DEF 14A of Insteel Industries Inc
Filed Jan 3, 2024 · FY20230001308179-24-000003
of Contents
| Director Compensation | | 41 | | Equity Compensation Plan Information | | 41 | | Compensation Committee Interlocks and Insider Participation | | 42 | | Item Number Three: | Ratification of the Appointment of Grant Thornton LLP as our Independent Registered Public Accounting Firm | 43 | | Board Recommendation | | 43 | | Fees Paid to Independent Registered Public Accounting Firm | | 43 | | Pre-Approval Policies and Procedures | | 44 | | Report of the Audit Committee | | 44 | | Certain Relationships and Related Person Transactions | | 45 | | Questions and Answers About the Annual Meeting | | 46 | | Other Information | | 50 | | Expenses of Solicitation | | 50 | | Householding | | 50 | | Shareholder Proposals for the 2025 Annual Meeting | | 51 | | Proposals for Inclusion in the Proxy Statement | | 51 | | Other Proposals | | 51 | | Delivery of Notice of a Proposal | | 51 |
Election of Directors
Election of Directors We typically elect approximately one-third of our directors each year to serve three-year terms. Our Board currently consists of seven directors. We are seeking the election of two director nominees: H.O. Woltz III and G. Kennedy (“Ken”) Thompson, each of whom have been nominated for three-year terms.
Election of Directors
| Information about our director nominees, continuing directors and executive officers can be found at pp. 17-19. |
The Audit Committee
The Audit Committee The Audit Committee is responsible for assisting the Board of Directors in fulfilling its oversight of:
The Executive Compensation Committee
The Executive Compensation Committee The Executive Compensation Committee is responsible for:
The Executive Compensation Committee
| • | reviewing and approving, for the Chief Executive Officer and other executive officers, annual base salary, annual incentive opportunity, long-term incentive opportunity and corporate goals and objectives applicable to compensation; | | • | annually evaluating our Chief Executive Officer’s performance in light of applicable goals and objectives; | | • | reviewing and making recommendations to the Board with respect to the compensation of non-management directors; | | • | reviewing, approving and administering our incentive compensation plans and equity-based compensation plans, including the sole authority for making awards under such plans; | | • | determining stock ownership guidelines for the executive officers and directors and monitoring compliance with such guidelines and administering our clawback policy; | | • | reviewing the Company’s incentive compensation arrangements to determine whether they encourage excessive risk-taking; | | • | reviewing the results of any shareholder advisory votes regarding our executive compensation and recommending to the Board how to respond to such votes; and | | • | recommending to the Board whether to have an annual, biannual or triennial shareholder advisory vote regarding executive compensation. |
The Executive Compensation Committee
The Executive Compensation Committee is also responsible for preparing a report on executive compensation that is to be included in our proxy statement relating to our Annual Meeting. This report is provided under “Executive Compensation Committee Report” on page 29.
Item Number One Election of Directors
Item Number One Election of Directors
Information Regarding Nominees, Continuing Directors and Executive Officers
Information Regarding Nominees, Continuing Directors and Executive Officers We have set forth below certain information regarding our nominees for director, our continuing directors and our executive officers. The age shown for each such person is his or her age on December 13, 2023, our record date.
Information Regarding Nominees, Continuing Directors and Executive Officers
| | Age | Director Since | Audit Committee | Executive Compensation Committee | Nominating and Governance Committee | Independent | | Abney S. Boxley III | 65 | 2018 | | | | Y | | Anne H. Lloyd | 62 | 2019 | | | | Y | | W. Allen Rogers II | 77 | 1986 | | | | Y | | Jon M. Ruth | 68 | 2016 | | | | Y | | Joseph A. Rutkowski | 68 | 2015 | | | | Y | | G. Kennedy Thompson | 73 | 2017 | | | | Y | | H. O. Woltz III | 67 | 1986 | | | | N |
Information Regarding Nominees, Continuing Directors and Executive Officers
| | Chair |
Information Regarding Nominees, Continuing Directors and Executive Officers
| www.insteel.com | INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 16 |
Nominees for Director with terms expiring at the 2027 Annual Meeting
Nominees for Director with terms expiring at the 2027 Annual Meeting
H. O. WOLTZ III
H. O. WOLTZ III
Age 67 Director since: February 4, 1986
Age 67 Director since: February 4, 1986 Mr. Woltz is our Chairman, President and Chief Executive Officer, having been employed by us and our subsidiaries in various capacities since 1978. He was named President and Chief Operating Officer in 1989, Chief Executive Officer in 1991 and Chairman of the Board in 2009. He served as our Vice President from 1988 to 1989 and as President of Rappahannock Wire Company, formerly a subsidiary of our Company, from 1981 to 1989. He also serves as President of Insteel Wire Products Company, a current subsidiary of our Company. Mr. Woltz served as President of Florida Wire and Cable, Inc., also formerly a subsidiary of our Company, until its merger with Insteel Wire Products Company in 2002. He has been employed by us for 45 years and has been our President for 34 years. Our Board determined that he should continue to serve as a director because he has an intimate knowledge of our products, manufacturing processes, customers and markets, and draws on that knowledge to provide the Board with detailed analysis and insight regarding the Company’s performance as well as extensive knowledge of our industry.
G. KENNEDY (“KEN”) THOMPSON
G. KENNEDY (“KEN”) THOMPSON
Age 73 Director since: September 6, 2017 INDEPENDENT
Age 73 Director since: September 6, 2017 INDEPENDENT Mr. Thompson retired in 2019 from Aquiline Capital Partners LLC, a private equity firm investing in the global financial services sector where he had been a partner since 2009. Prior to joining Aquiline, Mr. Thompson was Chairman, President and Chief Executive Officer of Wachovia Corporation, a publicly traded regional bank from 1999 to 2008. Previously, Mr. Thompson was the chairman of The Clearing House, The Financial Services Roundtable and the Financial Services Forum. He is a former president of the International Monetary Conference and was also president of the Federal Advisory Council of the Federal Reserve Board. Mr. Thompson currently serves as a director of two other publicly traded companies: Lending Tree, Inc. and Pinnacle Financial Partners, Inc. We determined Mr. Thompson should continue to serve as a director because of his financial expertise, public company leadership experience and executive management experience. Committee Memberships:
Age 73 Director since: September 6, 2017 INDEPENDENT
| • | Executive Compensation Committee | | • | Audit Committee (Chair) |
Age 73 Director since: September 6, 2017 INDEPENDENT
Current Directorships:
Age 73 Director since: September 6, 2017 INDEPENDENT
| • | Lending Tree, Inc. | | • | Pinnacle Financial Partners, Inc. |
Continuing Directors with terms expiring at the 2025 Annual Meeting
Continuing Directors with terms expiring at the 2025 Annual Meeting
JON M. RUTH
JON M. RUTH
Age 68 Director since: April 1, 2016 INDEPENDENT
Age 68 Director since: April 1, 2016 INDEPENDENT Mr. Ruth retired from Cargill Incorporated (“Cargill”), a global provider of food, agricultural, industrial and financial products and services in 2015, following 35 years of service to Cargill. Mr. Ruth served in various senior executive positions with Cargill, most recently as Vice President leading its SAP enterprise resource planning implementation across its businesses in Europe and North America from 2005 to 2015, as a director of North Star BlueScope Steel, a joint venture between Cargill and BlueScope Steel from 2004 to 2015, and as President of North Star Steel from 2003 to 2005. Our Board determined that he should continue to serve as director because of his extensive experience as a senior executive of a large multi-national company with specific experience in the steel industry. Committee Memberships:
Age 68 Director since: April 1, 2016 INDEPENDENT
| • | Executive Compensation Committee (Chair) | | • | Nominating and Governance Committee |
JOSEPH A. RUTKOWSKI
JOSEPH A. RUTKOWSKI
Age 68 Director since: September 18, 2015 INDEPENDENT
Age 68 Director since: September 18, 2015 INDEPENDENT Mr. Rutkowski has been a Principal at Winyah Advisors LLC, a management consulting firm, since 2010. Previously, Mr. Rutkowski spent 21 years at Nucor Corporation (“Nucor”), the largest steel producer in the United States. Mr. Rutkowski began his career with Nucor in 1989, most recently serving as Executive Vice President of Business Development, International and North America, for Nucor from 1998 until his retirement in 2010. He served as Vice President of Nucor from 1993 to 1998 and previously as General Manager of a number of Nucor steel mills. Our Board determined that he should continue to serve as a director because of his extensive background as a senior executive in the steel industry and because he also contributes his experience as a current director of Cenergy Holdings S.A., and Viohalco, S.A., both Belgian public companies, and as a former director of Cleveland Cliffs, Inc., a U.S. public company. Committee Memberships:
Age 68 Director since: September 18, 2015 INDEPENDENT
| • | Executive Compensation Committee | | • | Nominating and Governance Committee (Chair) |
Age 68 Director since: September 18, 2015 INDEPENDENT
Current Directorship:
Age 68 Director since: September 18, 2015 INDEPENDENT
| • | Cenergy Holdings S.A. | | • | Viohalco S.A. |
Age 68 Director since: September 18, 2015 INDEPENDENT
| INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 17 |
Continuing Directors with terms expiring at the 2026 Annual Meeting
Continuing Directors with terms expiring at the 2026 Annual Meeting
ABNEY S. BOXLEY III
ABNEY S. BOXLEY III
Age 65 Director since: April 1, 2018 INDEPENDENT
Age 65 Director since: April 1, 2018 INDEPENDENT Mr. Boxley served as President and Chief Executive Officer of Boxley Materials Company from 1988 through its acquisition by Summit Materials Inc. (“Summit Materials”) in 2016 and continuing until 2018. Mr. Boxley then served as Summit Materials’ Regional Vice President and later as its Executive Vice President until his retirement in 2021. He currently serves as a consultant to Summit Materials and as President of Boxley Family, LLC and Chairman of Boxley Ready Mix, LLC, both private companies. In addition to our Board, Mr. Boxley serves on the boards of two other public companies: Pinnacle Financial Partners, Inc. and RGC Resources, Inc., as well as on a number of non-profit boards. Our Board determined that Mr. Boxley should continue to serve as a director because of his in-depth knowledge of the construction aggregates business, a business that is related to ours, and because he brings to our Board his experience as a Chief Executive Officer of a substantial business enterprise and his experience as a director of two other public companies. Committee Memberships:
Age 65 Director since: April 1, 2018 INDEPENDENT
| • | Executive Compensation Committee | | • | Nominating and Governance Committee |
Age 65 Director since: April 1, 2018 INDEPENDENT
Current Directorships:
Age 65 Director since: April 1, 2018 INDEPENDENT
| • | Pinnacle Financial Partners, Inc. | | • | RGC Resources, Inc. |
W. ALLEN ROGERS II
W. ALLEN ROGERS II
Age 77 Director since: February 4, 1986 INDEPENDENT
Age 77 Director since: February 4, 1986 INDEPENDENT Mr. Rogers is a partner in Peter Browning Partners, LLC, a provider of advisory services to public company boards. He was a principal of Ewing Capital Partners, an investment banking firm which he co-founded, from 2003 until 2022. During 2002 and 2003, he was a Senior Vice President of Intrepid Capital Corporation, an investment banking and asset management firm. From 1998 until 2002, Mr. Rogers was President of Rogers & Company, Inc., a private investment banking boutique. From 1995 through 1997, Mr. Rogers served as a Managing Director of KPMG BayMark Capital LLC, and the investment banking practice of KPMG. Mr. Rogers served as Senior Vice President – Investment Banking of Interstate/Johnson Lane Corporation from 1986 to 1995 and as a member of that firm’s Board of Directors from 1990 to 1995. Mr. Rogers serves as our independent Lead Director. Our Board determined that Mr. Rogers should continue to serve as a director due to his expertise in public capital markets, investment banking and finance, some of which is attributable to his participation as an investment banker in our initial public offering, as well as his expertise in public company governance. Committee Memberships:
Age 77 Director since: February 4, 1986 INDEPENDENT
| • | Audit Committee | | • | Nominating and Governance Committee |
ANNE H. LLOYD
ANNE H. LLOYD
Age 62 Director since: April 16, 2019 INDEPENDENT
Age 62 Director since: April 16, 2019 INDEPENDENT Ms. Lloyd served as Executive Vice President and Chief Financial Officer of Martin Marietta Materials, Inc. (“Martin Marietta”), a publicly traded global supplier of building materials, from 2005 until her retirement in 2017. She joined Martin Marietta in 1998 as Vice President and Controller and was named Chief Accounting Officer in 1999. Ms. Lloyd currently serves as a director of Highwoods Properties, Inc. and as a director and non-executive chair of James Hardie Industries p.l.c. We believe that Ms. Lloyd should continue to serve as a director because of her financial expertise, her deep knowledge of the construction aggregates business, a business that is related to ours, and because of her extensive public-company experience, including as a director of two other public companies. Committee Memberships:
Age 62 Director since: April 16, 2019 INDEPENDENT
| • | Audit Committee | | • | Executive Compensation Committee |
Age 62 Director since: April 16, 2019 INDEPENDENT
Current Directorships:
Age 62 Director since: April 16, 2019 INDEPENDENT
| • | Highwoods Properties, Inc. | | • | James Hardie Industries p.l.c. |
Age 62 Director since: April 16, 2019 INDEPENDENT
| www.insteel.com | INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 18 |
Our Key Compensation Practices
| | A Committee comprised solely of independent directors | | | An independent compensation consultant that reports to and is directed by the Committee, and that provides no other services to the Company | | | A mandatory clawback policy for performance-based incentive compensation awarded to executive officers | | | Double triggers for change in control payments | | | Significant vesting periods for equity awards | | | Robust share ownership guidelines | | | No tax gross-ups of any kind, including for any excise taxes in conjunction with change in control payments | | | No significant perquisites | | | No repricing or replacing of underwater stock options without shareholder approval | | | Award caps that apply to both our ROCICP and to our long-term equity incentives | | | Mitigation of risk, in that responsible management of our assets is an integral component of the calculation of annual incentives payable under our ROCICP |
II. Overall Objectives
In formulating our approach to total compensation, the Committee utilizes peer group data to assess our executive officers’ compensation opportunities against those of similarly situated executives at other companies in similar industries, as well as comparably-sized companies in other industries (as described in “How We Make Executive Compensation Decisions” on page 24). We generally aim to provide total compensation opportunities to our executive officers that are near the median of our peer group. In keeping with our pay for performance culture, we expect our executive officers to deliver overall results that exceed the target level of performance in order to receive above median market compensation. Performance below the target level of performance is expected to result in below median market compensation.
II. Overall Objectives
| • | Align executives’ interests with those of our shareholders by providing annual incentives which are designed to reward the attainment of short-term goals, and long-term incentives which are designed to reward increases in our shareholder value over time. |
II. Overall Objectives
| • | Annual Incentive. Our primary objective is to create shareholder value. The annual incentive for our executive officers is based entirely on the Company’s return on capital, which is a measure that incorporates both the generation of earnings and the management of the Company’s balance sheet and is closely correlated with long-term shareholder returns. | | • | Long-Term Incentives. Our long-term incentives are entirely equity-based, comprised of 50% restricted stock units (“RSUs”) and 50% stock options. Use of these equity-based incentives ensures that their value is directly linked to changes in the price of our common stock and inherently performance-based. In addition, these awards build ownership among our executives and help to promote commonality of interest between our executives and our shareholders. |
II. Overall Objectives
| • | Encourage long-term commitment to the Company. |
II. Overall Objectives
We believe that the value provided by our executives increases over time as they become increasingly knowledgeable about our industry, customers and competitors, as well as our business processes, people and culture. We believe that providing incentives for executive officers to remain with the Company will enhance its long-term value. Accordingly, we include elements such as our Supplemental Retirement Plan (“SRP”) and Change in Control Severance (“CIC”) Agreements as components of our executive compensation program to provide such incentives. The full benefit under our SRP is not earned until an executive officer is employed by us for 30 years, and the minimum benefit under these agreements requires ten years of service. We believe that our long-term equity incentives, which fully vest over a three-year period, are also a key element of our effort to ensure retention of our key executives.
