DEF 14A of Construction Partners, Inc.
Filed Jan 26, 2024 · FY20230001718227-24-000006
Our Board of Directors
Our Board of Directors Our Amended and Restated Certificate of Incorporation provides that the number of members of the Board will be determined from time to time by resolution of the Board. Currently, the Board consists of eight members. The Board is divided into three classes, with Classes I and III consisting of three directors each and Class II consisting of two directors. The directors in each class serve three-year terms, with one class elected each year. Our current directors are divided into the following classes: •Class I, consisting of Ned N. Fleming, III, Charles E. Owens and Fred J. (Jule) Smith, III, whose terms will expire at the 2025 Annual Meeting of Stockholders; •Class II, consisting of Craig Jennings and Mark R. Matteson, whose terms will expire at the 2026 Annual Meeting of Stockholders; and •Class III, consisting of Michael H. McKay, Stefan L. Shaffer and Noreen E. Skelly, whose terms will expire at the Annual Meeting.
Information about the Nominees and Other Directors
Information about the Nominees and Other Directors Set forth below are the biographies of each of the nominees and our other directors, including their names, ages, the committees of the Board on which they serve, positions and offices held with the Company, if any, principal occupations or employment for at least the past five years, the length of their tenure as directors, and the names of other public companies in which such persons hold or have held directorships during the past five years. Additionally, information about the specific experience, qualifications, attributes or skills that led to the Board’s conclusion that each person listed below should serve as a director is set forth below. The stock ownership of each director is set forth in the table above entitled “Security Ownership of Certain Beneficial Owners and Management.”
Information about the Nominees and Other Directors
| Name | | Age | Position | | Ned N. Fleming, III (2) (3) | | 63 | Executive Chairman of the Board | | Craig Jennings (3) | | 65 | Director | | Mark R. Matteson (2) (3) | | 60 | Director | | Michael H. McKay (1) | | 62 | Director | | Charles E. Owens (3) | | 73 | Vice Chairman of the Board | | Stefan L. Shaffer (1) (2) | | 66 | Director | | Noreen E. Skelly (1) | | 59 | Director | | Fred J. (Jule) Smith, III | | 54 | President, Chief Executive Officer and Director | | (1) | Member of the Audit Committee | | | | (2) | Member of the Compensation Committee | | | | (3) | Member of the Nominating and Corporate Governance Committee | | |
Class III Nominees - Terms Expire at the Annual Meeting
Class III Nominees - Terms Expire at the Annual Meeting Michael H. McKay has served as a member of the Board since 2002. Mr. McKay has been an Advisory Partner at Bain & Company since 2009. He also serves as a member of the board of directors of Hubbardton Forge, LLC and served on the board of directors of Big Outdoor Holdings, LLC until 2023. Since joining Bain & Company in 1987, he helped found its Private Equity Group and has evaluated and developed strategies for hundreds of businesses. From 2004 to 2006, Mr. McKay served as Chief Investment Officer of a principal investment firm based in Washington, D.C., making public and private investments, and was Managing Partner of a Boston-based hedge fund from 2006 to 2009. Until 2022, Mr. McKay was also a Senior Lecturer at the Brandeis International Business School, where he has served on the faculty since 2010. Mr. McKay received a Master of Business Administration from The University of Chicago Graduate School of Business, where he received the Mayer Prize as top graduating student, and a Bachelor of Arts with high distinction in Economics from Harvard University. We believe that Mr. McKay’s experience analyzing, financing and investing in public and private companies makes him well-qualified to serve as a director of our Company. Stefan L. Shaffer has served as a member of the Board since 2018. Mr. Shaffer is the Managing Partner of SPP Capital Partners, a middle market investment banking and asset management firm that he co-founded in 1989. Prior to founding SPP Capital Partners, Mr. Shaffer was a Vice President in the Private Placement Group at Bankers Trust Company from 1986 to 1989, and engaged in private law practice at White & Case LLP from 1982 to 1986. Mr. Shaffer received a Juris Doctor from Cornell University Law School and a Bachelor of Arts from Colgate University. We believe that Mr. Shaffer’s experience analyzing, financing and advising public and private companies makes him well-qualified to serve as a director of our Company. Noreen E. Skelly has served as a member of our Board since 2019. Ms. Skelly currently serves as the Chief Financial Officer for Blue Sky Bank, a commercial bank headquartered in Pawhuska, Oklahoma, with locations throughout Oklahoma and Texas. She previously served as Chief Financial Officer of Broadway National Bank, a commercial bank headquartered in San Antonio, Texas, from August 2021 to August 2022 and as Executive Vice President and Chief Financial Officer of Veritex Holdings, Inc., the publicly traded holding company of Veritex Community Bank, headquartered in Dallas, Texas, from June 2012 through January 2019. Prior to that, Ms. Skelly was the Chief Financial Officer of Highlands Bancshares, Inc., a bank holding company located in the Dallas, Texas area. Her experience includes serving in various senior management positions within the corporate finance functions at Comerica Bank and ABN AMRO / LaSalle Bank. Ms. Skelly began her professional career at the Federal Reserve Bank of Chicago and was promoted to serve as an accounting policy analyst for the Board of Governors of the Federal Reserve System in Washington, D.C. Ms. Skelly received a Master of Business Administration from the University of Chicago Booth School of Business and a Bachelor of Business Administration in finance from the University of Texas at Austin. We believe that Ms. Skelly’s experience as a chief financial officer of a publicly traded company and as a finance executive make her well-qualified to serve as a director of our Company.
