GIBRALTAR INDUSTRIES, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Rule 14a-12
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Gibraltar Industries, Inc.
(Name of Registrant as Specified In Its Charter)
_________________________________________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Notice of 2017 Annual
Meeting of Stockholders
and Proxy Statement
Friday,
May 5, 2017
at 11:00 A.M., Eastern Time
Gateway Building, 3556 Lake Shore Road, Buffalo, NY 14219
April 4, 2017
To My Fellow Stockholders:
It is my pleasure to invite you to attend the 2017 Annual Meeting of Stockholders of Gibraltar Industries, Inc. to be held on Friday,
May 5, 2017
at 11:00 A.M. local time at the Gateway Building in Buffalo, New York. The meeting will begin with discussion of and voting on the matters described in the attached Notice of 2017 Annual Meeting of Stockholders and Proxy Statement, followed by a report on our Company’s financial performance and operations.
The Proxy Statement is critical to our corporate governance process and to affirming the direction of our Company. The Proxy Statement provides you with important information about our Board of Directors and executive officers, and informs you of steps we are taking to fulfill our responsibilities to you as a stockholder.
Over the past three years, Gibraltar has undergone a succession process that resulted in the appointment of six new directors to the Board since 2014, the appointment of Frank G. Heard as our Chief Executive Officer at the beginning of 2015, and the appointment of Timothy F. Murphy as our Chief Financial Officer effective April 1, 2017. In connection with the leadership succession described above, Gibraltar has implemented the following significant corporate governance improvements:
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Adopted annual elections of directors as opposed to our previous classified board structure;
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Reduced the average tenure of directors from eight years to five years, increased the diversity, and increased the proportion of independent directors; and
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Separated the role of Chairman from the Chief Executive Officer role.
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These improvements, among others, demonstrate the continuing efforts of the Board to implement best-in-class corporate governance practices.
During 2016, Gibraltar continued to successfully implement its four-pillar value creation strategy focused on operational excellence, product innovation, acquisitions, and portfolio management. Significant progress was made in each of the four strategies and the Company made more money at a higher rate of return with a more efficient use of capital for the second year in a row. We look forward to communicating more about the successes Gibraltar has had over the past twelve months and how that performance impacts our governance and compensation considerations.
The Proxy Statement is designed to provide you with information relating to the
proposals that require your vote and to solicit your vote if you cannot attend the Annual Meeting in person.
Your vote is very important to us and we encourage you to vote promptly.
Please note that your broker cannot vote on all of the proposals without your instruction. If you do not plan to attend the Annual Meeting in person, please execute and return your proxy or inform your broker as to how you would like us to vote your shares on the proposals set forth in the Proxy Statement.
The Proxy Statement includes a description of seven proposals. Our Board of Directors recommends that stockholders vote
FOR
all proposals. Please read each proposal carefully and study the recommendations of the Board of Directors and its committees.
On behalf of our management team and our Board of Directors, I want to thank you for your continued support and confidence in our Company.
Sincerely,
William Montague
Chairman of the Board
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Table of Contents
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Page
Number
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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DEFINITIVE PROXY STATEMENT
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PROPOSAL 1 – ELECTION OF DIRECTORS
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CORPORATE GOVERNANCE
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DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
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COMPENSATION OF DIRECTORS
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PROPOSAL 2 – TIMING OF ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-WHEN-ON-PAY”)
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PROPOSAL 3 – ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY”)
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COMPENSATION DISCUSSION & ANALYSIS
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Executive Summary
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Compensation Overview and Pay-for-Performance
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Distinguishing Awarded Compensation from Realized Compensation
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Say-on-Pay Vote Results
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Design of the Compensation Program
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Elements of Our Compensation Program
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Employment Agreements
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Clawback Policy
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Tax Considerations
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Conclusion
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COMPENSATION COMMITTEE REPORT
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COMPENSATION OF EXECUTIVE OFFICERS
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Summary Compensation Table
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Grants of Plan-Based Awards
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Outstanding Equity Awards at Fiscal Year End
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Option Exercises and Stock Vested
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Nonqualified Deferred Compensation
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POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
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PROPOSAL 4 – APPROVAL OF THE MATERIAL TERMS OF THE SPECIAL PERFORMANCE STOCK UNIT GRANT
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PROPOSAL 5 – APPROVAL OF THE MATERIAL TERMS OF THE ANNUAL PERFORMANCE STOCK UNIT GRANT
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PROPOSAL 6 – APPROVAL OF THE FIRST AMENDMENT TO THE GIBRALTAR INDUSTRIES, INC. 2015 EQUITY INCENTIVE PLAN
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORT
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PROPOSAL 7 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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INFORMATION ABOUT OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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AUDIT COMMITTEE REPORT
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OTHER MATTERS
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OTHER INFORMATION
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STOCKHOLDERS’ PROPOSALS
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APPENDIX A
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GIBRALTAR INDUSTRIES, INC.
3556 Lake Shore Road
PO Box 2028
Buffalo, New York 14219-0228
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 5, 2017
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Gibraltar Industries, Inc., a Delaware corporation (the “Company”), will be held at the Gateway Building, 3556 Lake Shore Road, Buffalo, New York, on Friday,
May 5, 2017
, at 11:00 A.M., local time, for the following purposes:
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Election of six Directors nominated by the Board to hold office until the 2018 Annual Meeting.
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Advisory vote to determine stockholder preference on whether future Say-on-Pay votes should occur every one, two, or three years (the "Say-When-on-Pay" vote).
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Advisory approval of the Company’s executive compensation (the “Say-on-Pay” vote).
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Approval of the material terms of the Company’s special grant of Performance Stock Units to enable the Company to deduct the related compensation for federal income tax purposes without being subject to limitations.
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Approval of the material terms of the Company’s Annual Performance Stock Unit Grant to enable the Company to deduct the related compensation for federal income tax purposes without being subject to limitations.
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Approval of First Amendment to the Gibraltar Industries, Inc. 2015 Equity Incentive Plan.
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Ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2017.
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Transaction of such other business as may properly come before the meeting or any adjournment or adjournments thereof.
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The Board of Directors has fixed the close of business on
March 20, 2017
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You may vote in person at the annual meeting or you may vote by using the proxy card enclosed with these materials. Stockholders who do not expect to attend the meeting in person are urged to vote, sign, and date the enclosed proxy and return it promptly in the envelope enclosed for that purpose. Returning the proxy card does not deprive you of your right to attend the Annual Meeting and to vote your shares in person for matters acted upon at the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting: the Definitive Proxy Statement and the Annual Report on Form 10-K are available at www.proxyvote.com.
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BY ORDER OF THE BOARD OF DIRECTORS
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Jeffrey J. Watorek
Secretary
Buffalo, New York
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April 4, 2017
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3556 Lake Shore Road
PO Box 2028
Buffalo, New York 14219-0228
DEFINITIVE PROXY STATEMENT
April 4, 2017
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Date, Time, and Place of Annual Meeting
Gibraltar Industries, Inc., a Delaware corporation (the “Company”, “Gibraltar”, “we”, or “us”) is making this Definitive Proxy Statement available to you on or about
April 4, 2017
in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the 2017 Annual Meeting of Stockholders. We will hold the 2017 Annual Meeting at the Gateway Building, 3556 Lake Shore Road, Buffalo, New York, on
May 5, 2017
at 11:00 A.M., local time, and at any adjournment or adjournments thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
Voting Information
Record Date.
The Board of Directors has fixed the close of business on
March 20, 2017
, as the record date for the determination of stockholders entitled to receive notice of and to vote at the 2017 Annual Meeting. At the close of business on
March 20, 2017
, the Company had outstanding and entitled to vote at the Annual Meeting 31,580,694 shares of common stock, $0.01 par value per share (“Common Stock”). Each share is entitled to one vote on each matter properly brought before the Annual Meeting.
Solicitation Costs.
The cost of the solicitation of proxies in the accompanying form will be borne by the Company, including expenses in connection with preparing and mailing this Definitive Proxy Statement. In addition to the use of the mail, proxies may be solicited by personal interviews and by telephone by directors, officers, and employees, without any additional compensation, as well as proxy solicitors. We have retained Alliance Advisors, LLC (“Alliance”) to act as a proxy solicitor in conjunction with the annual meeting. We have agreed to pay Alliance $12,000, plus reasonable out-of-pocket expenses, for proxy solicitation services. Arrangements will be made with brokerage houses, banks and other custodians, nominees, and fiduciaries for the forwarding of solicitation material to the beneficial owners of Common Stock, and the Company will reimburse them for reasonable out-of-pocket expenses incurred in connection therewith.
Voting Your Proxy.
If the enclosed proxy is properly executed, returned, and received in time for the Annual Meeting, the shares represented thereby will be voted in accordance with the specifications, if any, made on the proxy card. If no specification is made, the proxies will be voted as recommended by the Board of Directors (i)
FOR
the nominees for directors named in this Definitive Proxy Statement, (ii)
FOR
the option that future Say-on-Pay votes are to be held annually (the “Say-When-on-Pay” vote), (iii)
FOR
the approval of the advisory resolution on our executive compensation (the “Say-on-Pay” vote), (iv)
FOR
the approval of the material terms of the Company’s special grant of Performance Stock Units, (v)
FOR
the approval of the material terms of the Company’s annual grant of Performance Stock Units, (vi)
FOR
the First Amendment to the Gibraltar Industries, Inc. 2015 Equity Incentive Plan, and (vii)
FOR
the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.
Vote Required.
The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting will constitute a quorum. Each proposal submitted to the stockholders requires the affirmative vote of holders of a majority of the shares present at the meeting, entitled to vote, assuming a quorum is present in person or by proxy. If a stockholder specifies an abstention from voting on a proposal, such shares are considered present but, since they are not affirmative votes for the proposal, they will have the same effect as votes against the proposal.
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Directors are elected by a majority of votes cast unless the election is contested, in which case directors are elected by a plurality of votes cast. Nominees for the election of directors must receive more “for” than “against” votes to be elected. If an incumbent director, in an uncontested election, does not receive a majority of the votes cast, the director is required to tender his or her resignation to the Board of Directors. The Nominating and Corporate Governance Committee will make a recommendation to the Board of Directors on whether to accept or reject the resignation, or whether other action should be taken. The Board of Directors will act on the recommendation and publicly disclose its decision and rationale behind it within 90 days of the date election results are certified.
Your shares may be voted on some of the matters to be acted on at the Annual Meeting if they are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority to vote shares on certain routine matters for which their customers do not provide voting instructions by the tenth day before the meeting. The ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017 is the only stockholder proposal considered a routine matter.
The election of directors, approval of an amendment to an equity plan, and votes on matters that relate to executive compensation, such as the Say-on-Pay vote, are not considered routine. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial holder of the shares with respect to that proposal, the brokerage firm CANNOT
vote the shares on that proposal. This is called a “broker non-vote.” In tabulating the voting result for any particular proposal, shares that are subject to broker non-votes with respect to that proposal will not be considered votes cast either for or against the proposal.
Please vote your proxy so your shares will be represented at the Annual Meeting.
Revocability of Proxy.
The execution of a proxy will not affect a stockholder’s right to attend the Annual Meeting and to vote in person. A stockholder who executes a proxy may revoke it at any time before it is exercised by giving written notice to the Secretary, by appearing at the Annual Meeting and so stating, or by submitting another duly executed proxy bearing a later date.
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of Directors shall consist of not less than three nor more than fifteen directors. The number of directors may be changed at any time by resolution of the Board of Directors. During 2016, the number of directors was decreased from eight members to seven members upon the retirement of a director after the 2016 Annual Meeting, concluding a two-year period in which the Board accommodated the retirement of six directors and the appointment of six new directors. During 2015, the Certificate of Incorporation was amended to eliminate the classified board structure and provide for the annual election of directors. Directors will stand for election to the Board of Directors as their terms expire and the transition to a declassified board will be completed by the 2018 Annual Meeting. The Board of Directors is presently comprised of seven members:
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Directors Subject to
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Class III Director
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Annual Elections
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Term Expiring in 2018
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Sharon M. Brady
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Vinod M. Khilnani
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Jane L. Corwin
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Frank G. Heard
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William P. Montague
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Craig A. Hindman
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James B. Nish
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At the Annual Meeting of Stockholders in 2017, six Directors shall be elected to hold office for a one-year term expiring in 2018. Sharon Brady, Frank Heard, Craig Hindman, Vinod Khilnani, William Montague, and James Nish have been nominated by the Board of Directors for election. All nominees, other than Mr. Heard, our President and Chief Executive Officer, are independent directors under the independence standards provided by Rule 5605(a)(2) of the NASDAQ listing standards.
Unless instructions to the contrary are received, we intend to vote the shares represented by proxies
FOR
the election of Sharon Brady, Frank Heard, Craig Hindman, Vinod Khilnani, William Montague, and James Nish as directors, each of whom has consented to serve as a director if elected. If any nominee becomes unavailable for election for any reason, we intend to vote the shares represented by the proxies solicited herewith for such other person or persons as the Board of Directors shall designate.