III. How We Make Executive Compensation Decisions
III. How We Make Executive Compensation Decisions The Committee, advised by its independent compensation consultant, is responsible for overseeing and approving the compensation program for our executive officers. Pearl Meyer & Partners, LLC (“Pearl Meyer”) serves as the Committee’s executive compensation consultant. Pearl Meyer was engaged by, and reports directly to the Committee, and the Committee has the sole authority to terminate or replace Pearl Meyer at any time. Pearl Meyer assists in the development of compensation programs for our executive officers and our non-employee directors by providing compensation information from our peer group companies, relevant market trend data, information on current issues in the regulatory environment, recommendations for program design and best practices and corporate governance guidance. The Committee realizes that it is extremely valuable to receive objective advice from its compensation advisors. Prior to the retention of a compensation consultant or any other external advisor, and from time to time as the Committee deems appropriate (but at least annually), the Compensation Committee assesses the independence of the advisor from management, taking into consideration all factors relevant to the advisor’s independence, including the factors specified in NYSE listing standards. The Committee has assessed the independence of Pearl Meyer based on these criteria and concluded that Pearl Meyer’s work for the Committee does not raise any conflict of interest. Pearl Meyer provides the Committee and our Chief Executive Officer with information about the compensation competitiveness of our executive officers. Our Chief Executive Officer uses this information to make recommendations to the Committee regarding compensation of these officers, other than himself, and Pearl Meyer provides guidance to the Committee about those recommendations. Pearl Meyer also makes independent recommendations to the Committee regarding the compensation of our Chief Executive Officer without the involvement of management. The Committee uses this information and considers these recommendations in making decisions about executive compensation for all our executive officers. All decisions regarding compensation of our executive officers are made solely by the Committee. The Committee does not generally make regular annual adjustments in pay. Instead, the Committee uses judgment when making compensation decisions and reviews executive pay from a holistic perspective, including reference to compensation peer group pay practices and norms, general industry pay levels as gathered from publicly-available survey sources, individual performance, experience, strategic importance of the position to Insteel and internal equity considerations. Other than adjustments relating to Mr. Jafroodi’s promotion to Vice President, Chief Financial Officer and Treasurer in January 2023, our named executive officers’ compensation was last adjusted in the third quarter of fiscal 2022. To determine what constitutes a “competitive” compensation package, the Committee generally considers the total compensation opportunities for executives at our peer group companies. Because of significant differences in the pay practices of our peer group companies, the Committee does not view this market data as a prescriptive determinant of individual compensation. Rather, it is used by the Committee as a general
III. How We Make Executive Compensation Decisions
guide in its decisions on the amount and mix of total target direct compensation. Ultimately, executive officer compensation is based on the Committee’s judgment, considering factors described elsewhere in this Compensation Discussion and Analysis that are particular to Insteel and our executive officers, including, most importantly, actual performance. The custom peer group constructed by the Committee and used by Pearl Meyer to benchmark the most recently implemented compensation changes consisted of the following publicly traded companies:
Base Salaries
| • | the executive’s performance; | | • | the executive’s responsibilities; | | • | the strategic importance of the position; | | • | competitive market compensation information; | | • | skills, experience and the amount of time the executive has served in the position; and | | • | the Company’s recent performance and current business outlook. |
Annual Incentives
Annual Incentives The annual incentive opportunity for our executive officers is based on our financial performance pursuant to the terms of our ROCICP. All of our sales and administrative employees also participate in this plan, with target annual incentive payments ranging from 10% to 100% of base salary and payments capped at twice the target incentive level. Based on peer group information, the Committee believes our annual incentive opportunity for executive officers at targeted award levels, when added to base salary levels, brings potential total cash compensation near the median total cash compensation for our peer group. When the annual incentive is at maximum levels, reflecting excellent Company performance, the potential total cash compensation would be above the median for our peer group. The Committee believes this balance between base salaries and annual cash incentives is appropriate, in that our executive officers’ cash compensation will be near the median for our peer group only if our short-term goals are achieved, and our goal is that such compensation exceeds the median in the event of superior performance during the fiscal year. For fiscal 2023, the Committee established our weighted average cost of capital (“WACC”), for purposes of calculating incentive awards under the ROCICP, to be 9.5% based on a weighted average of (i) our after-tax interest rate for debt and (ii) the after-tax return that we believe would be expected by a prudent investor in our stock. Attaining a return equal to our WACC would have resulted in the payout of incentive compensation at the target bonus level. The performance level at which the maximum incentive payment would be earned was set at 14.5% of the beginning of the year invested capital (WACC + 5%) while the minimum threshold at which an incentive payment would be earned was set at 4.5% of the beginning of year invested capital (WACC - 5%). The actual return on capital as calculated under our ROCICP for fiscal 2023 was 9.1% resulting in incentive payments to our executive officers at 93.5% of the targeted amounts. The target, maximum and actual payout levels for each named executive officer under the ROCICP for fiscal 2023 are set forth below:
Annual Incentives
| Executive Officer | Target (% of base salary) | Target | Maximum | Actual | | H. O. Woltz III | 100% | $700,000 | $1,400,000 | $654,500 | | Scot R. Jafroodi | 60% | $186,000 | $372,000 | $153,341* | | Mark A. Carano | 60% | $222,000 | $444,000 | —** | | Richard T. Wagner | 60% | $222,000 | $444,000 | $207,570 | | James R. York | 60% | $162,000 | $324,000 | $151,470 | | James F. Petelle | 60% | $165,000 | $330,000 | $154,275 |
Annual Incentives
| * Mr. Jafroodi’s ROCICP target opportunity was increased from 40% of base salary to 60% of base salary as a result of his promotion to Vice President, Chief Financial Officer and Treasurer effective January 2, 2023. His actual fiscal 2023 ROCICP payment was prorated to reflect the change in his base salary and ROCICP opportunity as a result of this promotion. | | ** Mr. Carano resigned effective December 30, 2022, and was ineligible to receive an ROCICP payment for fiscal 2023. |
Annual Incentives
For fiscal 2024, the Committee determined that the WACC, for purposes of the ROCICP, will be 10.0% based on current estimates of the Company’s cost of debt and equity and its anticipated capital structure. The Committee believes that return on capital is the most appropriate metric for our executives’ annual incentive opportunity in that it is driven off both the generation of earnings and responsible management of our balance sheet, and it is closely correlated with the creation of shareholder value. Since responsible management of our assets is an integral component of the annual incentive calculation, the Committee believes that use of this program inherently restrains excessive risk-taking on the part of management. The amounts earned annually under the ROCICP are established strictly by formula. The ROCICP does not provide for adjustments to the annual incentive based on subjective factors.
Annual Incentives
| www.insteel.com | INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 26 |
Annual Incentives
Pursuant to the terms of our Clawback Policy for Executive Officers, if we are required to file an accounting restatement with the SEC to correct an error in previously issued financial statements, then we will recover from our current and former executive officers any incentive-based compensation received by those executives during the last three fiscal years that exceeds the amount of incentive-based compensation that otherwise would have been received by the executive had it been determined based on the restated amounts, computed without regard to any taxes paid.
Long-Term Incentives
Long-Term Incentives Our executives’ long-term incentive opportunity is entirely equity-based, consisting of 50% RSUs and 50% stock options. The targeted value of the long-term incentives for each executive officer during fiscal 2023 is set forth below:
Long-Term Incentives
| Executive Officer | Target Value | | H. O. Woltz III | $700,000 | | Scot R. Jafroodi | $250,000* | | Mark A. Carano | $250,000** | | Richard T. Wagner | $275,000 | | James R. York | $150,000 | | James F. Petelle | $150,000*** |
Long-Term Incentives
| * Reflects Mr. Jafroodi’s target long-term incentive opportunity effective January 2, 2023, when he was promoted to Vice President, Chief Financial Officer and Treasurer and became a named executive officer. | | ** Mr. Carano resigned effective December 30, 2022 and did not receive any long-term incentive awards in fiscal 2023. | | *** Mr. Petelle retired effective September 30, 2023 and received pro-rated long-term incentive awards for fiscal 2023. |
Long-Term Incentives
The RSUs and stock options are awarded in two equal tranches, with the first tranche granted on the date of our annual meeting of shareholders each February and the second tranche effective on the date that is six months after the date of such meeting. These dates are typically about three weeks after the announcement of our quarterly financial results. The Committee believes that providing these awards on predetermined dates that closely follow the reporting of our quarterly financial results is the most appropriate approach. RSUs vest on the third anniversary of the grant date and stock options vest one-third each year on the anniversary of the grant date. Stock options and RSUs are subject to forfeiture if an executive officer leaves our employ for reasons other than death, disability or retirement prior to vesting. The number of RSUs to be awarded to our executive officers on each grant date is calculated based on the closing stock price on such date. The strike price of the stock options to be awarded to our executive officers on each grant date is based on the closing price on such date and the number of options to be granted is calculated based on their aggregate fair value on that date. Since the value of each grant of options and RSUs is pre-determined by the Committee, and the awards occur on pre-established dates, management does not participate in the process of granting these options and RSUs.
