stock awards and SAR awards in 2022. Furthermore, “compensation actually paid” for 2023 is due in part to the increase in value of stock from December 31, 2022 to December 31, 2023 and actual realization of this amount of compensation is, of course, dependent on actual future financial performance and the Company’s common stock value.
Pay Versus Performance Disclosure
| (5) The Company is using as its Peer Group the S&P 600 Building Products Index, which is an index used by the Company for purposes of disclosure in its Form 10-K under Item 201(e) of Regulation S-K. |
Pay Versus Performance Disclosure
| (6) The Company has chosen pretax income as its “Company-Selected Measure”, in that the Company’s annual cash incentive payment is weighted 75% on the achievement of a certain pretax income target, adjusted each year by the Compensation Committee to exclude any items determined by the Committee to be extraordinary and not considered in the establishment of the pretax income target. The amounts set forth above are after such adjustments. |
Pay Versus Performance Disclosure
Item 402(v) of the SEC’s Regulation S-K requires that the Company disclose at least three, and up to seven, financial performance measures which in the Company’s assessment represent the most important financial performance measures used by the Company to link compensation actually paid to the named executive officers to Company performance. The most important financial measures used by the Company for the fiscal years in the table above were as follows:
Pay Versus Performance Disclosure
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 41 |
Most Important Financial Performance Measures for Determining NEO Compensation
Most Important Financial Performance Measures for Determining NEO Compensation
Most Important Financial Performance Measures for Determining NEO Compensation
| 1. Pretax Income – Pretax income is defined as income before income taxes. As discussed under the heading “ Annual Cash Incentive Compensation ” above, the Company’s annual cash incentive payment is weighted 75% on the achievement of a certain pretax income target. | | 2. Operating Cash Flow – Operating Cash Flow is defined as net cash provided by operating activities. As discussed under the heading “ Annual Cash Incentive Compensation ” above, the Company’s annual cash incentive payment is weighted 25% on the achievement of a certain operating cash flow target. | | 3. EBITDA – EBITDA is defined as earnings before interest, tax, depreciation, and amortization. As discussed under the heading “ Long-Term Equity Incentive Compensation ” above, the actual number of performance-based restricted stock units that vest each year is based on performance against target EBITDA for 1 year, cumulative 2 years and cumulative 3 years, respectively. |
Most Important Financial Performance Measures for Determining NEO Compensation
In determining each of the above metrics for purposes of calculating the annual cash incentive payment and the payout percentages for performance-based restricted stock units, the Compensation Committee will exclude any items determined by the Committee to be extraordinary and not considered in the establishment of the target. Other than pretax income, operating cash flow and EBITDA, there are no other financial performance metrics utilized by the Company in Annual Cash Incentive Compensation or Long-Term Equity Incentive Compensation. The first table below illustrates the relationship between (a) the executive compensation actually paid to the PEOs and the average executive compensation paid to the other named executive officers to (b) the TSR of the Company and its Peer Group. The second table below illustrates the relationship between (a) the executive compensation actually paid to the PEOs and the average executive compensation paid to the other named executive officers to (b) the net income and the pretax net income of the Company.
Most Important Financial Performance Measures for Determining NEO Compensation
| 42 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Most Important Financial Performance Measures for Determining NEO Compensation
Relationship Between “Compensation Actually Paid” and Specified Financial Performance Measures Relationship Between “Compensation Actually Paid” and Total Shareholder Return As shown in the following graph, the “Compensation Actually Paid” to our PEO and our other NEOs fluctuates with our TSR. Fluctuations in “compensation actually paid” amounts are affected by changes in our share price, including as a result of changes in fair value of unvested SARs, RSUs and PSUs, the value of each of which is directly connected to our share price. “Compensation actually paid” for our PEO and other NEOs rises and falls with TSR because a majority of the compensation for our PEO and our other NEOs, respectively, is equity-based compensation, the value of which is dependent on stock price performance, in line with our pay-for-performance philosophy described above.