Class I Continuing Directors - Terms Expire in 2025
Class I Continuing Directors - Terms Expire in 2025 Ned N. Fleming, III is one of the founders of our Company and has served as Executive Chairman of the Board since our inception. He has served as Managing Partner of SunTx since 2001 and also serves as chairman of the board of directors of Anchor Partners, LLC, Cone Machinery Holdings, LLC and RB Fire United, LLC. Mr. Fleming previously served as a member of the board of directors of Big Outdoor Holdings, LLC, Veritex Holdings, Inc., a publicly traded bank holding company, DF&R Restaurants, Inc., a formerly publicly traded restaurant operator, and Spinnaker Industries, Inc., a publicly traded materials manufacturing company. Prior to co-founding SunTx in 2001, Mr. Fleming served as President and Chief Operating Officer of Spinnaker Industries, Inc. until its sale in 1999. Prior to that, Mr. Fleming worked at a Dallas-based private investment firm, where he led acquisitions in the food and beverage and defense industries. Mr. Fleming received a Master of Business Administration with distinction from Harvard Business School and a Bachelor of Arts in Political Science from Stanford University. As a result of his role with our Company since our inception, Mr. Fleming has significant knowledge of us and our industry, which we believe makes him well-qualified to serve as a director of our Company. Charles E. Owens is one of the founders of our Company and served as our President and Chief Executive Officer and as a member of our Board from our inception until March 2021, when he transitioned to the role of Vice Chairman of the Board. From 1990 until its sale in 1999, Mr. Owens was President and Chief Executive Officer of Superfos Construction U.S., Inc. (“Superfos”), the North American operation of Superfos a/s, a publicly held Danish company. During his tenure at Superfos, he oversaw the successful acquisition and integration of approximately 35 companies, leading Superfos to become one of the largest highway construction companies in the United States. Prior to 1990, Mr. Owens was President of Couch Construction, Inc., a subsidiary of Superfos headquartered in Dothan, Alabama. Mr. Owens received a Bachelor of Business Administration from Troy University. As a result of his role with our Company since our inception, Mr. Owens has significant knowledge of us and our industry, which we believe makes him well-qualified to serve as a director of our Company. Fred J. (Jule) Smith, III has served as our President and Chief Executive Officer since April 2021 and as a member of our Board since November 2021. Before that, Mr. Smith served as our Chief Operating Officer from October 2020 to March 2021 and as a Senior Vice President of the Company since 2017. From 2005 until October 2020, Mr. Smith also served in various management roles for FSC II, LLC, our North Carolina subsidiary (“FSC”), including as its President from 2009 to 2020. Before joining FSC, Mr. Smith served as Chief Operating Officer of Fred Smith Construction, Inc. from 2005 to 2009. Prior to that, he held various other positions within Fred Smith Construction, Inc. and also served in the supply corps of the U.S. Navy. Mr. Smith received a Master of Business Administration and a Bachelor of Arts in History from Wake Forest University. We believe that Mr. Smith’s extensive experience in our industry and tenure as a key officer of our Company make him well-qualified to serve as a director of our Company.
Class II Continuing Directors - Terms Expire in 2026
Class II Continuing Directors - Terms Expire in 2026 Craig Jennings has served as a member of the Board since 2017. Since 2001, he has been a partner and Chief Financial Officer of SunTx. Prior to co-founding SunTx, Mr. Jennings was Vice President of Finance and Treasurer of Spinnaker Industries, Inc., a publicly traded materials manufacturing company, until its sale in 1999. Prior to that, Mr. Jennings held senior finance positions at a publicly traded oil field services company and a publicly traded food and beverage company, and also was a Senior Audit Manager with Ernst & Young LLP. Mr. Jennings received his Bachelor of Business Administration from the University of Toledo and is a Certified Public Accountant. We believe that Mr. Jennings’ investment, financial and directorship experience makes him well-qualified to serve as a director of our Company. Mark R. Matteson has served as a member of the Board since our inception. Since 2001, he has been a partner of SunTx. Prior to co-founding SunTx in 2001, Mr. Matteson was Vice President of Corporate Development of Spinnaker Industries, Inc., a publicly traded materials manufacturing company, until its sale in 1999. He currently serves as chairman of the board of directors of Freedom Truck Finance, LLC and as a member of the board of directors of Anchor Partners, LLC. Mr. Matteson received a Master of Business Administration from Georgetown University and a Bachelor of Arts in Foreign Service and International Politics from The Pennsylvania State University. As a result of his role with our Company since our inception, Mr. Matteson has significant knowledge of us and our industry, which we believe makes him well-qualified to serve as a director of our Company.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Executive Summary
Executive Summary Our goal is to attract and retain talented executives who deliver value to our stockholders through the achievement of the Company’s specific business objectives, such as consistent, sustained growth in revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”), among other objectives. We have designed our executive compensation program and overall pay-for-performance philosophy to align with that goal and our results. Our executive compensation program for the 2023 fiscal year reflected the following developments and circumstances: •Performance-Based Compensation Structure: In fiscal 2023, our performance-based compensation program consisted of a formulaic annual incentive program for our executives and a structured long-term incentive program consisting of time-based restricted stock and performance-based restricted stock units. These incentive programs are designed to focus executives on the key drivers of Company performance in the current year and through future years. These programs are designed to reward performance and align executives’ interests with those of our stockholders. •Acquisitive Growth: Fiscal 2023 was an active year for acquisitions at the Company, as we acquired five complementary businesses operating across four states, including a new platform company, while continuing to execute on our strategy of controlled, profitable growth. Management remained focused on our core business while taking advantage of these opportunities and successfully integrating the acquired businesses after completion of the respective transactions. •Financial Performance / ROAD Map: During fiscal 2023, management and the Board continued to focus on our five-year strategic plan for the Company. This plan, known as “ROAD Map 2027,” represents a dynamic framework with financial targets and other strategic goals that guide management’s decision-making process in the execution of the Company’s business and are incorporated into the Company’s incentive compensation program. ROAD Map 2027 is reviewed at least annually and refined by management to incorporate circumstances existing at the time. •Inflation Response: Our employees at all levels continued to execute our strategy efficiently and effectively through persistent inflation in the prices of key inputs of our business. In response to this challenge, we have implemented a number of targeted measures, including expanding our supplier and subcontractor relationships, focusing on vertical integration opportunities and increasing our use of price escalator provisions and other contractual mechanisms to preserve profit margins. •Recruitment and Workforce Development: We operate in a highly competitive labor market, with a growing demand but limited supply of both skilled and unskilled labor. Our management team remains highly focused on both recruitment and workforce development, seeking to become and remain the employer of choice for construction professionals in our markets. Our ability to attract, train and develop employees with a diverse range of backgrounds and experiences correlates directly with the success of the Company. •Sustainability: The Company continues to focus on its goal of becoming a leader in sustainability within the asphalt pavement and aggregate industries. Among other initiatives, the Company supports The Road Forward, an initiative led by the National Asphalt Pavement Association to promote climate stewardship within the asphalt industry, and routinely collaborates with federal and state agencies and other stakeholders on issues ranging from energy efficiency to sustainable asphalt mix designs. During fiscal 2023, we also received the Top Project Award from the U.S. Environmental Protection Agency’s ENERGY STAR® program for our work on a data visualization tool that allows us to proactively assess and manage our energy usage at our hot-mix asphalt plants.
Compensation Philosophy
Compensation Philosophy The Compensation Committee is responsible for establishing and implementing the Company’s executive compensation philosophy. The Compensation Committee reviews and determines all components of our NEOs’ compensation, including making individual compensation decisions and reviewing and revising the Company’s compensation programs and practices. In order to attract, retain and engage the highest level of executive talent, the Compensation Committee has established the following compensation philosophy: •Provide competitive compensation: The Company’s executive compensation programs are designed to attract, retain and motivate highly qualified executives critical to achieving the Company’s strategic objectives and building stockholder value. •Promote a pay-for-performance culture: We expect executives to perform at a high level to ensure the Company’s success and reward executives appropriately when success is achieved. A significant portion of our NEOs’ compensation is derived from our annual and long-term incentive plans, which encourage achievement of both short-term and long-term Company objectives. •Alignment between management and stockholders: In order to align our executives’ interests with those of our stockholders, we provide a significant portion of our NEOs’ total compensation in the form of equity. Executive equity awards are designed to focus executives on long-term value creation, as well as to encourage retention of our key executives.
