DEF 14A of Argan Inc
Filed May 1, 2023 · FY20230001558370-23-007356
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS The members of our Board of Directors are elected annually and hold office until the next annual meeting of stockholders and until their successors have been elected and shall have been qualified. Vacancies and newly-created directorships resulting from any increase in the number of authorized directors may be filled by a majority vote of the directors then in office. At the Annual Meeting, our stockholders are being asked to elect ten individuals to our Board of Directors, all of whom currently serve in that capacity. Unless a stockholder withholds authority, the holders of proxies representing shares of Common Stock will vote “FOR” the election of each of the nominees listed below. Proxies cannot be voted for a greater number of persons than the number of nominees named. If any nominee for any reason is unable to serve or for good cause will not serve, the proxies may be voted for such substitute nominee as the proxy holder may determine. We are not aware of any nominee who will be unable to or for good cause will not serve as a member of our Board of Directors.
Directors/Nominees
Directors/Nominees The names of the nominees, their ages as of April 30, 2023, and certain other information about them are set forth below:
Directors/Nominees
| Name | Age | Position | | Rainer H. Bosselmann | 80 | Director | | Cynthia A. Flanders | 68 | Director | | Peter W. Getsinger | 71 | Director | | William F. Griffin, Jr. | 68 | Director | | John R. Jeffrey, Jr. | 69 | Director | | Mano S. Koilpillai | 62 | Director | | William F. Leimkuhler | 71 | Chairman of the Board | | W.G. Champion Mitchell | 76 | Director | | James W. Quinn | 65 | Director | | David H. Watson | 47 | Director |
Directors/Nominees
Rainer H. Bosselmann. Mr. Bosselmann has been a director since May 2003 and served as Chairman of the Board of Directors of the Company from May 2003 to August 2022. He also served as the Company’s Chief Executive Officer (“CEO”) from October 2003 until his retirement in August 2022. Mr. Bosselmann was a director and Vice Chairman of the Board from January 2003 to May 2003. Mr. Bosselmann was chairman of the board, chief executive officer and a director of Arguss Communications, Inc. (“Arguss”), a telecommunications infrastructure company listed on the NYSE, from 1996 through 2002 and president of Arguss from 1997 through 2002. Mr. Bosselmann served as an independent director of The Roberts Company, formerly a privately owned firm, from 2008 until December 2015 when it was acquired by us. Mr. Bosselmann’s experience positions him to share his extensive knowledge of the Company with the Board during its deliberations, including its history and development, and to provide critical continuity. As chief executive officer of Arguss and then the Company, he developed substantial expertise in managing public companies with diverse and remotely-located business operations, and in identifying, executing and integrating acquisitions. Cynthia A. Flanders. Ms. Flanders has been a member of our Board of Directors since April 2009 and was our chief financial officer during the calendar year 2015. During the year ended January 31, 2019, the Board membership of Ms. Flanders was restored to “independent” pursuant to the requirements of the NYSE. Ms. Flanders currently serves as a member of the board of directors of Forbright Bank (formerly known as Congressional Bank), a full service, privately-held bank in Chevy Chase, Maryland. Since October 2013, she has served as a senior advisor for Verit Advisors LLC, an independent investment bank advisory firm that specializes in ESOPs and other ownership transitions. In April 2021, Ms. Flanders co-founded The Profitable Idea, LLC, an online business workshop and educational space for entrepreneurs and business owners to learn how to make their businesses sustainably profitable. Ms. Flanders is also founder of Manage Fearlessly, an organization that provides business training and career coaching resources to a number of company executives, senior managers, and entrepreneurs. From 1975 through 2009, Ms. Flanders held a series of positions of increasing responsibility with Bank of America and its predecessor organizations (the “Bank”). Ultimately, she served as the Global Commercial Banking Executive for the Bank’s Mid-Atlantic region overseeing eight commercial banking markets and over 80 client teams delivering a full array of financial services to over 6,000 small, middle market and micro-cap clients in the region. With her long banking and management career, Ms. Flanders brings to the Board her considerable experience in executive management and strategic planning, as well as expertise in financial analysis, capital structuring and due diligence investigations. Her many years of lending to businesses in the Mid-Atlantic region of the United States (the “U.S.”) have provided her with a unique understanding of our business and the construction industry. In addition, she represents an important resource for consultation regarding commercial banking matters. Peter W. Getsinger. Mr. Getsinger has been a member of our Board of Directors since his appointment in November 2014. Mr. Getsinger retired in 2018 from Nexstar Capital Partners LLC (a SEC registered firm), a firm that he founded in 2004 as an alternative investment management firm focused on investing in emerging markets with a primary concentration in Latin America, where he was managing partner and chief investment officer. The firm received its initial investment capital from the Griswold family, formerly the controlling shareholders of the Alex Brown investment banking firm of Baltimore. In 2005, his firm acquired an ownership interest in Electro Dunas S.A. (“Dunas,” an electricity distributor servicing the southwest of Peru and one of four privatized distribution companies in that country). Mr. Getsinger served as a board member of Dunas until 2016. From 2012 to 2014, he was chairman of its board of directors. Prior to forming Nexstar, Mr. Getsinger was head of global investment banking for Latin America at Deutsche Bank. He held the same role at Bankers Trust Company in addition to running the global project finance business. He previously served as the senior vice president and head of fixed income sales for the United Kingdom, continental Europe, and the Middle East at Lehman Brothers. Mr. Getsinger is also a former director and owner of GPU Argentina Holdings, Inc. Mr. Getsinger brings a significant amount of business experience to our Board along with deep financial and diverse banking expertise. Because of his experience with Dunas, he provides additional power industry knowledge. Mr. Getsinger has a strong background in international markets and his leadership in providing global investment banking services is valuable to us in matters relating to strategic planning and potential overseas expansion. William F. Griffin, Jr. Mr. Griffin was appointed to the Board of Directors in April 2012. He is a co-founder of Gemma Power Systems, LLC (“Gemma”) which was acquired by Argan in December 2006 along with its affiliated companies. Mr. Griffin is a veteran of power plant construction with over 40 years of related experience. He now holds the position of Non-Executive Chairman of Gemma. Mr. Griffin served as Vice Chairman of Gemma from November 2007 to November 2019 and as Chief Executive Officer of Gemma from September 2008 to November 2019. From September 2008 to January 2009 and from November 2017 to July 2018, he was also President of Gemma. Under Mr. Griffin’s leadership, Gemma grew to become one of the nation’s leading providers of engineering, procurement and construction services to the power generation market. Over the past two years, Mr. Griffin has evolved into an important leadership mentor for the new heads of both Gemma and our overseas energy project construction firm, Atlantic Projects Company Limited (“APC”). Mr. Griffin has significant senior executive experience in the energy-related construction sector. Based on his long length of service as the leader of our most important operating company, Mr. Griffin contributes an in-depth understanding of our business that may not be easily attainable by an outside member of our Board. Based on the extent of his experience, the Board of Directors benefits from Mr. Griffin making important contributions to its decision making regarding our strategic direction, our commitment to certain business development efforts, the identification of future construction project opportunities, contract negotiations and project execution. John R. Jeffrey, Jr. Mr. Jeffrey has been a member of our Board of Directors since June 2017. Mr. Jeffrey accumulated 40 years of experience with Deloitte & Touche LLP (“Deloitte”), which included 30 years as a partner serving several of Deloitte’s largest audit clients, before retiring in 2017. Mr. Jeffrey was Managing Partner of Deloitte’s Global Japanese Services Group from 2003 to 2015. Mr. Jeffrey was a member of Deloitte’s United States Chairman and CEO Nominating Committee in 2010. Currently, Mr. Jeffrey serves as a board member for two non-profit entities based in New York offering educational and enrichment programs dedicated to improving the education of children. In 2021, Mr. Jeffrey joined Clearview Media Acquisition Group, a media investment entity, as a member of its Board of Directors.