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Set forth below is certain information furnished to us by the directors and nominees for election as directors. We believe our directors should satisfy a number of qualifications, including demonstrated integrity, a record of personal accomplishment, a commitment to participation in board activities, and other traits discussed below in “Corporate Governance.” The Board of Directors considered these qualifications, which are summarized following the biographical information for each director, in determining to recommend that the directors be nominated for election.
Nominees
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Sharon M. Brady
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SHARON BRADY has served as a Director of the Company since July 2015, bringing 36 years of human resources leadership experience in the industrial manufacturing and retail sectors. Most recently, she served as Senior Vice President of Human Resources at Illinois Tool Works, Inc. ("ITW"), a Fortune 200 diversified industrial manufacturer. Prior to ITW, she progressed through a series of leadership roles for large-cap companies in the manufacturing, retail, and pharmaceutical industries. Ms. Brady’s qualifications to serve on the Company’s Board reflect her extensive experience in global talent development, as well as in the design and implementation of leadership development frameworks, executive compensation plans, governance processes, and culture change strategies, including diversity initiatives and succession planning.
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Frank G. Heard
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FRANK HEARD has served as Chief Executive Officer and a Director of the Company since January 2015. He joined Gibraltar as President and Chief Operating Officer in 2014 with more than 25 years of experience in the building products industry. Prior to Gibraltar, Mr. Heard served as President of the Building Components Group, a division of ITW. In that role, he had global responsibility for the strategic direction and operational performance of 25 business units in 18 countries across a wide range of industry segments including residential and commercial construction, retail, and component manufacturing. Prior to serving as President of the Building Components Group, Mr. Heard held various executive management roles for ITW dating back to 1990. Mr. Heard’s qualifications to serve as a member of the Company’s Board include his demonstrated leadership skills as President of the Company since May 2014 through present, his integral knowledge of the markets in which the Company operates, its competitors, products, personnel, manufacturing facilities, and target markets as well as his global operating company experience in the building products industry at ITW.
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Craig A. Hindman
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CRAIG HINDMAN has served as a Director of the Company since 2014. He is a global executive with 35 years of leadership experience across multiple industry segments. Most recently, Mr. Hindman was Executive Vice President and Chief Executive Officer of the Industrial Packaging Group of businesses at ITW. In that role, he was responsible for 110 business units operating in 30 countries, and was successful in growing revenues and increasing margins through innovation and business simplification initiatives. He also completed two acquisitions before leading the sale of the Industrial Packaging Group to The Carlyle Group in 2014. Mr. Hindman spent more than two decades in ITW’s Construction Products Group, providing him with significant experience in and familiarity with end markets also served by Gibraltar. He graduated from Colgate University with a bachelor’s degree and from Northwestern University with an MBA. Addiitonally, he serves as a director of a number of not-for-profit organizations and private companies, including Wilsonart International which he serves as a member of the compensation committee. Mr. Hindman’s qualifications to serve on the Company’s Board include his experience as an executive with responsibility for the financial and operational performance of global industrial business units within a best-in-class, Fortune 200 company. Other qualifications include his experience in the integration of acquired businesses and business simplification over a period of more than 20 years.
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Vinod M. Khilnani
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VINOD KHILNANI has served as a Director of the Company since 2014. Most recently from January 2013 to May 2013, he was Executive Chairman of the Board at CTS Corporation, a sensors and electronics components company with operations in North America, Europe, and Asia. Mr. Khilnani previously served as CTS Corporation’s Chairman and Chief Executive Officer from 2009 to 2013, President and Chief Executive Officer from 2007 until 2009, and Senior Vice President and Chief Financial Officer from 2001 to 2007. In addition to implementing growth and market diversification strategies at CTS Corporation, he successfully led restructuring and acquisition transactions, completed private equity and debt offerings, and established operations in Eastern Europe and Asia. Mr. Khilnani is currently a director of Materion Corporation, 1
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Source Corporation (parent of 1
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Source Bank) and ESCO Technologies, Inc. He serves as lead independent director, chairman of the nominating and corporate governance committee, and a member of the compensation committee of Materion Corporation; chairman of the audit committee and member of the compensation committee of 1
st
Source Corporation; and chairman of the compensation committee at ESCO Corporation. Mr. Khilnani’s qualifications to serve on the Company’s Board include his service as a director of publicly-held, global organizations in a number of industries, his leadership role as Chairman and Chief Executive Officer of CTS Corporation, and his extensive background in accounting and finance for global manufacturing entities.
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William P. Montague
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WILLIAM MONTAGUE has served as a Director of the Company since the consummation of the Company’s initial public offering in 1993 and as the Chairman of the Board since June 2015. He served as Executive Vice President and Chief Financial Officer of Mark IV Industries, Inc. (“Mark IV”), a manufacturer of engineered systems and components from 1986 to 1996, as Mark IV’s President and a Director from 1996 through 2004, and as Chief Executive Officer and a Director of Mark IV from 2004 to 2008. In April 2009, subsequent to Mr. Montague’s retirement, Mark IV filed for bankruptcy protection. Mr. Montague also serves on the Board of Directors of Endo International plc., where he is chairman of the compensation committee and serves on the audit, transaction, and nominating and corporate governance committees. Mr. Montague’s qualifications to serve on the Company’s Board include his ability to offer the perspectives of a chief executive officer along with his extensive financial and accounting experience acquired during his career with Mark IV and as a certified public accountant. His experience as a director, chief financial officer, and chief executive officer with other public companies with complex capital resource requirements and diverse geographical operations similar to the Company provides significant value to the Board. Mr. Montague's 24 years of experience on the Board and long-term exposure to senior executives of the Company provides a unique perspective regarding Gibraltar's culture.
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James B. Nish
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JAMES NISH has served as a Director of the Company since July 2015, bringing 28 years of investment banking experience serving clients in a variety of international industrial manufacturing markets. Most recently, he led the Mid-Cap Corporate Investment Banking team at J.P. Morgan Chase. Prior to that, he was head of the Industrial Manufacturing Group at Bear Stearns, where he worked for 22 years. He also serves on the board of Scorpio Bulkers Inc., where he also serves on the audit committee. Mr. Nish’s qualifications to serve on the Company’s Board reflect his experiences centered on helping global industrial manufacturing companies accelerate their growth through mergers, acquisitions, and capital market transactions. A Certified Public Accountant, he has extensive experience in accounting, finance, personnel assessments, and currently serves as an adjunct professor at Baruch College and Pace University where he teaches both undergraduate business and MBA courses.
Directors Not Standing for Election
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Jane L. Corwin
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JANE CORWIN has served as a Director of the Company since 2014. She served as an elected member of the New York State Assembly, representing the 144
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Assembly District, from 2009 to 2016. Prior to serving in elected office, Ms. Corwin held various positions, including Director, Secretary, Treasurer, and Vice President at White Directory Publishers, Inc. from 1990 until its sale in 2004. Ms. Corwin also serves as an officer of a not-for-profit organization. Ms. Corwin’s qualifications to serve on the Company’s Board include her ability to provide a valuable and different perspective on employment and corporate governance due to her extensive background in government and politics - including eight years serving on the Corporations, Authorities, and Commissions Committee of the New York State Assembly - along with her experience gained serving as a director and executive in the private sector.
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES IN PROPOSAL 1
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CORPORATE GOVERNANCE
The Board of Directors has adopted Corporate Governance Documents which set forth the practices the Board of Directors will follow with respect to various matters, such as director responsibilities, compensation, and access to management. The Corporate Governance Documents are posted on the corporate governance page of the Company’s website at
www.gibraltar1.com
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Board Leadership
The Board of Directors is responsible for oversight of management of the business and affairs of the Company with the objective of enhancing stockholder value. To carry out these responsibilities and the activities of its committees, the Board of Directors was comprised of between seven and eight directors during the year ended December 31, 2016. As noted above, one director retired from the Board during 2016.
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Under the Company’s Bylaws, the Company's Chairman of the Board, William Montague, presides over meetings of the Board of Directors and meetings of the stockholders, while Gibraltar's Chief Executive Officer ("CEO"), Frank Heard, has general authority for strategic initiatives involving the business and operational affairs of the Company, subject to the supervision and oversight of the Board. Gibraltar separated the Chairman and CEO role in 2015 and believes this leadership structure better aligns with corporate governance best practices. The separated Chairman and CEO roles help to enhance the independent oversight of management which we believe more closely aligns the Company’s leadership with the expectations of our stockholders.
In addition to the leadership structure described above, the independent directors of our Board meet in executive session at each quarterly board meeting, and all of the Board’s key committees - the Audit Committee, Compensation Committee, and the Nominating and Corporate Governance Committee - are comprised solely of and led by independent directors.
Board Tenure
Our corporate governance guidelines require our non-employee directors to submit their resignation from the Board upon reaching the age of 72. We do not have any other tenure limitations, as we believe our retirement policy and natural turnover achieve the appropriate balance between maintaining long-term directors with deep institutional knowledge and refreshing the Board with new directors who bring new perspectives and diversity to the Board. Whenever possible, we structure director retirements and new director appointments to overlap so institutional knowledge can be transferred to new directors. We also conduct an on-boarding process for our new directors so they can obtain an understanding of Gibraltar’s business, the opportunities and challenges the Company manages, and provide an opportunity to meet the management team. As of April 4, 2017, the average tenure for each of the Company's board members is equal to five years of service.
Risk Oversight
The Board of Directors is actively engaged in the oversight of strategies adopted by management for mitigating risks faced by the Company. A fundamental part of risk oversight is not only understanding the material risks a company faces and the steps management is taking to manage those risks, but also understanding what level of risk is appropriate for Gibraltar. The involvement of the Board of Directors in reviewing the Company’s enterprise risk management process and business strategy is an integral aspect of the Board's assessment of management’s tolerance for risk and also the Board's determination of what constitutes an appropriate level of risk for the Company.
Risks may arise in many different areas, including, among many others, business strategy; financial condition; competition for talent; operational efficiency; electronic data security; quality assurance; environmental, health, and safety; supply chain management; reputation; customer spending patterns; and intellectual property. The Board of Directors believes that, in light of the interrelated nature of the Company’s risks, oversight of risk management is ultimately the responsibility of the full Board and has not divided the responsibility for oversight of risk management among its committees. In carrying out this critical responsibility, the Board has implemented a enterprise risk management program designed to:
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understand the critical risks in the Company's business and strategy;
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evaluate the Company's risk management process and whether it functions adequately;
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facilitate open communication between management and the Directors; and
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•
|
foster an appropriate culture of integrity and risk awareness.
|
The Board discusses risk throughout the year at meetings in general terms and in relation to specific proposed actions. While the Board oversees the enterprise risk management process, management is responsible for managing risk. The Company has internal processes and an effective internal control environment which facilitate the identification and management of risks and regular communication with the Board. These include an enterprise risk management program under the leadership of our Chief Financial Officer and our Treasurer, regular reports from management on business strategy, a Code of Business Conduct, and product quality standards. Management communicates routinely with the Board on the significant risks identified and how they are being managed.
Independence of Directors
The Board of Directors has determined that each of Sharon Brady, Jane Corwin, Craig Hindman, Vinod Khilnani, William Montague, and James Nish is an “independent director” as defined under NASDAQ rules, which the Board has adopted as the standards by which it will determine independence.
Board Committees and Related Matters
Our Board of Directors has three standing committees - the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. Copies of the charters of these committees are available on the Company’s website at
www.gibraltar1.com
.
5
The current composition of each board committee is set forth below:
|
Director
|
Audit Committee
|
Compensation Committee
|
Nominating and Corporate Governance Committee
|
Board of Directors
|
|
Sharon Brady
|
Chair
|
a
|
||
|
Jane Corwin
|
a
|
a
|
a
|
|
|
Frank Heard
|
a
|
|||
|
Craig Hindman
|
a
|
a
|
a
|
|
|
Vinod Khilnani
|
a
|
Chair
|
a
|
|
|
William Montague
|
a
|
a
|
a
|
Chair
|
|
James Nish
|
Chair
|
a
|
||
|
Fiscal 2016 Meetings
|
9
|
7
|
5
|
6
|
Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and committees on which he served during the period.
Audit Committee
The Audit Committee is comprised of Jane Corwin, William Montague, and James Nish, each of whom is independent as required by the NASDAQ rules applicable to such Committee. Mr. Nish serves as the chairman of the Audit Committee. The Audit Committee acts in accordance with its charter to assist the Board of Directors in its oversight of matters relating to the financial reporting process, the system of internal accounting control and management of financial risks, the audit process, review and approval of related party transactions, compliance with laws and regulations, and the Company’s code of business conduct. The Board of Directors has made a determination that each of Jane Corwin, William Montague, and James Nish is an “audit committee financial expert” under the standards established by SEC rules as a result of their business experience as set forth above under “Election of Directors”.