Most Important Financial Performance Measures for Determining NEO Compensation
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 43 |
Most Important Financial Performance Measures for Determining NEO Compensation
Relationship Between “Compensation Actually Paid” and Net Income and Pretax Net Income As shown in the following graph, the “Compensation Actually Paid” to our PEO and our other NEOs fluctuates with our Net Income and Pretax Net Income. As discussed under the heading “ Annual Cash Incentive Compensation ” above, the Company’s annual cash incentive payment is weighted 75% on the achievement of a certain pretax income target. Management deems pre-tax earnings to be the key factor to increasing shareholder value, which is indicative of its 75% weighting toward the annual cash incentive plan. Fluctuations in “compensation actually paid” amounts are affected by the annual cash incentive year-over-year, and the annual cash incentive paid to the PEO and the other NEOs in 2022 was $0 while the annual cash incentive paid to the PEO and the other NEOs in 2023 was 200% of target, due to our varying levels of achievement against pre-established performance goals under our annual incentive plan and our long-term equity incentive compensation program, in line with our pay-for-performance philosophy described above.
Most Important Financial Performance Measures for Determining NEO Compensation
| 44 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Pay Ratio Disclosure
Pay Ratio Disclosure Under Item 402(u) of the SEC’s Regulation S-K, the Company is required to disclose annually the ratio of the annual total compensation of the median employee (“Median Employee”) to the total annual compensation of the principle executive officer (“PEO”). The purpose of this disclosure is to provide a measure of the equitability of pay within an organization. The Company’s PEO on December 31, 2023 is Mr. Fairbanks. To determine Mr. Fairbank’s total annual compensation for purposes of pay ratio disclosure, we have used the same methodology used in the Summary Compensation Table. We identified the Median Employee by examining the 2023 total compensation, as reported on applicable tax statements, for all employees, domestic and foreign, excluding our PEO, who were employed by us on December 31, 2023. We included all full-time, part-time, seasonal or temporary employees. We did not include temporary workers employed by a third party (i.e., “leased workers”). For any full-time or part-time employees hired during 2023 or for any employee on an unpaid leave of absence during the year, we annualized their compensation. We did not do this for seasonal or temporary employees. Once we determined the identity of the Median Employee, we calculated such employee’s 2023 compensation using the same methodology as that used in the Summary Compensation Table for Mr. Fairbanks. The Company believes its compensation philosophy and process yield an equitable result. The ratio of the total annual compensation of our PEO to the Median Employee is as follows:
Pay Ratio Disclosure
| Median Employee Total Annual Compensation | $69,761 | | Mr. Fairbanks (“PEO”) Total Annual Compensation | $5,773,779 | | Ratio of PEO to Median Employee Total Annual Compensation | 82.77:1.0 |
Retention Agreements
Retention Agreements On May 2, 2018, the Company entered into Retention Agreements (the “Retention Agreements”) with three (3) of the named executive officers (collectively, the “Recipients,” or individually a “Recipient”) pursuant to which the Company awarded restricted stock units (“RSUs”) and made cash payment awards to the Recipients, with the RSUs vesting and the cash payments being made only if certain retention conditions are met. The Recipients were: Bryan H. Fairbanks, the Company’s Executive Vice President and Chief Financial Officer at the time, and the current President and Chief Executive Officer; Adam D. Zambanini, the Company’s President of Trex Residential Products at the time and the current Executive Vice President and Chief Operating Officer; and William R. Gupp, the Company’s Senior Vice President, Chief Legal Officer and Secretary at the time, who retired that position on May 4, 2023. The Retention Agreements for the Recipients were identical in form and provided that in the event the Recipient was actively employed by the Company on a specific date, the RSUs would vest and the cash payment would be made to such Recipient. The Retention Dates for Mr. Fairbanks, Mr. Zambanini and Mr. Gupp were as follows:
Retention Agreements
The aggregate value of the RSUs and the cash payment for each of the Recipients was two (2) times their then current base salary and target cash incentive, with 50% of such amount being reflected in RSUs and 50% of such
Retention Agreements
| Executive Officer | Grant Date Value of RSUs/Number of RSUs (1) | Cash Payment | | Bryan H. Fairbanks | $494,720 / 18,840 | $494,720 | | Adam D. Zambanini | $436,800 / 16,636 | $436,800 | | William R. Gupp | $574,090 / 20,784 | $574,090 |
Additional Information on our Program
Additional Information on our Program Stock Ownership Guidelines To align our officers’ and directors’ interests with those of our stockholders, the Board in December 2013 instituted Stock Ownership Guidelines (the “Guidelines”). Under the Guidelines, each executive officer is required to own and hold, as a minimum, that number of shares of the Company’s common stock having a market value of at least a stated multiple of the executive officer’s base salary. The stated multiple for the Chief Executive Officer is 3, for a Senior Vice President or Executive Vice President is 1.5, and for a Vice President is 1. For purposes of the Guidelines, common stock includes shares of common stock no matter how acquired (i.e., vesting of restricted shares or restricted stock units, or shares purchased on the open market), unvested time-based restricted shares or restricted stock units, and unvested performance-based restricted shares or restricted stock units at target levels. Executive officers have 5 years from becoming an executive officer, whichever occurs later, to comply with the ownership requirements. Other than Ms. Lovcik who became an officer on October 23, 2023, each named executive officer meets the current minimum requirements. Anti-Hedging and Anti-Pledging Policy The Board adopted in October 2013 a policy that prohibits our executive officers from purchasing any financial instrument or entering into any transaction that is designed to hedge or offset any decrease in the market value of Company equity (including, but not limited to, prepaid variable forward contracts, equity swaps, collars, or exchange funds), or pledging, hypothecating, or otherwise encumbering Company equity as collateral for indebtedness. Clawback Policy The Board amended and restated in October 2023 its Recovery of Compensation for Accounting Restatements Policy (the “clawback” policy) with respect to incentive-based compensation. The clawback policy provides that in the event of a restatement of the Company’s financial results, the Compensation Committee is entitled to recover from executive officers any incentive-based compensation that would not otherwise have been awarded to such
Additional Information on our Program
persons under the as-restated financial statements during the three years preceding the date of the restatement. A copy of our Recovery of Compensation for Accounting Restatements Policy was filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Insider Trading Policy The Board amended and restated in February 2006 its Insider Trading Policy, which is applicable to all directors, officers and employees of the Company. This policy expressly prohibits such persons from trading, either directly or indirectly, in our securities after becoming aware of material nonpublic information related to the Company. The policy also establishes guidelines for blackout periods. Our insider trading policy provides guidance as to what constitutes material information and when information becomes public. Before any of our directors, executive officers or other covered persons identified by our insider trading policy engages in certain transactions involving Company securities, such person must obtain pre-clearance and approval of the transaction from our Chief Legal Officer. Furthermore, such individuals, including the NEOs, are only permitted to trade in the Company’s securities during prescribed trading windows. The policy discusses the consequences of an insider trading violation, additional trading restrictions, and certain reporting requirements applicable to directors, officers, and designated key employees. A copy of our Insider Trading Policy was filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Does the Company have Severance or Change in Control Agreements with its named executive officers? The named executive officers have severance agreements, which provide for certain benefits upon an involuntary termination. These agreements promote retention