Directors/Nominees
Mr. Jeffrey provides our Board with significant expertise in the areas of public accounting, risk management, mergers and acquisitions, and related regulatory matters, which he developed over a long career with Deloitte, a leading public accounting firm. He brings to the Board viable experience with operational and governance issues faced by complex organizations, including extensive international expertise. Mr. Jeffrey also brings to our Board valuable experience in dealing with long-term construction projects. Mr. Jeffrey is a certified public accountant with an active license. Mano S. Koilpillai. Ms. Koilpillai was appointed to our Board of Directors in September 2019 and has served as chairwoman of the Company’s environmental, social and corporate governance committee since June 2021. Ms. Koilpillai has over 30 years of experience with Fortune 50 and private associations and corporations, including non-profit, international, consulting and government entities. In October 2020, she began service as the chief financial officer of The Rural Broadband Association, which represents community-based telecommunications companies bringing robust, high-quality broadband access to rural and small-town America. Ms. Koilpillai is the founder of Dynamic Consulting and Accounting, LLC, and served as president and chief executive officer from September 2014 to October 2020. Additionally, from September 2012 until August 2014, she served as chief financial officer for Defenders of Wildlife, a non-profit organization. Previously, she also held positions with the National Women’s Law Center, the Internet Society and the Washington Scholarship Fund. With her experience as a senior level financial executive with organizations of various sizes, complexity and industries, Ms. Koilpillai provides the Board with insights into the requirements for building high-performing finance teams and for maintaining optimum IT organization structures. She also provides the Board with good counsel regarding the implementation of process improvements, the mitigation of fraud risks and the installation of financial systems. Ms. Koilpillai is a certified public accountant William F. Leimkuhler. Mr. Leimkuhler has been a member of our Board of Directors since June 2007 and was appointed as Chairman of the Board in August 2022. Currently, Mr. Leimkuhler serves as a senior vice president of Mutualink, Inc. (“Mutualink”), a privately owned provider of communications interoperability solutions for public safety and critical infrastructure. From November 2017 to January 31, 2021, Mr. Leimkuhler served as the chief financial officer of Mutualink. He has been the general counsel to Paice Corporation, a privately held developer of hybrid electric powertrains, since 1999. He also advises a number of technology-based companies on business, financial and legal matters. From 1994 through 1999, he held various positions with Allen & Company LLC (“Allen”), a New York investment banking firm, initially serving as the firm’s general counsel. From 2012 to September 2019, Mr. Leimkuhler was a member of the board of directors of Northern Power Systems Corp. (TSX: NPS), which designed, manufactured and serviced wind turbines. He served as chairman of the board from December 2013. He also served on the audit and compensation committees of this board. Mr. Leimkuhler is also the lead director of U.S. Neurosurgical, Inc. (OTCBB: USNU), which operates, and holds interests in, radiological treatment facilities. The leadership experience that Mr. Leimkuhler has developed as a legal executive with an investment banking firm, a securities law firm partner and a board and associated committee member for public companies makes him a valuable member of our Board. He is a respected source of legal guidance to the members of the executive management team and the members of our Board of Directors and provides special insight to them on matters relating to financial reporting and corporate governance requirements. W.G. Champion Mitchell. Mr. Mitchell has been a member of our Board of Directors since October 2003. From January 2003 until March 2008, Mr. Mitchell was chairman of the board and chief executive officer of Network Solutions, Inc. which was engaged in the creation, marketing and management of digital identity and web presence products. Mr. Mitchell currently serves as a director of two privately-held companies, Direct Brands, Inc. and The 41st Parameter, Inc. He is also a member of the board of governors for RTI International, a leading independent, nonprofit research and development organization, and for the University of North Carolina system that controls all state-owned universities and operates the largest hospital system in the state. Mr. Mitchell possesses business leadership skills which were honed as a former chief executive officer for a series of companies. This background makes him a valuable source of advice and consultation for the management team and the other members of the Board as we address the contemporary issues facing public companies today. His many years of experience as a corporate executive and his length of service on our Board provide him with a unique capability to assess the needs of the Board and to evaluate the value of potential Board members, with substantial insight into management, operational and financial matters, and with knowledge of market conditions and trends. James W. Quinn. Mr. Quinn has been a member of our Board of Directors since May 2003. Mr. Quinn is currently a managing director of Allen. Since 1982, Mr. Quinn has served in various capacities at Allen and its affiliates, including head of the Corporate Syndicate Department and chief financial officer for approximately ten years. Mr. Quinn served as a director of Arguss from 1999 through 2002. He also serves as a director on the boards of several privately held companies in connection with Allen’s investment in the companies and of several charitable organizations. Mr. Quinn’s experience with financial and investment banking matters at Allen and his terms of service on the boards of the Company and Arguss make him a valued member of our Board and well-qualified to be the chair of the Board’s Compensation Committee. His many years of experience allow him to counsel the Board on matters such as executive compensation, mergers and acquisitions, capital structure, financings and strategic planning and to provide insightful views on public company reporting matters and general business trends. David H. Watson. Mr. Watson was appointed President and Chief Executive Officer of the Company and a member of the Board of Directors, effective August 2022. Previously, Mr. Watson served as our Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary since he joined the Company in October 2015. Mr. Watson is a certified public accountant and has held senior financial positions with public and private companies for over 15 years. Mr. Watson was the Chief Financial Officer of Gladstone Investment Corporation (NASDAQ: GAIN) from 2010 until 2015, and also served as its Treasurer from 2012 until 2015. In addition, Mr. Watson was the Chief Financial Officer of Gladstone Capital Corporation (NASDAQ: GLAD) from 2011 until 2013 and served as its Treasurer from 2012 until 2015. Gladstone Investment Corporation and Gladstone Capital Corporation are closed-end, non-diversified management investment companies. Prior to Gladstone, Mr. Watson served as a director of Portfolio Accounting of MCG Capital Corporation (NASDAQ: MCGC) from 2007 until 2010.
Directors/Nominees
Mr. Watson’s experience positions him to share his extensive knowledge of the Company with the Board during its deliberations, including its history and development and the results of its operations. As chief financial officer of the Company, he developed important relationships with the leaders now running our subsidiary operations. He possesses the leadership skills, the energy and the problem-solving capabilities that are important to the Board of Directors and the Company.
Compensation of Directors
Compensation of Directors The following table summarizes the fees and other compensation for the non-employee members of our Board of Directors for Fiscal 2023. Each non-employee member of our Board of Directors received an annual fee of $35,000. Members of the Audit Committee received an additional annual fee of $5,000 and the Audit Committee Chair received an additional annual fee of $10,000. Effective August 16, 2022, we established an annual fee for the Chairman of the Board in the amount of $65,000, and the lead independent director role and associated annual fee of $15,000 were eliminated. Directors were reimbursed for reasonable expenses actually incurred in connection with attending each formal meeting of the Board of Directors or the meeting of any committee thereof. Directors were also eligible to receive awards of options to purchase shares of our Common Stock and of restricted stock units.
Compensation of Directors
| | | Stock Option | Restricted Stock | All Other | Total | | Name | Fees | Awards (1) | Unit Awards (1) | Compensation | Compensation | | Cynthia A. Flanders | $40,000 | $38,750 | $62,510 | $— | $141,260 | | Peter W. Getsinger | 40,300 | 38,750 | 62,510 | — | 141,560 | | John R. Jeffrey, Jr. | 50,000 | 38,750 | 62,510 | — | 151,260 | | Mano S. Koilpillai | 35,300 | 38,750 | 62,510 | — | 136,560 | | William F. Leimkuhler | 67,800 | 38,750 | 62,510 | — | 169,060 | | W.G. Champion Mitchell | 35,000 | 38,750 | 62,510 | — | 136,260 | | James W. Quinn | 42,500 | 38,750 | 62,510 | — | 143,760 |
Compensation of Directors
| (1) Amounts represent the aggregate award date fair values reflecting the assumptions discussed in Note 12, Stock-Based Compensation, of our consolidated financial statements included in our Annual Report on Form 10-K for Fiscal 2023. |
APPROVAL OF EXECUTIVE COMPENSATION (THE “SAY-ON-PAY” PROPOSAL)
APPROVAL OF EXECUTIVE COMPENSATION (THE “SAY-ON-PAY” PROPOSAL) We are seeking stockholder approval of the compensation of our Named Executive Officers as described in the “Executive Compensation Discussion and Analysis” section, the compensation tables and the other narrative compensation disclosures of this Proxy Statement, all of which are included below. This non-binding advisory proposal, commonly known as a “say-on-pay” proposal, is required under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This vote represents our eleventh annual advisory say-on-pay vote. Last year, the stockholders approved our executive compensation with 96% of the vote in favor of our program. Based on management’s recommendation and the results of voting by the stockholders at the 2019 Annual Meeting, the Board of Directors determined that we will hold an advisory vote on our executive compensation every year. Because this is an advisory vote, the results will not be binding on the Board of Directors and it will not directly affect or otherwise limit any existing compensation or award arrangement of any of our Named Executive Officers. However, our Compensation Committee does consider the outcome of the annual votes when determining executive compensation arrangements. The Compensation Committee has conducted comprehensive stockholder outreach which commenced during our fiscal year ended January 31, 2018. During Fiscal 2023 and shortly thereafter, the members of the Compensation Committee continued to engage in meaningful contacts with certain stockholders, as we proactively contacted all of our top 25 stockholders, who collectively represented approximately 69% of our outstanding shares, as described further in the “Executive Compensation Discussion and Analysis” section below. The purpose of the outreach practice is to deepen our understanding of the perspectives of our stockholders with respect to our compensation practices, and to evaluate and to address any concerns or reactions we receive. Based on feedback we have received in the past, we increased the vesting period for stock option awards, introduced the use of performance-based long-term incentive equity compensation, instituted a cap on annual cash incentive awards and committed to a policy prohibiting the future negotiation of single-trigger change-in-control provisions, among other changes. These changes led to enhancements of the disclosures regarding executive compensation which are reflected in the discussion of our executive compensation included in our Proxy Statement for the current year. The Board of Directors has adopted several other policies to improve accountability and further encourage an alignment of stockholder and executive officer interests. These policies, which are also described in further detail below in the “Executive Compensation Discussion and Analysis” section, include a stock ownership policy for Named Executive Officers and non-employee members of our Board, a claw-back policy, a no pledging policy and an anti-hedging policy. In April 2023, we introduced a new restricted stock award for certain executive officers in order to incentivize growth of our diluted EPS over a three-year measurement period. Consistent with past efforts to increase compensation transparency for our stockholders, we developed specific performance metrics for use in the determination of the amount of non-equity cash incentive compensation that may be earned each year by the CEO of Gemma. The metrics were used to confirm the amounts of such compensation earned by him for Fiscal 2023. In April 2021, we introduced the use of a new restricted stock award in order to incentivize the growth in the number and value of renewable energy construction projects awarded to Gemma over the ensuing three-year period. In summary, our executive compensation program has been structured by the Compensation Committee to assure the stability of our core management team through challenging business environments. Concurrently we provide incentives to drive profitable growth and to deliver value to our stockholders. In considering how to vote on this advisory proposal, we urge our stockholders to study all the relevant information in the “Executive Compensation Discussion and Analysis” section below, and the compensation tables and the other narrative disclosures regarding our executive compensation program that are included herein.