Overview of Our Executive Compensation Program
| Component | Purpose | Key Features | | Long-Term Incentives | Long-Term Incentive Plan - A (“LTIP-A”) awards: Grants of restricted stock or cash-settled restricted stock units (“RSUs”) with time-based vesting intended to retain and reward key employees and to increase alignment with stockholders. | During fiscal 2023, LTIP-A grants of restricted stock were awarded to select members of management. These awards vest ratably over four years to encourage retention. We began awarding combinations of restricted stock and cash-settled restricted stock units to certain executives in December 2023 and expect to continuing awarding a combination of restricted stock and cash-settled restricted stock units going forward. | | | Long-Term Incentive Plan - B (“LTIP-B”) awards: Grants of performance stock units (“PSUs”) that are intended to encourage and reward key employees for accomplishing certain Company financial objectives and to increase alignment with stockholders. | Key employees may earn 75% to 150% of the initial target grant based on the Company’s performance on specified metrics compared to the Company’s targets over a three-year performance period. During fiscal 2023, management received LTIP-B awards covering the fiscal 2023-2025 performance period, with the amount to be earned based on the Company’s compound aggregate revenue growth rate and average Adjusted EBITDA margin over the performance period. The final number of PSUs that will vest may be increased or decreased by up to 15% based on the Company’s total stockholder return relative to the Russell 2000 Index. | | Discretionary Equity Grants | Grants of equity-based awards designed to retain, motivate and align key employees. | The Compensation Committee has from time to time granted discretionary equity awards, such as “mobilization awards” (restricted stock with time-based vesting criteria) and immediately vested stock bonus awards, to select members of management, including the NEOs. The mobilization awards vest 50% at the end of year 4 and 50% at the end of year 5. |
Components of Compensation
Annual Cash Incentives Each member of our management team, including each of our NEOs, has a target annual cash incentive opportunity calculated as a percentage of his or her base salary. For our NEOs, those percentages were as follows in fiscal 2023:
Components of Compensation
| Name | Target Cash Incentive (% of Salary) | | Fred J. (Jule) Smith, III | 100% | | R. Alan Palmer (1) | — | | Gregory A. Hoffman | 75% | | John L. Harper | 75% | | Robert P. Flowers | 75% | | M. Brett Armstrong | 75% |
Components of Compensation
| (1) Mr. Palmer did not have a target annual cash incentive opportunity for fiscal 2023. |
Components of Compensation
Each participant’s annual cash incentive is determined based on (i) the level of achievement of one or more Company financial objectives and (ii) one or more secondary metrics based either on individual performance or Company performance. Following a calculation of the participant’s baseline cash incentive award using the foregoing metrics, the final amount of the payment to each participant remains subject to adjustment by the Compensation Committee in its sole discretion. For fiscal year 2023, annual cash incentives were based on the following metrics and weightings:
Components of Compensation
| Fiscal 2023 Adjusted EBITDA | Payout | | (as a % of Target) | (as a % of Target) | | Less than 80% | 0% | | 80% or more but less than 90% | 50% | | 90% or more but less than 100% | 75% | | 100% or more but less than 110% | 100% | | 110% or more but less than 115% | 115% | | 115% or more | 120% |
Components of Compensation
For fiscal 2023, the target Adjusted EBITDA for purposes of the annual cash incentive was approximately $160.0 million and the actual Adjusted EBITDA achieved was approximately $174.1 million, resulting in a payout of 100% of the NEOs’ respective target amounts attributable to the Adjusted EBITDA metric. The amount earned by each NEO with respect to the individual or additional Company performance component was based on the Compensation Committee’s evaluation of the level of achievement by the NEO or Company, as applicable, of one or more specific objectives, the nature of which varied based on the respective NEO’s geographic or functional area of responsibility. For fiscal 2023, Messrs. Smith’s and Hoffman’s annual cash incentive metrics were based on the Company’s leverage ratio, audit results, cash flow from operations and overhead expense. For Messrs. Harper and Flowers, who serve as presidents of two of the Company’s subsidiary operating companies, the annual cash incentive metrics were based on their respective companies’ Adjusted EBITDA, safety results, organic growth and progress toward implementation of a new enterprise resource planning (ERP) system. Mr. Armstrong’s annual cash incentive metrics were based on the Company’s organic growth, capital expenditures compared to budget, and progress toward implementation of a new fleet management and maintenance software program. In November 2023, the Compensation Committee determined the amount of the annual cash incentive earned by each eligible NEO. The following table sets forth the amounts paid to each eligible NEO subsequent to fiscal year-end for fiscal 2023 performance based on the elements described above:
Components of Compensation
| Name (1) | LTIP-A Award (% of salary) | Number of Shares | | Fred J. (Jule) Smith, III | 40% | 8,482 | | Gregory A. Hoffman | 30% | 3,517 | | John L. Harper | 30% | 5,017 | | Robert P. Flowers | 30% | 4,810 | | M. Brett Armstrong | 30% | 4,655 |
Components of Compensation
| (1) Mr. Palmer did not receive an LTIP-A award during fiscal 2023. |
Components of Compensation
LTIP-B Awards During fiscal 2023, the Compensation Committee granted LTIP-B awards to certain NEOs. The LTIP-B awards represent PSUs having a notional value equivalent to one share of our Class A common stock for purposes of determining the number of shares underlying the award. Each LTIP-B award provides for a target number of PSUs that are eligible to vest, with the preliminary number of vested PSUs to be determined based on the Company’s actual performance compared to its targets over the three-year performance period beginning October 1, 2022 and ending September 30, 2025. For fiscal 2023, the following performance metrics were used:
Components of Compensation
Fifty percent (50%) of the target PSUs (the “Revenue Target PSUs”) will be eligible to vest based on the Company’s achievement of compound aggregate revenue growth rate as it compares to the revenue growth rate target, as set forth in the table below. The number of vested Revenue Target PSUs will be interpolated for performance between each performance level (based on whole percentages), and no Revenue Target PSUs will vest if the actual performance level is less than 89% of the revenue growth target over the performance period.