Compensation Committee
The Compensation Committee is composed of Sharon Brady, Craig Hindman, Vinod Khilnani, and William Montague, each of whom is independent as required by NASDAQ rules as applicable to such Committee. Ms. Brady serves as the chairman of the Compensation Committee. The Compensation Committee acts in accordance with its charter to approve the structure and design of the compensation programs in effect for executive officers and directors of the Company. The Company’s Compensation Committee meets in executive session to determine and approve the compensation packages provided to the executive officers. The Compensation Committee is responsible for ensuring the decisions regarding compensation are in line with market conditions and enhance the Company’s ability to attract, retain, and motivate highly qualified individuals to serve as executive officers and directors. To fulfill its responsibilities, the Compensation Committee has the authority to obtain advice from and retain advisors. The Compensation Committee hired Willis Towers Watson during 2016 to perform market studies of compensation programs offered by a peer group of companies. Additionally, Korn Ferry Hay Group was hired by the Compensation Committee to serve as a compensation advisor in 2017. Both Willis Towers Watson and Korn Ferry Hay Group are independent advisors as determined by assessing each firm on six factors as prescribed by the SEC. The Compensation Committee worked with Willis Towers Watson, Korn Ferry Hay Group, and the Company’s executive management team to make final decisions regarding the design of the programs used to compensate the Company’s executive officers and directors in a manner which is consistent with the Company’s compensation objectives. The Compensation Committee is also responsible for the administration of the Company’s incentive compensation plans and authorization of grants of equity-based awards pursuant to such plans.
Compensation Committee Interlocks and Insider Participation
During 2016, Sharon Brady, William Colombo, Craig Hindman, Vinod Khilnani, and William Montague served as members of the Compensation Committee. None of Ms. Brady, Mr. Colombo, Mr. Hindman, Mr. Khilnani, or Mr. Montague was an executive officer or employee of the Company or any of its subsidiaries during 2016 or prior thereto. In 2016, none of the executive officers of the Company or members of the Compensation Committee served on the compensation committee or on any other committee performing similar functions for any other entity’s board of directors, any of whose officers or directors served on the Company’s Board of Directors or Compensation Committee.
6
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is comprised of Jane Corwin, Craig Hindman, Vinod Khilnani, and William Montague, each of whom is independent as required by NASDAQ rules applicable to such Committee. Mr. Khilnani serves as the chairman of the Nominating and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee is to identify and nominate individuals qualified to become Board and committee members, to establish and implement policies and procedures relating to the nominations of qualified candidates, to develop and recommend to the Board a set of corporate governance guidelines for the Company, and to oversee, review, and make periodic recommendations to the Board concerning the Company’s corporate governance guidelines and policies. The current nominees for director were recommended for election to the Board at a meeting of the Nominating and Corporate Governance Committee held February 15, 2017. Craig Hindman, Vinod Khilnani, and William Montague did not participate in the recommendation that they be nominated for election to the Board.
Director Nomination Process
When a Board vacancy arises, the Committee seeks to identify candidates for nomination who are highly qualified, willing to serve as a member of the Company’s Board, and will be able to serve the best interests of stockholders. Each candidate must possess at least the following minimum qualifications:
|
•
|
Each candidate shall be prepared to represent the best interests of all stockholders and not just one particular constituency;
|
|
•
|
Each candidate shall be an individual who has demonstrated integrity and ethics in his or her personal and professional life and has established a record of professional accomplishment in his or her chosen field; and
|
|
•
|
Each candidate shall be prepared to participate fully in board activities, including active membership on at least one board committee and attendance at, and active participation in, meetings of the board and the committees of which he or she is a member, and not have other personal or professional commitments that would interfere with or limit his or her ability to do so.
|
The Committee believes that, given the size and complexity of the Company’s operations, the best interests of the Company’s stockholders will be served by a Board which is composed of individuals that contribute to the Board’s overall diversity - diversity being broadly construed to mean a variety of opinions, perspectives, as well as personal and professional experiences and backgrounds. Accordingly, the Committee seeks to identify candidates for nomination who will contribute to the diversity of perspectives present in Board deliberations. During the nomination process, the Committee considers whether the Board’s composition reflects an appropriately diverse mix of skills and experience, in relation to the needs of the Company.
The Nominating and Corporate Governance Committee identifies candidates from a number of sources including directors on the Board, Gibraltar’s executive management team, and research, including database and internet searches. All potential candidates for a director role, including incumbents, are considered and evaluated against the qualifications outlined above.
Stockholder Recommendations of Nominees
The Company has adopted a policy regarding stockholder recommendations of nominees for director to be submitted for evaluation to the Nominating and Corporate Governance Committee. A stockholder may recommend a nominee for consideration by the Nominating and Corporate Governance Committee by sending a recommendation, in writing, to the Secretary of the Company or any member of the Nominating and Corporate Governance Committee, together with such supporting material as the stockholder deems appropriate. Any person recommended by a stockholder in accordance with this policy will be considered by the Nominating and Corporate Governance Committee in the same manner and by the same criteria as other potential nominees. The Nominating and Corporate Governance Committee did not receive any nomination recommendations from stockholders during 2016.
Succession Planning
In light of the critical importance of executive leadership to Gibraltar’s success, we have a succession planning process that is enterprise wide for managers up to and including our Chief Executive Officer. Our Board of Directors’ involvement in the process includes a review of succession plans and recommendations as to succession in the event of each executive officer’s termination of employment for any reason.
Our Chief Executive Officer provides an annual review to the Board of Directors assessing the executive officers of Gibraltar. Our Compensation Committee, pursuant to its charter, annually reviews the performance of the executive officers and discusses succession plans for each such officer with the Chief Executive Officer. The Board of Directors has the responsibility to review succession plans for the Chief Executive Officer and other key executive positions.
7
The Board of Directors and Nominating and Corporate Governance Committee also work together to assess the composition, tenure, and diversity of the Board of Directors and evaluate succession planning considerations when recommending Board nominees.
Communication with the Board of Directors
The Board of Directors has established a policy with respect to stockholder communication with the directors. Stockholders may send communications to the Board of Directors in care of the Secretary at the Company’s headquarters located at 3556 Lake Shore Road, PO Box 2028, Buffalo, NY 14219-0228. All mail will be opened and logged. All communication, other than trivial communication or obscene material, will be forwarded promptly to the Directors. Trivial material will be delivered at the next meeting of the Board of Directors. Mail addressed to a particular member of the Board of Directors will be forwarded to that member. Mail addressed to “Outside Directors” or “Non-Management Directors” or similar addressees will be sent to the chairman of the Audit Committee.
The Company does not have a policy regarding director attendance at the annual meeting. Last year’s annual meeting was attended by the entire Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers
The following table sets forth certain information regarding the Directors and named executive officers of the Company as of March 20, 2017:
|
Name
|
Age
|
Position(s) Held
|
|
Frank G. Heard
|
58
|
Director, President, and Chief Executive Officer
|
|
Kenneth W. Smith
|
66
|
Senior Vice President and Chief Financial Officer
|
|
Cherri L. Syvrud
|
50
|
Senior Vice President of Human Resources and Organizational Development
1
|
|
Paul M. Murray
|
64
|
Retired Senior Vice President of Human Resources
1
|
|
Timothy F. Murphy
|
53
|
Vice President, Treasurer, and Secretary
|
|
William P. Montague
|
70
|
Chairman of the Board
|
|
Sharon M. Brady
|
66
|
Director
|
|
Jane L. Corwin
|
53
|
Director
|
|
Craig A. Hindman
|
62
|
Director
|
|
Vinod M. Khilnani
|
64
|
Director
|
|
James B. Nish
|
58
|
Director
|
|
William J. Colombo
|
61
|
Retired Director
2
|
|
1
|
Ms. Syvrud was hired as Senior Vice President of Human Resources and Organization Development on April 4, 2016 and appointed an officer of the Company on May 5, 2016. At which time, Mr. Murray resigned as an officer of the Company and became Senior Vice President of Administration during a transition period before his planned retirement on March 1, 2017. We included Ms. Syvrud and Mr. Murray in the Summary Compensation Table in accordance with Item 402 of Regulation S-K.
|
|
2
|
Mr. Colombo retired from the Board during 2016. We included Mr. Colombo in the 2016 Director Compensation Table in accordance with Item 402 of Regulation S-K.
|
The recent business experience of the directors is set forth above under “Election of Directors.” The recent business experience of the executive officers who are not also directors is as follows:
|
Kenneth W. Smith
|
KENNETH SMITH has been the Company’s Senior Vice President and Chief Financial Officer since joining the Company in 2008. Prior thereto, he served as Chief Financial Officer of Circor International, a global manufacturer of flow control components from 2000 through 2008, for the period from 1996 to 2000 he served as Vice President of Finance for North Safety Products, a manufacturer of personal protection equipment for employees of industrial companies, and before that as Finance Director of Digital Equipment Corporation, a manufacturer of computer hardware and software and a provider of integration services. Mr. Smith announced that he will retire in April 2017.
8
|
Cherri L. Syvrud
|
CHERRI SYVRUD has served as Senior Vice President of Human Resources and Organizational Development of the Company since joining the Company in March 2016. Prior thereto, Ms. Syvrud had a 28-year career with ITW where she last served as a Platform Director of Human Resources, developing and implementing processes to increase operational effectiveness and talent development globally. She graduated from the University of St. Francis with a bachelor’s degree in business.
|
Paul M. Murray
|
PAUL MURRAY was Senior Vice President of Administration of the Company from April 2016 until his retirement in March 2017, Senior Vice President of Human Resources and Organizational Development from 2004 to March 2016, and Vice President of Administration from 1997 to 2004. Prior thereto, Mr. Murray held Human Resource management positions at The Sherwin Williams Company and Pratt & Lambert.
|
Timothy F. Murphy
|
TIMOTHY MURPHY has served as Treasurer since 2013, Secretary since 2012, and Vice President of Treasury Operations from 2010 to 2013. Mr. Murphy served various roles as a director within the Company’s Finance function from 2004 to 2010. Prior to joining the Company, Mr. Murphy served as a Senior Manager at KPMG. He graduated from the University of Buffalo with bachelor’s and master's degrees in accounting and economics, respectively. Effective April 1, 2017, Mr. Murphy was appointed Gibraltar's Senior Vice President and Chief Financial Officer.
COMPENSATION OF DIRECTORS
2016 Compensation of Directors
Willis Towers Watson, a nationally recognized compensation consultant, provided survey information, other publicly available information, and advice to the Compensation Committee with respect to compensation-related matters for non-employee director compensation for a peer group of companies. The peer group is the same as the peer group disclosed in the section entitled “Compensation Discussion & Analysis” below.
Based on updated survey data in 2015, the Compensation Committee approved a compensation program for non-employee directors consisting of an annual retainer of $50,000 and an annual payment for each Board committee on which he or she serves equal to $10,000; an additional annual fee of $100,000 for the Chairman of the Board; an additional annual fee to the Chairs of the Compensation Committee and Audit Committee of $7,500; and an additional annual fee to the Chair of the Nominating and Corporate Governance Committee of $5,000.
In addition, in 2015, the Compensation Committee approved annual grants of stock to each non-employee directors having an aggregate fair value equal to $70,000. These shares vested immediately unless the director elected to defer the receipt of all or a portion of the stock award they received for issuance in the future. Pursuant to this approval, non-employee directors received awards of stock in May 2016. The number of restricted stock awards was prorated for Mr. Colombo who retired from the Board during 2016. The amount of restricted stock compensation provided to our directors is consistent with the amount of equity-based compensation paid to directors of our peer group as determined in the peer study described above.
Our Management Stock Purchase Plan (“MSPP”) permits non-employee directors to defer their receipt of payment of a portion of their retainer fee to an account established for the director and credited with restricted stock units (“RSUs”) equal in number to the number of shares of the Company’s stock which could have been purchased using the amount of director fees deferred (see the discussion of the MSPP under the caption
Non-Qualified Deferred
Compensation
in the “Compensation Discussion & Analysis” below). RSUs credited to the account of non-employee directors to reflect amounts deferred under the MSPP are paid to the participant upon the termination of their service to the Board.
Under the non-employee Director compensation structure approved in 2015, meeting fees and Matching RSUs under the MSPP were eliminated to align pay practices with best practices.