PRINCIPAL STOCKHOLDERS
| (1) Each applicable percentage of ownership is based on 13,441,590 shares of Common Stock outstanding as of January 31, 2023, together with applicable stock options for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options that are currently exercisable or exercisable within 60 days of January 31, 2023 are deemed to be beneficially owned by the person holding such stock options for the purpose of computing the percentage of ownership of such person, but are |
Fiscal 2023 Business Highlights
This comparison of the price performance of our Common Stock over the last five years versus the performance of the S&P 500 and the performance of the heavy construction company index is not favorable. Although our share performance has not been stronger over the five-year period, we are encouraged by the positive trend of our share price which has outperformed the S&P 500, since January 31, 2022. We are also encouraged by the growth in our project backlog, which grew by over $0.1 billion to surpass $0.8 billion in total, and the diversity of our current project backlog. We anticipate that with efficient operational execution, these projects in our backlog will provide a solid base from which to drive revenue growth. We remain committed to enhancing Argan’s shareholder value through the payment of regular quarterly dividends since January 31, 2019 and the repurchase of our shares through our $125 million share repurchase program. We remain optimistic that the market will recognize the value of our shares as we grow our backlog during the electrification of the economy. The following table presents our annualized one-year, three-year and five-year total stockholder returns, or “TSR” (defined as total stock market value appreciation plus dividends paid for the relevant period), and the comparable average TSR percentages for a group of peer companies. The peer group consists of 12 publicly traded companies selected by us and identified below in the “Competitive Market Positioning” section of this Proxy Statement. The table also presents the ranking of our performance compared to the peer group for each TSR period.
Fiscal 2023 Business Highlights
| | Total Stockholder Return: Argan v. Peer Group (1) | | | | TSR | Argan | Peer Group Average | Peer Group Percentile Rank | | 1‑year TSR | 11.2% | 20.7% | 62% | | 3‑year TSR | 7.5% | 13.7% | 69% | | 5‑year TSR | 2.6% | 3.9% | 38% |
Fiscal 2023 Compensation Deliberations
Fiscal 2023 Compensation Deliberations This section of the discussion and analysis of our executive compensation covers Fiscal 2023 compensation deliberations and associated compensation decisions made by the Compensation Committee. Pay for Holding Company Named Executives Is “At Risk” and Aligned with Performance. The compensation program for holding company executives, our CEO and CFO, is designed to maintain a strong link between pay and performance. “At risk” compensation for these executives includes discretionary annual cash bonuses and long-term equity incentive awards (stock options and restricted stock units) through which the performance of each of the individual officers is rewarded. It is important to differentiate between the Named Executive Officers who are officers of Argan, a holding company, and the Named Executive Officer who is the Chief Executive Officer of Gemma, our principal operating company. Our CEO, Mr. Watson, and our CFO, Mr. Deily (together, the “Holding Company Named Executive Officers”), are employees of the holding company and are responsible for the overall strategic direction of the Company and other important activities. They include capital allocation and treasury functions, monitoring of the financial performance of all subsidiaries, investor relations activities, the preparation of consolidated financial reports in compliance with the rules and regulations of the SEC and the effectiveness of the Company’s system of internal controls over financial reporting. The Holding Company Named Executive Officers direct company-wide initiatives, including the structuring and management of health, general liability and other insurance programs and international, federal, state and local tax planning and compliance. They also perform retention and succession planning related to key employees, initiate management changes and perform other tasks. In addition, the CEO and CFO are constantly evaluating possible acquisition targets with the intention of identifying companies with significant potential for profitable growth and realizable synergies with one or more of our existing businesses, and that can be operated in a manner that best provides favorable cash flows for the Company and value for our stockholders. The Holding Company Named Executive Officers are compensated pursuant to a program that sets base salaries at the lower end of the peer group. This reflects, in part, that they are not directly responsible for the profitability and performance of our subsidiaries. As the Chief Executive Officer of Gemma (“the “CEO of Gemma”), Mr. Collins has had the specific responsibility for the leadership and management of our largest subsidiary, Gemma, and its ongoing operations and financial performance. In order to achieve its objectives, the Compensation Committee has designed the executive compensation program utilizing four major pay elements for Messrs. Watson and Deily:
Fiscal 2023 Compensation Deliberations
| ● | Annual Cash Bonus Compensation. Provides discretionary annual cash bonus awards for successful short-term financial performance and other achievements that are aligned with our business strategy. |
Fiscal 2023 Compensation Deliberations
| ● | Long-Term Equity-Based Incentive Compensation. Provides executives with stock option and certain restricted stock unit awards that represent opportunities for them to participate in, and be rewarded for, the growth in the value of the Company’s Common Stock. Awards may also facilitate executive stock ownership. Both stock options and restricted stock units vest based on the satisfaction of service requirements. |
Fiscal 2023 Compensation Deliberations
| ● | Performance-Based, Long-Term, Equity-Based Incentive Compensation. Provides performance-based components to our equity-based long-term incentive award program. Certain performance-based restricted stock units vest over three-year periods based on our total shareholder returns relative to our peer group. In April 2023, we introduced a new restricted stock award that vests based on compounded growth of our diluted EPS over a three-year measurement period. |
Fiscal 2023 Compensation Deliberations
| ● | Stockholder Value. The Compensation Committee generally places a focus on long-term value creation which, from a TSR basis, has been disappointing. However, it was noted that the Company remains above 62% in peer group percentile ranks for the 1-Year TSR measurement period and above 69% for the 3-Year TSR measurement period through April 26, 2023. Accomplishments for Fiscal 2023 that served to enhance stockholder value included share repurchases of approximately $68 million and quarterly cash dividends of $0.25 per share which returned an aggregate amount of $14 million to our stockholders. |
Fiscal 2023 Compensation Deliberations
Additionally, in April 2023 and 2022, we made targeted investments in the leadership teams at all of our subsidiaries by awarding TRSUs covering 13,300 and 15,000 shares of our Common Stock, respectively. We believe that our efforts to retain the core groups of management and other key employees at Gemma and our other operating companies were effective during Fiscal 2023, as we believe that turnover of management and key employees continues to be low relative to industry standards. Compensation for Mr. Collins. The Compensation Committee reviewed the incentive compensation calculation for Mr. Collins, and confirmed that it was determined pursuant to the terms of the employment agreement which was entered into on November 15, 2019. The employment agreement has four performance-based criteria for each fiscal year, including Gemma’s achievement of certain levels of adjusted EBITDA and of adjusted EBITDA as a percent of corresponding revenues, Gemma’s meeting certain safety targets and the increase in the active contract backlog of Gemma. For the first criterion, if the adjusted EBITDA of Gemma (as defined in the employment agreement) for any fiscal year equals or exceeds $30 million, Mr. Collins shall be entitled to receive a cash payment in an amount between 1% and 2% of the adjusted EBITDA of Gemma based on a sliding scale. For Fiscal 2023, the adjusted EBITDA of Gemma, as defined, was $44.6 million. For the second criterion, if the adjusted EBITDA as a percent of revenues of Gemma for any fiscal year equals or exceeds ten percent (10%), Mr. Collins shall be entitled to a payment in an amount between 0.2% and 1% of adjusted EBITDA of Gemma based on a sliding scale. For Fiscal 2023, the adjusted EBITDA as a percent of revenues of Gemma, as defined, was 20.0%. For the third criterion, if the project safety performance on Gemma’s projects, as measured by the OSHA Recordable Incident Rate (“RIR”), for any calendar year during Mr. Collins’ employment term is between 0.0 and 1.5, he shall be entitled to receive a performance-based compensation payment of up to $200,000 based on a sliding scale. If the RIR for any calendar year during his employment term is greater than 1.5, the overall performance-based compensation shall be reduced based on a sliding scale. For Fiscal 2023, because Gemma’s RIR was less than 0.50 for calendar year 2022, Mr. Collins earned $200,000. For the fourth criteria, if the change from the beginning of the fiscal year to the end in the amount of remaining unsatisfied performance obligations plus revenues of Gemma during the year (“change in active contract work”) exceeds zero, Mr. Collins shall be entitled to performance-based compensation equal to 0.05% of the change in active contract work, subject to a maximum of $250,000. For Fiscal 2023, the change in active contract work increased by approximately $538 million. The total amount of performance-based cash compensation for any fiscal year earned by Mr. Collins as a result of Gemma’s attainment of one or more of the performance goals described above may not exceed a total amount of $2,500,000. Mr. Collins earned non-equity incentive plan cash compensation in the amount of $1,400,000 for Fiscal 2023 pursuant to the terms of his employment agreement. In addition, Mr. Collins was awarded a discretionary cash bonus of $250,000 during Fiscal 2023. The nonqualified deferred compensation plan for key employees of Gemma was approved by our Board on April 6, 2017 (see Exhibit 10.7 to our Annual Report on Form 10-K for the year ended January 31, 2017 that was filed with the SEC on April 11, 2017) with the objective of keeping the management team of Gemma in place for the long term. The unfunded, cash-based plan, as amended, now has four-to-six-year vesting periods with a continuous employment requirement (see Exhibit 10.12 to our Quarterly Report on Form 10-Q for the three-month period ended October 31, 2020 that was filed with the SEC on December 9, 2020). Based on the performance of certain key employees of Gemma for the year just ended, a dollar amount may be contributed to the deferred compensation plan, as amended, for each such employee. Of each annually awarded amount, 50% vests on the fourth anniversary of the date of award and 25% vests on each of the fifth and sixth anniversary dates. Except in the event of disability or death, vesting is dependent on continuous employment with Gemma up to the applicable vesting date. Mr. Collins participates in the plan, with a deferred compensation balances at January 31, 2023 of $450,000 that was established in prior years. Mr. Collins received a distribution of $100,000 during Fiscal 2023, and he did not earn deferred compensation related to Fiscal 2023. IRC Section 409A regulates the income tax treatment of most forms of nonqualified deferred compensation. We believe we are in compliance with IRC Section 409A and the regulations promulgated thereunder. Compensation Decisions. As a result of the recent deliberations of the Compensation Committee and based on the factors outlined above, the Compensation Committee:
Fiscal 2023 Compensation Deliberations
| ● | Approved the payment of annual cash bonuses to Mr. Watson and Mr. Deily in the amounts of $330,000 and $185,000, respectively, related to performance during Fiscal 2023; |
Fiscal 2023 Compensation Deliberations
| ● | Approved the payment of non-equity incentive plan compensation to Mr. Collins in the amount of $1,400,000 related to achievements during Fiscal 2023; |
Fiscal 2023 Compensation Deliberations
| ● | Approved the award of non-qualified stock options, PRSUs, EPRSUs and TRSUs to Mr. Watson covering 5,000 shares, 5,000 target shares, 10,000 target shares and 12,000 shares of Common Stock, respectively; |
Fiscal 2023 Compensation Deliberations
| ● | Approved the award of non-qualified stock options, PRSUs, EPRSUs and TRSUs to Mr. Deily covering 2,500 shares, 2,500 target shares, 2,500 target shares and 12,500 shares of Common Stock, respectively; and |
Fiscal 2023 Compensation Deliberations
| ● | Approved the award of non-qualified stock options, PRSUs, EPRSUs, RRSUs and TRSUs to Mr. Collins covering 2,500 shares, 1,000 target shares, 2,500 target shares, up to 7,500 shares and 5,000 shares of Common Stock, respectively. |
Fiscal 2023 Compensation Deliberations
The stock-based awards identified above were made to Messrs. Watson, Deily and Collins in September 2022 and April 2023. Accordingly, the values of these awards will be included in the “Summary Compensation Table” in the amounts of compensation to be reported for the fiscal year ending January 31, 2024. For Fiscal 2023, over 67% and 50% of all cash and equity incentive compensation, respectively, was “At Risk” for our Named Executive Officers. As discussed above, the decisions of the Compensation Committee were based on recommendations received from our CEO, the Compensation Committee’s own evaluations of each executive’s performance, the overall achievements accomplished by Gemma and the Company during Fiscal 2023 and our overall executive compensation strategy. The Compensation Committee approved the cash bonus and non-equity incentive compensation payments described above and made its recommendations for stock option and restricted stock unit awards to the Board of Directors for approval. These recommendations were approved by the independent directors of the Board of Directors in April 2023.
Competitive Market Positioning
Competitive Market Positioning Although the Compensation Committee has the authority under its charter to hire outside advisors to provide it with information as needed in making compensation decisions, it has not used the services of any external advisor in connection with the exercise of its responsibilities or completion of any of its initiatives. In view of the holding company structure and special factors relating to our business, the Compensation Committee believes that the engagement of a compensation consultant would not provide significant information beyond that which is already available to us at this time. The Compensation Committee seeks to achieve executive compensation that is aligned with the program’s pay-for-performance principles and is competitive with compensation provided by a peer group of selected publicly traded companies. In determining executive compensation, the Compensation Committee considers a number of factors and data from a market-relevant group of peer companies that are potential competitors for executive talent and each Named Executive Officer’s performance and experience. For Fiscal 2023, the peer group consisted of the following 12 companies from the specialty construction and engineering services industry (the “2023 Peer Group”). The Compensation Committee periodically reviews the composition of each annual peer group and updates it based on available market information when appropriate. The companies in the 2023 Peer Group were selected because, in the judgment of the members of the Compensation Committee, they represent companies with which we would compete for executive talent. One company, Infrastructure and Energy Alternatives, Inc. was removed from the peer group after it was acquired by MasTec during Fiscal 2023. It was replaced by Limbach Holdings, Inc. We do not view benchmarking as a stand-alone tool for setting compensation due to the aspects of our business and objectives that may be unique to us, but we believe that gathering and reviewing this information should be a part of our compensation-related decision-making process. In exercising its collective judgment in the assessment of executive pay, the Compensation Committee uses benchmarking as one consideration. We do not target executive compensation at any specific percentile or ranking within a peer group.
Our Executive Compensation Program
Our Executive Compensation Program Based on the feedback we received during our outreach efforts over the years, the Compensation Committee took action. We have enhanced the disclosures included in our proxy statements by providing discussion of our executive compensation program with greater clarity including the specific factors that influence the annual decisions of the Compensation Committee on executive compensation. We changed our standard stock option vesting period to three years from the one-year period used historically. The longer vesting period has been included in all stock option awards made since January 2018. The Compensation Committee also reduced the number of shares of our Common Stock covered by annual stock option awards typically made to our CEO and CFO. The lower stock option awards are now complemented with the awards of restricted stock units which are intended to introduce a stronger performance-based equity component to our long-term incentive awards. PRSUs have been awarded to our CEO and CFO annually, usually each April, since 2018. These awards vest over three-year periods based on our total stockholder return relative to the return of each award’s designated peer group of companies. We believe that this type of incentive award is more consistent with market practice. We also believe that the measurement of total stockholder return is an appropriate performance metric as the Holding Company Named Executive Officers are considered to have direct influence on the results. The investors expressed support for our use of restricted stock units as an element of our executive compensation program and the use of this metric-scheme specifically. Additionally, in April 2021, we further reduced the number of shares covered by stock option awards and added TRSUs as a component of the overall executive compensation program. Most recently, in April 2023, we added EPRSUs to augment the overall executive compensation program, again reducing the number of stock option shares. EPRSU awards focus on the compounded growth of the Company’s diluted EPS, a metric that we believe is a meaningful measurement of value provided to stockholders. These changes were made, in part, to address the negative impacts on stock options of dividend distributions, to encourage increased holdings of our stock, and to retain talent over the long-term. In April 2023, 2022 and 2021, the independent members of the Board awarded to Mr. Watson options to purchase 5,000 shares, 10,000 shares and 10,000 shares of our Common Stock, respectively, and PRSUs with the targeted number of shares available for issuance equal to 5,000 shares, 10,000 shares and 10,000 shares of our Common Stock, respectively. The vesting period for each stock option is three years. Each PRSU award vests on the third anniversary of the award, with the number of issuable shares based on the price performance of our Common Stock compared to the price performance of the common stock of each award’s designated peer group. Additionally, in April 2023, 2022 and 2021, the independent members of the Board approved the awards of TRSUs covering 12,000 shares, 10,000 shares and 10,000 shares, respectively, to Mr. Watson. In April 2023, the independent members of the Board awarded EPRSUs to Mr. Watson with 10,000 shares targeted for issuance. The number of shares issuable pursuant to the EPRSU award will be determined on the three-year anniversary of award based on the sum of our EPS amounts for the fiscal years ending January 31, 2024, 2025 and 2026 compared to target compounded growth EPS amounts based on the sum of our EPS amounts for the fiscal years ended January 31, 2021, 2022 and 2023. Likewise, in April 2023, the independent members of the Board awarded to Mr. Deily options to purchase 2,500 shares of our Common Stock, with vesting over a three-year period. In September 2022, when Mr. Deily was promoted to the position of CFO, he was awarded PRSUs with the number of issuable shares targeted at 2,500 shares, and with the same vesting terms as included in the PRSU award made to Mr. Watson in April 2023. Additionally, the independent members of the Board approved the award of TRSUs covering 12,500 shares to Mr. Deily in September 2022. In April 2023, Mr. Deily was awarded EPRSUs with the targeted number of shares available for issuance equal to 2,500 shares. The actual number of issuable shares will be determined based on the same vesting terms as included in the EPRSUs awarded to Mr. Watson in April 2023. In April 2022 and 2021, the independent members of the Board awarded to Mr. Bosselmann three-year stock options with each award covering 12,500 shares of our Common Stock, and PRSUs with the targeted number of shares available for issuance for each award equal to 12,500 shares of our Common Stock. The PRSUs include the same vesting terms as included in the PRSU awards made to Mr. Watson in April 2022 and April 2021. Additionally, the independent members of the Board approved the awards of TRSUs covering 12,500 shares of our Common Stock to Mr. Bosselmann in both April 2022 and 2021. Depending on the price performance of our Common Stock compared with the 2023 Peer Group, the maximum numbers of shares of Common Stock (200% of the target number of shares) that Mr. Watson and Mr. Deily may earn over the three-year stock price performance period of the PRSUs awarded in April 2023 and September 2022, respectively, are 10,000 shares and 5,000 shares, respectively, plus adjustments for cash dividends, as determined based on the stock-earning scale presented below:
Our Executive Compensation Program
| Payout | —% | 25% | 50% | 75% | 100% | 125% | 150% | 200% |
Changes Implemented by the Compensation Committee