Change in Control Severance (“CIC”) Agreements
Change in Control Severance (“CIC”) Agreements We have entered into CIC Agreements with each of our executive officers. These agreements specify the terms of separation if termination of employment occurs following a change in control. These agreements are considered “double-trigger” since no benefits are payable under them unless both a change in control and loss of employment occur. The initial term of each agreement is two years, and the agreements automatically renew for successive one-year terms unless we or the executive officer provides notice of termination. The agreements do not provide assurances of continued employment, nor do they specify the terms of an executive officer’s termination should the termination occur in the absence of a change in control. These agreements are consistent with the Committee’s overall objective of aligning the interests of executive officers and shareholders in that they provide protection to the executive officers in the event of job loss following a transaction. Absent this protection, the executive may be distracted by personal uncertainties and risks in the event of a proposed transaction or may not vigorously pursue certain transactions that would benefit shareholders due to potential negative personal consequences. Under the terms of these agreements, in the event of termination within two years of a change in control, Mr. Woltz would receive severance benefits equal to two times base salary, plus two times the average bonus for the prior three years and the continuation of health and welfare benefits (including payment of premiums for “COBRA” coverage) for two years following termination. Messrs. Jafroodi, Carano, Wagner, York and Petelle would receive severance benefits equal to one times base salary, plus one times the average bonus for the prior three years and the continuation of health and welfare benefits (including payment of premiums for “COBRA” coverage) for one year following termination. In addition, all stock options and RSUs outstanding immediately prior to termination would vest and, in the case of options, become exercisable for the remainder of the term provided for in the original agreement relating to each grant of options. Finally, we would pay up to $15,000 for outplacement services for each of our executive officers. Any termination benefits payable under a CIC Agreement are subject to reduction, if necessary, to avoid the application of the “golden parachute” rules of Section 280G and the excise tax imposed under Section 4999 of the Internal Revenue Code. The agreements do not provide for a “gross up” of any payments to cover any tax liability that may be imposed on our executive officers. The CIC Agreements for Mr. Carano and Mr. Petelle terminated upon their departures from the Company on December 30, 2022, and September 30, 2023, respectively. The Committee periodically reviews the payments that could be received by executive officers pursuant to their respective Severance CIC Agreements but does not consider the amount of the potential benefits under these agreements when it establishes the elements of each executive officer’s ongoing compensation.
Severance Agreement
Severance Agreement We have a Severance Agreement with Mr. Woltz. The Severance Agreement provides certain termination benefits if we terminate the employment of Mr. Woltz without cause (as defined in the Severance Agreement). The Severance Agreement provides for automatic one-year renewal terms unless we or Mr. Woltz provide prior notice of termination. Mr. Woltz would not be entitled to termination benefits under a severance agreement (i) if his employment with us is terminated for cause, or (ii) if he is entitled to receive benefits under his CIC Agreement described above. Under the terms of the Severance Agreement, if Mr. Woltz was terminated without cause, he would receive a lump sum severance payment equal to one and one-half times his annual base salary and the continuation of health and welfare benefits (including payments of premiums for “COBRA” coverage) for 18 months following termination. In addition, all stock options and RSUs outstanding immediately prior to termination would vest and, in the case of options, become exercisable for the remainder of the term provided for in the original agreement relating to each grant of options. Finally, we would pay up to $15,000 for outplacement services for Mr. Woltz. Any termination benefits payable under Mr. Woltz’s Severance Agreement are subject to reduction, if necessary, to avoid the application of the “golden parachute” rules of Section 280G and the excise tax imposed under Section 4999 of the Internal Revenue Code. We first entered into the Severance Agreement with Mr. Woltz in December 2004. At that time, the Committee concluded that Mr. Woltz, who was leading efforts to restructure the Company, required additional protection in the event that he lost his position under circumstances in which he would not be entitled to benefits under his CIC Agreement.
Summary Compensation Table
Summary Compensation Table The following table and accompanying footnotes provide information regarding compensation of our Chief Executive Officer, our current Chief Financial Officer, our former Chief Financial Officer and our three other most highly compensated executive officers for the fiscal year ended September 30, 2023.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Stock Awards(4) ($) | Option Awards(4) ($) | Non-Equity Incentive Plan Compensation(5) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(6) ($) | All Other Compensation(7) ($) | Total ($) | | H. O. Woltz III President and CEO | 2023 | 700,000 | 349,992 | 350,009 | 654,500 | — | 92,011 | 2,146,512 | | | 2022 | 681,731 | 324,990 | 325,011 | 1,067,500 | — | 104,602 | 2,503,834 | | | 2021 | 665,769 | 300,024 | 300,002 | 932,077 | 195,092 | 82,784 | 2,475,749 | | Scot R. Jafroodi(1) Vice President, CFO and Treasurer | 2023 | 293,750 | 125,015 | 125,009 | 153,341 | 24,112 | 24,503 | 745,730 | | Mark A. Carano(2) Former Senior Vice President, CFO and Treasurer | 2023 | 92,500 | — | — | — | — | 24,716 | 117,216 | | | 2022 | 351,731 | 125,004 | 124,989 | 422,077 | 11,679 | 28,560 | 1,064,040 | | | 2021 | 345,000 | 125,021 | 124,993 | 414,000 | 55,532 | 86,350 | 1,150,896 | | Richard T. Wagner Senior Vice President and COO | 2023 | 370,000 | 137,479 | 137,493 | 207,570 | 24,701 | 42,764 | 920,007 | | | 2022 | 355,385 | 137,506 | 137,500 | 426,462 | — | 61,754 | 1,118,607 | | | 2021 | 345,385 | 137,499 | 137,500 | 414,462 | 152,587 | 40,539 | 1,227,972 | | James R. York Senior Vice President Sourcing and Logistics | 2023 | 270,000 | 75,003 | 75,001 | 151,470 | 31,181 | 27,106 | 629,761 | | | 2022 | 255,385 | 74,988 | 74,996 | 306,462 | 15,904 | 27,097 | 754,832 | | | 2021 | 245,385 | 54,997 | 54,999 | 294,462 | 45,116 | 21,994 | 716,953 | | James F. Petelle(3) Former Vice President Administration, Secretary and CLO | 2023 | 275,000 | 37,505 | 37,497 | 154,275 | 19,862 | 35,641 | 559,780 | | | 2022 | 256,731 | 74,988 | 74,996 | 308,077 | 5,186 | 39,164 | 759,142 | | | 2021 | 244,231 | 75,010 | 74,998 | 293,077 | 70,717 | 35,092 | 793,125 |
SUMMARY COMPENSATION TABLE
