DEF 14A of Forestar Group Inc.
Filed Dec 15, 2023 · FY20230001406587-23-000137
WHO CAN ATTEND AND VOTE
| | Page | | Fiscal 2023 Grants of Plan-Based Awards | 32 | | Fiscal 2023 Outstanding Equity Awards | 33 | | Fiscal 2023 Option Exercises and Stock Vested | 35 | | Potential Payments Upon Termination or Change in Control | 35 | | Securities Authorized for Issuance under Equity Compensation Plans | 38 | | CEO PAY RATIO | 39 | | PAY VERSUS PERFORMANCE | 40 | | AUDIT COMMITTEE REPORT | 44 | | PROPOSAL NO. 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 45 | | BENEFICIAL OWNERSHIP OF COMMON STOCK | 46 | | Management | 46 | | Certain Other Beneficial Owners | 47 | | CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | 48 | | Related Party Transaction Policy | 48 | | Stockholder’s Agreement | 50 | | Master Supply Agreement | 51 | | Shared Services Agreement | 52 | | Tax Sharing Agreement | 52 | | Related Party Transactions | 52 | | GENERAL INFORMATION | 55 | | Time, Place and Purposes of Meeting | 55 | | Record Date | 55 | | Stockholders Sharing the Same Address | 55 | | Difference Between Holding Shares as a Stockholder of Record and as a Beneficial Owner | 55 | | Voting Your Shares | 56 | | Broker Discretionary Voting if You Do Not Instruct Your Broker on How to Vote Your Shares | 56 | | Voting in Person at the Annual Meeting | 57 | | How You Can Change or Revoke Your Vote | 57 | | Quorum | 57 | | Abstentions | 58 | | Broker Non-Votes | 58 | | Required Votes | 58 | | Proxy Solicitation | 59 | | DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS | 60 | | Voting Questions or Assistance | 60 | | Electronic Delivery of Proxy Materials | 60 | | REQUESTING DOCUMENTS FROM THE COMPANY | 61 | | OTHER MATTERS | 62 |
Proposal No. 1 – Election of Directors
Proposal No. 1 – Election of Directors Our Board of Directors currently consists of five directors, all of whom are up for reelection at the 2024 Annual Meeting. Four of our directors were elected by our stockholders at the 2023 Annual Meeting. After Mr. Donald C. Spitzer's retirement in February 2023, Ms. Elizabeth (Betsy) Parmer was appointed by the Board of Directors to fill the vacancy. Each of the five directors, if elected at the 2024 Annual Meeting, will serve until the 2025 Annual Meeting and until his or her successor has been elected and qualified. The Nominating and Governance Committee recommended to the Board of Directors our five directors as director nominees, each of whom is listed under the heading “Director Nominees” on page 6. After review and consideration by the Board of Directors, as recommended by the Nominating and Governance Committee, the Board nominated the following five nominees for election to our Board of Directors:
Proposal No. 1 – Election of Directors
| • | Donald J. Tomnitz | • | Elizabeth (Betsy) Parmer | | • | Samuel R. Fuller | • | G.F. (Rick) Ringler, III | | • | Lisa H. Jamieson | | |
Proposal No. 1 – Election of Directors
| The Board of Directors Unanimously Recommends that Stockholders Vote “FOR” Each of our Five Nominees for Director. |
Selection of Director Nominees
Selection of Director Nominees Mr. Fuller, Ms. Jamieson, Mr. Ringler, Ms. Parmer and Mr. Tomnitz are standing for election as directors to serve until the 2025 Annual Meeting, or until their replacements are duly elected and meet all requirements. All nominees are presently serving as directors. After reviewing their qualifications, the Nominating and Governance Committee recommended them as nominees to the full Board, and the full Board subsequently voted unanimously to recommend them to the stockholders as nominees. Mr. Fuller, Mr. Ringler, Ms. Parmer and Mr. Tomnitz were designated by D.R. Horton for nomination as directors. Ms. Jamieson was designated as the Non-Stockholder Designee for nomination as a director. For a description of the Stockholder’s Agreement, see the sections “Proposal No. 1 — Election of Directors — Stockholder’s Agreement” and “Certain Relationships and Related Party Transactions — Stockholder’s Agreement.” We did not pay a fee to any third party to identify, evaluate or assist in identifying or evaluating potential nominees. Each of the nominees has consented to being named in this Proxy Statement and to serve if elected. If any nominee becomes unavailable to serve, however, the persons named as proxies in the enclosed form of proxy intend to vote the shares represented by the proxy for the election of such other person or persons as may be nominated or designated by management, unless they are directed by the proxy to do otherwise. Unless you specify otherwise on your proxy, the persons named as proxies in such proxy intend to vote for the election of the nominees listed below to serve as directors.
Director Qualifications
Director Qualifications Our Nominating and Governance Committee is charged with assuring that the proper skills and experience are represented on our Board. Our Corporate Governance Guidelines, which are available on our website at www.forestar.com under the “Investor Relations — Corporate Governance — Governance Documents” section, include a non-exclusive list of qualifications that should be considered in reviewing director candidates. The qualifications consider business experience, independence, our business, geographic locations, diversity of backgrounds and skills and other factors. We expect all our directors to possess the highest personal and professional ethics, integrity and values. We also expect our directors to be committed to the long-term interests of our stockholders as a whole. We also review the existing time commitments of director candidates to confirm that they do not have any obligations that would conflict with the time commitments of a director of the Company. The Nominating and Governance Committee looks to recruit candidates that can contribute different perspectives to the Board, as the Nominating and Governance Committee recognizes the importance of having diversity of age, gender, race and ethnicity on the Board.