Included in the number of shares held by each Named Executive Officer presented above are 25% of the target number of shares of Common Stock that may be issued to each officer pursuant to outstanding PRSUs, RRSUs, EPRSUs and TRSUs, even though such shares are not considered beneficially owned for purposes of the “Principal Stockholders” table included herein. Until the applicable ownership requirement is achieved, each individual is required to retain shares of Common Stock with a total value of at least 50% of the intrinsic value, net of taxes, of any shares that he or she acquires under a Company stock plan. Excluding sales of shares related to taxes associated with the exercising of stock options or vesting of stock awards, no sales of existing stockholdings are permitted until the applicable required stock ownership quantity is attained. Once the applicable ownership requirement is attained, the individual may sell any shares that exceed the applicable minimum requirement. Each non-employee member of our Board of Directors shall own a minimum of 10,000 shares of our Common Stock, and most have either exceeded the stock ownership threshold or is generally making satisfactory progress toward achieving the ownership requirement. In certain cases where satisfactory progress has not been achieved, the individuals have indicated their plan to satisfy the ownership guidelines. Claw-Back Policy. The Company adopted a claw-back policy covering performance-based incentive compensation. Under this policy, the Board of Directors may, in its sole discretion and to the extent that it determines it is in the Company’s best interest to do so, require the reimbursement of all or a portion of any performance-based incentive compensation, if:
Major Elements of Executive Compensation and Analysis of Compensation Decisions
Major Elements of Executive Compensation and Analysis of Compensation Decisions Annually, the Compensation Committee considers each of the elements of executive compensation that are discussed below, individually and in the aggregate, when making decisions regarding the ratification and/or approval of compensation amounts for each Named Executive Officer. The Compensation Committee has reviewed the structure of the Company’s executive compensation program for imprudent risks and it has discussed the findings of this risk assessment with management. The members of the Compensation Committee believe that our executive compensation program does not motivate employees to take risks that are reasonably likely to have a material adverse effect on us. Annual Base Salaries. Each Named Executive Officer is paid an annual base salary which amount reflects the value of the executive’s skills to the Company, experience with the Company and prior, the record of achievement, expectations of future accomplishments and other factors considered important to the Company. Base salary levels are established in order to attract quality executives, to provide a fixed base of cash compensation, and to recognize the challenges and varied skill requirements of different positions. Base salaries are reviewed annually and from time to time in connection with a promotion or other change in responsibilities. In making individual salary recommendations to the Compensation Committee, our CEO evaluates the performance of the other Named Executive Officers, reviews market compensation levels for comparable positions, and considers the particular executive’s potential attractiveness to other companies while mindful of the overall financial health and performance of the Company. The Compensation Committee reviews the salary recommendations of the CEO and, together with impressions formed based on the observations of the members, approves base salaries for Named Executive Officers. The Compensation Committee sets the base salary for the CEO. In so doing, the Compensation Committee members annually review the performance of the CEO and other relevant information. The base salary amounts paid to each Named Executive Officer for the fiscal years ended January 31, 2023, 2022 and 2021 are set forth in the “Salary” column of the “Summary Compensation Table” presented below. Effective August 2022, the base salary amounts for Mr. Watson and Mr. Deily were increased to $400,000 and $300,000, respectively, in conjunction with their promotions to CEO and CFO, respectively. No further changes were made to the base salaries of the other Named Executive Officers for the fiscal year ended January 31, 2023. Annual Cash Bonuses. The Compensation Committee may award cash bonus payments to Named Executive Officers in order to recognize and to reward individual performance that has meaningfully enhanced the operations and financial results of the Company during the most recently completed fiscal year. Awards are intended to convey to executives that good performance is recognized and valued by the Board of Directors. Furthermore, we believe that annual cash bonus awards strongly encourage executives to continue to improve their efforts in delivering annual results that are aligned with our long-term goals. At the conclusion of each fiscal year, the CEO submits recommended annual cash bonus award amounts for each of the other Named Executive Officers to the Compensation Committee for consideration, modification at their discretion and ultimate approval. After reviewing the recommendations of the CEO, the Fiscal 2023 financial performance of the Company as a whole, the increase in project backlog, the strong safety record, the increased ESG efforts, the successful tax savings, applicable employee contract performance calculations and the individual performances of Messrs. Watson, Deily and Collins, the Compensation Committee approved an aggregate amount of $765,000 in annual cash bonus awards for Fiscal 2023. The amounts of the cash bonus awards earned by each Named Executive Officer for the fiscal years ended January 31, 2023, 2022 and 2021 are set forth in the “Bonus” column of the “Summary Compensation Table” presented below. The amount of the cash award determined pursuant to the non-equity incentive compensation plan included in the employment agreement of the CEO of Gemma in the amount of $1,400,000 is presented in the corresponding column of the “Summary Compensation Table.” The cash awards related to Fiscal 2023 performance were paid to executives in March and April 2023. The employment agreements for Messrs. Watson and Deily provide for annual target bonus payments of 100% and 75% of base salary, respectively, subject to the satisfaction of reasonable performance criteria as established each year at the discretion of the Board of Directors. Additionally, the annual cash bonus award amounts for Messrs. Watson and Deily will continue to be subject to maximum amounts equal to 200% of the corresponding base salary amounts. Long-Term Equity-Based Compensation. Named Executive Officers are eligible to receive long-term equity-based compensation awards under our Stock Plans. The long-term equity-based compensation awarded to executives is largely a combination of PRSUs, EPRSUs (introduced in April 2023), RRSUs and TRSUs. Over the past several years, we have reduced the number of shares of Common Stock covered by new non-qualified stock option awards. The Compensation Committee members believe that the current combinations of these types of long-term equity-based awards respond to the objectives of our executive compensation program:
Major Elements of Executive Compensation and Analysis of Compensation Decisions
| ● | Link incentive compensation to the Company’s long-term performance; |
Major Elements of Executive Compensation and Analysis of Compensation Decisions
| ● | Create long-term stockholder value; |
Major Elements of Executive Compensation and Analysis of Compensation Decisions
| ● | Reward actions that enhance long-term stockholder returns. |
Major Elements of Executive Compensation and Analysis of Compensation Decisions
The vesting related to the PRSU awards depends on the price performance of our Common Stock measured against the price performance of a designated peer group of common stocks over a three-year period. The vesting related to EPRSUs depends on the growth of the Company’s diluted EPS over a three-year period. We believe these types of measurements utilize appropriate performance metrics that incentivize actions that create value for stockholders. The vesting period for TRSUs is three years. We believe that TRSU awards encourage increased holdings of our stock by our executives and retain talent over the long-term. Additionally, the Company began to award RRSUs in response to stockholder feedback and to incentivize the CEO of Gemma to emphasize growth in the number and amounts of renewable energy projects awarded to Gemma. The award of options to purchase shares of our Common Stock have become a less significant portion of our executive composition program over recent years. As noted previously, awards of stock options that are made include the elongated three-year vesting periods that the Compensation Committee adopted as Company policy in January 2018. In making each stock award determination, the Compensation Committee considered key business priorities, peer group trends, potential stockholder dilution and the general economic environment. Stock options are typically used as incentives to align the priorities of Named Executive Officers with those of our stockholders because stock options provide value to holders only if our stock price increases from the date of grant to the date of exercise. In addition, except with respect to certain terminations following a change in control of the Company, the continued employment of a stock option holder is required for the vesting of each stock option to occur. Thus, the potential realization of the value of outstanding but unvested stock options meaningfully encourages executives to remain with the Company, as leaving the Company results in the forfeiture of the value and potential gain associated with any unvested stock option awards. Based on the results of its deliberations focused on performance for Fiscal 2023, the Compensation Committee recommended the award of stock options to Messrs. Watson, Deily and Collins on April 11, 2023, which were subsequently approved by the independent members of the Board, having grant date fair values of approximately $40,600, $20,300 and $20,300, respectively, that were determined based on the Black-Scholes valuation model, and an option exercise price equal to the price of the underlying Common Stock on the date of award ($39.47 per share). PRSUs were awarded to Messrs. Watson and Collins on April 17, 2023 with estimated fair value amounts of approximately $174,579 and $34,916, respectively. In addition, TRSUs were awarded to Messrs. Watson and Collins on April 17, 2023 with estimated fair value amounts of approximately $473,640 and $197,350, respectively. In addition, EPRSUs were awarded to Messrs. Watson, Deily and Collins on April 17, 2023 with estimated fair value amounts of approximately $394,700, $98,675 and $98,675, respectively. Lastly, RRSUs were awarded to Mr. Collins on April 17, 2023 with an estimated fair value amount of approximately $148,013. Information regarding stock options and restricted stock units awarded to Named Executive Officers during Fiscal 2023 is presented in the “Grants of Plan-Based Awards Tables” section of this Proxy Statement that is included below. The fair value amounts of the stock options and restricted stock units awarded to Named Executive Officers during the fiscal years ended January 31, 2023, 2022 and 2021 are set forth in the “Summary Compensation Table” that is also presented below. Note that the information relating to the stock-based awards made in April 2023 that are described above will be included in the corresponding executive compensation tables that will be presented next year for the year ending January 31, 2024.