Components of Compensation
| Performance Level | Revenue Growth Rate vs. Revenue Growth Target | Payout % (Vested PSUs) | | Below Threshold | < 89% | 0% of Revenue Target PSUs | | Threshold | 89% | 75% of Revenue Target PSUs | | Target | 100% | 100% of Revenue Target PSUs | | Maximum | > 112% | 150% of Revenue Target PSUs |
Components of Compensation
Similarly, fifty percent (50%) of the target PSUs (the “Adjusted EBITDA Margin Target PSUs”) will be eligible to vest based on the Company’s achievement of average Adjusted EBITDA margin as it compares to the average Adjusted EBITDA margin target, as set forth in the table below. The number of vested Adjusted EBITDA Margin Target PSUs will be interpolated for performance between each performance level (based on whole percentages), and no Adjusted EBITDA Margin Target PSUs will vest if the actual performance level is less than 95.2% of the average Adjusted EBITDA margin target over the performance period.
Components of Compensation
| Performance Level | Average Adjusted EBITDA Margin vs. Target | Payout % (Vested PSUs) | | Below Threshold | < 95.2% | 0% of Adjusted EBITDA Margin Target PSUs | | Threshold | 95.2% | 75% of Adjusted EBITDA Margin Target PSUs | | Target | 100% | 100% of Adjusted EBITDA Margin Target PSUs | | Maximum | > 104.8% | 150% of Adjusted EBITDA Margin Target PSUs |
Components of Compensation
Following a determination of the preliminary vested PSUs, the final number of PSUs that are eligible to vest will be either increased or decreased by up to 15% based on a comparison of the Company’s total stockholder return (“TSR”) over the performance period compared to that of the Russell 2000 over the same period (provided that the Company’s TSR must be positive in order for any upward adjustment to be made). Specifically, the award is subject to modification based on the following schedule:
Components of Compensation
| | Performance Period Ending September 30, 2025 | | | Name (1) | LTIP-B Award (% of salary) | Number of PSUs | | Fred J. (Jule) Smith, III | 75% | 15,905 | | Gregory A. Hoffman | 40% | 4,689 | | John L. Harper | 50% | 8,362 | | Robert P. Flowers | 50% | 8,017 | | M. Brett Armstrong | 50% | 7,758 |
Components of Compensation
| (1) Mr. Palmer did not receive an LTIP-B award during fiscal 2023. |
Components of Compensation
| For the Performance Period Ended September 30, 2023 | | | | | | | Compound Aggregate Revenue Growth Rate | | | ROCE | | | | Target | Actual | Payout Percentage | Target | Actual | Payout Percentage | | 18.0% | 25.8% | 150% | 13.0% | 6.3% | —% |
Components of Compensation
| (1) Mr. Palmer did not receive an LTIP-B award in 2021. |
Components of Compensation
| (1) Mr. Palmer did not receive a stock bonus award. | | (2) The value presented in the table above is determined by reference to a share value of $43.75, the closing price for a share of our Class A common stock on December 13, 2023, the grant date. |
Employment Agreements
Employment Agreements The Company has entered into an employment agreement (each, an “Employment Agreement” and collectively, the “Employment Agreements”) with certain key members of management, including Messrs. Smith, Hoffman, Harper, Flowers and Armstrong. Each Employment Agreement contains substantially similar terms other than with respect to title, minimum base salary and principal place of employment, including with respect to the following key aspects of the employment relationship: •Term. The term of the Employment Agreements began on April 1, 2020 for Messrs. Smith, Harper, Flowers and Armstrong and on April 1, 2023 for Mr. Hoffman, and expire on April 1, 2025. Beginning on April 1, 2025 and on each April 1 thereafter, the term will renew for an additional one-year period, unless either party provides written notice of its intention not to extend the term at least 60 days prior to the applicable anniversary date, or the applicable Employment Agreement is otherwise terminated in accordance with the termination provisions set forth therein. •Salary. The Employment Agreements specify a minimum annual base salary during the term. The minimum base salary will be reviewed at least annually by the Compensation Committee, and the Compensation Committee may, but is not required to, increase the applicable executive’s salary during the term. •Annual Bonus. Each executive is eligible to receive a cash bonus in an amount determined either in the discretion of the Compensation Committee or based on the achievement of performance goals under any annual incentive program that may be established and administered by the Compensation Committee from time to time. •Equity Awards. Each executive is eligible to receive awards under the Equity Incentive Plan and any other stock option, stock purchase or equity-based incentive compensation plan or arrangement adopted by the Company from time to time in which executives of the Company are eligible to participate, in an amount determined by the Compensation Committee. Any such equity awards will be governed by the applicable plan and award agreements. •Perquisites; Employee Benefits. Each executive is entitled to fringe benefits and perquisites consistent with the practices of the Company and to the extent that the Company provides similar benefits or perquisites to similarly situated executives, which may include the use of a Company-owned automobile to the extent that the Company deems necessary for the performance of services to the Company. Each executive is entitled to participate in all other employee benefit plans, practices and programs on a basis that is no less favorable than is provided to similarly situated executives, to the extent consistent with applicable law and the terms of the applicable employee benefit plans. •Termination Payments. If an Employment Agreement is terminated under certain circumstances, the executive may be entitled to receive certain severance payments and benefits. For a description of these payments and benefits and the circumstances under which they may be required, see the discussion below under the heading “Potential Payments Upon Termination or Change in Control.” •Restrictive Covenants. The Employment Agreements provide for certain restrictive covenants, including covenants limiting or prohibiting competition, use of confidential information, solicitation of customers, recruitment of employees, and disparagement of the Company during the term of the Employment Agreements and, if the Company so elects, for a period of eighteen months following the termination of employment with the Company for any reason. •Right of First Refusal to Purchase Shares of Class B Common Stock. During the term of the Employment Agreements and for a period of eighteen months following the termination of employment for any reason, the Company or its assignee will have a right of first refusal to purchase any shares of the Company’s Class B common stock that the executive (or, as applicable, the executive’s estate) elects to transfer, convert or dispose of during such period. •Clawback. The executive’s compensation is subject to any clawback policies required by applicable law, government regulation or stock exchange listing requirement or otherwise adopted by the Company, as such policies may be amended from time to time. For more information about our clawback policy that applies to all NEOs, see the discussion below under the heading “Compensation Policies and Practices Related to Risk Management — Incentive Compensation Recoupment Policy.”
How We Determine Executive Compensation
How We Determine Executive Compensation The Compensation Committee meets several times each year to perform its responsibilities as delegated by the Board of Directors and as set forth in the Compensation Committee’s charter. These responsibilities include evaluating and approving the Company’s compensation philosophy, policies, plans and programs for our NEOs. In the performance of its duties, the Compensation Committee regularly reviews the total compensation, including the base salary, target annual cash incentive award opportunities, long-term incentive award opportunities and other benefits for each of our NEOs. The Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of compensation consultants, outside counsel and other advisers as it deems necessary to assist with the execution of its duties and responsibilities. Prior to selecting or receiving advice from such advisers, the Compensation Committee is required to consider certain factors specified in SEC and Nasdaq rules, including an evaluation of whether the adviser has a conflict of interest that would impair the independent execution of the adviser’s services to the Company. The Company will provide appropriate funding for payment of reasonable compensation to any adviser retained by the Compensation Committee. Due to our size and the unique nature of our industry, which primarily consists of small, closely held companies and large national or multinational corporations, the Compensation Committee has elected not to identify a peer group for compensation benchmarking purposes based on a lack of directly comparable companies. Instead, in determining appropriate compensation levels for the NEOs, the Compensation Committee relies on its knowledge of the competitive market, historical pay practices, internal relationships among positions at the Company and individual performance of the NEOs.