9
2016 Director Compensation
|
Name
|
Fees Earned or Paid in Cash (1)
|
Stock Awards (2)
|
Total
|
||||||
|
Sharon M. Brady
|
$
|
65,000
|
|
$
|
69,998
|
|
$
|
134,998
|
|
|
William J. Colombo
|
$
|
25,833
|
|
$
|
23,323
|
|
$
|
49,156
|
|
|
Jane L. Corwin
|
$
|
70,000
|
|
$
|
69,998
|
|
$
|
139,998
|
|
|
Craig A. Hindman
|
$
|
70,000
|
|
$
|
69,998
|
|
$
|
139,998
|
|
|
Vinod M. Khilnani
|
$
|
75,000
|
|
$
|
69,998
|
|
$
|
144,998
|
|
|
William P. Montague
|
$
|
180,000
|
|
$
|
69,998
|
|
$
|
249,998
|
|
|
James B. Nish
|
$
|
67,500
|
|
$
|
69,998
|
|
$
|
137,498
|
|
|
(1)
|
Consists of (a) annual retainer fees of $50,000 (pro-rated for retired directors); (b) $100,000 for Mr. Montague to reflect his position as Chairman of the Board; (c) $10,000 for each committee a directors serves; and (d) $5,000, $2,500, $5,000, and $7,500 for Ms. Brady and Messrs. Colombo, Khilnani, and Nish, respectively to reflect their respective positions as Committee Chairpersons. Mmes. Brady and Corwin and Messrs. Hindman and Nish deferred all of their annual retainer fee into the MSPP.
|
|
(2)
|
This column represents the grant-date fair value of stock granted during the year. The fair value of stock is calculated using the closing price of Gibraltar Industries, Inc. common stock on the date of grant.
|
Outstanding Equity Awards at Fiscal Year End
The following chart summarizes the aggregate number of stock awards outstanding at December 31, 2016 for each director:
|
Name
|
Restricted Shares (1)
|
Deferred Share Units (2)
|
Restricted Stock Units ("RSUs") (3)
|
Aggregate Number of Stock Awards Outstanding
|
|||||
|
Sharon M. Brady
|
1,322
|
|
2,389
|
|
3,775
|
|
7,486
|
|
|
|
Jane L. Corwin
|
6,039
|
|
2,389
|
|
8,910
|
|
17,338
|
|
|
|
Craig A. Hindman
|
3,465
|
|
2,389
|
|
9,120
|
|
14,974
|
|
|
|
Vinod M. Khilnani
|
3,465
|
|
—
|
|
7,023
|
|
10,488
|
|
|
|
William P. Montague
|
8,039
|
|
2,389
|
|
29,931
|
|
40,359
|
|
|
|
James B. Nish
|
1,322
|
|
2,389
|
|
3,775
|
|
7,486
|
|
|
|
(1)
|
Restricted shares generally vest over three years. Mr. Montague holds 2,000 restricted shares that will vest upon his retirement from the Board.
|
|
(2)
|
Deferred share units will be converted into shares upon retirement from the Board of Directors.
|
|
(3)
|
Represents Restricted Stock Units ("RSUs") deferred in the MSPP that will be converted to cash and paid out upon retirement from the Board. Includes 3,406 and 588 unvested RSUs for the benefit of Ms. Corwin and Mr. Nish, respectively, which will be forfeited if their service as a member of the Company’s Board of Directors is terminated prior to age sixty (60).
|
PROPOSAL 2
TIMING OF ADVISORY VOTE ON EXECUTIVE COMPENSATION ("SAY-WHEN-ON-PAY")
We are providing our stockholders with the opportunity to cast an advisory Say-When-on-Pay vote. This vote is required to be held at least once every six years and gives our stockholders the opportunity to express a preference among three options: whether the Say-on-Pay vote will occur every one, two, or three years. Stockholders may vote for one of these options or may choose to abstain from voting on the matter. Based on many factors, including but not limited to those provided below, the Board has determined that a Say-on-Pay vote should occur every year.
10
The Board of Directors recognizes the importance of receiving regular input from our stockholders on important issues, such as our compensation policies and procedures. The Board recognizes that even if the effectiveness of its compensation policies and procedures cannot be adequately evaluated on an annual basis, many stockholders may want to express their preference each year based on a multi-year review. At present, an annual Say-on-Pay vote may represent the most effective means for some of our stockholders to express meaningful input on compensation for our executive officers.
Although the Board currently recommends having a Say-on-Pay vote each year, the Board believes that a well-structured compensation program should include plans that drive the creation of stockholder value over the long-term and do not simply focus on short-term gains. The Board also believes that any annual advisory vote will be more limited in value than a vote which reflects the long-term executive compensation philosophy of the Compensation Committee and the long-term results of its actions. Moreover, many elements of compensation are structured to vest over a multi-year period equal to at least three years.
This vote is an advisory vote and is therefore not binding on the Company or the Board of Directors. However, the Board and the Compensation Committee will carefully review the outcome of the vote and likely make a decision that is consistent with the outcome of the vote as to the policy to be adopted by the Board on the frequency of future Say-on-Pay votes.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE OPTION OF
EVERY ONE YEAR
AS THE FREQUENCY WITH WHICH STOCKHOLDERS WILL BE PROVIDED AN ADVISORY VOTE ON EXECUTIVE COMPENSATION, AS DISCLOSED PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC IN PROPOSAL 2.
AS DISCLOSED PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC IN PROPOSAL 3
|
PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY”)
We are providing our stockholders with the opportunity to cast an advisory vote to approve the compensation of our named executive officers as described in this Definitive Proxy Statement (commonly referred to as the “Say-on-Pay” vote). The Say-on-Pay vote is advisory and therefore not binding on the Company or the Board of Directors. However, the outcome of the vote will provide information to the Company and the Board of Directors regarding stockholder sentiment about our compensation policies and procedures, which the Compensation Committee will carefully review and consider when making future decisions regarding the compensation of our executive officers. Stockholders are encouraged to read the section entitled “Compensation Discussion & Analysis”, which describes how our compensation policies and procedures implement our compensation philosophy.
We believe the Say-on-Pay vote represents an additional means by which we may obtain important feedback from our stockholders about compensation of our executive officers, which is established by the Compensation Committee and designed to link pay with performance while enabling the Company to attract and retain qualified talent on the executive management team.
As set forth in the Compensation Discussion & Analysis, the overall objective of our executive compensation program is to attract, retain, and engage the talent necessary to ensure Gibraltar's continued success and to ensure alignment of executive pay with stockholder interests and support Company goals and strategies. To meet this objective, the Compensation Committee has designed compensation programs that (i) provide competitive total pay opportunities relative to an appropriate peer group, (ii) drive high performance through the use of programs that support and reward desired business results, (iii) reinforce commitment to operational excellence, quality, safety, innovation, and the environment, and (iv) manage compensation program costs and risks while providing for flexibility to vary costs in changing business environments. As a result, a significant portion of our executive officers' overall compensation is performance-based, in that it depends on the achievement of both short and long-term financial goals and strategic objectives. In 2016, incentive compensation represented 60% and 45% of the Chief Executive Officer’s and other named executive officers’ target compensation opportunity, respectively. We believe that this emphasis on both short and long-term financial performance aligns executives’ and stockholders’ interests. The Compensation Committee believes that the executive compensation program is strongly aligned with the long-term interests of our stockholders and is effective in implementing our compensation philosophy and in achieving our strategic goals.
The Say-on-Pay vote gives you, as a stockholder, the opportunity to provide feedback on our executive compensation program by voting for or against the following resolution:
“RESOLVED, that the stockholders of Gibraltar Industries, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this Definitive Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion & Analysis, the Summary Compensation Table, and other related tables and disclosure.”
11
The Board urges stockholders to endorse the executive compensation program by voting in favor of this resolution. As set forth in the Compensation Discussion & Analysis, the Compensation Committee is of the view that the executive compensation for 2016 was reasonable and appropriate, justified by the performance of the Company and the result of a carefully considered approach.
Although the Say-on-Pay vote is non-binding, the Board of Directors and Compensation Committee will carefully review the outcome of the vote. The Compensation Committee will consider the outcome of the Say-on-Pay vote, as well as other communication from stockholders relating to our compensation practices, in future determinations concerning our executive compensation program.
|
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS DEFINITIVE PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC IN PROPOSAL 3.
|
COMPENSATION DISCUSSION & ANALYSIS
This section (the “CD&A”) provides the Company’s stockholders with information about the compensation awarded to our named executive officers (“NEOs”) who are listed in the Summary Compensation Table and demonstrates how the compensation program encourages our NEOs to create stockholder value. The CD&A further illustrates the considerations the Compensation Committee has used and will continue to use in establishing the Company’s compensation philosophy, overseeing the policies that result from that philosophy, and making decisions with respect to those policies, including changes to the policies if warranted.
Executive Summary
2016 Business Results
Gibraltar's Executive Pay Philosophy is designed to promote alignment of executive pay with stockholder interests and to support Company goals and strategies. Executive compensation programs are designed and managed to promote value creation, to advance overall business objectives, and to attract, retain, and engage the workforce necessary to ensure the Company's continued success. As such, our pay-for-performance compensation philosophy can best be understood in the context of the financial and strategic achievements of the Company in 2016 as outlined below.
The Company continued to execute upon the value creation strategy introduced under the leadership of Mr. Heard. Gibraltar's value creation strategy to drive transformational change includes a four-pillar approach which consists of a strong focus on operational excellence, product innovation, acquisitions as a strategic accelerator for growth, and portfolio management. During 2016, the Company made progress on a number of initiatives that contributed to the success of the Company in context of the value creation strategy. Included among these initiatives was the further implementation of an operational excellence program in the form of the 80/20 simplification process. Additionally, we completed the integration of a key acquisition from 2015 and followed up with a bolt-on acquisition in a new, high-growth market for Gibraltar which now consists of our Renewable Energy and Conservation Segment. Furthermore, we divested our European Industrial business and announced the exit of our U.S. bar grating and European residential solar racking product lines in 2016.
As a result of these efforts, the Company generated significantly more earnings at a higher rate of return, made more efficient use of capital, and delivered higher stockholder returns in 2016 compared to the prior year.
The Company’s financial results exceeded targets set for performance goals under the Company’s performance-based compensation programs due to the success realized from strategic initiatives during 2016.
The charts below compare our financial results from 2016 to 2015 and 2014 under the financial metrics that are used in determining payouts under (i) our Management Incentive Compensation Plan (“MICP”) and (ii) number of Performance Stock Units (“PSUs”) earned under our annual grant of performance-based equity compensation. Note that these financial measures differ from GAAP measures reported as a result of special charges. We add back these charges and gains, in accordance with the terms of our performance-based compensation, to provide a measurement of earnings from our ongoing operations and serve as a basis to assess the Company in future periods. These adjusted financial measures are reconciled to our GAAP financial measures within the CD&A.
12
The charts above reflect a link between incentive compensation and performance for 2016, on average our NEO's earned an annual incentive equal to 139% of target under our MICP and all of our executives earned PSUs equal to 200% of target based on the return on invested capital, or ROIC, performance goal. These performance goals were established with targets that were designed to provide opportunities for high performing executives to achieve above market rewards based upon outstanding business results.
13
Additionally, the strong performance of the Company led to a substantial increase in Gibraltar's stock price from $25.44 as of December 31, 2015 to $41.65 as of December 31, 2016. We generated a total stockholder return of 64% for 2016 compared to 27% for the S&P SmallCap 600 Industrials Index. Compared to the peer group described below, our total stockholder return ranked in the 77
th
percentile. Our total stockholder return for 2016 further validates the success Gibraltar had implementing its four-pillar approach to create stockholder value.
Executive Compensation Highlights
Gibraltar is committed to a strong pay-for-performance philosophy that we believe meets or exceeds industry norms. Some of the best practices we employ to achieve this objective include:
|
What We Do
|
What We Don’t Do
|
|
ž
Deliver a significant portion of executive compensation in the form of at-risk, performance-based compensation
|
ž
Have single-trigger change-in-control agreements
|
|
ž
Set performance goals for stock-based incentives on ROIC based on stockholder recommendations
|
ž
Provide change-in-control cash benefits greater than 275% of cash compensation
|
|
ž
Limit the maximum payout that can be received in our annual cash incentive plan to 150% of target
|
ž
Maintain a supplemental executive retirement plan
|
|
ž
Reward our executives with performance-based compensation awards linked to relative total stockholder return
|
ž
Allow our directors and employees to enter into hedging and pledging transactions with Gibraltar stock
|
|
ž
Require our directors and executive officers to satisfy stock ownership guidelines
|
|
|
ž
Maintain a Clawback Provision that applies to all employees
|
|
Conclusion
The Compensation Committee believes the highlights above reflect the Company’s pay-for-performance philosophy and commitment to compensation programs that encourage the creation of sustainable, long-term stockholder value and alignment of the interests of senior management with those of our stockholders. The Company’s performance in 2016 exceeded plan and guidance which led to the higher than targeted compensation earned under our incentive compensation plans. We believe the Company's operating performance and the resultant higher compensation to our executive management demonstrates the effectiveness of the Company’s pay-for-performance philosophy. The highlights above, as well as the information contained in this CD&A, further reflect the Compensation Committee’s aim to design a compensation program that is consistent with best practices and industry standards. As a result of the Company's operating performance and exceptional total stockholder return for the year, the Compensation Committee recommends you
vote
FOR
the advisory approval of executive compensation (commonly referred to as the “Say-on-Pay” vote) in Proposal 3.
Compensation Philosophy and Pay-for-Performance
The Compensation Committee's executive pay philosophy supports Gibraltar's position as a leading manufacturer and distributor of residential, industrial, infrastructure, renewable energy, and conservation products. The executive pay philosophy is designed, and will be restructured as necessary, to ensure alignment of executive pay with stockholder interests and to support Company goals and strategies.