Stockholder’s Agreement
Stockholder’s Agreement In October 2017, we became a majority-owned subsidiary of D.R. Horton, Inc. (“D.R. Horton”) (the “Merger”) and a controlled company under New York Stock Exchange (“NYSE”) rules. As a controlled company, we are not required to have a majority of independent directors, an independent compensation committee, or an independent nominating committee. However, at this time, we intend to continue to maintain a majority of independent directors and both an independent compensation committee and nominating committee. In connection with the Merger, we entered into a Stockholder’s Agreement with D.R. Horton (the “Stockholder’s Agreement”) that provides for certain board and board committee appointment rights. Under the terms of the Stockholder’s Agreement and our Second Amended and Restated Certificate of Incorporation, our Board consists of five directors, comprised of four individuals designated by D.R. Horton (which includes our Executive Chairman) and one individual designated by the Nominating and Governance Committee, as the Non-Stockholder Designee (as defined in the Stockholder's Agreement). At the time of the Merger, D.R. Horton designated Mr. Fuller, Mr. Ringler, Mr. Spitzer and Mr. Tomnitz as directors. In August 2019, the Company's Nominating and Governance Committee designated, and the Company’s Board of Directors appointed, Ms. Jamieson to serve as the Non-Stockholder Designee director. In March 2023, D.R. Horton and the Company's Nominating and Governance Committee designated Ms. Parmer to serve as a D.R. Horton designee. At all times when D.R. Horton and its affiliates beneficially own 20% or more of our voting securities, the Board will have five directors unless otherwise agreed in writing between us (as approved by a majority of our independent directors) and D.R. Horton, and D.R. Horton will have the right to designate a number of directors equal to the percentage of our voting securities beneficially owned by D.R. Horton and its affiliates multiplied by the total number of directors that we would have if there were no vacancies, rounded up to the nearest whole number (and in any event not less than one). We and D.R. Horton have also each agreed to use reasonable best efforts to cause at least three of the directors to be considered “independent” under the rules of the SEC and under applicable listing standards. For more information on the Stockholder’s Agreement, see the section on “Certain Relationships and Related Party Transactions — Stockholder’s Agreement.” Additional information regarding the Stockholder’s Agreement, including a copy of the Stockholder’s Agreement, can be found in our Current Report on Form 8-K filed with the SEC on June 29, 2017.
Director Elections Standard and Resignation Policy
Director Elections Standard and Resignation Policy Our amended and restated bylaws include a voting standard in uncontested elections of directors (as is the case for this annual meeting) of a majority of votes cast in the election. Under the majority of votes cast standard, a director nominee is elected if the number of votes cast “for” the nominee exceeds the number of votes cast “against” the nominee. In contested elections (that is, those in which the number of nominees exceeds the number of directors to be elected), the voting standard is a plurality of votes cast, which means that the individuals who receive the largest number of votes cast are elected as directors up to the maximum number of directors to be chosen at the meeting. Our Board of Directors also adopted a director resignation policy, which is set forth in the Corporate Governance Guidelines available at www.forestar.com under the “Investor Relations — Corporate Governance — Governance Documents” section. This policy sets forth the procedures that will apply in the event that a director does not receive the requisite majority of votes cast “for” his or her election. In summary, an incumbent director nominee who fails to receive the required vote for election will, within five days after certification of the election results, tender his or her resignation to our Executive Chairman for consideration by the Nominating and Governance Committee of our Board of Directors. The Nominating and Governance Committee will consider the resignation and, within 45 days after the date of the stockholders meeting at which the election of directors occurred, will make a recommendation to the Board of Directors on whether to accept or reject the resignation. The Board of Directors will act on the Committee’s recommendation within 90 days after the date of the stockholders meeting. The director whose resignation is under consideration will not participate in the Committee or Board of Directors’ decision with respect to accepting or rejecting his or her resignation as director. If a resignation is not accepted by the Board of Directors, the director will continue to serve. If the failure of a nominee to be elected at the annual meeting results in a vacancy on the Board of Directors, that vacancy can be filled by action of the Board. Following the Board’s decision on whether to accept or reject the resignation, we will publicly disclose the Board’s decision, together with an explanation of the process by which the decision was made and, if applicable, the Board’s reason(s) for rejecting the tendered resignation.
Director Nominees
Director Nominees
Director Nominees
| Donald J. Tomnitz | | | Executive Chairman of the Board Age 75 Director since: October 2017 Tenure: •6 years | Principal Occupation and Other Information Donald J. Tomnitz has served as Executive Chairman of the Board of Forestar since October 2017. Prior to joining the Company, Mr. Tomnitz was a consultant to D.R. Horton from 2014 to 2017. From 1998 to 2014, Mr. Tomnitz was the Vice Chairman and Chief Executive Officer of D.R. Horton, after having served as its President, an Executive Vice President and as President of D.R. Horton’s Homebuilding Division. Mr. Tomnitz also served on the Board of Directors of D.R. Horton until October 2014. Before joining D.R. Horton, Mr. Tomnitz was a Captain in the U.S. Army, a Vice President of RepublicBank of Dallas, N.A. and a Vice President of Crow Development Company, a Trammell Crow Company. Mr. Tomnitz holds a Bachelor of Arts in economics from Westminster College and a Master of Business Administration in finance from Western Illinois University. Qualifications Mr. Tomnitz has significant knowledge and experience in the real estate development and homebuilding industries, including public company chief executive officer experience. |
Director Nominees
| Samuel R. Fuller | | | Director Age 80 Director since: October 2017 Committees: •Audit Committee (Chair) •Compensation Committee •Nominating and Governance Committee Tenure: •6 years | Principal Occupation and Other Information Samuel R. Fuller has been retired since 2008, having obtained significant experience in accounting and financial roles through his employment with D.R. Horton from 1992 until his retirement. He served as Controller of D.R. Horton from 1995 until his promotion to Chief Financial Officer in 2000 and was a member of the Board of Directors from 2000 until 2003. Mr. Fuller holds a Bachelor of Arts degree in accounting from the University of Oregon and a Master of Business Administration in finance from the University of Texas at Arlington. Qualifications Mr. Fuller is an expert in accounting and financial reporting and has significant knowledge and experience in accounting, finance, and internal control over financial reporting in a public company environment. |