Role of Compensation Consultant
Role of Compensation Consultant During fiscal 2023, the Compensation Committee retained Dana Krieg, an independent compensation consultant (the “Compensation Consultant”) in accordance with the Compensation Committee’s charter. Ms. Krieg has more than 25 years of executive compensation consulting experience, having worked for Watson Wyatt (now Willis Towers Watson) and Ernst & Young for the majority of her career. She advises clients on executive compensation strategy and design as well as governance and overall compliance of their executive compensation programs. The Compensation Consultant reports directly to the Compensation Committee. The Compensation Committee retains sole authority to hire or terminate the Compensation Consultant, approve the Compensation Consultant’s fees, determine the nature and scope of the services to be provided and evaluate the Compensation Consultant’s performance. The Compensation Consultant attends Compensation Committee meetings, as requested, and communicates with the Compensation Committee chair between meetings. The Compensation Committee makes all final decisions and recommendations regarding the Company’s compensation program. During fiscal 2023, the Compensation Consultant’s roles included, but were not limited to, the following: •advising the Compensation Committee on executive compensation trends; •evaluating the effectiveness of the Company’s cash- and equity-based compensation programs; •providing advice to the Compensation Committee on governance best practices, as well as any other areas of concern or risk; and •reviewing and commenting on proxy statement disclosure items, including the CD&A. The Compensation Committee has assessed the independence of the Compensation Consultant, considering all relevant factors, including those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act. Based on this review, the Compensation Committee concluded that there are no conflicts of interest raised by the work performed by the Compensation Consultant and that the Compensation Consultant is independent.
Summary Compensation Table
Summary Compensation Table The following table summarizes the compensation earned by our NEOs for the fiscal years presented.
Summary Compensation Table
| | | Salary | Bonus | Stock Awards | Non-Equity Incentive Plan Compensation | All Other Compensation | Total | | Name and Principal Position | Year | ($) | ($)(4) | ($)(5) | ($) | ($)(6) | ($) | | Fred J. (Jule) Smith, III (1) | 2023 | 605,769 | 370,281 | 793,024 | 615,000 | 62,318 | 2,446,392 | | President and Chief Executive Officer | 2022 | 571,396 | 250,000 | 1,179,480 | 287,500 | 74,251 | 2,362,627 | | | 2021 | 512,115 | 82,500 | 2,844,325 | 412,500 | 87,903 | 3,939,343 | | R. Alan Palmer (2) | 2023 | 394,923 | — | — | — | 34,545 | 429,468 | | Former Executive Vice President and Chief Financial Officer | 2022 | 375,231 | — | — | 225,000 | 39,399 | 639,630 | | | 2021 | 357,808 | 157,500 | 530,000 | 202,500 | 39,071 | 1,286,879 | | Gregory A. Hoffman (3) | 2023 | 364,231 | 53,556 | 264,784 | 300,000 | 36,993 | 1,019,564 | | Senior Vice President and Chief Financial Officer | | | | | | | | | John L. Harper | 2023 | 478,000 | 60,769 | 433,932 | 254,625 | 34,833 | 1,262,159 | | Senior Vice President | 2022 | 453,597 | 50,000 | 638,976 | 171,375 | 57,359 | 1,371,307 | | | 2021 | 435,481 | 120,563 | 1,440,275 | 244,687 | 55,951 | 2,231,708 | | Robert P. Flowers | 2023 | 459,000 | 105,869 | 416,028 | 348,750 | 34,372 | 1,364,019 | | Senior Vice President | 2022 | 437,365 | 20,000 | 616,756 | 82,688 | 57,103 | 1,213,912 | | | 2021 | 408,731 | 110,250 | 1,436,300 | 236,250 | 64,847 | 2,193,378 | | M. Brett Armstrong | 2023 | 438,462 | 103,113 | 402,600 | 337,500 | 49,518 | 1,331,193 | | Senior Vice President | 2022 | 396,846 | — | 558,846 | 150,000 | 55,063 | 1,160,755 | | | 2021 | 379,769 | 42,750 | 1,160,700 | 213,750 | 47,904 | 1,844,873 |
Summary Compensation Table
| (1) Mr. Smith served as the Company’s Chief Operating Officer from October 1, 2020 through March 31, 2021, and has served as President and Chief Executive Officer since April 1, 2021. | | (2) Mr. Palmer retired from his role as Executive Vice President and Chief Financial Officer of the Company effective March 31, 2023. Since that date, Mr. Palmer has remained employed with the Company but is no longer considered an executive officer of the Company. | | (3) Mr. Hoffman served as the Company’s Senior Vice President, Finance, from April 2021 until he was appointed Senior Vice President and Chief Financial Officer effective April 1, 2023. Mr. Hoffman was not an NEO prior to fiscal 2023. | | (4) For fiscal 2023, the amounts presented include (a) cash bonuses paid during the fiscal year in the following amounts: for Mr. Smith, $220,000, for Mr. Flowers, $21,000, and for Mr. Armstrong, $50,000, (b) cash bonuses paid subsequent to fiscal year-end for fiscal 2023 performance in the following amounts: for Mr. Smith, $35,000, for Mr. Hoffman, $20,000, and for Mr. Flowers, $26,156, and (c) bonuses paid in the form of immediately vested Class A common stock subsequent to fiscal year-end for fiscal 2023 performance having the following grant date fair market values: for Mr. Smith, $115,281, for Mr. Hoffman, $33,556, for Mr. Harper, $60,769, for Mr. Flowers, $58,713, and for Mr. Armstrong, $53,113. |
Summary Compensation Table
| (5) These amounts reflect the aggregate grant date fair value of equity-based awards made during the applicable fiscal year, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718 (“ASC 718”), assuming no forfeitures. A discussion of the assumptions used in the calculation of the amounts is included in Note 14, “Equity-Based Compensation” in the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 that was filed with the SEC on November 29, 2023. The amount for each respective year presented includes the value of LTIP-A awards with time-based vesting criteria granted during the applicable fiscal year. In addition, the amounts shown for fiscal 2023 include the fair value at the grant date of the LTIP-B award for the three-year performance period ending September 30, 2025 based on the probable outcome of the performance conditions. The aggregate values of the respective LTIP-B awards at the grant date assuming achievement of the highest level of performance conditions (and application of the maximum possible TSR modifier) are as follows: (a) for Mr. Smith, $2,448,818, (b) for Mr. Hoffman, $728,607, (c) for Mr. Harper, $1,312,915, (d) for Mr. Flowers, $1,264,143, and (e) for Mr. Armstrong, $1,173,833. Mr. Palmer did not receive any equity awards during fiscal 2022 or 2023. For more information regarding the long term equity incentive compensation awarded to our NEOs during fiscal 2023, see the discussion under the heading “Long-Term Equity Incentive Compensation”. The amounts shown for fiscal 2021 and fiscal 2022 include the fair value at the grant date of two LTIP-B awards for the three-year