| (1) Mr. Jafroodi was promoted to Vice President, Chief Financial Officer and Treasurer effective January 2, 2023. | | (2) Mr. Carano resigned effective December 30, 2022. | | (3) Mr. Petelle retired effective September 30, 2023. | | (4) The amounts reported in these columns reflect the aggregate grant date fair value of stock and option awards granted during each fiscal year and do not reflect the actual value, if any, that may be received by executive officers for their awards. Our assumptions used in the calculation of these amounts for fiscal 2023 are set forth in Note 9 of our consolidated financial statements as reported in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Dividend equivalents paid on RSUs are currently paid in cash and are reported in the “All Other Compensation” column. | | (5) The amounts reported in this column are the annual cash incentive amounts earned for such fiscal years under our ROCICP. | | (6) Amounts reported for each fiscal year represent the increase in the actuarial present value during such fiscal year of the accumulated benefits accrued under our Supplemental Retirement Plan (“SRP”) determined using interest rate assumptions consistent with those set forth in Note 11 of our consolidated financial statements as reported in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. The actuarial present values of the accumulated benefits of Mr. Woltz and Mr. Carano decreased in fiscal 2023 as follows: Mr. Woltz, $97,485 and Mr. Carano, $87,914. The amounts in this column were calculated based on the following discount rate assumptions as of the end of each fiscal year: 2021, 2.75%, 2022, 4.5% and 2023, 5.25%. Executive officers may not be fully vested in the amounts reflected herein. We do not offer any program for deferring compensation and therefore there were no above-market earnings on deferrals that were required to be reported in this column. |
SUMMARY COMPENSATION TABLE
| www.insteel.com | INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 30 |
SUMMARY COMPENSATION TABLE
| (7) Amounts shown for fiscal 2023 include (i) dividend equivalents paid on RSUs; (ii) the current dollar value attributed by the IRS to the death benefit program we provide to our executive officers; and (iii) the amount of matching funds paid into our 401(k) retirement savings plan on behalf of the executive officers. The following table shows the amount of each component described above and included in the All Other Compensation column: |
SUMMARY COMPENSATION TABLE
| Name | Dividend Equivalents Paid on RSUs ($) | Death Benefit Value ($) | 401(k) Matching Payments ($) | | H. O. Woltz III | 67,233 | 6,858 | 17,920 | | Scot R. Jafroodi | 12,980 | 1,242 | 10,281 | | Mark A. Carano | 20,895 | 334 | 3,487 | | Richard T. Wagner | 30,487 | 3,564 | 8,713 | | James R. York | 13,431 | 5,211 | 8,464 | | James F. Petelle | 16,593 | 11,124 | 7,924 |
Fiscal 2023 Grants of Plan-Based Awards
Fiscal 2023 Grants of Plan-Based Awards The following table provides information regarding (1) annual incentive compensation payments to our executive officers under our ROCICP and (2) the value of stock options and RSUs awarded to our executive officers during fiscal 2023. Our practice is to grant equity awards on two dates each fiscal year: the date of our annual meeting of shareholders and the date that is six months after such meeting. Stock options have a ten-year term and vest in equal annual increments of one-third of the amount of each grant on the first, second and third anniversaries of the grant date. Options are priced at the closing price of our stock on the date of grant, as reported on NYSE. RSUs are settled in shares of our common stock at the end of three years. Our executive officers do not have the right to vote the shares represented by RSUs and may not sell or transfer RSUs or use them as collateral. Our executive officers receive dividend equivalents in cash on outstanding RSUs. Stock options and RSUs are subject to forfeiture if an executive officer leaves our employ for reasons other than death, disability or retirement prior to vesting. For purposes of our equity award agreements, “retirement” means the executive’s voluntary termination of employment on or after age 55 and completing ten years of service. Pursuant to the Severance Agreement we have with Mr. Woltz, vesting of his stock options and RSUs will accelerate in connection with a termination without cause. For all our executive officers, if employment with us terminates due to death, disability or retirement, or without cause in connection with a change in control pursuant to the terms of our CIC Agreements, the vesting of their stock options and RSUs will accelerate. See “Potential Payments Upon Termination or Change in Control.”
Fiscal 2023 Grants of Plan-Based Awards
| INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 31 |
FISCAL 2023 GRANTS OF PLAN-BASED AWARDS
FISCAL 2023 GRANTS OF PLAN-BASED AWARDS
FISCAL 2023 GRANTS OF PLAN-BASED AWARDS
| | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number | All Other Option Awards: Number | Exercise or Base Price of | Grant Date Fair Value of Stock | | Name | Grant Date(1) | Threshold ($) | Target ($) | Maximum ($) | of Shares of Stock or Units (#) | of Securities Underlying Options (#) | Option Awards ($/Share)(3) | and Option Awards ($)(4) | | H. O. Woltz III | N/A | | 700,000 | 1,400,000 | | | | | | | 2/14/2023 | | | | 5,781 | | | 174,991 | | | 2/14/2023 | | | | | 13,238 | 30.27 | 174,964 | | | 8/14/2023 | | | | 5,647 | | | 175,001 | | | 8/14/2023 | | | | | 13,148 | 30.99 | 175,045 | | Scot R. Jafroodi(5) | N/A | | 98,000(6) | 196,000(6) | | | | | | | N/A | | 186,000(7) | 372,000(7) | | | | | | | 2/14/2023 | | | | 2,065 | | | 62,508 | | | 2/14/2023 | | | | | 4,728 | 30.27 | 62,488 | | | 8/14/2023 | | | | 2,017 | | | 62,507 | | | 8/14/2023 | | | | | 4,696 | 30.99 | 62,521 | | Mark A. Carano | N/A | | 222,000 | 444,000 | — | — | — | — | | Richard T. Wagner | N/A | | 222,000 | 444,000 | | | | | | | 2/14/2023 | | | | 2,271 | | | 68,743 | | | 2/14/2023 | | | | | 5,200 | 30.27 | 68,728 | | | 8/14/2023 | | | | 2,218 | | | 68,736 | | | 8/14/2023 | | | | | 5,165 | 30.99 | 68,765 | | James R. York | N/A | | 162,000 | 324,000 | | | | | | | 2/14/2023 | | | | 1,239 | | | 37,505 | | | 2/14/2023 | | | | | 2,837 | 30.27 | 37,497 | | | 8/14/2023 | | | | 1,210 | | | 37,498 | | | 8/14/2023 | | | | | 2,817 | 30.99 | 37,504 | | James F. Petelle | N/A | | 165,000 | 330,000 | | | | | | | 2/14/2023 | | | | 1,239 | | | 37,505 | | | 2/14/2023 | | | | | 2,837 | 30.27 | 37,497 |
FISCAL 2023 GRANTS OF PLAN-BASED AWARDS
| (1) The awards with “N/A” in the Grant Date column represent awards under our Return on Capital Incentive Compensation Plan or ROCICP. | | (2) Our ROCICP is considered a non-equity incentive plan and is discussed above under “Compensation Discussion and Analysis – Elements of Compensation.” There is no threshold amount payable under the program. The amounts shown in the “Target” column reflect each executive officer’s target bonus percentage of base salary set by the Executive Compensation Committee for fiscal 2023. The amounts shown in the “Maximum” column reflect the maximum amount payable to each executive officer under the program based on his target bonus percentage. | | (3) For each option, the exercise price per share is the closing price of our common stock on NYSE on the grant date. | | (4) These amounts represent the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, excluding the effect of estimated forfeitures. The actual value an executive officer may receive depends on the market price of our stock, and there can therefore be no assurance that amounts reflected in this column will actually be realized. | | (5) Mr. Jafroodi served as our Corporate Controller and Chief Accounting Officer at the beginning of our 2023 fiscal year. At the time of his promotion to Vice President, Chief Financial Officer and Treasurer on January 2, 2023, his base salary was increased, and his target and maximum payouts under the ROCICP as a percentage of his base salary were modified. His actual fiscal 2023 ROCICP payment was determined on a pro-rata basis to reflect the time during which he served in each of those roles. | | (6) Target and maximum payouts as percentage of base salary from October 2, 2022 to January 1, 2023. | | (7) Target and maximum payouts as a percentage of base salary from January 2, 2023 to September 30, 2023. |
Outstanding Equity Awards at Fiscal Year End 2023
Outstanding Equity Awards at Fiscal Year End 2023 The following table provides information regarding unexercised stock options and unvested RSUs held by our executive officers as of September 30, 2023, the last day of fiscal 2023. All values in the table are based on a market value of our common stock of $32.46, the closing price reported on NYSE on September 29, 2023, the last trading day during fiscal 2023.