Executive compensation programs are designed and managed to promote value creation, to advance overall business objectives, and to attract, retain, and engage the talent necessary to ensure Gibraltar's continued success. The Compensation Committee focuses the design and delivery of the Company's compensation programs to achieve the following:
|
•
|
Provide competitive total pay opportunity levels relative to an appropriate group of our peer companies;
|
|
•
|
Drive high performance by our executive officers through the use of programs that support and reward desired business results. These programs will provide opportunities for high performing executive officers to achieve above market rewards;
|
|
•
|
Reinforce our commitment to operational excellence, quality, safety, innovation, and to the environment; and
|
|
•
|
Manage current and future programs and risks and provide the flexibility to vary costs through periods of change in our business.
|
14
Executive officers and senior management’s interests are more directly aligned with the interests of our stockholders when compensation programs are significantly impacted by the value of our common stock, encourage ownership of our common stock, and reward both short and long-term financial performance. The significant elements of our compensation program for executive officers include base salary, the annual Management Incentive Compensation Plan (“MICP”), equity-based incentive compensation under the Long-term Incentive Plan ("LTIP"), other perquisites, and a non-qualified, equity-based deferred compensation plan (“MSPP”). The Compensation Committee believes our LTIP, which includes performance-based and time-based equity awards, meets the objectives noted above. Another element of our compensation program, the MICP provides an annual incentive program to our executives which varies based upon the achievement of financial and strategic goals. The Compensation Committee believes the other elements of our compensation program are competitive with the market and allow us to attract, retain, and engage a highly qualified senior management team. As a result, the compensation programs include a substantial portion of performance-based compensation, including the MICP and performance-based equity awards issued under the LTIP.
Consistent with our executive pay philosophy, our CEO's target compensation is designed to be heavily weighted toward performance-based compensation. As depicted in the chart below, 60% of our CEO’s target compensation is provided in the form of performance-based compensation. The target compensation of our other NEOs is also weighted toward performance-based compensation. On average, 45% of their compensation is performance based with another 12% tied to time-vested stock awards. The long-term value of time-vested stock awards will fluctuate with our stock price, thus aligning our executive officers’ interests with our stockholders’ interests.
The following charts highlight the targeted compensation mix for our CEO and the average mix for the other NEOs:
Performance-based compensation includes annual incentive compensation and performance-based equity awards. A significant portion of the executive officers’ compensation is at-risk based on the value of the Company’s common stock and financial performance. The above charts include targeted compensation generated from the Company match, which is provided for salary and MICP deferrals into our non-qualified deferred compensation plan, the MSPP, an important part of our compensation program. Compensation deferred into the MSPP is converted to restricted stock units and the aggregate amount deferred is also at-risk since the amounts paid are based on the value of the Company’s common stock. The structure of the MSPP furthers our goal of aligning the interest of our executive officers with the interests of our stockholders as it encourages the deferral of their current compensation for a future payment based on the Company's stock price.
The components of compensation that are performance-based link executive compensation to performance. Our annual MICP has the following performance related criteria: (i) adjusted operating margin, (ii) adjusted earnings per share, (iii) days of working capital, and (iv) achievement of strategic objectives. The Compensation Committee believes the structure of the MICP incentivises management to simplify and improve the Company's operations to generate more earnings at a higher rate of return with a more efficient use of capital. The performance criteria and weighting of each performance criteria change from year to year based on the Compensation Committee and management’s determination of the most significant objectives included in the strategic plan. During 2016, the achievement of strategic objectives was added to the MICP. This change was made to emphasize the importance of delivering on personalized objectives and goals that align with Gibraltar's four pillar value creation strategy. The most significantly weighted performance goal continues to be adjusted earnings per share as the Compensation Committee wants to incentivize the executive management team to improve earnings.
15
A significant portion of our executive officer’s Long-Term Incentive Plan includes performance-based compensation composed of performance stock unit awards (“PSUs”). For 2016, PSUs were awarded to our executive officers and earned during the annual performance period based on the Company's return on invested capital (“ROIC” as defined in the awards) compared to targeted ROIC.
As noted above under the “2016 Business Results”, our NEOs earned 139%, on average, of their target compensation under the annual MICP and 200% of the targeted PSU awards granted to them in February 2016. These percentages of target were calculated based upon the financial results generated by the Company during 2016. A more detailed calculation of the amounts earned under these components of performance-based compensation can be found below in the section entitled “Elements of Our Compensation Program”.
The other significant components of compensation for our executive officers are not at-risk and consist of a competitive base salary and long-term incentive compensation consisting of time-based restricted stock units (“RSUs”). The RSUs convert to shares over a vesting period generally consisting of four years. The Compensation Committee believes the RSU awards align the executive officers’ goals with the interests of our stockholders as the officers are incentivized to adopt a long-term approach to wealth creation and increase the stock price through ownership of RSUs and shares of the Company’s common stock. Time-based equity awards provide a good balance between retention and performance by encouraging executive officers to remain employed with the Company through the vesting date and encouraging the creation of sustainable, long-term stockholder value.
Distinguishing Awarded Compensation from Realized Compensation
It is important to distinguish the compensation awarded to our executive officers in 2016 as required to be reported under applicable SEC rules from the compensation that was actually earned by our executive officers. Compensation reported within the Summary Compensation Table uses different measurements of the compensation reported depending on the type of compensation. The PSU compensation reported for each executive officer is disclosed at targeted award value, or grant-date fair value, while the compensation from the MICP reported in the table reflects the actual amount earned and paid to the executive officers, or realized value. If both portions of performance-based compensation were measured at their realized value, it would show the impact of actual performance on each executive officer’s compensation.
The following table provides the impact that performance-based and deferred compensation had on total compensation realized by our executive officers in 2016:
|
Name
|
Fixed Compensation
|
Performance Based Compensation
|
|
|||||||||||||||||||||||||||||||
|
Salary (2)
|
RSU Awards (3)
|
All Other (2)
|
MICP
|
PSUs
|
Deferred
Compensation
|
Total Compensation
|
||||||||||||||||||||||||||||
|
Target (4)
|
Realized (2)
|
Target (2)
|
Realized (5)
|
Target (6)
|
Realized (6)
|
Target
|
Realized
|
% of Target
|
||||||||||||||||||||||||||
|
Frank G. Heard
|
$
|
715,135
|
|
$
|
393,254
|
|
$
|
42,394
|
|
$
|
715,000
|
|
$
|
959,888
|
|
$
|
679,246
|
|
$
|
2,311,504
|
|
$
|
625,642
|
|
$
|
854,375
|
|
$
|
3,170,671
|
|
$
|
5,276,550
|
|
166%
|
|
Kenneth W. Smith
|
$
|
404,497
|
|
$
|
181,795
|
|
$
|
73,135
|
|
$
|
242,400
|
|
$
|
330,270
|
|
$
|
403,991
|
|
$
|
1,374,801
|
|
$
|
232,362
|
|
$
|
310,376
|
|
$
|
1,538,180
|
|
$
|
2,674,874
|
|
174%
|
|
Cherri L. Syvrud (1)
|
$
|
168,750
|
|
$
|
56,251
|
|
$
|
75,177
|
|
$
|
59,063
|
|
$
|
84,902
|
|
$
|
112,469
|
|
$
|
242,607
|
|
$
|
65,391
|
|
$
|
—
|
|
$
|
537,101
|
|
$
|
627,687
|
|
117%
|
|
Paul M. Murray (1)
|
$
|
252,462
|
|
$
|
123,355
|
|
$
|
74,422
|
|
$
|
88,200
|
|
$
|
125,244
|
|
$
|
252,009
|
|
$
|
857,598
|
|
$
|
97,708
|
|
$
|
126,000
|
|
$
|
888,156
|
|
$
|
1,559,081
|
|
176%
|
|
Timothy F. Murphy
|
$
|
240,673
|
|
$
|
84,359
|
|
$
|
40,460
|
|
$
|
60,000
|
|
$
|
81,750
|
|
$
|
143,991
|
|
$
|
490,008
|
|
$
|
75,084
|
|
$
|
57,656
|
|
$
|
644,567
|
|
$
|
994,906
|
|
154%
|
|
(1)
|
Reflects Mrs. Syvrud's pro rated compensation for the portion of 2016 that she was employed by the Company, and Mr. Murray's compensation for the full year. Mr. Murray resigned as an officer of the Company effective April 4, 2016 and remained employed as the Senior Vice President of Administration.
|
|
(2)
|
Amounts correspond to those set forth in the Summary Compensation Table.
|
|
(3)
|
RSU awards include $393,254, $181,795, $56,251, $62,995, and $23,999 of compensation for Frank Heard, Kenneth Smith, Cherri Syvrud, Paul Murray, and Timothy Murphy, respectively, related to the grant date fair value of RSUs issued under the annual LTIP program; and $60,360 and $60,360 of compensation for Messrs. Murray and Murphy, respectively, related to the grant date fair value of CEO discretionary RSUs. These amounts equal the value of restricted stock units from the Summary Compensation Table.
|
|
(4)
|
Equal to the target annual incentive compensation calculated for each NEO based upon a percentage of their salaries.
|
|
(5)
|
Equal to the actual number of PSU shares earned based on performance of the Company times the 90-day average stock price as of December 31, 2016.
|
|
(6)
|
The deferred compensation target equals the company-match shares that would be credited to their MSPP accounts if each NEO deferred all eligible amounts under the MSPP and the MICP was at target. The realized amount equals the value of the company-match shares added to each NEO’s MSPP account during 2016.
|
16
As shown above, the realized compensation earned by each Named Executive Officers ranged from 117% to 176% of targeted compensation. Realized compensation exceeded target compensation as a result of the Company’s performance in relation to the performance goals set for the MICP and PSU awards and the exceptional total stockholder return for the year. The Compensation Committee believes realized compensation is an important metric to understand when evaluating the effectiveness of the Company’s compensation programs.
Say-on-Pay Vote Results
At the 2016 Annual Meeting of Stockholders, Gibraltar received 96.6% support from its stockholders on the Say-on-Pay vote. The Compensation Committee considered the 2016 Say-on-Pay vote and concluded that the vast majority of stockholders approved of the Company’s compensation programs. The Company routinely meets with its stockholders to discuss the Company’s performance and strategic plan. During this process, the executive team often solicits feedback from stockholders on corporate governance and compensation matters.
A summary of the feedback we received from our investors and others, and the actions we have taken are highlighted below:
|
Stockholder feedback
|
Actions taken by the Company
|
|
Adopt annual elections for directors of the Board
|
ž
Adopted a de-classified board structure at the 2015 Annual Meeting
|
|
Separate the Chairman and CEO roles
|
ž
The CEO and Chairman of the Board roles were separated in 2015
|
|
Impose a limit on short-term incentive program payout
|
ž
Limited the payout under our Management Incentive Compensation Plan to 150% of target
|
Design of the Compensation Program
The Compensation Committee engaged independent compensation advisors, Willis Towers Watson, during 2016 to provide survey information and assistance in the development of a compensation program for our executive officers which has a strong emphasis on performance and long-term incentives and which is competitive within our industry in terms of (1) base salaries, (2) annual incentives, and (3) long-term incentives. These three components are the key elements of the compensation program offered to our executive management team.
The Company’s compensation program is reviewed annually to ensure the goals of the program are met and is amended from time to time to incorporate changes consistent with current industry best practices. The compensation program compensates our executive officers through a mix of base salary, annual incentive payments, and long-term equity-based incentives.
Peer Company Analysis
When the Compensation Committee established our executive officers’ 2016 compensation, we took into consideration the compensation of executives in a peer group of companies used for comparative data, consisting of:
|
ž
Actuant Corporation
|
ž
Builders FirstSource
|
ž
NCI Building Systems
|
|
ž
Albany International Corp.
|
ž
Eagle Materials
|
ž
Patrick Industries, Inc.
|
|
ž
American Woodmark
|
ž
Griffon Corporation
|
ž
Quanex Building Products
|
|
ž
A.O. Smith Corporation
|
ž
Headwaters Incorporated
|
ž
Simpson Manufacturing
|
|
ž
Apogee Enterprises
|
ž
L.B. Foster Company
|
ž
Trex Company
|
The Compensation Committee believes the chosen peer group aligns with best practices, provides a sufficient sample size from which we draw conclusions, and reflects a representative market for executive talent that our business faces. The peer companies were selected based on their comparable size, as measured by net sales and market capitalization, and industry. Companies within the selected peer group are all building products or industrial businesses that have revenues, market capitalization, or assets equal to 50%-250% of Gibraltar’s. No changes were made to the peer group in 2016.
Compensation Committee Approval Process
Management recommendations for salary increases and participation levels for all other components of our compensation program, for all executive officers other than the CEO, are made annually and are based on the CEO’s evaluation of each executive officer’s performance, length of service to the Company, experience, level of responsibility, the Company’s financial position, and degree to which their efforts have contributed to the implementation of the Company’s strategies and goals. This information is then used by the Compensation Committee to review and establish the compensation of each executive officer. The CEO’s compensation package is determined by the Compensation Committee based upon the same criteria.
17
Final authority for the establishment of annual compensation packages of our executive officers resides with the Compensation Committee. Once base salaries are established, the formula-driven components of our compensation program are applied to determine the amount of the total compensation which our executive officers will be entitled to receive based upon the degree to which the Company’s annual goals have been achieved.