performance periods ending September 30, 2023 and 2024, respectively, based on the probable outcome of the performance conditions. For information regarding the actual payouts of the LTIP-B awards granted in 2021 for the three-year performance period ended September 30, 2023, see the discussion under the heading “Long-Term Equity Incentive Compensation – 2021 LTIP-B Awards that Vested in 2023”. | | (6) For fiscal 2023, the amounts in this column are described in further detail in the following table. For each of the NEOs, these amounts include Company-paid health insurance premiums and 401(k) plan matching contributions, as well as the value of his personal use of a Company-owned vehicle (for Messrs. Smith, Palmer and Flowers) or vehicle allowance (for Messrs. Smith, Harper and Armstrong). The value to the NEOs of their personal use of Company-owned automobiles is based on the incremental cost to the Company of such use, which the Company has calculated as the total variable expense associated with operation of such automobiles during the applicable period. Amounts marked as “Other” in the table below include: (a) for each of the NEOs other than Mr. Flowers, Company-paid premiums for long-term disability insurance; (b) for each NEO, Company-paid group term life insurance premiums; (c) for Mr. Harper, Company-paid premiums for accidental death and dismemberment insurance, and (d) for Messrs. Smith and Hoffman, Company-paid premiums for dental and vision insurance. |
Summary Compensation Table
| | Health Insurance | 401(k) Match | Vehicle | Other | Total | | Name | ($) | ($) | ($) | ($) | ($) | | Smith | 23,452 | 18,923 | 18,314 | 1,629 | 62,318 | | Palmer | 17,550 | 12,877 | 780 | 3,338 | 34,545 | | Hoffman | 23,005 | 11,354 | 795 | 1,839 | 36,993 | | Harper | 19,123 | 12,200 | 450 | 3,060 | 34,833 | | Flowers | 18,608 | 12,200 | — | 3,564 | 34,372 | | Armstrong | 20,365 | 9,115 | 17,400 | 2,638 | 49,518 |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table provides information concerning plan-based awards made to our NEOs during fiscal 2023.
Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (4) | | | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | Name | Grant Date | ($) (2) | ($) | ($) (3) | (#) (5) | (#) | (#) (6) | (#) (7) | ($) (8) | | Smith | 11/3/2022 | — | — | — | — | — | — | 8,482 | 258,616 | | | 11/3/2022 | — | — | — | 11,929 | 15,905 | 23,858 | — | 534,408 | | | | 307,500 | 615,000 | 676,500 | — | — | — | — | — | | Hoffman | 11/3/2022 | — | — | — | — | — | — | 3,517 | 107,233 | | | 11/3/2022 | — | — | — | 3,517 | 4,689 | 7,034 | | 157,550 | | | | 150,000 | 300,000 | 330,000 | — | — | — | — | — | | Harper | 11/3/2022 | — | — | — | — | — | — | 5,017 | 152,968 | | | 11/3/2022 | — | — | — | 6,272 | 8,362 | 12,543 | — | 280,963 | | | | 181,875 | 363,750 | 400,125 | — | — | — | — | — | | Flowers | 11/3/2022 | — | — | — | — | — | — | 4,810 | 146,657 | | | 11/3/2022 | — | — | — | 6,013 | 8,017 | 12,026 | — | 269,371 | | | | 174,375 | 348,750 | 383,625 | — | — | — | — | — | | Armstrong | 11/3/2022 | — | — | — | — | — | — | 4,655 | 141,931 | | | 11/3/2022 | — | — | — | 5,819 | 7,758 | 11,637 | — | 260,669 | | | | 168,750 | 337,500 | 371,250 | — | — | — | — | — |
Grants of Plan-Based Awards
| (1) For fiscal 2023, one-half of each NEO’s annual cash incentive payment was determined by comparing the Company’s consolidated Adjusted EBITDA to its target consolidated Adjusted EBITDA for the fiscal year. In order for the NEOs to earn any amount under this metric, the Company’s Adjusted EBITDA must have been at least 80% of target Adjusted EBITDA, with such performance level resulting in a payout of 50% of the target amount of the portion of the cash incentive tied to Adjusted EBITDA. The maximum amount that could be earned by the NEOs based on Adjusted EBITDA was 120% of the target amount of the portion of the cash incentive tied to Adjusted EBITDA, which would be paid only if Adjusted EBITDA met or exceeded 115% of target Adjusted EBITDA. The remainder of each NEO’s annual cash incentive payment was determined based on the level of achievement of one or more individual or Company goals, with respect to which the degree of achievement was assessed by the Compensation Committee. | | (2) The amounts in this column represent the total amounts payable to each NEO assuming the achievement of the minimum performance level required to receive a payment with respect to the Adjusted EBITDA metric and each NEO’s individual or additional Company performance goals. For a discussion of the actual cash incentive awards paid to our NEOs for service during fiscal 2023, see the discussion under the heading “Annual Cash Incentives.” | | (3) The amounts in this column represent the total amounts payable to each NEO assuming that Adjusted EBITDA met or exceeded 115% of the target amount and that the performance criteria for each individual goal were satisfied. For a discussion of the actual cash incentive awards paid to our NEOs for service during fiscal 2023, see the discussion under the heading “Annual Cash Incentives.” |
Grants of Plan-Based Awards
| (4) During fiscal 2023, each NEO other than Mr. Palmer received an LTIP-B award covering the three-year performance period ending September 30, 2025. Each LTIP-B award provides for a target number of PSUs that are eligible to vest, with 50% of the target PSUs eligible to vest based on the achievement of the Company’s compound aggregate revenue growth rate as compared to the revenue growth rate target over the applicable performance period and 50% of the target PSUs eligible to vest based on the achievement of the Company’s average Adjusted EBITDA margin as compared to the average Adjusted EBITDA margin target over the applicable performance period. Following a determination of the preliminary vested PSUs, the final number of PSUs eligible to vest will be increased or decreased by up to 15% based on a comparison of the Company’s TSR over the performance period to that of the Russell 2000 over the same period (provided that the Company’s TSR must be positive in order for any upward adjustment to be made). | | (5) Each LTIP-B award agreement provides that (i) in order for the grantee to earn any amount under the revenue growth rate metric, the Company’s compound annual revenue growth rate over the performance period must be at least 89% of the target, with such performance level resulting in a payout of 75% of the portion of the award tied to this metric and (ii) in order for the grantee to earn any amount under the Adjusted EBITDA margin metric, the Company’s average Adjusted EBITDA margin over the performance period must be at least 95.2% of the target, with such performance level resulting in a payout of 75% of the portion of the award tied to this metric. The amounts in this column represent the total number of vested PSUs assuming the achievement of the minimum performance level required for the vesting of any PSUs under both the revenue growth rate metric and Adjusted EBITDA