of high-performing individuals and also assist in recruiting and retaining key employees by providing competitive arrangements. In addition, the Company has entered into change in control agreements with the named executive officers to provide certain cash payments to the officers upon a termination following a change in control, which is in the form of a “double trigger.” In addition, such agreements provide for an acceleration of equity grants upon a change in control. Change in control agreements are designed to protect executives in the event of a change in control and provide security for executives against sudden or arbitrary termination in connection with a change in control. The provisions of each agreement were determined by analysis of peer group and market trends and practices and are set at competitive levels with industry practice. For a discussion of these arrangements, including the estimated quantification of these amounts, see the Severance and Change in Control Agreements discussion following this Compensation Discussion and Analysis. How do our decisions regarding each element affect decisions regarding the other elements? The Compensation Committee considers total cash and equity compensation when setting the compensation of executive officers. In doing so, the Compensation Committee considers the retention value of the long-term equity currently held by the executive. Based on this review, the Compensation Committee may decide to adjust one or more elements of an executive’s total compensation. The Compensation Committee aims to provide competitive total direct compensation and assesses an executive’s total compensation package when looking at the executive’s competitive standing relative to the market. Additionally, the Compensation Committee seeks to provide a competitive compensation mix, with discretion depending on factors deemed relevant to the Compensation Committee, such as individual performance, internal equity, and historical pay practices. Certain compensation decisions may specifically affect other elements of compensation. For example, because potential annual cash incentive and long-term equity incentive payouts are based on the executive’s base salary, increases in base salary also increase the amount of such payouts. What are the tax and accounting considerations that factor into decisions regarding executive compensation? We consider tax and accounting implications in determining our compensation programs. Policy on Deductibility of Named Executive Officer Compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended, precludes the tax deductibility of a named executive officer’s compensation that exceeds
Additional Information on our Program
$1,000,000 per year. The Tax Cuts and Jobs Act, which became effective as of January 1, 2018, modified Section 162(m) provisions, including the elimination of the “performance-based exception” that previously allowed certain performance-based compensation meeting specific requirements to qualify for full tax deductibility by the Company. As a result of the tax law changes, compensation paid to designated “covered executives”, including current and former named executive officers, in excess of $1,000,000 per individual will generally not be deductible, whether or not it is performance-based. Although the Compensation Committee has historically attempted to structure executive compensation to preserve deductibility, it also reserves the right to provide compensation that may not be fully deductible in order to maintain flexibility in compensating named executive officers in a manner consistent with our compensation philosophy, as deemed appropriate. The Compensation Committee believes that stockholder interests are best served by not restricting the Committee’s discretion in this regard, even though such compensation may result in non-deductible compensation expenses to the Company. Internal Revenue Code Section 409A. The Company reviews its compensation plans and programs for compliance with Section 409A of the Internal Revenue Code and the relevant Treasury Resolutions regarding nonqualified deferred compensation. Impact of FASB ASC Topic 718. The accounting standards applicable to the various forms of long-term incentive plans under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 is one factor that the Company considers in the design of its long-term equity incentive programs. The Company monitors its FASB ASC Topic 718 expense to ensure that it is reasonable, but expense will not be the most important factor in making decisions about our long-term incentive plans.