Based on the peer group analysis described above along with CEO and Compensation Committee review, targeted annual incentive compensation and long-term equity-based incentive compensation components of each executive officer’s total compensation were set at percentages of each executive officer’s base salary. Structuring our compensation to provide that a substantial portion of each executive officer’s total compensation is based on (i) an annual incentive program and (ii) an equity-based long-term incentive program rewards our executive officers for achieving clearly defined annual financial goals and for implementation of policies and practices which generate long-term appreciation in the value of the Company’s common stock. This provides the executive officers and stockholders a degree of certainty as to the level of incentive compensation which executive officers will be entitled to receive upon attainment of a specified level of performance.
The following table summarizes the targeted compensation for annual cash incentive compensation and equity incentive awards (including RSUs and PSUs) established by the Compensation Committee:
|
Percentage of Salary
|
||
|
Position
|
Annual Incentive Compensation (MICP)
|
Long-term Equity Compensation (LTIP)
|
|
Chief Executive Officer
|
100%
|
150%
|
|
Chief Financial Officer
|
60%
|
145%
|
|
Senior Vice President
|
35%
|
75% and 125%
|
|
Vice President
|
25%
|
70%
|
The Compensation Committee set the targeted annual incentive compensation and long-term equity compensation levels as a percentage of salary after consulting with Willis Towers Watson. The compensation levels were considered reasonable in comparison to the peer companies described above and tailored to the Company’s leadership structure, level of responsibility, and emphasis on pay-for-performance while also emphasizing stock ownership which we believe aligns management’s interests with the interests of our stockholders.
The long-term equity-based incentive program, as developed by the Compensation Committee, provides executive officers the ability to earn long-term equity-based incentive compensation which is based, in part, on the passage of time and, in part, on the achievement of performance objectives. This plan was responsive to the desires of both the Compensation Committee and management to develop a long-term equity-based incentive program which would be more closely aligned with the interests of the Company’s stockholders than an equity-based incentive program that provided for payment solely on the expiration of time.
The Compensation Committee believes that the long-term equity-based incentive compensation structure described above promotes the interests of the Company’s stockholders by providing an incentive to executive officers to continue their employment with the Company as well as an incentive to create stockholder value. Furthermore, executive officers are provided an incentive to improve the value of the Company’s common stock over the long term because final payment of this long-term equity-based incentive compensation program is based on the price of the Company’s stock at the time of payment.
Consideration of Risk
We believe the design of our executive compensation program provides an appropriate balance of incentives for executives and avoids inappropriate risks. Our compensation program is balanced and focused on the long term so that our executive officers are incentivized to deliver superior performance over sustained periods. In addition, our compensation plans are designed to allow for deferral of compensation and have elements that are only realizable upon retirement, providing strong incentives to implement policies that promote long-term value creation while avoiding excessive risk-taking in the short term. Performance goals are established to align with our overall risk framework and reflect a balanced mix of financial measures designed to avoid placing excessive weight on a single measure. Compensation is also balanced among current cash payments, deferred cash, and equity awards. With limited exceptions, the Compensation Committee retains discretion to adjust compensation for quality of performance and adherence to Company values. Additionally, we have policies in place that limit the amount of compensation that can be earned under performance-based incentive programs, require our executive officers to own certain levels of Company stock, prohibit hedging and pledging activities, and include a Clawback Provision for all performance-based compensation.
18
Elements of Our Compensation Program
Our compensation program for executive officers and senior management contains the following elements:
|
•
|
Base Salary
|
|
•
|
Annual Management Incentive Compensation Plan (MICP)
|
|
•
|
Equity-based Incentive Compensation (Omnibus Plan)
|
|
•
|
Long-term Incentive Compensation Plan (LTIP)
|
|
•
|
Restricted Stock Units
|
|
•
|
Performance Stock Units
|
|
•
|
Non-qualified Deferred Compensation Plan (MSPP)
|
|
•
|
CEO's Supplemental RSU Pool
|
|
•
|
Retirement Plans
|
|
•
|
Change in Control Benefits
|
|
•
|
Perquisites and Other Benefits
|
|
•
|
Generally Available Benefit Programs
|
|
•
|
2017 Equity Grant to CEO
|
Base Salaries.
As noted above, the Company provides executive officers with a base salary established by the Compensation Committee, which reflects the level of responsibility held by our executive officers, rewards them for the day to day performance of their duties, and is competitive within our industry. Our competitive analysis includes a review of the base salaries and total compensation paid by our peer group companies to their executive officers.
The Compensation Committee established the base salary of our President and Chief Executive Officer at $715,000, in consultation with Willis Towers Watson, and based upon an analysis of the base salaries of similarly positioned executives in our peer group. This analysis also provided a baseline for other components of compensation for the President and Chief Executive Officer, including stock-based compensation and annual incentive compensation targets.
We establish the base salaries of our other executive officers using the same process of analyzing the level of their responsibility and contribution to the Company’s overall objectives and taking into consideration the range of base salaries paid to these officers by our peer group companies.
Annual Management Incentive Compensation Plan.
Our annual Management Incentive Compensation Plan (“MICP”) provides alignment between executive management’s cash compensation and stockholder interests by rewarding management for achievement of performance targets that the Compensation Committee believes will enhance stockholder value.
MICP targets in 2016 included adjusted operating margin ("OM"), adjusted earnings per share ("EPS"), days of working capital ("DWC"), and the achievement of strategic objectives. The targets and thresholds for the achievement of MICP awards for 2016 compared to actual achievement and targets set for the prior year are as follows:
|
OM
|
EPS
|
DWC
|
||||||||
|
Level of Achievement
|
2016
|
2015
|
2016
|
2015
|
2016
|
2015
|
||||
|
Threshold
|
7.0%
|
4.8%
|
$
|
1.13
|
|
$
|
0.55
|
|
58
|
66
|
|
80% Achievement
|
7.7%
|
5.0%
|
1.13
|
|
0.55
|
|
58
|
66
|
||
|
100% Achievement
|
8.2%
|
5.5%
|
1.40
|
|
0.65
|
|
57
|
62
|
||
|
150% Achievement
|
9.1%
|
6.0%
|
1.70
|
|
0.70
|
|
54
|
59
|
||
|
Actual
|
10.0%
|
6.3%
|
$
|
1.67
|
|
$
|
1.09
|
|
50
|
57
|
As shown above, all targets were to equal or exceed prior year results and were set to significantly improve from the targets set in 2015. Additionally, the Compensation Committee added a fourth performance criteria to the annual MICP award during 2016, the achievement of strategic objectives. Points were assigned to each specific strategic objectives for all executive officers. Their performance relative to completing each objective was evaluated on a point scale using specific measurements for their performance during the year. The percentage of attainment towards these strategic objectives was measured by comparing the actual points attained in all objectives compared to the total amount of points assigned to each objective.
19
Targeted annual incentive compensation under the MICP as a percentage of executive officer base salaries along with the potential payouts at threshold, target, and maximum levels are as follows:
|
Officer
|
Targeted Annual Incentive Compensation as a
Percentage of Base Salary
|
Potential Payout At
|
|||||||||||
|
Base Salary
|
Threshold
|
Target
|
Maximum
|
||||||||||
|
Frank G. Heard
|
100%
|
$
|
715,000
|
|
$
|
382,525
|
|
$
|
715,000
|
|
$
|
1,072,500
|
|
|
Kenneth W. Smith
|
60%
|
$
|
404,000
|
|
$
|
129,684
|
|
$
|
242,400
|
|
$
|
363,600
|
|
|
Cherri L. Syvrud
|
35%
|
$
|
168,750
|
|
$
|
31,598
|
|
$
|
59,063
|
|
$
|
88,594
|
|
|
Paul M. Murray
|
35%
|
$
|
252,000
|
|
$
|
47,187
|
|
$
|
88,200
|
|
$
|
132,300
|
|
|
Timothy F. Murphy
|
25%
|
$
|
240,000
|
|
$
|
32,100
|
|
$
|
60,000
|
|
$
|
90,000
|
|
These targets and thresholds are reviewed on an annual basis to better align incentive compensation to the Company’s goals. The targets and thresholds for OM and EPS were developed based on the Company’s historical performance and expectations for the year, which showed that these levels of profitability would provide a strong return for our stockholders. The target and threshold developed for DWC were based on management’s goal to maintain working capital levels and maximize cash flows from operations in an effort to efficiently use our capital. The strategic objectives were established to support the four pillars of the Company's value creation strategy.
The Compensation Committee believes incentivizing management to deliver improved earnings with a focus on the efficient use of capital will provide stockholders with value as higher profits and low working capital requirements lead to increased cash flow used to fund growth initiatives, including acquisitions. The OM target is based upon a percentage of net sales to incentivize management to maximize profitability at any level of sales volume. The Compensation Committee also believes it is important for management to be incentivized to optimize working capital requirements which will maximize cash flow from operations, and in turn fund the growth of the Company. The combination of the three financial targets, OM, EPS, and DWC, incentivize management to maximize the return on investment for our stockholders. In light of these beliefs, the Compensation Committee concluded that the metrics used in determination of the MICP payout are effectively connected to the creation of stockholder value.
During 2016, fifty percent (50%) of the MICP was based upon EPS, twelve and a half percent (12.5%) was based upon OM, another twelve and a half percent (12.5%) was based upon DWC, and twenty-five percent (25%) was based on the achievement of strategic objectives. The performance goals and weightings are reviewed by the Compensation Committee with management on an annual basis and adjusted if deemed appropriate by the Compensation Committee. The Compensation Committee and senior management agreed that the executive officers should be compensated for their efforts to meet strategic objectives aligned to the Company's four-pillar value creation strategy and this performance goal was added to the MICP in 2016. The Compensation Committee reviews and alters the weightings and the targets to ensure the management team focuses on the key metrics during different periods.
Maximum achievement under the MICP is limited to one hundred and fifty percent (150%). Adjustments are made to the performance levels achieved by the Company with respect to the applicable performance criteria to eliminate the effect of restructuring and impairment charges, acquisition-related costs, and other non-routine transactions. As noted above, we believe adjusted earnings represent our core, on-going operations and we assess our performance on adjusted financial measures.
20
The following summarizes the level of attainment for each financial performance goal during 2016 (dollar amounts in thousands):
|
OM
|
EPS
|
DWC
|
|||||||||
|
Income from operations as reported
|
$
|
72,964
|
|
||||||||
|
Net income from continuing operations as reported
|
$
|
33,719
|
|
||||||||
|
Portfolio management costs, pre-tax and after tax
|
18,074
|
|
14,178
|
|
|||||||
|
Restructuring costs, after tax
|
5,848
|
|
3,442
|
|
|||||||
|
Senior leadership transition, after tax
|
2,701
|
|
1,590
|
|
|||||||
|
Acquisition related costs, after tax
|
1,209
|
|
712
|
|
|||||||
|
Adjusted operating income
|
$
|
100,796
|
|
||||||||
|
Adjusted net income
|
$
|
53,641
|
|
||||||||
|
Weighted average shares outstanding - diluted
|
32,069
|
|
|||||||||
|
Net sales as reported
|
$
|
1,007,981
|
|
||||||||
|
Average net working capital (1)
|
$
|
139,232
|
|
||||||||
|
Average daily sales
|
$
|
2,800
|
|
||||||||
|
Actual results
|
10.0
|
%
|
$
|
1.67
|
|
50
|
|
||||
|
MICP targets
|
8.2
|
%
|
$
|
1.40
|
|
57
|
|
||||
|
Maximum payout target
|
9.1
|
%
|
$
|
1.70
|
|
54
|
|
||||
|
Payout factor (2)
|
150.0
|
%
|
145.0
|
%
|
150.0
|
%
|
|||||
|
Weighting
|
12.5
|
%
|
50.0
|
%
|
12.5
|
%
|
|||||
|
MICP payout percentage
|
18.75
|
%
|
72.50
|
%
|
18.75
|
%
|
|||||
|
(1)
|
Average net working capital was based on the 13-month average of accounts receivable and inventory less accounts payable for each month end between December 31, 2015 and December 31, 2016.
|
|
(2)
|
Since the actual results outperformed the MICP target for all three financial performance goals, the payout factor was determined to be greater than 100% for all three goals. The final payout factor was calculated by prorating the over-performance compared to target and the maximum payout factor on a straight-line basis from 100% to 150%. The MICP limits the payout factor calculated under each performance goal to 150%.
|
The following table summarizes how each executive officer performed on their strategic objectives during 2016 along with the performance on the three financial performance goals calculated above and the final payout factor:
|
Strategic Objective Payout Factor
|
Financial Objective Payout Percentages
|
|||||||||||||
|
Executive Officer
|
Percentage Completion
|
Weighting
|
Payout Percerntage
|
OM
|
EPS
|
DWC
|
Total Payout Percentage
|
|||||||
|
Frank G. Heard
|
97.00
|
%
|
25.00
|
%
|
24.25
|
%
|
18.75
|
%
|
72.50
|
%
|
18.75
|
%
|
134.25
|
%
|
|
Kenneth W. Smith
|
105.00
|
%
|
25.00
|
%
|
26.25
|
%
|
18.75
|
%
|
72.50
|
%
|
18.75
|
%
|
136.25
|
%
|
|
Cherri L. Syvrud
|
135.00
|
%
|
25.00
|
%
|
33.75
|
%
|
18.75
|
%
|
72.50
|
%
|
18.75
|
%
|
143.75
|
%
|
|
Paul M. Murray
|
128.00
|
%
|
25.00
|
%
|
32.00
|
%
|
18.75
|
%
|
72.50
|
%
|
18.75
|
%
|
142.00
|
%
|
|
Timothy F. Murphy
|
105.00
|
%
|
25.00
|
%
|
26.25
|
%
|
18.75
|
%
|
72.50
|
%
|
18.75
|
%
|
136.25
|
%
|
Note that we reference several adjusted financial measures to explain our 2016 results. Adjusted financial data excluded one-time charges consisting of intangible asset impairments, restructuring activities, and acquisition-related costs. We believe that the presentation of adjusted financial measures provides meaningful supplemental data to stockholders, as well as management, that are indicative of the Company’s core operations and facilitates comparison across reporting periods as well as to peer companies.