margin metric, without giving any effect to the TSR modifier as described in note 4. | | (6) Each LTIP-B award agreement provides that (i) up to 150% of the target number of PSUs under the revenue growth metric will be eligible to vest if the Company’s actual compound annual revenue growth rate over the performance period meets or exceeds 112% of the target rate and (ii) up to 150% of the target number of PSUs under the Adjusted EBITDA margin metric will be eligible to vest if the Company’s average Adjusted EBITDA margin over the performance period meets or exceeds 104.8% of the target. The amounts in this column represent the total number of vested PSUs assuming the achievement of the performance level required for the maximum vesting of PSUs under both the revenue growth rate metric and Adjusted EBITDA margin metric, without giving effect to any TSR modifier as described in note 4. | | (7) The amounts in this table represent the LTIP-A awards with time-based vesting awarded to each NEO other than Mr. Palmer under the Equity Incentive Plan during fiscal 2023. These awards vested or will vest, as applicable, in four equal annual installments, on each of September 30, 2023, 2024, 2025 and 2026. | | (8) Represents the grant date fair value of each equity award computed in accordance with ASC 718, assuming no forfeitures. A discussion of the assumptions used in the calculation of the amounts is included in Note 14, “Equity-Based Compensation” in the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 that was filed with the SEC on November 29, 2023. |
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End The following table provides information regarding outstanding unvested stock awards held by our NEOs as of September 30, 2023. The market value of the awards reflected in the following table is based on a value of $36.56 per share, the closing market price of our Class A common stock on September 29, 2023, the last trading day prior to our fiscal year-end. For purposes of the following table, awards that vested on September 30, 2023 or with respect to the performance period ended September 30, 2023 are deemed not to be outstanding.
Outstanding Equity Awards at Fiscal Year End
| | Stock Awards | | | | | | Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested | | Name | (#) (1) (2) | ($) | (#) (3) | ($) | | Smith | 114,530 | 4,187,217 | 22,710 | 830,278 | | Palmer | 20,000 | 731,200 | — | — | | Hoffman | 34,964 | 1,278,284 | 6,667 | 243,746 | | Harper | 57,138 | 2,088,965 | 11,984 | 438,135 | | Flowers | 56,864 | 2,078,948 | 11,526 | 421,391 | | Armstrong | 46,442 | 1,697,920 | 10,819 | 395,543 |
Outstanding Equity Awards at Fiscal Year End
| (1) The amounts in this column represent restricted shares of Class A common stock with time-based vesting criteria previously granted under the Equity Incentive Plan. | | (2) Unless the award is forfeited or vesting is accelerated because of a termination of employment under the circumstances described below under the heading “Potential Payments upon Termination or Change in Control,” the restrictions on the restricted stock reported in the table above will lapse, and the awards vested or will vest, as applicable, as follows: |
Outstanding Equity Awards at Fiscal Year End
| | Stock Awards | | | | | Name | 1/4/2024 | 9/30/2024 | 9/30/2025 | 9/30/2026 | | Smith | 2,500 | 55,870 | 54,038 | 2,122 | | Palmer | — | 10,000 | 10,000 | — | | Hoffman | — | 17,416 | 16,668 | 880 | | Harper | — | 28,485 | 27,398 | 1,255 | | Flowers | — | 28,354 | 27,306 | 1,204 | | Armstrong | — | 23,113 | 22,163 | 1,166 |
Outstanding Equity Awards at Fiscal Year End
| (3) The amounts in this column represent the number of shares issuable upon the vesting of LTIP-B awards outstanding at fiscal year-end assuming the achievement of the threshold level of performance as defined in the respective award agreements, and without giving effect to any potential modification of the number of vested PSUs based on the Company’s TSR over the performance period. |
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table provides information regarding the amounts recognized by our NEOs upon the vesting of stock awards during fiscal 2023. Our NEOs did not exercise any stock options during fiscal 2023.
Option Exercises and Stock Vested
| | Number of Shares Acquired on Vesting | Value Realized on Vesting | | Name (1) | (#) (2) | ($) (3) | | Smith | 20,228 | 798,377 | | Hoffman | 5,866 | 150,938 | | Harper | 9,736 | 400,907 | | Flowers | 9,392 | 386,785 | | Armstrong | 8,575 | 352,774 |
Option Exercises and Stock Vested
| (1) Mr. Palmer did not acquire any shares upon the vesting of equity awards during fiscal 2023. | | (2) Represents shares of Class A common stock acquired upon the vesting of time-based restricted stock awards and performance share awards covering the three-year performance period ended September 30, 2023. | | (3) The value realized on vesting is based on the closing market price of our Class A common stock on the applicable vesting date. |
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control
Director Compensation
Director Compensation
Chief Executive Officer Pay Ratio
Chief Executive Officer Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Item 402(u) of Regulation S-K (the “pay ratio rule”), we are providing the following information about the relationship of the median of the total annual compensation of our employees and the total annual compensation of our Chief Executive Officer. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with the pay ratio rule. The pay ratio rule permits a company to identify its median employee once every three years, unless there has been a change in its employee population or employee compensation arrangements that the company reasonably believes would result in a significant change in its pay ratio disclosure. We previously determined our median employee by preparing a list of all employees (excluding our Chief Executive Officer) as of September 30, 2021, along with their gross income reportable on IRS form W-2 paid to such employees during the fiscal year ended September 30, 2021. Reportable gross income for fiscal 2021 was annualized for those full-time employees who were not employed for the full fiscal year. After identifying the median employee, we calculated that employee’s annual total compensation using the same methodology we use for our NEOs as set forth in the Summary Compensation Table above. Because there have been no material changes in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure, we have elected to base the pay ratio disclosure on the same median employee identified for the fiscal year ended September 30, 2021. Using the methodology described above, the annual compensation for fiscal 2023 for our Chief Executive Officer was $2,446,392 and for our median employee was $63,617. The resulting ratio of our Chief Executive Officer’s pay to that of our median employee for the fiscal year ended September 30, 2023 was 38.4 to 1.