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) (1) (2) | Non-Equity Incentive Plan Compensation ($) (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (4) | Total ($) | | Bryan H. Fairbanks (5) President and Chief Executive Officer | 2023 | 747,000 | — | 2,783,750 | 491,250 | 1,718,100 | — | 33,679 | 5,773,779 | | | 2022 | 722,000 | — | 2,125,000 | 375,000 | 0 | — | 33,722 | 3,255,722 | | | 2021 | 612,500 | — | 1,301,563 | 229,688 | 1,408,750 | — | 527,175 | 4,079,676 | | Adam D. Zambanini (6) Executive Vice President and Chief Operating Officer | 2023 | 484,000 | — | 1,049,750 | 185,250 | 774,400 | — | 30,231 | 2,523,631 | | | 2022 | 468,000 | — | 702,950 | 124,050 | 0 | — | 459,704 | 1,754,704 | | | 2021 | 425,000 | — | 559,938 | 98,813 | 637,500 | — | 28,640 | 1,749,891 | | Brenda Lovcik (7) Senior Vice President and Chief Financial Officer | 2023 | 103,562 | 300,000 | 300,000 | 0 | 200,000 | — | 18,411 | 921,973 | | | 2022 | — | — | — | — | — | — | — | — | | | 2021 | — | — | — | — | — | — | — | — | | Amy M. Fernandez (8) Senior Vice President, Chief Legal Officer and Secretary | 2023 | 420,000 | — | 553,350 | 97,650 | 588,000 | — | 31,641 | 1,690,641 | | | 2022 | — | — | — | — | — | — | — | — | | | 2021 | | | | | | | | | | Dennis C. Schemm (9) Former Senior Vice President and Chief Financial Officer | 2023 | 198,838 | — | 838,100 | 147,900 | 0 | — | 23,279 | 1,208,117 | | | 2022 | 453,600 | — | 607,750 | 107,250 | 0 | — | 30,032 | 1,198,632 | | | 2021 | 405,000 | — | 499,163 | 88,088 | 567,000 | — | 30,087 | 1,589,338 | | William R. Gupp (10) Former Senior Vice President, Chief Legal Officer and Secretary | 2023 | 253,500 | — | 591,600 | 104,400 | 286,246 | — | 597,810 | 1,833,556 | | | 2022 | 434,000 | — | 534,905 | 94,395 | 0 | — | 30,041 | 1,093,341 | | | 2021 | 390,000 | — | 480,675 | 84,825 | 546,000 | — | 31,447 | 1,532,947 |
Summary Compensation Table
| (1) Amounts represent the grant date fair value determined in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 14, Stock-based Compensation, to the Company’s audited Consolidated Financial Statements in the 2023 Form 10-K, as filed with the SEC. Additional information regarding the design of the long-term equity incentive compensation plan, including a description of the performance-based conditions applicable to 2023 awards, is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Summary Compensation Table
| (2) Grants reflect stock appreciation rights (SARs) as further described in the “Long-Term Equity Incentive Compensation” part of the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Summary Compensation Table
| (3) Additional information regarding the design of the annual cash incentive plan, including a description of the performance-based conditions applicable to 2023 awards, is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Summary Compensation Table
| (4) See the “All Other Compensation Table” below for additional information on these amounts for 2023. |
Summary Compensation Table
| (5) Stock Awards to Mr. Fairbanks in 2023 include performance-based restricted stock units, for which the grant date value reported above based on performance at target is $1,637,500 and the maximum grant date value if the highest level of performance is achieved is $3,275,000. |
Summary Compensation Table
| (6) Stock Awards to Mr. Zambanini in 2023 include performance-based restricted stock units, for which the grant date value reported above based on performance at target is $617,500 and the maximum grant date value if the highest level of performance is achieved is $1,235,000. |
Summary Compensation Table
| (7) Ms. Lovcik’s employment began on October 23, 2023. Upon such appointment Ms. Lovcik was granted time based-restricted stock units valued at $300,000. Ms. Lovcik also received a sign-on cash bonus of $300,000. |
Summary Compensation Table
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 51 |
Summary Compensation Table
| SUMMARY COMPENSATION TABLE |
Summary Compensation Table
| (8) Ms. Fernandez employment began on December 7, 2021. Stock Awards to Ms. Fernandez in 2023 include performance-based restricted stock units, for which the grant date value reported above based on performance at target is $325,500 and the maximum grant date value if the highest level of performance is achieved is $651,000. |
Summary Compensation Table