Severance and Change in Control Benefits
Severance and Change in Control Benefits In the event of a change in control, Mr. Watson and Mr. Deily are entitled to receive benefits based on each executive’s individual agreement negotiated with the Company. Also, in the event of employment termination, Messrs. Watson, Deily and Collins may be paid severance benefits in certain circumstances pursuant to each executive’s individual agreement negotiated with the Company. The estimated severance benefits that would be payable to each executive under the respective arrangements upon the occurrence of certain events are set forth in the chart that is included in the section “Potential Payments upon Termination” below. Providing severance and change in control benefits assists the Company in attracting and retaining executive talent. Additional details regarding the severance and change in control provisions of the employment agreement for each current Named Executive Officer are also provided below in the “Summary of Employment Arrangements” section of this Proxy Statement. Each of our stock plans and the corresponding written agreements with the executives describe the effects on outstanding stock options and other stock awards of the termination of a holder’s employment with the Company under various circumstances, including the provision that all outstanding stock options and other stock awards shall generally become fully vested upon a change in control of the Company, as defined in the applicable stock plan documents.
Tax Deductibility of Compensation
Tax Deductibility of Compensation The Tax Cuts and Jobs Act, signed into law in December 2017, established additional limitation on the deduction for certain executive compensation under Section 162(m). For tax years beginning after December 31, 2017 (i.e., our Fiscal 2019), the exception for performance-based compensation was eliminated and covered employees (those subject to the deduction limitation) now includes the chief financial officer. Further, once an employee qualifies as a covered employee, the limitation applies to that person as long as a company pays that person compensation (even if the employee retired or severed). As such, for Fiscal 2023, we cannot deduct compensation in excess of $1,000,000 for Mr. Collins and Mr. Griffin. The compensation amounts for the other Named Executive Officers unrelated to the exercise of non-qualified stock options and the vesting of restricted stock units generally have not exceeded the $1,000,000 excess compensation threshold.
Summary of Our Executive Compensation Principles and Objectives
Summary of Our Executive Compensation Principles and Objectives Our executive compensation program is designed to reward executives who contribute to our consistent favorable consolidated performance and to the successful attainment of operating plan objectives and strategic goals with total compensation that is comparable to those companies with which we compete for executive talent. The executive compensation program is intended to maintain a strong link between compensation and performance and is intended to achieve the following: Overall levels of executive compensation are established based on an assessment of our performance as a whole. Individual executive compensation is determined based on an assessment of the experience and performance of each Named Executive Officer, as well as the compensation levels of comparable positions in our peer group and general market practices. Variation in compensation among the Named Executive Officers reflects the different roles, responsibilities, and performance of the Named Executive Officers, as compared to comparable positions in the peer group with which we compete for talent. As noted previously, the Holding Company Named Executive Officers perform substantially different functions from operating subsidiary Named Executive Officers, and are thus compensated with relatively lower base salaries and generally receive a greater mix of stock-based compensation.
Summary Compensation Table
Summary Compensation Table For Fiscal 2023, we are reporting compensation for four “Named Executive Officers” identified below, including the Company’s CEO and CFO, the Chief Executive Officer of Gemma and a Director and former CEO of the Company. The following table sets forth the total amount of compensation paid to or earned by these Named Executive Officers for the fiscal years ended January 31, 2023, 2022 and 2021.
Summary Compensation Table
| | Fiscal | | | | | Non-equity | | | | Name and Principal | Year Ended | Salary | Bonus | Stock | Stock Option | Incentive Plan | All Other | Total | | Position | January 31, | Earned | Earned | Awards (1) | Awards (1) | Compensation (2) | Compensation (3) | Compensation | | David H. Watson(4) | 2023 | $305,444 | $330,000 | $693,162 | $66,800 | $— | $3,038 | $1,398,444 | | President and Chief Executive Officer | 2022 | 222,917 | 250,000 | 1,029,000 | 111,200 | — | 2,812 | 1,615,929 | | | 2021 | 200,000 | 180,000 | 299,088 | 181,760 | — | 2,647 | 863,495 | | Richard H. Deily(4) | 2023 | $251,371 | $185,000 | $634,366 | $23,380 | $— | $2,720 | $1,096,837 | | Senior Vice President, Chief Financial | | | | | | | | | | Officer, Treasurer and Corporate | | | | | | | | | | Secretary | | | | | | | | | | Charles E. Collins IV | 2023 | $400,000 | $250,000 | $538,261 | $33,400 | $1,400,000 | $59,071 | $2,680,732 | | Chief Executive Officer, Gemma | 2022 | 333,689 | — | 457,800 | — | 816,000 | 41,200 | 1,648,689 | | | 2021 | 315,000 | — | — | 56,800 | 662,000 | 30,784 | 1,064,584 | | Rainer H. Bosselmann(4) | 2023 | $131,250 | $— | $866,452 | $83,500 | $— | $830,417 | $1,911,619 | | Chief Executive Officer | 2022 | 225,000 | 225,000 | 1,286,250 | 139,000 | — | 1,913 | 1,877,163 | | | 2021 | 225,000 | 200,000 | 373,861 | 227,200 | — | 1,834 | 1,027,895 |
Summary Compensation Table
| (1) Amounts represent the aggregate award-date fair values computed for financial reporting purposes reflecting the assumptions discussed in Note 12 – Stock-Based Compensation of our consolidated financial statements that are included in Item 8 of our Annual Report on Form 10-K for the year ended January 31, 2023. |
Summary Compensation Table
| (2) Amounts represent cash earned by Mr. Collins determined pursuant to the incentive compensation terms of his employment agreement. |
Summary Compensation Table
| (3) Amounts represent matching and profit-sharing contributions made pursuant to the applicable Company’s 401(k) plan, term life insurance premiums and car allowance payments made to Mr. Collins. For Mr. Bosselmann, amount for Fiscal 2023 includes the aggregate amount of future cash payments and the other employee benefits that the Company committed to provide over the three-year period following the date of his retirement. |
Summary Compensation Table
| (4) On August 16, 2022, Mr. Bosselmann retired from his positions of CEO and Chairman of the Board of Directors. Mr. Watson was appointed CEO and Mr. Deily was appointed CFO at that time. Prior to being appointed CEO and for Fiscal 2022 and 2021, Mr. Watson served as Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary. |
Executive Officers Who Are Not Directors
Executive Officers Who Are Not Directors Mr. Deily, age 69, was appointed as our Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary, effective August 16, 2022. Prior to the appointment, Mr. Deily served as the Company’s Corporate Controller since October 2007 and Vice President since January 2015. Mr. Deily has over 40 years of continuous senior financial management experience with publicly traded companies in various industries including construction, commercial software, telecommunications, government contracting and electronics manufacturing. Past positions held by Mr. Deily at other companies included Chief Accounting Officer as well as Chief Financial Officer. Mr. Deily began his career as a certified public accountant and financial auditor with Arthur Andersen & Co. Mr. Collins, age 46, was promoted to the position of Chief Executive Officer of Gemma in November 2021. He had served as Co-President of Gemma since August 2018. Additionally, he served as Director of Projects at Gemma from July 2018 to July 2019. Prior to July 2018, Mr. Collins served as a Gemma Project Manager. Mr. Collins is a certified Project Management Professional and holds several state contracting licenses for Gemma.
Potential Payments upon Termination
Potential Payments upon Termination The terms of the employment agreements with our Named Executive Officers provide that we pay certain severance benefits in the event that one of them is terminated by us other than for “cause” as that term is defined in each applicable agreement. The following table presents amounts payable to the executives considered Named Executive Officers for Fiscal 2023 based on the assumption that the executives are terminated without cause on January 31, 2023. The section entitled “Summary of Employment Arrangements” above includes descriptions of the payments which shall be made to Mr. Watson and Mr. Deily upon a change in control.
Potential Payments upon Termination
| | Base | Cash Incentive | Health Care | | | Executive Officer | Salary | Payments | Benefits/Other | Totals | | David H. Watson | 400,000(1) | 330,000(2) | 26,628(1) | 756,628 | | Richard H. Deily | 150,000(3) | 185,000(2) | 14,322(3) | 349,322 | | Charles E. Collins IV | 400,000(4) | 1,400,000(5) | 49,685(4) | 1,849,685 |
Potential Payments upon Termination
| (1) Amounts represent the continuation of salary and benefits payments for twelve months, respectively. |
Potential Payments upon Termination
| (2) Amounts represents the cash bonus amounts awarded for Fiscal 2023 but paid after January 31, 2023. |
Potential Payments upon Termination
| (3) Amounts represent the continuation of salary and benefits payments for six months, respectively. |
Potential Payments upon Termination
| (4) Amounts represent the continuation of salary and benefits, respectively, for twelve months. |
Potential Payments upon Termination
| (5) Amount represents the total of the non-equity incentive cash compensation earned and the cash bonus amount awarded for Fiscal 2023 but paid after January 31, 2023. |
Grants of Plan-Based Awards Tables
Grants of Plan-Based Awards Tables The following tables set forth certain information with respect to plan-based awards made to the Named Executive Officers (identified in the “Summary Compensation Table” above) during Fiscal 2023. The awards presented in the table immediately below represent non-qualified options to purchase shares of our Common Stock that were granted under our Argan, Inc. 2020 Stock Plan.