Director Nominees
| Lisa H. Jamieson | | | Director Age 63 Director since: August 2019 Committees: •Audit Committee •Compensation Committee (Chair) •Nominating and Governance Committee Tenure: •4 years | Principal Occupation and Other Information Lisa H. Jamieson is a shareholder of Bourland, Wall and Wenzel, P.C., where she has been practicing law since 2018. Ms. Jamieson was a partner with the firm of Shannon, Gracey, Ratliff & Miller, LLP from 2008 until 2016. From 2016 to 2018, Ms. Jamieson was with the law firm of Pope, Hardwicke, Christie, Kelly & Taplett, LLP. Ms. Jamieson is experienced in all facets of estate planning and probate law, is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization and is a Certified Public Accountant (retired status). Ms. Jamieson's practice includes sophisticated business and estate tax planning, administration of dependent and independent estates, guardianships for incapacitated adults and counseling and representing trustees. Ms. Jamieson is licensed in Texas, having graduated from Baylor University School of Law. She is a Fellow in the American College of Trust and Estate Counsel and is a past President of the Tarrant County Probate Bar. Ms. Jamieson is a former Chair of the Real Estate, Probate and Trust Law Section of the State Bar of Texas, the largest section of the State Bar. She also has chaired the Guardianship Code Committee of the Section as well as Chair of the Jurisdiction Committee which revised the jurisdiction statutes of decedents' estates and guardianships. Qualifications Ms. Jamieson provides knowledge in the accounting field. She also provides senior leadership experience gained through her executive level positions held in several sections of the State Bar and her tenured experience in her law practice. Ms. Jamieson contributes her expertise in the operational management and legal affairs to the Board. |
Director Nominees
| Elizabeth (Betsy) Parmer | | | Director Age 56 Director since: March 2023 Committees: •Audit Committee •Compensation Committee •Nominating and Governance Committee Tenure: •<1 year | Principal Occupation and Other Information Elizabeth (Betsy) Parmer is the founder and owner at the Law Offices of Elizabeth Parmer. She specializes in large estate divorces and high-conflict family law litigation with a background of ad valorem tax representation. Ms. Parmer has been practicing law for 30 years. Since 1995, she has been practicing at the Law Offices of Elizabeth Parmer. She currently serves as a board member for the charity organization Dayna's Footprints. Ms. Parmer holds a Bachelor of Arts in history from Yale University and a Juris Doctor from the University of Texas at Austin. Qualifications Ms. Parmer brings to the Board extensive legal experience, management expertise and other business acumen. |
Director Nominees
| G.F. (Rick) Ringler, III | | | Director Age 76 Director since: October 2017 Committees: •Audit Committee •Compensation Committee •Nominating and Governance Committee (Chair) Tenure: •6 years | Principal Occupation and Other Information G.F. (Rick) Ringler, III provides real estate and financial consulting to various former customers since his retirement in 2012. He retired from commercial banking in 2012 and has concentrated on personal investments since 2017. From 2006 to his retirement in 2012, he served as Senior Vice President — Commercial and Real Estate Lending for Frost Bank. Prior to that, he served on the Board of Directors of First National Bank of Burleson and Landmark Bank of Fort Worth, where he was the Chief Lending Officer. He also was a Senior Lending Officer at three other bank groups for a total of six over a career in banking that spanned 44 years beginning with Fort Worth National Bank in 1968. Mr. Ringler holds a Bachelor of Business Administration in finance from Texas Christian University. Qualifications Mr. Ringler has significant experience in commercial and residential real estate construction and development financing. |
Director Compensation
Director Compensation Our director compensation program is designed to compensate our directors for the time commitment and preparations required for directors to fulfill their responsibilities, to align director compensation with the long-term interests of our stockholders and to assist in recruiting high-caliber directors.
Fiscal 2023 Director Compensation
Fiscal 2023 Director Compensation The following table presents compensation earned by non-employee directors for services rendered in fiscal 2023 as calculated in accordance with SEC rules.
Fiscal 2023 Director Compensation
| Name(1) | Fees Paid in Cash(2) | Stock Awards(3) | Total | | Samuel R. Fuller | $67,500 | $48,501 | $116,001 | | Lisa H. Jamieson | $67,500 | $48,501 | $116,001 | | Elizabeth (Betsy) Parmer(4) | $32,500 | $137,061 | $169,561 | | G.F. (Rick) Ringler, III | $67,500 | $48,501 | $116,001 | | Donald C. Spitzer(5) | $32,500 | $— | $32,500 |
Fiscal 2023 Director Compensation
_________________ (1)The Company pays director fees only to non-employee directors. (2)Amounts represent director fees paid in cash during fiscal 2023. (3)Amount represents the grant date fair value of $14.76 per unit for the 3,286 restricted stock units granted to each non-employee director on March 21, 2023. The grant date fair value of the restricted stock units was determined in accordance with accounting guidance for share-based payments. The Company recognizes expense for this award over the three-year vesting period for those directors who are not retirement eligible. For Ms. Parmer, the amount also includes 6,000 restricted stock units granted on March 21, 2023, with a grant date fair value of $14.76 per unit, in connection with her appointment to the Board. (4)Ms. Parmer was appointed to the Board of Directors effective March 1, 2023. (5)Mr. Spitzer resigned from the Board of Directors effective February 21, 2023 and thus did not receive any equity awards during fiscal 2023. As of September 30, 2023, each non-employee director held the following number of unvested restricted stock units:
Fiscal 2023 Director Compensation
| Name | Unvested Restricted Stock Units | | Samuel R. Fuller | 7,786 | | Lisa H. Jamieson | 7,786 | | Elizabeth (Betsy) Parmer | 9,286 | | G.F. (Rick) Ringler, III | 7,786 |
Overview