| (9) Stock Awards to Mr. Schemm included performance-based restricted stock units, for which the grant date value reported above based on performance at target was $493,000. Mr. Schemm’s last day of employment was June 9, 2023, and pursuant to the 2014 Stock Incentive Plan all his unvested performance-based restricted stock units were forfeited on such date. |
Summary Compensation Table
| (10) Mr. Gupp retired from his position as Senior Vice President, Chief Legal Officer and Secretary on May 4, 2023. The amounts stated above provide his compensation for 2023 which includes the period he served as an executive officer and the period during which he was not an executive officer. Stock Awards to Mr. Gupp in 2023 include performance-based restricted stock units, for which the grant date value reported above based on performance at target is $348,000 and the maximum grant date value if the highest level of performance is achieved is $696,000. |
Summary Compensation Table
| 52 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Grants of Plan-Based Awards
Grants of Plan-Based Awards
Grants of Plan-Based Awards
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | All Other Awards; Number of Underlying Options (#) (4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (7) | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | | | Bryan H. Fairbanks | | 53,691 | 859,050 | 1,718,100 | | | | | | | | | | 2/14/2023 | | | | 2,402 | 28,829 | 57,658 | 20,180 | 18,067 | 56.80 | 3,275,000 | | Adam D. Zambanini | | 24,200 | 387,200 | 774,400 | | | | | | | | | | 2/14/2023 | | | | 906 | 10,871 | 21,743 | 7,610 | 6,813 | 56.80 | 1,235,000 | | Brenda Lovcik | | — | — | — | | | | | | | | | | 10/23/2023 | | | | — | — | — | 5,394 | — | — | 300,014 | | Amy M. Fernandez | | 18,375 | 294,000 | 588,000 | | | | | | | | | | 2/14/2023 | | | | 477 | 5,731 | 11,461 | 4,011 | 3,591 | 56.80 | 651,000 | | Dennis C. Schemm (5) | | — | — | — | | | | | | | | | | 2/14/2023 | | | | 720 | 8,680 | 17,359 | 6,076 | 5,439 | 56.80 | 986,000 | | William R. Gupp (6) | | 6,800 | 108,796 | 217,592 | | | | | | | | | | 2/14/2023 | | | | 510 | 6,127 | 12,254 | 4,289 | 3,840 | 56.80 | 696,000 |
Grants of Plan-Based Awards
| (1) Represents threshold, target and maximum payout levels under the annual cash incentive plan for 2023 performance. Additional information regarding the design of the annual cash incentive plan, including a description of the performance-based conditions applicable to 2023 awards, is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Grants of Plan-Based Awards
| (2) Represents threshold, target and maximum payout levels (number of shares) for performance-based restricted stock units granted in 2023. Additional information regarding the design of the long-term equity incentive compensation plan, including a description of the performance-based conditions applicable to 2023 awards, is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Grants of Plan-Based Awards
| (3) Represents number of shares of time-based restricted stock units granted in 2023. Additional information regarding the design of the long-term equity incentive compensation plan is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Grants of Plan-Based Awards
| (4) Represents number of stock appreciation rights granted in 2023. Additional information regarding the design of the long-term equity incentive compensation plan is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Grants of Plan-Based Awards
| (5) Mr. Schemm’s last day of employment was June 9, 2023. He did not receive a non-equity incentive award for 2023, and his unvested equity awards were forfeited on such date. |
Grants of Plan-Based Awards
| (6) Mr. Gupp retired from his position as Senior Vice President, Chief Legal Officer and Secretary on May 4, 2023 and he served as Legal Counsel starting May 5, 2023. The amount reflected above reflects his estimated futured payouts under non-equity incentive plan awards for his service as an executive officer. |
Grants of Plan-Based Awards
| (7) Amounts represent the grant date fair value determined in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 14, Stock-based Compensation, to the Company’s audited Consolidated Financial Statements in the 2023 Form 10-K. |
Grants of Plan-Based Awards
| 54 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
Outstanding Equity Awards at Fiscal-Year End
Outstanding Equity Awards at Fiscal-Year End
Outstanding Equity Awards at Fiscal-Year End