Grants of Plan-Based Awards Tables
| | | Number of Shares of | | Grant Date | | | Grant | Common Stock | Exercise | Fair Value of | | Name | Date (1) | Underlying the Award | Price/Share | Stock Option Awards (2) | | David H. Watson | 4/18/2022 | 10,000 | $36.78 | $66,800 | | Richard H. Deily | 4/18/2022 | 3,500 | 36.78 | 23,380 | | Charles E. Collins IV | 4/18/2022 | 5,000 | 36.78 | 33,400 | | Rainer H. Bosselmann | 4/18/2022 | 12,500 | 36.78 | 83,500 |
Grants of Plan-Based Awards Tables
| (1) The grant date represents the date on which the independent members of the Board of Directors awarded the stock options. The options to purchase shares of our Common Stock become exercisable in equal installments on the first three anniversaries of the award date. |
Grants of Plan-Based Awards Tables
| (2) Each amount represents the fair value of the corresponding stock options on the date of grant as computed for financial reporting purposes reflecting the assumptions discussed in Note 12 – Stock-Based Compensation of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 31, 2023. |
Grants of Plan-Based Awards Tables
The restricted stock units presented in the three tables immediately below were awarded under our stock plans.
Grants of Plan-Based Awards Tables
| | | Estimated Future Payouts | | | Grant Date | | | Grant | Under PRSUs (2) | | | Fair Value of | | Name | Date (1) | Threshold (3) | Target (4) | Maximum (5) | PRSUs (6) | | David H. Watson | 4/18/2022 | — | 10,000 | 20,000 | $325,362 | | Richard H. Deily | 9/13/2022 | — | 2,500 | 5,000 | 76,011 | | Charles E. Collins IV | 4/18/2022 | — | 1,000 | 2,000 | 32,536 | | Rainer H. Bosselmann | 4/18/2022 | — | 12,500 | 25,000 | 406,702 |
Grants of Plan-Based Awards Tables
| (1) The grant date represents the date on which the independent members of the Board of Directors awarded the PRSUs. |
Grants of Plan-Based Awards Tables
| (2) These awards vest over a three-year performance measurement period based on our total shareholder return relative to the shareholder return of the applicable peer group of twelve other companies. |
Grants of Plan-Based Awards Tables
| (3) If our stock price performance over the three-year measurement period is not among the top seven of thirteen performers, the executive does not earn any shares of our Common Stock. |
Grants of Plan-Based Awards Tables
| (4) The target number of shares of Common Stock before adjustment for cash dividends is earned by the executive if our stock performance ranks sixth or seventh among the thirteen peer companies (including us). |
Grants of Plan-Based Awards Tables
| (5) The maximum number of shares of Common Stock, before adjustment for cash dividends, is earned by the executive if our stock performance ranks in the top four among the thirteen peer companies (including us). |
Grants of Plan-Based Awards Tables
| (6) Each amount represents the fair value of the corresponding restricted stock units on the date of award determined for financial reporting purposes based on the per share price of a share of our Common Stock on the award date and the target number of shares, the assignment of equal probabilities to the thirteen possible payout outcomes at the end of the three-year vesting period, and a computation of the weighted average of the possible outcome amounts. |
Grants of Plan-Based Awards Tables
| | | Estimated Future Payouts | | | Grant Date | | | Grant | Under RRSUs (2) | | | Fair Value of | | Name | Date (1) | Threshold (3) | Target (4) | Maximum (4) | RRSUs (5) | | Charles E. Collins IV | 4/18/2022 | — | 7,500 | 7,500 | $137,925 |
Grants of Plan-Based Awards Tables
| (1) The grant date represents the date on which the independent members of the Board of Directors awarded the RRSUs. |
Grants of Plan-Based Awards Tables
| (2) These awards vest over a three-year term based on the success of Gemma in increasing the amount of RUPO related to renewable energy projects during certain periods within the three-year term of each award, as defined. |
Grants of Plan-Based Awards Tables
| (3) If RUPO hurdle amounts are not achieved for separate periods of time defined in the awards, the executive does not earn any shares of our Common Stock. |
Grants of Plan-Based Awards Tables
| (4) The target and maximum number of shares of Common Stock, before adjustment for cash dividends, that may be earned by the executive based on the achievement of all the applicable RUPO hurdles. The actual amount of renewable energy project awards failed to reach the first RUPO hurdle in April 2023, resulting in the forfeiture of 1,500 shares of Common Stock covered by this award. |
Grants of Plan-Based Awards Tables
| (5) Each amount represents the fair value of the corresponding renewable restricted stock units on the date of award determined for financial reporting purposes based on 50% of the aggregate market value of the shares of common stock covered by the award on the date of the award. |
Grants of Plan-Based Awards Tables
| | | Estimated Future | Grant Date | | | Grant | Payouts | Fair Value of | | Name | Date (1) | Under TRSUs (2) | TRSUs (3) | | David H. Watson | 4/18/2022 | 10,000 | $367,800 | | Richard H. Deily | 4/18/2022 | 3,500 | 128,730 | | Richard H. Deily | 9/13/2022 | 12,500 | 429,625 | | Charles E. Collins IV | 4/18/2022 | 10,000 | 367,800 | | Rainer H. Bosselmann | 4/18/2022 | 12,500 | 459,750 |
Grants of Plan-Based Awards Tables
| (1) The grant date represents the date on which the independent members of the Board of Directors awarded the TRSUs. |
Grants of Plan-Based Awards Tables
| (2) These awards vest in equal installments on each of the first three anniversaries of the award date. Accordingly, at each vesting date, one-third of the award shares plus a number of shares to be determined based on the amount of cash dividends deemed paid on shares earned pursuant to the awards become issuable to each awardee. |
Grants of Plan-Based Awards Tables
| (3) The fair value of each award determined for financial reporting purposes equals the aggregate market price for the number of shares covered by each award on the date of award. |
Grants of Plan-Based Awards Tables
No other stock or stock option awards were made by us to any of the Named Executive Officers during Fiscal 2023.
Stock Options Exercised and Stock Vested
Stock Options Exercised and Stock Vested During Fiscal 2023, there were no stock options exercised by any of our Named Executive Officers. In April 2022, 11,231 shares and 8,984 shares of Common Stock were issued to Messrs. Bosselmann and Watson, respectively, that were earned pursuant to the PRSUs awarded in April 2019. The issued shares of Common Stock included only a portion of the maximum shares available for issuance, plus additional shares for each officer related to cash dividends. In addition, in April 2022, Messrs. Watson, Deily, Collins and Bosselmann were issued 3,411 shares, 1,193 shares, 1,705 shares and 4,264 shares of Common Stock related to the vesting of TRSUs on the anniversary of their respective awards.
Non-Qualified Deferred Compensation Plan
Non-Qualified Deferred Compensation Plan The nonqualified deferred compensation plan for key employees of Gemma was approved by the Board on April 6, 2017 with the objective of keeping the management team of Gemma in place for the long term. The unfunded, cash-based plan, as amended, has six or seven-year vesting periods with a continuous employment requirement. Based on the performance of each key employee, a dollar amount may be set aside each year for each key employee in the deferred compensation plan. For awards made on or after January 31, 2021 and pursuant to an amendment to the plan, 50% of each annually awarded amount vests on the fourth anniversary of the date of award and 25% of the awarded amount will vest on the fifth and sixth anniversary dates, respectively. For awards made prior to January 1, 2021, 50% of each annually awarded amount vests on the fifth anniversary of the date of award and 25% of the awarded amount will vest on the sixth and seventh anniversary dates, respectively. Except in the events of disability or death, vesting is dependent on continuous employment with Gemma up to the applicable vesting date. Over 25 of Gemma’s key employees are participants in the plan. The balances presented below for Mr. Collins relate to his participation in the plan prior to becoming a Named Executive Officer. None of our other Named Executive Officers are participants in the plan.
Non-Qualified Deferred Compensation Plan
| | Executive | Registrant | Total | Withdrawals/ | Balance at | | Named Executive Officer | Contributions | Contributions | Compensation | Distributions | January 31, 2023 (1) | | Charles E. Collins IV | $— | $— | $— | $100,000 | $450,000 |
Non-Qualified Deferred Compensation Plan
| (1) The amount represent the total of amounts set aside for fiscal years prior to Fiscal 2020. |
Pay Ratio Disclosure
Pay Ratio Disclosure Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Item 402(a) of Regulation S-K promulgated by the SEC thereunder requires us to disclose the median of the total compensation of all employees, excluding our CEO, and the ratio of the median of the annual total compensation of all employees to the annual total compensation of our CEO. The annual total compensation of the employee with the median amount of such compensation, among all of our employees who were employed as of December 31, 2022 (other than our CEO), was $78,080 for the period defined below. The annual total compensation for Mr. David Watson, our CEO, was $1,398,444 for Fiscal 2023 as presented in the “Summary Compensation Table” above. The ratio of the annual total compensation of our CEO to the annual total compensation of the employee with the median amount of such compensation was 18 to 1. The SEC’s rules for identifying the median-compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratio. The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on the data included in our payroll and employment records and the methodology described herein. In order to identify the employee with the median amount of annual total compensation and as our consistently applied compensation measure, we identified the actual amount of fixed cash compensation paid to each employee from January 1, 2022 through December 31, 2022. We defined fixed cash compensation as any regular payment(s) (such as base salary), overtime pay and annual fixed allowance(s) that were guaranteed to the employee regardless of performance. For each employee who was hired during the defined period and did not work for the entire twelve-month period (and was not designated as a temporary employee in our payroll records or was employed for 30 days or less), we estimated his/her twelve-month fixed cash compensation amount based on (i) the amount actually paid for the portion of the period that the individual was employed or (ii) the planned salary amount for each employee who was on a leave of absence. The employee population used to identify the employee with the median amount of annual total compensation comprised approximately 819 individuals.