Overview This Compensation Discussion and Analysis describes the compensation elements for our NEOs. Our NEOs for fiscal 2023 are: •Donald J. Tomnitz, Executive Chairman; •Daniel C. Bartok, President and Chief Executive Officer;* •James D. Allen, Executive Vice President and Chief Financial Officer; and •Mark S. Walker, Executive Vice President and Chief Operating Officer.** * Effective January 1, 2024, Mr. Bartok will retire as President and Chief Executive Officer and Anthony ("Andy") W. Oxley will serve as the Company's President and Chief Executive Officer. **Effective October 1, 2022, Mr. Walker was promoted to Executive Vice President and Chief Operating Officer of the Company. We are a national, well-capitalized residential lot development company focused primarily on selling finished single-family residential lots to homebuilders. We are investing in land acquisition and development to expand our residential lot development business across a geographically diversified national platform while consolidating market share in the fragmented U.S. lot development industry. We are primarily investing in short-duration, phased development projects. This strategy is a unique, lower-risk business model that we expect will produce more consistent returns than other public and private land developers. We have expanded and diversified our lot development operations across 54 markets in 22 states by investing available capital into our existing markets and by entering new markets. We believe our geographically diverse operations provide a strong platform for us to consolidate market share in the highly fragmented lot development industry. We also believe our geographic diversification lowers our operational risks and enhances our earnings potential by mitigating the effects of local and regional economic cycles. Our real estate origins date back to the 1954 incorporation of Lumbermen’s Investment Corporation, which became a wholly-owned subsidiary of the predecessor to Temple-Inland Inc. ("Temple-Inland") in 1971. We changed our name to Forestar Real Estate Group Inc. after Temple-Inland began reporting us as a separate business segment in 2006, and in 2007, Temple-Inland completed a tax-free distribution of our shares to its stockholders, making us an independent publicly-traded company. In 2008, we changed our name from Forestar Real Estate Group Inc. to Forestar Group Inc. We became a majority-owned subsidiary of D.R. Horton, Inc. ("D.R. Horton") in October 2017 by virtue of a merger with a wholly-owned subsidiary of D.R. Horton. Immediately following the merger, D.R. Horton owned 75% of our outstanding common stock, and as of September 30, 2023, owned approximately 63% of our outstanding common stock. We have grown significantly since the merger in October 2017. Our Compensation Committee strives to provide a fair and competitive compensation program for executive officers that will attract, motivate and retain highly qualified and experienced executives, reward superior performance and provide incentives that are based on the performance of the Company, with an overall emphasis on maximizing long-term stockholder value. The following discussion provides information regarding our compensation objectives and the relationship between the performance of the executive and the Company.
Compensation Philosophy and Objectives
Compensation Philosophy and Objectives Our executive compensation program is designed to attract, retain and motivate our executives to maximize company and individual performance as we grow the volume and profitability of our residential lot development business. We are guided by the following principles in determining the form and amount of executive compensation: •Compensation should align with the performance of the Company and performance of the individual. A portion of total compensation is discretionary in nature yet evaluated based on our financial and operating performance, as well as individual performance of the executive. Bonuses are paid semi-annually based on the achievement of Company objectives and the assessment of individual performance. Also, our restricted stock unit awards generate additional value for executives as our stock price increases. •Compensation should align executives’ and stockholders’ interests. Our discretionary bonuses are designed to incentivize and reward performance as we grow the volume and profitability of our residential lot development business. In addition, the use of equity-based compensation aligns our executives’ interests with our stockholders’ interests and encourages our executives to focus on growth and long-term performance. •Compensation should be competitive. Our total compensation, including our base salaries, discretionary bonuses and long-term equity awards, should be competitive with our public and private peers to enable us to attract and retain key executives. •Retention. We believe an overall package of appropriate pay and benefits helps retain executives and managers. This includes a competitive base salary, discretionary cash bonuses, health and welfare benefits and Company matching contributions under our 401(k) plan. In addition, equity awards with vesting and forfeiture provisions encourage retention.
Elements of our Compensation Program
Elements of our Compensation Program The elements of our compensation program are as follows: •Salaries; •Discretionary semi-annual cash bonuses; •Long-term time-based equity awards, with restricted stock units as the primary equity incentive; •401(k) retirement plan contributions; and •Health and welfare benefits. Each element of compensation is evaluated independently to determine whether, in our Compensation Committee’s judgment, it is competitive within our industry. Our Compensation Committee maintains a balance among the elements of compensation that aligns a portion of compensation to performance. Our Compensation Committee reviews tally sheets that show all elements of compensation on an aggregate basis over the previous three years. From year to year, the Compensation Committee may also choose to award all or only certain elements of compensation to an NEO.
Elements of our Compensation Program
| Element | Performance Measure | Measurement / Vesting Period | | Base Salary | Continued service subject to annual evaluation | Evaluated each year | | Discretionary cash bonus: | | | | Semi-annual cash bonus | Company and individual performance | 6 months to 1 year | | Long-term equity incentives: | | | | Restricted stock units | Continued service | 3 to 5 years | | 401(k) retirement benefits | 401(k) contribution is dependent on the percentage elected by the NEO and allowable under regulatory limits | None | | Health and welfare benefits | None | None |
Base Salaries
Base Salaries Base salaries are determined based on the executive’s responsibilities, performance, experience and the Compensation Committee’s judgment. In reviewing the salaries of executives, the Compensation Committee reviews publicly-available data from our peer group companies (see "Competitive Pay Analysis and Peer Group" on page 28). Base salaries provide our NEOs a foundation of fixed income, encourage retention and recognize effective leadership. With the exception of Mr. Walker, whose base salary increased $25,000 to $300,000 upon his appointment to COO, the base salaries of our other NEOs for fiscal 2023 remained unchanged from fiscal 2022 levels. Each of the NEO’s base salaries was increased for fiscal 2024 to align their salaries with the salaries of similar executives of similar publicly-traded companies, including members of our peer group and other public companies within a range of our market capitalization and industrial classification code, and to recognize each executive’s performance in their role. The base salaries for fiscal years 2023 and 2024 of our NEOs are set forth in the following table.