| Executive Officer and Grant Date | Option/SAR Awards | | | | Stock Awards | | | | | | Number of Securities Underlying Unexercised Options Exercisable (#) (2) (5) | Number of Securities Underlying Unexercised Options Unexercisable (#) (2) (5) | Option Exercise Price ($) | Option Expiration Date (3) | Number of Shares of Stock Not Vested (#) (2) (5) | Market Value of Shares of Stock Not Vested ($) (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (2) (5) (6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (4) | | Bryan H. Fairbanks | | | | | | | | | | 2/14/2018 | 4,832 | — | 28.11 | 2/14/2028 | — | — | — | — | | 2/13/2019 | 5,900 | — | 38.85 | 2/13/2029 | — | — | — | — | | 2/19/2020 | 5,136 | — | 50.83 | 2/19/2030 | — | — | — | — | | 2/17/2021 | 2,954 | 1,477 | 104.56 | 2/17/2031 | 1,708 | 141,405 | 2,440 | 202,008 | | 2/23/2022 | 3,688 | 7,374 | 82.01 | 2/23/2032 | 7,112 | 588,803 | 10,161 | 841,229 | | 2/14/2023 | — | 18,067 | 56.80 | 2/14/2033 | 20,180 | 1,670,702 | 28,829 | 2,386,753 | | Adam D. Zambanini | | | | | | | | | | 2/15/2017 | 2,170 | — | 17.52 | 2/15/2027 | — | — | — | — | | 2/14/2018 | 4,264 | — | 28.11 | 2/14/2028 | — | — | — | — | | 2/13/2019 | 5,900 | — | 38.85 | 2/13/2029 | — | — | — | — | | 2/19/2020 | 5,136 | — | 50.83 | 2/19/2030 | — | — | — | — | | 2/17/2021 | 1,271 | 635 | 104.56 | 2/17/2031 | 735 | 60,851 | 1,050 | 86,930 | | 2/23/2022 | 1,220 | 2,439 | 82.01 | 2/23/2032 | 2,352 | 194,722 | 3,361 | 278,257 | | 2/14/2023 | — | 6,813 | 56.80 | 2/14/2033 | 7,610 | 630,032 | 10,871 | 900,010 | | Brenda Lovcik | | | | | | | | | | 10/23/2023 | — | — | — | — | 5,394 | 446,569 | — | — | | Amy M. Fernandez | | | | | | | | | | 2/23/2022 | 517 | 1,032 | 82.01 | 2/23/2032 | 996 | 82,459 | 1,422 | 117,727 | | 2/14/2023 | — | 3,591 | 56.80 | 2/14/2033 | 4,011 | 332,071 | 5,731 | 474,470 | | Dennis C. Schemm(7) | — | — | — | — | — | — | — | — | | William R. Gupp | | | | | | | | | | 2/15/2017 | 9,548 | — | 17.52 | 2/15/2027 | — | — | — | — | | 2/14/2018 | 6,192 | — | 28.11 | 2/14/2028 | — | — | — | — | | 2/13/2019 | 5,298 | — | 38.85 | 2/13/2029 | — | — | — | — | | 2/19/2020 | 4,546 | — | 50.83 | 2/19/2030 | — | — | — | — | | 2/17/2021 | 1,091 | 545 | 104.56 | 2/17/2031 | 631 | 52,241 | 901 | 74,594 | | 2/23/2022 | 929 | 1,856 | 82.01 | 2/23/2032 | 1,790 | 148,194 | 2,558 | 211,777 | | 2/14/2023 | — | 3,840 | 56.80 | 2/14/2033 | 4,289 | 355,086 | 6,127 | 507,254 |
Outstanding Equity Awards at Fiscal-Year End
| (1) Represents number of securities underlying unexercised stock appreciation rights (SARs). Additional information regarding the design of the long-term equity incentive compensation plan is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Outstanding Equity Awards at Fiscal-Year End
| (2) The Company completed two-for-one stock splits payable in the form of a stock dividend on May 7, 2014 to stockholders of record on April 7, 2014, on June 18, 2018 to stockholders of record on May 23, 2018, and on September 14, 2020 to stockholders of record on August 19, 2020. The numbers shown above reflect numbers on a post-split basis. |
Outstanding Equity Awards at Fiscal-Year End
| (3) The term of each SAR is ten years. (Under the 2023 Stock Incentive Plan and 2014 Stock Incentive Plan, the term is extended by one year if the grantee dies in the tenth year of the term.) |
Outstanding Equity Awards at Fiscal-Year End
| (4) The value is calculated based on the $82.79 closing price of the Company’s common stock on the NYSE on December 29, 2023, the last market trading day of the year, times the number of restricted time-based units that are unvested (and at target with respect to performance-based restricted stock units). |
Outstanding Equity Awards at Fiscal-Year End
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 55 |
Outstanding Equity Awards at Fiscal-Year End
| OUTSTANDING EQUITY AWARDS AT FISCAL-YEAR END |
Outstanding Equity Awards at Fiscal-Year End
| (5) Vests in three equal annual installments beginning on (a) the first anniversary of the grant date for awards granted in 2021, (b) March 1, 2023 for awards granted in 2022 and (c) March 1, 2024 for awards granted in 2023. |
Outstanding Equity Awards at Fiscal-Year End
| (6) Represents target number of performance-based restricted stock units that vest over a 3-year time period based on performance against target EBITDA for 1 year, cumulative 2 years and cumulative 3 years, respectively. Additional information regarding the design of the long-term equity incentive compensation plan, including a description of the performance-based conditions, is included in the “Compensation Discussion and Analysis” section of this Proxy Statement. |