Pay Versus Performance
Pay Versus Performance We assessed our pay-versus-performance alignment pursuant to Item 402(v) of Regulation S-K for the three years ended January 31, 2023 and have provided the table below, which presents total compensation for our named executive officers (“NEOs”), compensation actually paid to our NEOs, and certain performance metrics. In this table, total compensation for our NEOs is provided following two methods. First, total compensation aligns to the amounts as disclosed in the Summary Compensation Table (“SCT”) for the respective year. Second, Compensation Actually Paid (“CAP”) is calculated pursuant to SEC rules and adjusts amounts presented in the SCT by year-over-year changes in the fair value of unvested equity awards that are outstanding at the end of the respective year or vest during the respective year. Included in the pay versus performance table (“PVP Table”) below for comparability is our total shareholder return (“TSR”) over the respective period and the TSR for a chosen peer group of the Company. The table also presents our net income as well as EBITDA as a percent of revenues, a financial performance measure we find most important in determining compensation for our NEOs. For further information concerning our philosophy of how we align compensation for our NEOs to certain performance metrics, refer to the “Executive Compensation Discussion and Analysis.”
Pay Versus Performance
| | | | | | | | Value of Initial Fixed $100 | | | | | | | | | | Average | Average | Investment Based On: | | | | | | SCT Total | SCT Total | CAP | CAP | SCT Total | CAP | | Peer | | EBITDA | | Fiscal | for CEO | for CEO | to CEO | to CEO | for Other | to Other | Argan, Inc. | Group | Net Income | as a % of | | Year | Bosselmann (1) | Watson (2) | Bosselmann (1) | Watson (2) | NEOs (3) | NEOs (3) | TSR (4) | TSR (4) (5) | (in thousands) (6) | Revenues (7) | | 2023 | $1,911,619 | $1,398,444 | $2,158,773 | $1,596,121 | $1,888,785 | $2,162,355 | $104 | $206 | $34,704 | 10.6% | | 2022 | 1,877,163 | n/a | 1,980,856 | n/a | 1,631,539 | 1,559,220 | 97 | 160 | 35,706 | 10.6% | | 2021 | 1,027,895 | n/a | 1,110,509 | n/a | 997,554 | 1,063,796 | 110 | 128 | 23,811 | 7.5% |
Pay Versus Performance
| (1) Mr. Bosselmann served as Chairman of the Board and CEO in each of Fiscal 2023, 2022 and 2021, and is therefore included as the CEO in the table for each year. |
Pay Versus Performance
| (2) Mr. Watson served as CEO from August 16, 2022, and is therefore included as CEO for Fiscal 2023 only. |
Pay Versus Performance
| (3) Other NEOs pertain to the following executives and their roles for each year: |
Pay Versus Performance
Fiscal 2021 – Mr. Watson (Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary), Mr. Collins IV (Co-President, Gemma) and T. Colin Trebilcock (Co-President, Gemma) Fiscal 2022 – Mr. Watson (Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary), Mr. Collins IV (Chief Executive Officer, Gemma) and Mr. Trebilcock (President, Gemma) Fiscal 2023 – Mr. Deily (Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary) and Mr. Collins IV (Chief Executive Officer, Gemma)
Pay Versus Performance
| (4) Cumulative total shareholder return is calculated based on the value of an initial fixed investment of $100 on January 31, 2020, assuming reinvestment of dividends. |
Pay Versus Performance
| (5) The peer group used for the calculation of peer group total shareholder returns is the Dow Jones US Heavy Construction TSM index. |
Pay Versus Performance
| (6) The amounts in this column represent net income reflected in our audited consolidated financial statements for the applicable fiscal year. |
Pay Versus Performance
| (7) EBITDA as a percentage of revenues is discussed above in the “Executive Compensation Discussion and Analysis.” |
Pay Versus Performance
The table below provides a reconciliation of the adjustments to the totals as presented in the SCT to compensation actually paid. Compensation actually paid is determined pursuant to SEC rules. As such, “Compensation Actually Paid” in the table below is not representative of the cumulative cash compensation provided and fair value of vested stock-based awards issued to our NEOs during the respective fiscal year. Rather, “Compensation Actually Paid” in the table below is determined by adjusting totals presented in the SCT by year-over-year changes in the fair value of unvested equity awards that are outstanding at the end of the respective year or vest during the respective year.
Pay Versus Performance
| | Chief Executive Officer | | | | Other Named Executive Officers Average | | | | | Fiscal Year Ended January 31, | | | | Fiscal Year Ended January 31, | | | | | 2021 | 2022 | 2023 | 2023 | | | | | | (Bosselmann) (1) | (Bosselmann) (1) | (Bosselmann) (1) | (Watson) (2) | 2021 (3) | 2022 (3) | 2023 (3) | | Summary Compensation Table Total | $1,027,895 | $1,877,163 | $1,911,619 | $1,398,444 | $997,554 | $1,631,539 | $1,888,785 | | Fair value of stock-based awards granted during the year, as disclosed in the SCT | (601,061) | (1,425,250) | (949,952) | (759,962) | (198,149) | (685,267) | (614,704) | | Year-end fair value of stock-based awards granted during the year | 854,824 | 657,043 | 946,327 | 757,062 | 290,753 | 382,871 | 800,822 | | Change in fair value of prior year stock-based awards vested during the year or unvested as of yearend | (171,149) | 871,900 | 250,779 | 200,577 | (26,362) | 230,076 | 87,452 | | Compensation Actually Paid | $1,110,509 | $1,980,856 | $2,158,773 | $1,596,121 | $1,063,796 | $1,559,220 | $2,162,355 |
Pay Versus Performance
| (1) Mr. Bosselmann served as Chairman of the Board and CEO in each of Fiscal 2023, 2022 and 2021, and is therefore included as the CEO in the table for each year. |
Pay Versus Performance
| (2) Mr. Watson served as CEO from August 16, 2022, and is therefore included as CEO for Fiscal 2023 only. |
Pay Versus Performance
| (3) Other NEOs pertain to the following executives and their roles for each year: |
Pay Versus Performance
Fiscal 2021 – Mr. Watson (Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary), Mr. Collins IV (Co-President, Gemma) and T. Colin Trebilcock (Co-President, Gemma) Fiscal 2022 – Mr. Watson (Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary), Mr. Collins IV (Chief Executive Officer, Gemma) and Mr. Trebilcock (President, Gemma) Fiscal 2023 – Mr. Deily (Senior Vice President, Chief Financial Officer, Treasurer and Corporate Secretary) and Mr. Collins IV (Chief Executive Officer, Gemma) As described further in “Executive Compensation Discussion and Analysis,” our executive compensation is assessed using a variety of quantitative and qualitative factors associated with the Company’s operational and financial performance, stockholder valuation creation, capital allocation, succession planning, the retention and motivation of core employees, stockholder engagement and effectiveness in the areas of financial reporting and income tax planning. We utilize several performance measures to align NEO compensation with performance, many of which are not included as measures presented in the PVP Table above. Furthermore, we generally seek to incentivize long-term performance, and therefore, do not align NEO compensation with all of the measures presented in the PVP Table above. The list below presents performance measures identified as the most important factors for the determination of NEO compensation.
Pay Versus Performance
| ● | EBITDA |
Pay Versus Performance
| ● | EBITDA as a percent of revenues |
Pay Versus Performance
| ● | Selling, general and administrative expenses as a percent of revenues |
Pay Versus Performance
| ● | Return on equity |
Pay Versus Performance
| ● | Project backlog |
Pay Versus Performance
We believe that EBITDA is a meaningful presentation that enables us to assess our operating performance by removing from our operating results the impacts of our capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of operating in different income tax jurisdictions. Further, we believe that EBITDA is widely used by investors and analysts as a measure of performance. In general, EBITDA as a percent of revenues reflects our ability to convert revenue dollars into earnings, which is primarily driven by maintaining strong gross margins. Likewise, SG&A as a percent of revenues, is a meaningful measure of the effectiveness of our cost containment efforts. The return on equity metric measures our profitability based on dollars invested. Our reported amount of project backlog at a point in time represents the success of our business development efforts, as it is measured as the total value of projects awarded to us that we consider to be firm as of that date less the amounts of revenues recognized to date on the corresponding projects. As demonstrated in the table above, our cumulative TSR over the three-year period presented was 4%, whereas the cumulative TSR of our peer group used for the table was 106% over the three-year period presented. The CAP for our CEOs and other NEOs fluctuated over the same period based on the timing of vesting associated with stock awards as well as the timing of satisfaction of performance-based elements of stock awards. Net income increased from Fiscal 2021 to Fiscal 2022 by approximately 50% and then decreased by a modest 3% from Fiscal 2022 to Fiscal 2023. EBITDA as a percentage of revenue grew by approximately 41% from Fiscal 2021 to Fiscal 2022. Fiscal 2023 marked the second consecutive year with EBITDA as a percentage of revenue in excess of 10%. Despite the success indicated by these two metrics over the three-year period, CAP for our NEOs fluctuated over the same period as a result of a meaningful portion of compensation awarded to NEOs being stock awards that are often performance based as well as the timing of vesting associated with those stock awards.