21
The Compensation Committee uses adjusted financial information to determine the incentive compensation paid to NEOs under our performance-based compensation plans. The Committee believes the impairment charges are valuation items that were generated from unfavorable economic conditions outside the control of management. The Committee wants to keep management motivated to make hard decisions to drive long-term value creation, such as entering into restructuring plans and making acquisitions and divestitures despite the short-term costs associated with these activities. These items normally are not subject to the budgeting process and cannot necessarily be anticipated. The Committee seeks to motivate management to improve operating results without penalizing management for one-time charges or giving them credit for one-time income activities, such as a gain on the sale of assets. Therefore, the Compensation Committee believes adding back one-time charges consisting of intangible asset impairments, portfolio management, restructuring activities, acquisition-related costs, charges from financing transactions, and tax valuation allowance adjustments will keep management motivated to generate stockholder value and improve operating results. The Committee also reviewed the compensation plans of our peer group and noted that nearly half of the companies in our peer group use adjusted financial measures to determine their compensation under incentive plans. The charges added back by our peer companies to determine adjusted financial data were similar in nature to those adjustments used by Gibraltar.
Long-term Equity Incentive Plan.
We maintain an equity incentive compensation plan known as the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the “Omnibus Plan”). Our Omnibus Plan is an integral component of our overall compensation structure and provides the Company a vehicle through which we make awards of equity-based compensation to our executive officers and other senior management employees. The Compensation Committee has provided for grants of equity-based awards to our executive officers each year under the Long-term Incentive Plan (“LTIP”). Long-term equity-based awards have a value, at the time the award is made, equal to a percentage of the executive officer’s base salary. Equity awards consist of time-vested grants of restricted stock units (“RSUs”) and performance-based grants of performance stock units (“PSUs”). Targeted annual incentive compensation under RSU and PSU awards as a percentage of executive officer base salaries are as follows:
|
Position
|
Annual RSU Grants as a Percentage of Base Salary
|
Annual PSU Grants as a Percentage of Base Salary
|
|
Chief Executive Officer
|
55%
|
95%
|
|
Chief Financial Officer
|
45%
|
100%
|
|
Senior Vice President
|
25%
|
50% and 100%
|
|
Vice President
|
10%
|
60%
|
The number of RSUs issued to the Chief Executive Officer was increased from 45% of his salary in 2015 to 55% in 2016 based upon a comprehensive analysis of his compensation prepared by Willis Towers Watson and the Compensation Committee's evaluation of his performance and the degree his efforts have contributed to the execution of the Company's strategic goals. Additionally, the Chief Executive Officer received an increase in the number of PSUs issued in 2016 to 95% of his salary from 75% in 2015 based upon the same evaluation. The Compensation Committee concluded that additional awards of equity compensation under the Company's LTIP would align CEO pay with the 50th percentile of compensation received by CEO in our peer group.
Restricted Stock Units
Under the terms of the 2015 RSU awards, vesting occurs at a rate of 25% per year. The vesting conditions which apply to restricted stock units granted to the executive officers under the Company’s long-term incentive plan are designed to reward executives for continuing their employment with the Company and for implementing policies and practices which increase the value of the Company’s common stock over a significant period of time.
Performance Stock Units
The number of PSUs earned were determined during the 2016 performance period based upon the Company’s return on invested capital (“ROIC”, as defined in the award) compared to the targeted ROIC. The Compensation Committee has selected ROIC as the performance goal used in determining payouts under PSU awards based on stockholder feedback and management’s recommendation. ROIC is an important metric to be considered when making investment decisions and a focus on ROIC will incentivize management to make careful considerations when allocating capital for equipment, acquisitions, and other growth initiatives. Although the PSU awards use only one performance goal to determine the number of units earned under the grants, the Compensation Committee believes ROIC is a comprehensive measurement of performance that measures profitability, cash flow generation, and asset management. Given that ROIC is a comprehensive performance metric, we believe this measure captures the effectiveness of our executive management team.
22
Targeted ROIC was based upon the budget presented to the Board of Directors by the executive management team. The Compensation Committee approved the 2016 target of 9.7% based on the budgeted financial information presented. The threshold to earn any PSUs under the award was set at 7.9%. The maximum number of shares earned is limited to 200%, which a ROIC of 11.7% or higher would have provided.
In 2016, the executive officers earned 200% of the targeted PSUs awarded as calculated below:
|
2016 ROIC
|
||||
|
Net income from continuing operations as reported
|
$
|
33,719
|
|
|
|
Portfolio management costs, after tax
|
14,178
|
|
||
|
Restructuring costs, after tax
|
3,442
|
|
||
|
Senior leadership transition, after tax
|
1,590
|
|
||
|
Acquisition related costs, after tax
|
712
|
|
||
|
Adjusted net income
|
$
|
53,641
|
|
|
|
Tax effected interest expense
|
9,032
|
|
||
|
Adjusted net income before interest
|
$
|
62,673
|
|
|
|
Average adjusted invested capital (1)
|
$
|
534,030
|
|
|
|
Return on invested capital
|
11.7
|
%
|
||
|
PSU minimum threshold
|
7.9
|
%
|
||
|
PSU target
|
9.7
|
%
|
||
|
PSU maximum limit
|
11.7
|
%
|
||
|
Payout factor (2)
|
200.0
|
%
|
||
|
(1)
|
Average adjusted invested capital was based on the 13-month average of total stockholders’ equity adjusted for one-time charges plus net debt for the period ended December 31.
|
|
(2)
|
Since the actual ROIC outperformed the maximum payout limit, the payout factor was determined to be 200%. The PSU awards limit the payout factor to 200%.
|
While the number of PSUs earned is determined based on performance during the first year of the award, the ultimate value of the award is determined three years from the date of grant when the then current stock price is applied to the number of units earned. The earned PSUs are converted to cash based on the trailing 90-day closing price of the Company’s common stock as of the last day of the three-year vesting period.
The targeted number of PSU awards granted to each executive officer is based upon a percentage of each recipient’s base salary which is determined by the Compensation Committee in the same manner as the other elements of executive compensation. The following table calculates the number of PSU awards issued, earned, and the maximum number of PSU awards that could have been earned during 2016:
|
Frank G. Heard
|
Kenneth W. Smith
|
Cherri L. Syvrud
|
Paul M. Murray
|
Timothy F. Murphy
|
||||||||||||||||
|
Salary as of grant date
|
$
|
715,000
|
|
$
|
404,000
|
|
$
|
225,000
|
|
$
|
252,000
|
|
$
|
240,000
|
|
|||||
|
PSU grant as a percentage of salary
|
95
|
%
|
100
|
%
|
50
|
%
|
100
|
%
|
60
|
%
|
||||||||||
|
Target compensation from PSU awards
|
$
|
679,250
|
|
$
|
404,000
|
|
$
|
112,500
|
|
$
|
252,000
|
|
$
|
144,000
|
|
|||||
|
Trailing 90-day average stock price
|
$
|
24.29
|
|
$
|
24.29
|
|
$
|
38.32
|
|
$
|
24.29
|
|
$
|
24.29
|
|
|||||
|
PSUs awarded during 2016
|
27,964
|
|
16,632
|
|
2,936
|
|
10,375
|
|
5,928
|
|
||||||||||
|
Percentage of PSUs earned (per above)
|
200.0
|
%
|
200.0
|
%
|
200.0
|
%
|
200.0
|
%
|
200.0
|
%
|
||||||||||
|
PSUs earned during 2016
|
55,928
|
|
33,264
|
|
5,872
|
|
20,750
|
|
11,856
|
|
||||||||||
|
Potential PSUs at Maximum
|
55,928
|
|
33,264
|
|
5,872
|
|
20,750
|
|
11,856
|
|
||||||||||
The Compensation Committee believes this compensation program more closely aligns executive officer compensation with the interests of the Company's stockholders by emphasizing ROIC and promotes retention of the Company's executive management team due to the three-year vesting period.
23
Non-Qualified Deferred Compensation.
One of the features of our Omnibus Plan (as described above) is the Management Stock Purchase Plan (“MSPP”), a non-qualified deferred compensation arrangement. The MSPP provides our executive officers the right to defer the receipt of their annual incentive compensation payment earned under the MICP and up to 25% of their base salary.
If, and to the extent that an executive officer defers any portion of his MICP payment or base salary, an account is established for his benefit under the MSPP and credited with RSUs equal in number to the number of shares of the Company’s stock which could have been purchased using the amount of the MICP payment or base salary which was deferred. The price used to determine the number of RSUs credited to an executive officer’s account is the 200-day closing average price per share of the Company’s stock determined one day prior to the date in which the compensation was earned and deferred. The Company’s use of a 200-day closing average price for valuing RSUs is intended to eliminate the effect of short-term market fluctuations on the number of RSUs awarded under our MSPP.
In addition to RSUs which are credited to the accounts of executive officers who elect to defer a portion of their MICP payment or base salary, the Company credits an additional number of RSUs (“Matching RSUs”) to the account of the executive officer. These Matching RSUs are forfeited if the executive officer’s employment is terminated, for any reason other than a change in control transaction, before the executive officer reaches age sixty (60).
RSUs credited to the account of an executive officer to reflect amounts deferred under the MSPP are paid to the participant upon a termination of employment. In addition, if the executive officer’s employment is terminated after age sixty (60), the participant will be entitled to receive payment for Matching RSUs.
The following table summarizes the amount each NEO deferred into the MSPP during 2016, the number of RSUs credited to their MSPP accounts, and the matching RSUs credited to their MSPP accounts:
|
2016 Deferred
|
RSUs Credited to MSPP for
|
||||||
|
Officer
|
Compensation
|
Officer Deferrals
|
Company Match
|
||||
|
Frank G. Heard
|
$
|
1,198,750
|
|
54,981
|
|
39,815
|
|
|
Kenneth W. Smith
|
$
|
447,500
|
|
19,957
|
|
14,166
|
|
|
Cherri L. Syvrud
|
$
|
—
|
|
—
|
|
—
|
|
|
Paul M. Murray
|
$
|
189,000
|
|
8,092
|
|
5,569
|
|
|
Timothy F. Murphy
|
$
|
76,875
|
|
3,716
|
|
2,787
|
|
The amount to be paid to a participant upon termination of his employment is equal to the number of RSUs credited to his account (including Matching RSUs, if applicable) multiplied by the 200-day rolling average price per share of the Company’s stock, determined as of the day immediately preceding the participant’s termination.
Payment of the amount determined above is made to the participant based on an election made prior to the deferral in either (a) a lump sum, (b) five substantially equal annual installments, or (c) ten substantially equal annual installments, beginning six months after the date of termination. During the period that the installment payments are being made, the undistributed value of the participant’s account will earn interest at a rate equal to the average annualized rate of interest payable on ten-year US Treasury Notes plus two percent (2%).
We believe the MSPP furthers our compensation objectives of aligning the interests of our executive officers with stockholder interests by providing the executive officers an opportunity to increase post-termination compensation as a result of increases in the value of the Company’s common stock over their careers.
CEO's Supplemental RSU Pool
. In 2016, at the request our Chief Executive Officer, the Compensation Committee approved to provide the CEO with a pool of RSU awards to issue at his discretion. The awards are intended to provide the CEO with a tool to recognize (a) significant accomplishment or effort not sufficiently recognized by the Company's annual or long-term incentive programs, (b) an incentive for retention, (c) potential for leadership development, or (d) a promotion or increased responsibilities. Awards are issued in the form of restricted stock or restricted stock units and generally cliff vest after a three-year period. Messrs. Murray and Murphy were each awarded 3,000 RSUs during 2016 under the CEO's Supplemental RSU Pool.
Retirement Plans.
All of our executive officers are entitled to participate in our Gibraltar 401(k) Plan. The Company does not provide any other retirement benefits aside from the 401(k) Plan.
24
Perquisites and Other Benefits.
We annually review the perquisites that executive management receives. Since our compensation plan provides for equity compensation to our executives which could lead to complicated tax issues, and because we believe that good financial and tax planning by experts reduces both the amount of time and attention that senior management must spend on this topic, the executive officers are eligible to receive a payment for financial and tax planning services. During 2016, all of the executives also received tax gross-up payments for the personal use of Company automobiles and reimbursement for medical costs. The Compensation Committee eliminated all tax gross-up payments beginning January 1, 2017.