Outstanding Equity Awards at Fiscal-Year End
| (7) Mr. Schemm’s last day of employment was June 9, 2023. Pursuant to the 2014 Stock Incentive Plan, his unvested equity awards were forfeited on that date. |
Outstanding Equity Awards at Fiscal-Year End
| 56 | TREX COMPANY, INC. | 2024 PROXY STATEMENT |
2023 Option / SAR Exercises and Stock Vested
2023 Option / SAR Exercises and Stock Vested
2023 Option / SAR Exercises and Stock Vested
| | Option Awards (1) | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) (2) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) (2) | Value Realized on Vesting ($) (3) | | Bryan H. Fairbanks (4) | — | — | 13,259 | 720,985 | | Adam D. Zambanini (5) | — | — | 8,258 | 455,092 | | Brenda Lovcik(6) | — | — | — | — | | Amy M. Fernandez(7) | — | — | 498 | 25,099 | | Dennis C. Schemm (8) | 1,234 | 36,866 | 6,745 | 371,358 | | William R. Gupp (9) | 6,640 | 314,526 | 28,975 | 1,585,439 |
2023 Option / SAR Exercises and Stock Vested
| (1) Represents stock appreciation awards (SARs). Additional information regarding SARs is provided in the “Long-Term Equity Incentive Compensation” part of the “Compensation Discussion and Analysis” section of this Proxy Statement. |
2023 Option / SAR Exercises and Stock Vested
| (2) The Company completed two-for-one stock splits payable in the form of a stock dividend on September 14, 2020 to stockholders of record on August 19, 2020. The numbers shown above reflect numbers on a post-split basis. |
2023 Option / SAR Exercises and Stock Vested
| (3) The value is calculated based on the closing price of the Company’s common stock on the date of vesting (as set forth below in footnotes 3 - 6), times the number of vested shares. |
2023 Option / SAR Exercises and Stock Vested
| (4) The amount shown for “Stock Awards” reflects 6,592 restricted stock units that vested on February 14, 2023 at a market price of $56.80, 1,709 restricted stock units that vested on February 17, 2023 at a market price of $53.79, 1,401 restricted stock units that vested on February 19, 2023 at a market price of $53.79, and 3,557 restricted stock units that vested on March 1, 2023 at a market price of $50.40. |
2023 Option / SAR Exercises and Stock Vested
| (5) The amount shown for “Stock Awards” reflects 4,945 restricted stock units that vested on February 14, 2023 at a market price of $56.80, 735 restricted stock units that vested on February 17, 2023 at a market price of $53.79, 1,401 restricted stock units that vested on February 19, 2023 at a market price of $53.79, and 1,177 restricted stock units that vested on March 1, 2023 at a market price of $50.40. |
2023 Option / SAR Exercises and Stock Vested
| (6) Ms. Lovcik first date of employment was October 23, 2023. |
2023 Option / SAR Exercises and Stock Vested
| (7) The amount shown for “Stock Awards” reflects 498 restricted stock units that vested on March 1, 2023 at a market price of $50.40. |
2023 Option / SAR Exercises and Stock Vested
| (8) The amount shown for “Option Awards” reflects 1,234 SARs exercised on September 1, 2023 at a strike price of $42.88 and a market price of $72.75. The amount shown for “Stock Awards” reflects 3,984 restricted stock units that vested on February 14, 2023 at a market price of $56.80, 655 restricted stock units that vested on February 17, 2023 at a market price of $53.79, 1,089 restricted stock units that vested on February 19, 2023 at a market price of $53.79, and 1,017 restricted stock units that vested on March 1, 2023 at a market price of $50.40. |
2023 Option / SAR Exercises and Stock Vested
| (9) The amount shown for “Option Awards” reflects 2,213 SARs exercised on January 18, 2023 at a strike price of $5.49 and a market price of $50.72, and 2,214 SARs exercised on January 31, 2023 at a strike price of $5.49 and a market price of $52.72, and 2,213 SARs exercised on February 8, 2023 at a strike price of $5.49 and a market price of $55.12. The amount shown for “Stock Awards” reflects 4,344 restricted stock units that vested on February 14, 2023 at a market price of $56.80, 631 restricted stock units that vested on February 17, 2023 at a market price of $53.79, 1,240 restricted stock units that vested on February 19, 2023 at a market price of $53.79, 896 restricted stock units that vested on March 1, 2023 at a market price of $50.40, and 21,864 restricted stock units that vested on May 2, 2023 at a market price of $54.56. |
2023 Option / SAR Exercises and Stock Vested
| TREX COMPANY, INC. | 2024 PROXY STATEMENT | 57 |