Semi - Annual Discretionary Bonuses
Semi - Annual Discretionary Bonuses Fiscal 2023: The Compensation Committee and the Board, as applicable, determined bonuses for fiscal 2023 in their discretion for our NEOs. The Committee's discretionary approach is intended to reward performance and align executives' interests with those of our stockholders by focusing our executives on critical short-term financial and operational objectives which also support our long-term financial goals. Consistent with the approach taken in prior years, the Compensation Committee and Board considered the following items, along with other relevant information, when determining the amount of discretionary bonuses for fiscal 2023: •Increase in margins; •Improvement of financial returns; •Management of inventory; •Extent of responsibilities; •Increase in the number of lots delivered; •Disciplined land acquisition; •Controlling selling, general and administrative costs; •Maintaining a strong balance sheet that provides operational flexibility; and •Maintaining strong financial internal controls, financial reporting systems and financial compliance. During fiscal 2023, after considering these factors, the Compensation Committee and the Board of Directors, as applicable, approved discretionary cash bonuses for the NEOs on a semi-annual basis. For the first semi-annual period ended March 31, 2023, Mr. Tomnitz and Mr. Bartok each received a $350,000 bonus, Mr. Allen received a $225,000 bonus and Mr. Walker received a $175,000 bonus. For the second semi-annual period ended September 30, 2023, Mr. Tomnitz and Mr. Bartok each received a $1,200,000 bonus and Mr. Allen and Mr. Walker each received a $300,000 bonus. The modest decrease in bonuses for fiscal 2023 over fiscal 2022 was driven by certain lower financial metrics. However, overall the Committee balanced this against the executive's strong individual performance, achievement of multiple financial operational objectives at the Company level and the overall performance of the Company under each of the executive's leadership. The Compensation Committee and Board believe the total compensation paid in fiscal 2023 to each of our NEOs is appropriate in light of our compensation philosophy, all of our compensation objectives and the compensation received by similar executives at our peer companies. For fiscal 2024, the Compensation Committee will evaluate executive performance and expects to continue to consider and award any discretionary bonuses on a semi-annual basis, none of which are guaranteed. As the Company continues to mature over time, the Compensation Committee will continue to evaluate more performance-based compensation programs and criteria designed to more closely align incentive compensation to achievement of pre-established performance criteria.
Long-Term Incentive Awards
Long-Term Incentive Awards Our 2018 Stock Incentive Plan gives us the ability to provide our eligible employees, including each of our NEOs, awards based on shares of our common stock. Our equity-based incentive awards for NEOs are currently granted in the form of time-based restricted stock units (“RSUs”). Our Compensation Committee grants equity awards to align interests of the executives with the interests of our stockholders and to remain competitive with market practices and support executive retention. In making decisions regarding annual equity-based awards, including determining the size of awards, our Compensation Committee considers previous grants made to the executive, the value and experience the executive brings to their role, retention incentives and the responsibilities of the executive. In the case of a new executive, or an executive assuming new responsibilities, an initial grant may be made above usual annual targeted levels. The size of equity-based awards may be determined based on input from a compensation consultant regarding market practices, recommendations of the Executive Chairman or the CEO (except the CEO and Executive Chairman do not make recommendations regarding their own awards) or the judgment of our Compensation Committee. The dollar value of the awards may be below, at or above the mid-range of what other comparable companies may offer in any given year. Time-based RSUs, which are the primary equity incentive we grant under our 2018 Stock Incentive Plan, may be granted at any time. Each RSU represents the right to receive one share of our common stock upon vesting. All other terms and conditions of the RSUs are determined at the time of award. On March 21, 2023, the Compensation Committee awarded to Mr. Tomnitz and Mr. Bartok 40,650 RSUs, Mr. Allen 27,100 RSUs and Mr. Walker 20,325 RSUs. The RSU grants to Mr. Tomnitz and Mr. Bartok each vest in three equal annual installments and Mr. Allen and Mr. Walker’s RSUs vest in five equal annual installments. The Compensation Committee may, at its discretion, determine to grant additional equity awards during fiscal 2024 to the NEOs.
Competitive Pay Analysis and Peer Group
Competitive Pay Analysis and Peer Group We employ several methods to evaluate our executive compensation practices relative to those of other companies. Our Compensation Committee, either alone or with the assistance of a compensation consultant, if one is engaged for the year, may conduct an analysis of the compensation of our NEOs to assist with setting compensation for the NEOs. We believe it is important to have compensation discussions with management throughout the year. The Compensation Committee believes providing a mix of short and long-term awards through cash and equity is an important part of aligning the executives’ interests with the Company’s as well as providing competitive pay structures designed to mitigate inappropriate risk taking. For further comparison, our Compensation Committee may evaluate compensation programs and amounts provided to the NEOs of the companies in our peer group. Although we believe benchmarking the pay of our peer group is useful in determining our compensation practices and pay levels, we do not target our pay toward any particular peer group benchmark. Our peer group for fiscal 2023 remained unchanged from fiscal 2022 and our Compensation Committee has determined to continue using this same peer group for assessing fiscal 2024 compensation levels. Our peer group is:
Competitive Pay Analysis and Peer Group
| Beazer Homes USA, Inc. | Howard Hughes Holdings Inc. | PGT Innovations, Inc. | | Century Communities, Inc. | M.D.C. Holdings, Inc. | The St. Joe Company | | Five Point Holdings, LLC | Masonite International Corp. | Tri Pointe Homes, Inc. |
Compensation Consultant
Compensation Consultant Our Compensation Committee may engage a compensation consultant or other third-party service providers from time to time to, among other things, provide market and other specific information on executive pay. In fiscal 2023, our Compensation Committee did not engage a compensation consultant or any other third-party service to provide advice or consult about executive compensation programs and amounts.