Outstanding Equity Awards at Fiscal Year End 2023
| www.insteel.com | INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 32 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
| | Option Awards | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Option (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of Units of Stock That Have Not Vested (#)(2) | Market Value of Units of Stock That Have Not Vested ($) | | H. O. Woltz III | 8,643 | — | 34.49 | 8/11/2026 | 29,340 | 952,376 | | | 10,981 | — | 37.06 | 2/7/2027 | | | | | 14,340 | — | 29.69 | 2/13/2028 | | | | | 10,534 | — | 41.85 | 8/13/2028 | | | | | 6,281 | — | 21.57 | 2/12/2029 | | | | | 15,408 | — | 18.25 | 8/12/2029 | | | | | 13,532 | — | 22.09 | 2/11/2030 | | | | | 16,949 | — | 19.86 | 8/11/2030 | | | | | 8,110 | 4,055 | 29.43 | 2/16/2031 | | | | | 5,771 | 2,885 | 41.87 | 8/16/2031 | | | | | 3,236 | 6,473 | 38.54 | 2/15/2032 | | | | | 4,152 | 8,304 | 32.77 | 8/15/2032 | | | | | — | 13,238 | 30.27 | 2/14/2033 | | | | | — | 13,148 | 30.99 | 8/14/2033 | | | | Mark A. Carano | — | — | — | — | — | — | | Scot R. Jafroodi | 3,165 | — | 23.95 | 2/11/2026 | 7,531 | 244,456 | | | 2,377 | — | 34.49 | 8/11/2026 | | | | | 2,013 | — | 37.06 | 2/7/2027 | | | | | 2,951 | — | 26.75 | 8/7/2027 | | | | | 2,629 | — | 29.69 | 2/13/2028 | | | | | 1,931 | — | 41.85 | 8/13/2028 | | | | | 3,455 | — | 21.57 | 2/12/2029 | | | | | 4,237 | — | 18.25 | 8/12/2029 | | | | | 3,721 | — | 22.09 | 2/11/2030 | | | | | 3,107 | — | 19.86 | 8/11/2030 | | | | | 1,487 | 743 | 29.43 | 2/16/2031 | | | | | 1,058 | 529 | 41.87 | 8/16/2031 | | | | | 593 | 1,187 | 38.54 | 2/15/2032 | | | | | 889 | 1,780 | 32.77 | 8/15/2032 | | | | | — | 4,728 | 30.27 | 2/14/2033 | | | | | — | 4,696 | 30.99 | 8/14/2033 | | | | Richard T. Wagner | 4,828 | — | 41.85 | 8/13/2028 | 12,349 | 400,849 | | | 2,589 | — | 19.86 | 8/11/2030 | | | | | — | 1,859 | 29.43 | 2/16/2031 | | | | | 2,645 | 1,322 | 41.87 | 8/16/2031 | | | | | 1,483 | 2,967 | 38.54 | 2/15/2032 | | | | | 1,631 | 3,262 | 32.77 | 8/15/2032 | | | | | — | 5,200 | 30.27 | 2/14/2033 | | | | | — | 5,165 | 30.99 | 8/14/2033 | | | | James R. York | 1,931 | — | 41.85 | 8/13/2028 | 6,157 | 199,856 | | | 3,455 | — | 21.57 | 2/12/2029 | | | | | 4,237 | — | 18.25 | 8/12/2029 | | | | | 3,721 | — | 22.09 | 2/11/2030 | | | | | 3,107 | — | 19.86 | 8/11/2030 | | | | | 1,487 | 743 | 29.43 | 2/16/2031 | | | | | 1,058 | 529 | 41.87 | 8/16/2031 | | | | | 809 | 1,618 | 38.54 | 2/15/2032 | | | | | 889 | 1,780 | 32.77 | 8/15/2032 | | | | | — | 2,837 | 30.27 | 2/14/2033 | | | | | — | 2,817 | 30.99 | 8/14/2033 | | | | James F. Petelle(3) | 2,745 | — | 37.06 | 12/29/2023 | — | — | | | 2,633 | — | 41.85 | 12/29/2023 | | | | | 1,014 | — | 29.43 | 12/29/2023 | | | | | 2,164 | — | 41.87 | 12/29/2023 | | | | | 2,427 | — | 38.54 | 12/29/2023 | | | | | 2,669 | — | 32.77 | 12/29/2023 | | | | | 2,837 | — | 30.27 | 12/29/2023 | | |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
| (1) All of these options have become exercisable or will become exercisable as to one-third of the total number of shares covered by such option on each of the first, second and third anniversary of the grant date. The grant date in each case is ten years prior to the option expiration date. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
| INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 33 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
| (2) These RSUs will vest on the third anniversary of the date of grant. The number of shares that will vest on dates subsequent to the end of fiscal 2023 is shown in the following chart. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
| | 2/16/2024 | 8/16/2024 | 2/15/2025 | 8/15/2025 | 2/14/2026 | 8/14/2026 | | H.O. Woltz III | 5,097 | 3,583 | 3,892 | 5,340 | 5,781 | 5,647 | | Scot R. Jafroodi | 934 | 657 | 714 | 1,144 | 2,065 | 2,017 | | Mark A. Carano | — | — | — | — | — | — | | Richard T. Wagner | 2,336 | 1,642 | 1,784 | 2,098 | 2,271 | 2,218 | | James F. Petelle | — | — | — | — | — | — | | James R. York | 934 | 657 | 973 | 1,144 | 1,239 | 1,210 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2023
| (3) All of Mr. Petelle’s unvested stock options and RSUs immediately vested upon his retirement on September 30, 2023. His stock options remained exercisable for 90 days following his retirement. Pursuant to the limitations imposed by Section 409A of the Internal Revenue Code, the shares underlying his RSUs will be distributed to him six months following his retirement date. |
Options Exercised and Stock Vested During Fiscal Year 2023
Options Exercised and Stock Vested During Fiscal Year 2023 The following table provides information regarding compensation earned by our executive officers as a result of vesting of RSUs and exercise of stock options during fiscal 2023.
Options Exercised and Stock Vested During Fiscal Year 2023
| | Option Awards | | Stock Awards | | | Name | No. of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | No. of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | H. O. Woltz III | — | — | 14,343 | 435,424 | | Scot R. Jafroodi | — | — | 2,630 | 79,841 | | Mark A. Carano | 4,708 | 45,809 | — | — | | Richard T. Wagner | 11,079 | 120,252 | 6,574 | 199,573 | | James R. York | — | — | 2,630 | 79,841 | | James F. Petelle | 11,729 | 123,231 | 3,586 | 108,862 |
Pension Benefits
Pension Benefits Under our SRP, which is implemented through individual agreements, we provide supplemental retirement benefits to our executive officers which provide for payments to them for a 15-year period beginning on the later of their (i) retirement or (ii) reaching age 65. The maximum annual benefit payable under the SRP is equal to 50% of the executive officer’s average annual base salary for the five consecutive years in which he received the highest salary during the ten years prior to retirement. Only base salary is included in the calculation of the benefit under the SRP. To receive the maximum benefit under the SRP, the executive officer must be employed by us for at least 30 years. An executive officer will receive reduced benefits under the SRP if he is employed by us for at least ten years and retires at or after reaching age 55. Since Mr. Woltz and Mr. Wagner have been employed by us for 30 years and have reached 55 years of age, their benefits under the SRP have fully vested. Mr. Petelle met the minimum requirement for reduced retirement benefits under the SRP and was eligible to receive benefits upon his retirement. Mr. Carano resigned effective December 30, 2022 prior to vesting in any portion of his SRP benefit and therefore forfeited all benefits under the plan. For more information regarding the SRP, see the discussion above under the “Compensation Discussion and Analysis – Elements of Compensation” section of this proxy statement. Assumptions used in the calculation of the amounts shown in the following chart are set forth in Note 11 of our consolidated financial statement as reported in our Annual Report on Form 10-K for fiscal 2023. The following table shows the actuarial present value of the accumulated benefit as of September 30, 2023 payable at, following or in connection with retirement to each of our executive officers, including the number of years of service credited to each.
Pension Benefits
| www.insteel.com | INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 34 |
FISCAL 2023 PENSION BENEFITS
FISCAL 2023 PENSION BENEFITS
FISCAL 2023 PENSION BENEFITS
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | | H. O. Woltz III | SRP | 45 | 3,511,092 | — | | Scot R. Jafroodi | SRP | 18 | 441,665 | — | | Mark A. Carano | — | — | — | — | | Richard T. Wagner | SRP | 30 | 1,745,268 | — | | James R. York | SRP | 5 | 177,086 | — | | James F. Petelle | SRP | 17 | 722,171 | — |
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control The discussion and tables below describe the potential payments that could be received by each of the NEOs if the executive’s employment was terminated on September 30, 2023, the last day of our fiscal year. The amounts in the tables for stock options and RSUs represent the value of the awards that vest as a result of the termination of the executive’s employment. For purposes of valuing the stock options and RSUs, the amounts below are based on a per share price of $32.46, which was the closing price of our stock as reported on NYSE on September 29, 2023 (the last trading day of our fiscal year).