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure
| | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for Current PEO(1) | Summary Compensation Table Total for Former PEO(1) | Compensation Actually Paid to Current PEO(1)(2) | Compensation Actually Paid to Former PEO(1)(2) | Average Summary Compensation Table Total for Non-PEO NEOs(1)(2) | Average Compensation Actually Paid to Non-PEO NEOs(1)(2) | Company TSR(3) | Peer Group TSR(3) | Net Income ($000) | Revenue ($000) | | (a) | (b) | (b) | (c) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | 2,446,392 | N/A | 4,047,952 | N/A | 1,081,281 | 1,679,339 | $302.15 | $226.32 | 49,001 | 1,563,548 | | 2022 | 2,362,627 | N/A | 1,367,724 | N/A | 1,096,401 | 718,359 | $216.78 | $175.64 | 21,376 | 1,301,674 | | 2021 | 3,939,343 | 492,913 | 4,996,295 | 492,913 | 1,889,210 | 2,185,221 | $275.79 | $162.83 | 20,177 | 910,739 |
Pay Versus Performance Disclosure
| (1) Fred J. Smith, III served as our principal executive officer (“PEO”) for each of fiscal 2023 and 2022 and a partial year in fiscal 2021. Charles E. Owens, our Vice Chairman, served as our PEO for a partial year in fiscal 2021. For fiscal 2023, our non-PEO NEOs were Messrs. Palmer, Hoffman, Harper, Flowers and Armstrong. For fiscal 2022 and 2021, our non-PEO NEOs were Messrs. Palmer, Harper, Flowers and Armstrong. | | (2) For each of fiscal 2023, 2022 and 2021, the values included in this column for the compensation actually paid to our Current PEO and the average compensation actually paid to our non-PEO NEOs reflected the following adjustments to the values included in column (b) and column (d), respectively, in the table above. For the former PEO, compensation actually paid in fiscal 2021 was equal to the Summary Compensation Table (“SCT”) total. |
Pay Versus Performance Disclosure
| Current PEO | 2023 | 2022 | 2021 | | SCT Total for Current PEO (b) | 2,446,392 | 2,362,627 | 3,939,343 | | - SCT “Stock Awards” column value | -793,024 | -1,179,480 | -2,844,325 | | + year-end fair value of equity awards granted in the covered year that are outstanding and unvested as of the covered year-end | 878,160 | 946,084 | 3,770,802 | | [+/-] year-over-year change in fair value of equity awards granted in prior years that are outstanding and unvested as of the covered year-end | 1,294,324 | -775,879 | — | | [+/-] change in fair value of equity awards granted in the covered year that vested in the covered year | 77,525 | 50,270 | 130,476 | | [+/-] year-over-year change in fair value of equity awards granted in prior years that vested in the covered year | 144,574 | -35,898 | — | | Compensation Actually Paid to Current PEO (c) | 4,047,952 | 1,367,724 | 4,996,295 |
Pay Versus Performance Disclosure
| Average for Non-PEO NEOs (d) | 2023 | 2022 | 2021 | | SCT Total for Non-PEO NEOs (d) | 1,081,281 | 1,096,401 | 1,889,210 | | - SCT “Stock Awards” column value | -303,469 | -453,645 | -1,141,819 | | + year-end fair value of equity awards granted in the covered year that are outstanding and unvested as of the covered year-end | 332,716 | 362,249 | 1,412,072 | | [+/-] year-over-year change in fair value of equity awards granted in prior years that are outstanding and unvested as of the covered year-end | 480,729 | -296,622 | — | | [+/-] change in fair value of equity awards granted in the covered year that vested in the covered year | 32,902 | 21,279 | 25,757 | | [+/-] year-over-year change in fair value of equity awards granted in prior years that vested in the covered year | 55,180 | -11,304 | — | | Compensation Actually Paid to Non-PEO NEOs (e) | 1,679,339 | 718,359 | 2,185,221 |
Pay Versus Performance Disclosure
| (3) For each of fiscal 2023, 2022 and 2021, TSR for the Company and the peer group was calculated as the yearly percentage change in cumulative TSR based on a deemed fixed investment of $100 at market close on September 30, 2020. The yearly percentage change in cumulative TSR was measured as the quotient of (a) the sum of (i) the cumulative amount of dividends for the period from September 30, 2020 through and including the last day of the covered fiscal year (the “Measurement Period”), assuming dividend reinvestment, plus (ii) the difference between stock price per share at the end and the beginning of the Measurement Period, divided by (b) stock price per share at the beginning of the Measurement Period. The peer group (the “Peer Group”) TSR set forth in this table utilizes the Dow Jones U.S. Heavy Construction Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K and included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. |
Pay Versus Performance Relationship Descriptions
Pay Versus Performance Relationship Descriptions The following graphical comparisons provide descriptions of the relationships between certain figures included in the Pay Versus Performance table for each of 2023, 2022, and 2021, including: (a) a comparison between our cumulative TSR and the total TSR of the Peer Group and (b) comparisons between (i) the compensation actually paid to the PEO and the average compensation actually paid to our non-PEO NEOs and (ii) each of Company TSR, Net Income and Revenue. For purposes of the following graphical comparisons, the Compensation Actually Paid to PEO for fiscal 2021 aggregates the compensation amounts of our current and former PEOs.
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid, Company TSR and Peer Group TSR
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid, Company TSR and Peer Group TSR
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Net Income
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Net Income
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Revenue
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Revenue The following table lists the four financial performance measures that we believe represent the most important performance measures used to link compensation actually paid to our PEO and non-PEO NEOs for 2023 to our performance:
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Revenue
| Revenue | | Revenue growth | | Adjusted EBITDA(1) | | Adjusted EBITDA margin(1) |
Relationship Between PEO and Average Non-PEO NEO Compensation Actually Paid and Revenue
| (1) Adjusted EBITDA and Adjusted EBITDA margin are financial measures not presented in accordance with generally accepted accounting principles (“GAAP”). Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) equity-based compensation expense, (v) loss on the extinguishment of debt, and (vi) certain management fees and expenses (for periods commencing prior to September 30, 2023). Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenues for the applicable period. These metrics are supplemental measures of the Company’s operating performance that are neither required by, nor presented in accordance with, GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of the Company’s operating performance. The Company presents Adjusted EBITDA and Adjusted EBITDA margin because management uses these measures as key performance indicators, and the Company believes that securities analysts, investors and others use these measures to evaluate companies in the Company’s industry. The Company’s calculation of Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similarly named measures reported by other companies. Potential differences may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets. For further discussion, including a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA and the calculation of Adjusted EBITDA margin, see Item 7 of our 2023 Form 10-K. |
ELECTION OF CLASS III DIRECTORS
ELECTION OF CLASS III DIRECTORS