Compensation Oversight Governance Practices
| Stockholders: | Stockholders have approved our stock incentive plans and provide an annual advisory vote on executive compensation. In addition, under the terms of the Stockholder’s Agreement with D.R. Horton, for so long as D.R. Horton beneficially owns 35% or more of our voting securities, we need the prior written consent of D.R. Horton to appoint or terminate key officers or change their compensation arrangements. Thus, under those circumstances, D.R. Horton's approval is required. | | Board and Compensation Committee: | Our Compensation Committee is composed entirely of independent directors. The Compensation Committee establishes and oversees the administration of our compensation programs. The Compensation Committee ensures that stockholder-approved plans are administered in accordance with good governance practices and intent. The Compensation Committee will also consider the results of stockholder advisory votes on executive compensation. The Compensation Committee is responsible for the approval of salaries and bonuses of the Executive Chairman and CEO and long-term equity compensation awarded to each of the NEOs. The full Board evaluates the performance of the CFO and COO and acts on recommendations of the Compensation Committee with respect to CFO and COO compensation. | | Management: | Management determines individual employee bonuses and administers all employee benefit and incentive plans on a day-to-day basis. Within management, the Executive Chairman serves as a liaison with the Compensation Committee. |
Equity Award Grant Practices
Equity Award Grant Practices Our general practice is to consider equity-based awards annually. From time to time, we may grant equity-based awards to our executive officers outside the annual award process, such as in connection with the hiring of a new executive, for retention purposes, to reward exemplary performance or for promotional recognition. The Executive Chairman provides award recommendations to our Compensation Committee for approval. We do not have any program, plan or practice to time the grants of stock-based awards in coordination with the release of material non-public information nor do we time the release of material non-public information for the purpose of affecting the value of equity compensation. Our policy for setting the timing of stock-based awards does not allow executives to have any role in choosing the price of their stock-based awards. We do not “back date,” “spring load” or reprice stock-based awards.
Summary Compensation Table
Summary Compensation Table The following table contains compensation information for our Executive Chairman, CEO, CFO, and COO. We refer to these persons as our NEOs. The information in the following table is presented in accordance with SEC requirements.
Summary Compensation Table
| Name and Principal Position(1) | Year | Salary ($) | Bonus(2) ($) | Stock Awards(3) ($) | All Other Compensation(4) ($) | Total ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | | Donald J. Tomnitz | 2023 | 400,000 | 1,550,000 | 599,994 | 17,289 | 2,567,283 | | Executive Chairman | 2022 | 395,833 | 1,700,000 | 600,004 | 13,624 | 2,709,461 | | | 2021 | 350,000 | 1,400,000 | 500,006 | 11,367 | 2,261,373 | | Daniel C. Bartok | 2023 | 400,000 | 1,550,000 | 599,994 | 19,440 | 2,569,434 | | President and Chief Executive Officer | 2022 | 395,833 | 1,700,000 | 600,004 | 15,002 | 2,710,839 | | | 2021 | 350,000 | 1,400,000 | 500,006 | 13,118 | 2,263,124 | | James D. Allen | 2023 | 350,000 | 525,000 | 399,996 | 13,244 | 1,288,240 | | Executive Vice President and Chief Financial Officer | 2022 | 345,833 | 550,000 | 400,008 | 12,367 | 1,308,208 | | | 2021 | 300,000 | 415,000 | 299,989 | 21,361 | 1,036,350 | | Mark S. Walker | 2023 | 300,000 | 475,000 | 299,997 | 12,555 | 1,087,552 | | Executive Vice President and Chief Operating Officer | | | | | | |
Summary Compensation Table
(1)Mr. Walker became an NEO in fiscal year 2023. (2)The amounts set forth in column (d) represent the discretionary cash bonuses earned by the NEOs during the applicable fiscal years. For additional information regarding the discretionary bonuses earned for fiscal 2023, please see “Semi - Annual Discretionary Bonuses” within the “Compensation Discussion and Analysis” section beginning on page 20 of this Proxy Statement. (3)The amounts set forth in column (e) represent the aggregate grant date fair value of stock awards granted during the applicable fiscal years calculated in accordance with ASC Topic 718. Assumptions used in the calculation are included in Note 1 under the caption "Stock-Based Compensation" to our audited consolidated financial statements for the year ended September 30, 2023 included in our Annual Report on Form 10-K filed with the SEC on November 17, 2023. (4)The amounts set forth in column (f) for fiscal 2023 include the following amounts:
Summary Compensation Table
| | Additional Life Insurance and Long-Term Disability Premiums ($) | HSA and Wellness Contribution ($) | 401(k) Matching Contributions ($) | Total ($) | | Mr. Tomnitz | 7,389 | — | 9,900 | 17,289 | | Mr. Bartok | 8,320 | 1,220 | 9,900 | 19,440 | | Mr. Allen | 3,344 | — | 9,900 | 13,244 | | Mr. Walker | 2,655 | — | 9,900 | 12,555 |
Fiscal 2023 Grants of Plan-Based Awards
Fiscal 2023 Grants of Plan-Based Awards The following table summarizes fiscal 2023 grants of stock-based compensation made to each of our NEOs:
Fiscal 2023 Grants of Plan-Based Awards
| Name | Grant Date | Type of Award | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards(1) ($) | | (a) | (b) | (c) | (d) | (e) | | Mr. Tomnitz | 3/21/2023 | RSUs(2) | 40,650 | 599,994 | | Mr. Bartok | 3/21/2023 | RSUs(2) | 40,650 | 599,994 | | Mr. Allen | 3/21/2023 | RSUs(3) | 27,100 | 399,996 | | Mr. Walker | 3/21/2023 | RSUs(3) | 20,325 | 299,997 |
Fiscal 2023 Grants of Plan-Based Awards
(1)The amounts in column (e) are based on the aggregate grant date fair value of the award determined pursuant to ASC 718. Assumptions used in the calculation of the amount in column (e) are included in Note 1 under the caption "Stock-Based Compensation" to our audited consolidated financial statements for the year ended September 30, 2023 included in our Annual Report on Form 10-K filed with the SEC on November 17, 2023. (2)These RSUs vest in three equal annual installments beginning on the first anniversary of the grant date. The award will be settled in shares of our common stock after vesting. (3)These RSUs vest in five equal annual installments beginning on the first anniversary of the grant date. The award will be settled in shares of our common stock after vesting.