BENEFITS AND PAYMENTS UPON TERMINATION
BENEFITS AND PAYMENTS UPON TERMINATION
BENEFITS AND PAYMENTS UPON TERMINATION
| | Voluntary Termination | Termination Without Cause | Termination Without Cause or for Good Reason after Change in Control | Retirement | Death | Disability | | H. O. Woltz III | | | | | | | | Salary Continuation(1) | — | — | — | — | — | 284,515 | | Severance Payment(2) | — | 1,050,000 | 3,169,385 | — | — | — | | Stock Options(3) | 60,605 | 60,605 | 60,605 | 60,605 | 60,605 | 60,605 | | RSUs(4) | 952,376 | 952,376 | 952,376 | 952,376 | 952,376 | 952,376 | | Benefits(5) | — | 36,322 | 48,430 | — | — | — | | Outplacement | — | 15,000 | 15,000 | — | — | — | | Supplemental Retirement Plan(6) | 3,511,092 | 3,511,092 | 3,511,092 | 3,511,092 | 2,631,476 | 3,511,092 | | Death Benefit(7) | — | — | — | — | 500,000 | — | | TOTAL | 4,524,073 | 5,625,395 | 7,756,888 | 4,524,073 | 4,144,457 | 4,808,588 |
BENEFITS AND PAYMENTS UPON TERMINATION
| (1) This amount represents the lump-sum present value of bi-weekly payments which Mr. Woltz would be entitled to receive pursuant to our disability insurance program. | | (2) These amounts would be paid to Mr. Woltz in a lump sum following termination without cause, pursuant to his Severance Agreement, or in the event of a termination following a change in control, pursuant to his CIC Agreement. | | (3) These amounts represent the difference between the market value of our stock on September 30, 2023 and the option strike prices for unvested options that would vest (i) pursuant to the terms of the option grant agreements in the event of death, disability or voluntary termination of employment on or after attaining age 55 and completing ten years of service; (ii) pursuant to the terms of his Severance Agreement in the event of termination without cause; and (iii) pursuant to the terms of his CIC Agreement in the event of termination following a change in control. | | (4) These amounts represent the market value of RSUs on September 30, 2023 that would vest (i) pursuant to the terms of the RSU agreements in the event of death, disability or voluntary termination of employment on or after attaining age 55 and completing ten years of service; (ii) pursuant to the terms of his Severance Agreement in the event of termination without cause; and (iii) pursuant to the terms of his CIC Agreement in the event of termination following a change in control. | | (5) These amounts represent premiums for continued participation in employee welfare benefit plans which would be paid by us for 18 months following termination without cause and 24 months following termination after a change in control. | | (6) The amounts under the “Voluntary Termination,” “Termination without Cause,” “Termination without Cause or for Good Reason after Change in Control,” “Retirement” and “Disability” columns for Mr. Woltz represent the lump-sum present value of his benefits under the SRP, on September 30, 2023, which have vested. The amounts under the “Death” column represents the estimated lump-sum present value of bi-weekly payments which the heirs of Mr. Woltz would have been entitled to receive for a ten-year period pursuant to the SRP in the event of death on September 30, 2023. | | (7) This amount would be payable in a lump sum to the heirs of Mr. Woltz in the event of his death, pursuant to our death benefit program. |
BENEFITS AND PAYMENTS UPON TERMINATION
| INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 35 |
BENEFITS AND PAYMENTS UPON TERMINATION
| | Voluntary Termination | Termination Without Cause | Termination Without Cause or for Good Reason after Change in Control | Retirement | Death | Disability | | Scot R. Jafroodi | | | | | | | | Salary Continuation(1) | — | — | 310,000 | — | — | 1,386,804 | | Severance Payment(2) | — | — | 173,934 | — | — | — | | Stock Options(3) | — | — | 19,509 | — | 19,509 | 19,509 | | RSUs(4) | — | — | 244,456 | — | 244,456 | 244,456 | | Benefits(5) | — | — | 21,479 | — | — | — | | Outplacement | — | — | 15,000 | — | — | — | | Supplemental Retirement Plan(6) | — | — | 441,665 | — | 956,194 | 579,028 | | Death Benefit(7) | — | — | — | — | 500,000 | — | | TOTAL | — | — | 1,226,043 | — | 1,720,159 | 2,229,797 | | | Voluntary Termination | Termination Without Cause | Termination Without Cause or for Good Reason after Change in Control | Retirement | Death | Disability | | Mark A. Carano(8) | | | | | | | | Salary Continuation(1) | — | — | — | — | — | — | | Severance Payment(2) | — | — | — | — | — | — | | Stock Options(3) | — | — | — | — | — | — | | RSUs(4) | — | — | — | — | — | — | | Benefits(5) | — | — | — | — | — | — | | Outplacement | — | — | — | — | — | — | | Supplemental Retirement Plan(6) | — | — | — | — | — | — | | Death Benefit(7) | — | — | — | — | — | — | | TOTAL | — | — | — | — | — | — | | | Voluntary Termination | Termination Without Cause | Termination Without Cause or for Good Reason after Change in Control | Retirement | Death | Disability | | Richard T. Wagner | | | | | | | | Salary Continuation(1) | — | — | 370,000 | — | — | 479,149 | | Severance Payment(2) | — | — | 349,498 | — | — | — | | Stock Options(3) | 24,613 | 24,613 | 24,613 | 24,613 | 24,613 | 24,613 | | RSUs(4) | 400,849 | 400,849 | 400,849 | 400,849 | 400,849 | 400,849 | | Benefits(5) | — | — | 29,464 | — | — | — | | Outplacement | — | — | 15,000 | — | — | — | | Supplemental Retirement Plan(6) | 1,745,268 | 1,745,268 | 1,745,268 | 1,745,268 | 1,375,986 | 1,375,986 | | Death Benefit(7) | — | — | — | — | 500,000 | — | | TOTAL | 2,170,730 | 2,170,730 | 2,934,692 | 2,170,730 | 2,301,448 | 2,280,597 |
BENEFITS AND PAYMENTS UPON TERMINATION
| www.insteel.com | INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 36 |
BENEFITS AND PAYMENTS UPON TERMINATION
| | Voluntary Termination | Termination Without Cause | Termination Without Cause or for Good Reason after Change in Control | Retirement | Death | Disability | | James R. York | | | | | | | | Salary Continuation(1) | — | — | 270,000 | — | — | 351,101 | | Severance Payment(2) | — | — | 250,798 | — | — | — | | Stock Options(3) | — | — | 12,605 | — | 12,605 | 12,605 | | RSUs(4) | — | — | 199,856 | — | 199,856 | 199,856 | | Benefits(5) | — | — | 24,213 | — | — | — | | Outplacement | — | — | 15,000 | — | — | — | | Supplemental Retirement Plan(6) | — | — | 177,086 | — | 987,289 | — | | Death Benefit(7) | — | — | — | — | 500,000 | — | | TOTAL | — | — | 949,558 | — | 1,699,750 | 563,562 | | | Voluntary Termination | Termination Without Cause | Termination Without Cause or for Good Reason after Change in Control | Retirement | Death | Disability | | James F. Petelle(9) | | | | | | | | Salary Continuation(1) | — | — | — | — | — | — | | Severance Payment(2) | — | — | — | — | — | — | | Stock Options(3) | — | — | — | 9,285 | — | — | | RSUs(4) | — | — | — | 179,374 | — | — | | Benefits(5) | — | — | — | — | — | — | | Outplacement | — | — | — | — | — | — | | Supplemental Retirement Plan(6) | — | — | — | 722,171 | — | — | | Death Benefit(7) | — | — | — | — | — | — | | TOTAL | — | — | — | 910,830 | — | — |
BENEFITS AND PAYMENTS UPON TERMINATION