Fiscal 2023 Outstanding Equity Awards
Fiscal 2023 Outstanding Equity Awards The following table summarizes outstanding equity awards at September 30, 2023. All awards will be settled in shares of our common stock unless noted below.
Fiscal 2023 Outstanding Equity Awards
| | Stock Awards | | | | | Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Vesting Date | | Mr. Tomnitz | 3/18/2021 | 6,214 | 167,405 | (2) | | | 3/31/2022 | 21,262 | 572,798 | (3) | | | 3/21/2023 | 40,650 | 1,095,111 | (4) | | Mr. Bartok | 3/18/2021 | 6,214 | 167,405 | (5) | | | 3/31/2022 | 21,262 | 572,798 | (6) | | | 3/21/2023 | 40,650 | 1,095,111 | (7) | | Mr. Allen | 3/30/2020 | 2,500 | 67,350 | (8) | | | 3/18/2021 | 7,556 | 203,559 | (9) | | | 3/31/2022 | 18,018 | 485,405 | (10) | | | 3/21/2023 | 27,100 | 730,074 | (11) | | Mr. Walker | 11/26/2018 | 600 | 64,482 | (12) | | | 5/6/2019 | 1,120 | 30,173 | (13) | | | 3/10/2020 | 3,600 | 96,984 | (14) | | | 3/18/2021 | 4,662 | 125,594 | (15) | | | 3/31/2022 | 11,261 | 303,371 | (16) | | | 3/21/2023 | 20,325 | 547,556 | (17) |
Fiscal 2023 Outstanding Equity Awards
(1)Value for all awards is based on the closing market price of our common stock of $26.94 as reported on the NYSE on September 29, 2023, the last trading day of fiscal 2023, unless otherwise noted. (2)The RSU award (covering 20,991 shares of common stock on the grant date) vests in three equal annual installments on each of the first three anniversaries of the grant date. As a result of his retirement eligibility, additional shares are also withheld to cover certain payroll taxes as and when due. (3)The RSU award (covering 33,784 shares of common stock on the grant date) vests in three equal annual installments on each of the first three anniversaries of the grant date. As a result of his retirement eligibility, additional shares are also withheld to cover certain payroll taxes as and when due. (4)The RSU award (covering 40,650 shares of common stock on the grant date) vests in three equal annual installments on each of the first three anniversaries of the grant date. As a result of his retirement eligibility, additional shares are also withheld to cover certain payroll taxes as and when due. (5)The RSU award (covering 20,991 shares of common stock on the grant date) vests in three equal annual installments on each of the first three anniversaries of the grant date. As a result of his retirement eligibility, additional shares are also withheld to cover certain payroll taxes as and when due. (6)The RSU award (covering 33,784 shares of common stock on the grant date) vests in three equal annual installments on each of the first three anniversaries of the grant date. As a result of his retirement eligibility, additional shares are also withheld to cover certain payroll taxes as and when due. (7)The RSU award (covering 40,650 shares of common stock on the grant date) vests in three equal annual installments on each of the first three anniversaries of the grant date. As a result of his retirement eligibility, additional shares are also withheld to cover certain payroll taxes as and when due. (8)The RSU award (covering 6,250 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of March 10, 2020. (9)The RSU award (covering 12,594 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. (10)The RSU award (covering 22,523 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. (11) The RSU award (covering 27,100 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. (12) The RSU award (covering 3,000 shares of D.R. Horton common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. This award was granted to Mr. Walker during his service at D.R. Horton, prior to his employment at the Company, but continues to vest based on his service to the Company. The market value for this award is based on the closing market price of D.R. Horton common stock of $107.47 as reported on the NYSE on September 29, 2023. (13) The RSU award (covering 5,600 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. (14) The RSU award (covering 9,000 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. (15) The RSU award (covering 7,770 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. (16) The RSU award (covering 14,077 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date. (17)The RSU award (covering 20,325 shares of common stock on the grant date) vests in five equal annual installments on each of the first five anniversaries of the grant date.
Fiscal 2023 Option Exercises and Stock Vested
Fiscal 2023 Option Exercises and Stock Vested The following table summarizes stock-based compensation awards vested in fiscal 2023:
Fiscal 2023 Option Exercises and Stock Vested
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized Upon Vesting ($)(1) | | Mr. Tomnitz | 28,399 | 420,483 | | Mr. Bartok | 25,688 | 382,258 | | Mr. Allen | 8,274 | 124,148 | | Mr. Walker | 8,190 (2) | 191,294 (2) |
Fiscal 2023 Option Exercises and Stock Vested
(1)Value reflects the aggregate dollar amount realized upon vesting by multiplying the number of shares vested by the closing market price of common stock on the vesting date. (2)Includes 900 shares of D.R. Horton common stock acquired under D.R. Horton's stock-based compensation awards that vested in fiscal 2023 for an aggregate value realized upon vesting of $77,685.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control
CEO Pay Ratio
CEO Pay Ratio As required by Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our median compensated employee and the annual total compensation of Mr. Bartok, our CEO during fiscal 2023. For fiscal 2023: •the annual total compensation of the median compensated employee of our Company (excluding Mr. Bartok) was $136,345; and •the annual total compensation of Mr. Bartok was $2,576,869. Based on this information, for fiscal 2023, the ratio of the annual total compensation of Mr. Bartok to the total compensation of our median compensated employee was 19 to 1. To identify our median employee for fiscal 2023, as well as to determine the total annual compensation of our median employee and Mr. Bartok for fiscal 2023, we took the following steps: 1.We determined that, as of September 30, 2023, our employee population consisted of 294 individuals (excluding Mr. Bartok) with all of these individuals located in the United States. This population consisted of full-time, part-time and temporary employees. As we had an even number of employees, the methodology resulted in the identification of two median employees. We selected the employee whom we believed had annual total compensation that was more representative of our general compensation practices. 2.To identify the median employee from our employee population, we obtained a listing of total compensation paid to each employee during fiscal 2023. For this purpose, total compensation included salary or wages, as applicable, commissions, bonuses, equity awards that vested or were exercised during the year and any other cash compensation. Such amounts were obtained from our payroll records. We annualized the salaries and wages of our full and part-time employees who were not employed for the entire fiscal year. 3.We identified our median employee using this compensation measure, which was consistently applied to all our employees as of the measurement date. Because all of our employees are located in the United States we did not make any cost-of-living adjustments in identifying the median employee. 4.Once we identified our median employee, we calculated such employee’s compensation for fiscal 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. 5.In addition to the amounts required to be reported as compensation in the Summary Compensation Table, we included the dollar value of employer paid non-discriminatory health insurance benefits in the total annual compensation of our median employee and Mr. Bartok to better reflect our employee compensation practices. The pay ratio as described above involves a degree of imprecision due to the use of estimates and assumptions but is a reasonable estimate that we calculated in a manner consistent with Item 402(u) of Regulation S-K.
Pay Versus Performance
Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid (as defined by SEC rules) and certain financial performance of the Company. For further information concerning the Company's pay for performance philosophy and how the Company aligns executive compensation with Company's performance, refer to the Compensation Discussion and Analysis section beginning on page 20. The following table sets forth information regarding compensation of our principal executive officer ("PEO") and average compensation of our other NEOs compared to Company performance for the most recently completed fiscal years. We have not included a Company-selected measure in the following table because we do not link our NEO compensation to any specific financial performance measure.
Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based On | | | | Year | Summary Compensation Table Total for Mr. Bartok(1) | Compensation Actually Paid to Mr. Bartok(2) | Average Summary Compensation Table Total for Non-PEO NEOs(3) | Average Compensation Actually Paid to Non-PEO NEOs(4) | Total Shareholder Return(5) | Peer Group Total Shareholder Return(6) | Net Income(7) (in millions) | | 2023 | $2,569,434 | $3,592,107 | $1,647,692 | $2,468,745 | $152.20 | $139.22 | $166.9 | | 2022 | $2,710,839 | $2,321,786 | $2,008,835 | $1,671,559 | $63.22 | $90.73 | $178.8 | | 2021 | $2,263,124 | $2,259,809 | $1,648,862 | $1,643,444 | $105.25 | $132.31 | $110.5 |
Pay Versus Performance
(1)The dollar amounts reported in this column are the amounts of the total compensation reported for our PEO, Daniel C. Bartok, who was our Chief Executive Officer in each of the years presented. Refer to “Executive Compensation - Summary Compensation Table.” (2)The dollar amounts reported represent the amount of “compensation actually paid” to Mr. Bartok, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received by Mr. Bartok. In accordance with these rules, these amounts reflect “Total Compensation” as set forth in the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718.
Pay Versus Performance
| Compensation Actually Paid to Mr. Bartok | 2023 | 2022 | 2021 | | Summary Compensation Table (SCT) total compensation | $2,569,434 | $2,710,839 | $2,263,124 | | Less: stock award values reported in SCT for the covered year | (599,994) | (600,004) | (500,006) | | Plus: fair value as of year-end of stock awards granted in the covered year | 1,095,111 | 378,043 | 391,062 | | Plus: year over year change in fair value as of year-end of outstanding unvested stock awards granted in prior years | 432,747 | (144,187) | 17,577 | | Plus: year over year change in fair value as of the vesting date of stock awards granted in prior years that vested in the covered year | 94,809 | (22,905) | 88,052 | | Compensation actually paid to Mr. Bartok | $3,592,107 | $2,321,786 | $2,259,809 |
Pay Versus Performance
(3)The dollar amounts reported represent the average of the amounts reported for the Company's non-PEO NEOs as a group in the "Total" column of the Summary Compensation Table in each applicable year. The names of the NEOs included for these purposes in each applicable year are as follows: (i) for 2023, Donald J. Tomnitz, James D. Allen, and Mark S. Walker; and (ii) for 2022 and 2021, Donald J. Tomnitz and James D. Allen. (4)The dollar amounts reported represent the average amount of “compensation actually paid” to the non-PEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. In accordance with these rules, these amounts reflect “Total Compensation” as set forth in the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718.
Pay Versus Performance
| Average Compensation Actually Paid to Non-PEO NEOs | 2023 | 2022 | 2021 | | Average Summary Compensation Table (SCT) total compensation | 1,647,692 | 2,008,835 | 1,648,862 | | Less: average stock award values reported in SCT for the covered year | (433,329) | (500,006) | (399,997) | | Plus: average fair value as of year-end of stock awards granted in the covered year | 790,914 | 315,038 | 312,844 | | Plus: average year over year change in fair value as of year-end of outstanding unvested stock awards granted in prior years | 408,037 | (133,608) | 15,024 | | Plus: average year over year change in fair value as of the vesting date of stock awards granted in prior years that vested in the covered year | 55,431 | (18,700) | 66,711 | | Average compensation actually paid to non-PEO NEOs | $2,468,745 | $1,671,559 | $1,643,444 |
Pay Versus Performance
(5)Total Shareholder Return (TSR) is calculated by assuming that a $100 investment was made on September 30, 2020. (6)The TSR Peer Group consists of the Russell 2000 Index, as used in the Company's stock performance graph in our annual report on Form 10-K. (7)The dollar amounts reported represent the amount of net income reflected in the Company's audited financial statements for the applicable fiscal year.
Election of Directors
Election of Directors To elect a director nominee, the votes cast “for” that nominee must exceed the votes cast “against” that nominee. In accordance with our Corporate Governance Guidelines, each incumbent nominee who does not receive the required vote for election must tender his or her resignation to our Executive Chairman for consideration by the Nominating and Governance Committee of our Board of Directors. For more information on the operation of our majority voting standard, see “Proposal No. 1 — Election of Directors.” Stockholders may not cumulate votes in the election of directors.