| (1) The amounts under the “Termination without Cause or for Good Reason after Change in Control” column would be paid to Mr. Jafroodi, Mr. Wagner and Mr. York on a bi-weekly basis for a period of one year pursuant to their respective CIC Agreements. The amounts under the “Disability” column for Mr. Wagner, Mr. Jafroodi and Mr. York represent the lump-sum present value of bi-weekly payments which they would be entitled to receive pursuant to our disability insurance program. | | (2) These amounts would be paid in a lump sum to Mr. Jafroodi, Mr. Wagner and Mr. York in the event of a termination following a change in control pursuant to their CIC Agreements. | | (3) These amounts represent the difference between the market value of our common stock on September 30, 2023 and the option strike prices for unvested options that would vest (i) pursuant to the terms of the option grant agreements in the event of death, disability or voluntary termination of employment on or after attaining age 55 and completing ten years of service; and (ii) pursuant to the executives’ CIC Agreements in the event of termination following a change in control. | | (4) These amounts represent the market value of RSUs on September 30, 2023, that would vest (i) pursuant to the terms of the RSU agreements in the event of death, disability or voluntary termination of employment on or after attaining age 55 and completing ten years of service; and (ii) pursuant to the terms of the executives’ CIC Agreements in the event of termination following a change in control. | | (5) These amounts represent premiums for continued participation in employee welfare benefit plans which would be paid by us for 12 months following termination after a change in control. | | (6) The amounts under the “Voluntary Termination,” “Termination without Cause,” “Termination without Cause or for Good Reason after Change in Control” and “Retirement” columns for Mr. Jafroodi, Mr. Wagner and Mr. York represent the lump-sum present value of the benefits they would be entitled to receive under the SRP in each scenario as of September 30, 2023. The amounts under the “Death” and “Disability” columns represent the estimated lump-sum present value of bi-weekly payments which Mr. Jafroodi, Mr. Wagner and Mr. York (or their heirs) would have been entitled to receive for a ten-year period pursuant to the SRP in the event of death or disability on September 30, 2023. | | (7) These amounts would be payable in a lump sum to the heirs of Mr. Jafroodi, Mr. Wagner and Mr. York in the event of their death, pursuant to our death benefit program. | | (8) Mr. Carano voluntarily resigned effective December 30, 2022, and received the amounts described under “Voluntary Termination.” | | (9) Mr. Petelle retired effective September 30, 2023, and received the amounts described above under “Retirement.” |
BENEFITS AND PAYMENTS UPON TERMINATION
| INSTEEL INDUSTRIES INC. | 2024 Proxy Statement | 37 |
CEO Pay Ratio
CEO Pay Ratio Pursuant to Item 402(u) of SEC Regulation S-K, we are required to disclose the ratio of the compensation of our Chief Executive Officer to the compensation of our median employee. The annual total compensation of our CEO for fiscal 2023 was $2,146,512, as shown in the Summary Compensation Table on p. 30, and the annual total compensation for our median employee, calculated in accordance with the requirements of the Summary Compensation Table, was $56,481 resulting in a pay ratio of 38 to 1. During fiscal 2023, there was no change to our employee population or compensation arrangements that we reasonably believe would significantly affect our pay ratio disclosure. In addition, there was no change in the circumstances of the employee identified as the median employee in fiscal 2021. Accordingly, as permitted by SEC rules, we used the same employee that was identified for this purpose in fiscal 2021 and used the employee’s fiscal 2023 actual compensation to compare to the CEO’s total compensation. We believe this pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules and the methodology described above.
Pay Versus Performance
Pay Versus Performance Pursuant to Item 402(v) of SEC Regulation S-K, we are providing the following disclosure regarding executive compensation for our principal executive officer (“PEO”) and our other NEOs (“Non-PEO NEOs”) and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
Pay Versus Performance
| | Summary Compensation Table Total for H.O. Woltz III ($) | | Average Summary Compensation | Average Compensation | Value of Initial Fixed $100 Investment Based on: | | | | | Year | | Compensation Actually Paid to H.O. Woltz III(1)(2) ($) | Table Total for Non-PEO NEOs(3) ($) | Actually Paid to Non-PEO NEOs(1)(2)(3) ($) | Total Shareholder Return ($) | Peer Group Total Shareholder Return(4) ($) | Net income ($ Thousands) | Return on Invested Capital(5) (%) | | 2023 | 2,146,512 | 2,297,925 | 594,499 | 553,469 | 207.28 | 146.15 | 32,415 | 9.1 | | 2022 | 2,503,834 | 1,508,180 | 924,155 | 672,291 | 157.60 | 109.34 | 125,011 | 47.6 | | 2021 | 2,475,749 | 4,043,446 | 972,237 | 1,368,777 | 219.98 | 144.86 | 66,610 | 36.9 |
Pay Versus Performance
| (1) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K, and therefore use hypothetical values and points in time when pay may not actually have been earned or delivered to the NEOs. These amounts reflect total compensation as reported in the Summary Compensation Table with certain adjustments as described in footnote 2 below. | | (2) Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEO and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in Exclusion of Stock Awards and Option Awards column are the totals from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table. Amounts in the Exclusion of Change in Pension Value column reflect the amounts attributable to the Change in Pension Value reported in the Summary Compensation Table. Amounts in the Inclusion of Pension Service Cost are based on the service cost for services rendered during the listed year. |
DESCRIPTION OF RELATIONSHIP BETWEEN PEO AND OTHER NEO COMPENSATION ACTUALLY PAID AND INSTEEL TOTAL SHAREHOLDER RETURN (“TSR”)
DESCRIPTION OF RELATIONSHIP BETWEEN PEO AND OTHER NEO COMPENSATION ACTUALLY PAID AND INSTEEL TOTAL SHAREHOLDER RETURN (“TSR”) The following chart sets forth the relationship between Compensation Actually Paid to Mr. Woltz, the average of Compensation Actually Paid to our other NEOs, and our cumulative TSR over the three most recently completed fiscal years.
DESCRIPTION OF RELATIONSHIP BETWEEN PEO AND OTHER NEO COMPENSATION ACTUALLY PAID AND RETURN ON INVESTED CAPITAL
DESCRIPTION OF RELATIONSHIP BETWEEN PEO AND OTHER NEO COMPENSATION ACTUALLY PAID AND RETURN ON INVESTED CAPITAL The following chart sets forth the relationship between Compensation Actually Paid to Mr. Woltz, the average of Compensation Actually Paid to our other NEOs, and our return on invested capital over the three most recently completed fiscal years.
DESCRIPTION OF RELATIONSHIP BETWEEN PEO AND OTHER NEO COMPENSATION ACTUALLY PAID AND NET INCOME
DESCRIPTION OF RELATIONSHIP BETWEEN PEO AND OTHER NEO COMPENSATION ACTUALLY PAID AND NET INCOME The following chart sets forth the relationship between Compensation Actually Paid to Mr. Woltz, the average of Compensation Actually Paid to our other NEOs, and our net income over the three most recently completed fiscal years.
Director Compensation
Director Compensation Our independent directors receive an annual cash retainer and an annual grant of RSUs. The RSUs are granted on the date of our annual meeting of shareholders and have a one-year vesting period. During fiscal 2023, we paid annual cash retainers to non-employee directors in the amount of $55,000 and we provided annual grants of RSUs valued at $75,000. In addition, we pay an annual cash retainer to (i) the independent Lead Director and the Chair of the Audit Committee in the amount of $15,000 each and (ii) the Chairs of the Nominating and Governance Committee and the Executive Compensation Committee in the amount of $10,000 each. Mr. Woltz, our CEO, receives no additional compensation for serving on our Board of Directors. The cash retainers are paid to our directors quarterly. We do not pay additional “meeting fees” to directors for attendance at Board and committee meetings. The following table shows the compensation we provided to our non-employee directors during fiscal 2023.
Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | | Abney S. Boxley III | 55,000 | 75,009 | 3,384 | 133,393 | | Anne H. Lloyd | 55,000 | 75,009 | 3,384 | 133,393 | | W. Allen Rogers II | 70,000 | 75,009 | 3,384 | 148,393 | | Jon M. Ruth | 65,000 | 75,009 | 3,384 | 143,393 | | Joseph A. Rutkowski | 65,000 | 75,009 | 3,384 | 143,393 | | G. Kennedy Thompson | 70,000 | 75,009 | 3,384 | 148,393 |
Director Compensation
| (1) This amount reflects the aggregate grant date fair value of restricted stock units awarded to each non-employee director computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures, and does not reflect the actual value, if any, that may be received by our non-employee directors for their awards. The fair value of 2,478 RSUs issued to each non-employee director on February 14, 2023 was $75,009. As of September 30, 2023, each independent director held 2,478 RSUs. | | (2) This amount reflects dividend equivalents paid in cash on RSUs held by our non-employee directors. |