Ms. Syvrud received a $60,000 signing bonus once she agreed to accept the Senior Vice President of Human Resources and Organizational Development position, this one-time perquisite is included below in the Summary Compensation Table.
Change in Control Benefits.
Our executive officers have been a key component in building our Company into the successful enterprise that it is today. We believe that it is important to protect our executive officers in the context of a change in control transaction to allow them to focus on the transaction. Further, it is our belief that the interests of our stockholders will be best served if the interests of our executive management are aligned with the long-term success of the Company. We believe that change in control benefits should eliminate, or at least reduce, the reluctance of our executive officers to vigorously negotiate the optimal financial terms for our shareholders in the event of any potential, future change in control transactions.
Our Change in Control benefits provide for the protection of previously granted equity-based incentive compensation and provide for a cash payment upon the consummation of the Change in Control transaction and subsequent termination of employment for our Chief Executive Officer and Chief Financial Officer.
The cash components of any change in control benefits are paid in one lump sum, except in the case of Mr. Heard whose benefit includes an amount equal to his base salary payable over twelve months with the balance of his benefit payable in a lump sum. For more information concerning amounts our executive officers are entitled to receive upon a termination of employment and change in control, see “Potential Payments Upon Termination or Change in Control” below.
Generally Available Benefit Programs.
The executive officers also participate in the Company’s other generally available benefit plans on the same terms as other employees at the Company’s headquarters. These plans include pay in lieu of time off, medical and dental insurance, life insurance, a supplemental salary continuation plan providing supplemental short-term disability benefits, and the Company’s matching contribution to the Gibraltar 401(k) Plan. Relocation benefits also are reimbursed but are individually negotiated when they occur.
2017 Equity Grant to CEO.
To provide the chief executive officer with a long-term, performance-based incentive to generate value for our stockholders, the Compensation Committee awarded Mr. Heard, a grant of equity awards on February 1, 2017, consisting of the following:
|
Award
|
Awards Granted
|
Grant Date Fair Value
|
|||
|
Non-qualified stock options
|
20,000
|
|
$
|
261,000
|
|
|
Restricted stock units (RSUs)
|
20,000
|
|
861,000
|
|
|
|
Performance stock units (TSR PSUs)
|
20,000
|
|
886,800
|
|
|
|
$
|
2,008,800
|
|
|||
All of these awards cliff-vest after three years on February 1, 2020 and will be settled in shares of Gibraltar stock. The exercise price of the stock options was set equal to the grant date stock price of $43.05. The TSR PSUs will be earned based upon the Company's relative total stockholder return ("TSR") generated over a performance period beginning February 2, 2017 and ending February 1, 2020 compared to the TSR of companies within the S&P SmallCap 600 Industrial Sector Index. The payout factor applied to the target TSR PSUs granted is based upon meeting a threshold of the 40th percentile. At the 40th percentile, no TSR PSUs will be issuable. A ranking between the 40th and 90th percentiles results in an adjustment of the number of TSR PSUs issuable on a straight-line basis until the maximum award limit is reached at the 90th percentile where the CEO will be entitled to 150% of the TSR PSUs awarded.
The equity grant was made to recognize the future potential our CEO has to continue the transformation of the organization and to more closely align his interests to the interests of our stockholders. As more than half of the fair value of the award is directly tied to total stockholder return, the Compensation Committee used this award to ensure the CEO is significantly and immediately impacted by share price results. The substantial performance-based component of the TSR PSUs and stock options is designed to motivate the CEO to further execute under Gibraltar's four-pillar strategy over the three-year vesting period and ultimately create value for our stockholders.
25
As these awards were granted in 2017, the compensation related to the awards will not appear in the Summary Compensation Table until next year.
Employment Agreements
CEO Employment Agreement.
The Company entered into an amended Employment Agreement with Frank G. Heard when he was promoted to President and Chief Executive Officer (“CEO”). The Employment Agreement provides for the following: (1) the term of the CEO’s employment will continue until terminated by the Company or the CEO; (2) establishment of the CEO’s annual base salary which may be adjusted from time to time, by the Compensation Committee; (3) the CEO will be eligible to receive an annual bonus under the MICP and long-term incentive compensation as determined under the LTIP; (4) the CEO will be entitled to participate in all other employee benefit plans and programs in effect for salaried employees employed at the Company’s headquarters; and (5) upon a termination of the CEO’s employment by the Company, without cause, or by the CEO for good reason, the CEO will be entitled to a severance benefit in an amount equal to 1.75 times his base salary.
Clawback Policy
The Company has a Clawback Policy which requires reimbursement of an executive officer’s performance-based compensation if the independent members of the Board determine that the executive engaged in fraudulent conduct that resulted in a restatement of financial statements filed with the Securities and Exchange Commission. The Clawback policy extends to all employees of Gibraltar. This policy is contained in our Corporate Governance Guidelines, which are available on our website at www.gibraltar1.com.
Tax Considerations
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation in excess of $1,000,000 paid to a company’s chief executive officer and any one of the four other most highly paid executive officers during its taxable year. Qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. The Section 162(m) limitation resulted in a disallowed tax deduction for compensation expense of $213,000 in 2016. The Compensation Committee continues to monitor this matter periodically in an effort to minimize the impact of the Section 162(m) limitation. Stockholder approval of the material terms of our PSU grants and the First Amendment to the Gibraltar Industries, Inc. 2015 Equity Incentive Plan will continue to limit the negative impact of Section 162(m) on the Company’s tax deductions in future periods.
Section 409A of the Internal Revenue Code generally imposes a tax on non-qualified deferred compensation arrangements which do not meet guidelines established by regulations under the Internal Revenue Code. The Company’s non-qualified deferred compensation arrangements are intended to comply with Section 409A.
Conclusion
The Compensation Committee believes the Company’s executive compensation program includes a balanced blend of time-based and performance-based compensation plans that enhance the Company’s ability to attract, retain, and motivate highly qualified individuals to serve as our executive officers and to align the financial interests of our executive officers with those of our stockholders. The high percentage of compensation that is implemented as performance-based for our executive officers re-enforces the Compensation Committee’s commitment to a pay-for-performance philosophy. These incentive programs encourage the executive team to drive operational improvements and make strategic planning decisions that lead to improved financial performance and the creation of stockholder value. As a result, the Committee recommends you vote
FOR
the "Say-on-Pay" vote in Proposal 2.
26
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the contents of the above Compensation Discussion & Analysis section of this Definitive Proxy Statement with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion & Analysis be included in this Definitive Proxy Statement and incorporated by reference in the Company’s annual report on Form 10-K filed February 21, 2017.
|
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF GIBRALTAR INDUSTRIES, INC.
|
|
|
Sharon M. Brady
|
|
|
Craig A. Hindman
|
|
|
Vinod M. Khilnani
|
|
|
William P. Montague
|
|
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
|
Stock Awards
|
|||||||||||||||||||||||||
|
Restricted
Stock
Unit
Awards
|
Non-qualified Stock Options
|
Performance
Stock
Unit
Awards
|
Non-Equity
Incentive
Plan
Compensation
|
Change in Pension Value and Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
||||||||||||||||||||
|
Name
|
Year
|
Salary (3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
(9)
|
Total
|
||||||||||||||||
|
Frank G. Heard (1)
|
2016
|
$
|
715,135
|
|
$
|
393,254
|
|
$
|
—
|
|
$
|
679,246
|
|
$
|
959,888
|
|
$
|
854,375
|
|
$
|
42,394
|
|
$
|
3,644,292
|
|
|
2015
|
$
|
699,077
|
|
$
|
942,001
|
|
$
|
191,750
|
|
$
|
1,794,501
|
|
$
|
1,020,000
|
|
$
|
157,710
|
|
$
|
78,442
|
|
$
|
4,883,481
|
|
|
|
2014
|
$
|
278,654
|
|
$
|
1,083,001
|
|
$
|
—
|
|
$
|
—
|
|
$
|
96,075
|
|
$
|
—
|
|
$
|
5,031
|
|
$
|
1,462,761
|
|
|
|
Kenneth W. Smith
|
2016
|
$
|
404,497
|
|
$
|
181,795
|
|
$
|
—
|
|
$
|
403,991
|
|
$
|
330,270
|
|
$
|
310,376
|
|
$
|
73,135
|
|
$
|
1,704,064
|
|
|
2015
|
$
|
399,500
|
|
$
|
570,999
|
|
$
|
95,875
|
|
$
|
1,027,244
|
|
$
|
346,500
|
|
$
|
121,994
|
|
$
|
74,168
|
|
$
|
2,636,280
|
|
|
|
2014
|
$
|
374,596
|
|
$
|
260,846
|
|
$
|
—
|
|
$
|
374,994
|
|
$
|
96,075
|
|
$
|
224,913
|
|
$
|
62,802
|
|
$
|
1,394,226
|
|
|
|
Cherri L. Syvrud (2)
|
2016
|
$
|
168,750
|
|
$
|
56,251
|
|
$
|
—
|
|
$
|
112,469
|
|
$
|
84,902
|
|
$
|
—
|
|
$
|
75,177
|
|
$
|
497,549
|
|
|
Paul M. Murray (2)
|
2016
|
$
|
252,462
|
|
$
|
123,355
|
|
$
|
—
|
|
$
|
252,009
|
|
$
|
125,244
|
|
$
|
126,000
|
|
$
|
74,422
|
|
$
|
953,492
|
|
|
2015
|
$
|
248,708
|
|
$
|
123,804
|
|
$
|
—
|
|
$
|
239,995
|
|
$
|
126,000
|
|
$
|
55,912
|
|
$
|
70,956
|
|
$
|
865,375
|
|
|
|
2014
|
$
|
223,000
|
|
$
|
129,437
|
|
$
|
—
|
|
$
|
222,996
|
|
$
|
33,327
|
|
$
|
81,728
|
|
$
|
66,825
|
|
$
|
757,313
|
|
|
|
Timothy F. Murphy
|
2016
|
$
|
240,673
|
|
$
|
84,359
|
|
$
|
—
|
|
$
|
143,991
|
|
$
|
81,750
|
|
$
|
57,656
|
|
$
|
40,460
|
|
$
|
648,889
|
|
|
2015
|
$
|
212,331
|
|
$
|
76,321
|
|
$
|
—
|
|
$
|
123,006
|
|
$
|
76,875
|
|
$
|
14,971
|
|
$
|
44,491
|
|
$
|
547,995
|
|
|
|
2014
|
$
|
186,738
|
|
$
|
83,166
|
|
$
|
—
|
|
$
|
112,205
|
|
$
|
19,962
|
|
$
|
35,031
|
|
$
|
34,810
|
|
$
|
471,912
|
|
|
|
(1)
|
Mr. Heard was hired as President and Chief Operating Officer in May 2014 and promoted to Chief Executive Officer effective January 1, 2015.
|
|
(2)
|
Ms. Syvrud was hired as Senior Vice President of Human Resources and Organization Development on April 4, 2016, and appointed an officer of the Company on May 5, 2016. At which time, Mr. Murray resigned as an executive officer of the Company and became Senior Vice President of Administration during a transition period before his planned retirement on March 1, 2017.
|
|
(3)
|
Includes amounts, if any, deferred at the direction of the executive officer. Salaries immaterially exceed the amounts disclosed in the CD&A as a result of rounding used to calculate salary payments within the payroll system in 2016.
|
27
|
(4)
|
This column represents the grant date fair value of restricted stock units granted that year. Fair value was calculated using the closing price of Gibraltar Industries, Inc. common stock on the date of grant. The 2016 RSU awards include $393,254, $181,795, $56,251, $62,995, and $23,999 of compensation for Frank Heard, Kenneth Smith, Cherri Syvrud, Paul Murray, and Timothy Murphy, respectively, related to the grant date fair value of RSUs issued under the annual LTIP program; and $60,360 and $60,360 of compensation for Messrs. Murray and Murphy, respectively, related to the grant date fair value of CEO discretionary RSUs.
|
|
(5)
|
This column represents the grant date fair value of non-qualified stock options granted that year. Fair value was calculated using a Black-Scholes valuation model.
|
|
(6)
|
This column represents the grant date fair value of PSUs and TSR PSUs granted during the year. Fair value is determined based upon the probable outcome of the performance conditions on the grant date. For PSUs awarded under the annual LTIP program, the fair value was estimated using the trailing 90-day average stock price which is the basis for payments made under the awards. All 2016 awards were issued under the annual LTIP program. For TSR PSUs awarded in December 2015, the fair value was calculated using a Monte Carlo valuation model.
|
|
(7)
|
This column represents the amounts earned under the Management Incentive Compensation Plan for the respective years.
|
|
(8)
|
This column represents the Company contributions to the non-qualified deferred compensation plans for each of the named executives, which is included in the Non-qualified Deferred Compensation Table.
|
|
(9)
|
This column represents the following 2016 other compensation:
|
|
Other Compensation
|
Frank G. Heard
|
Kenneth
W. Smith
|
Cherri L. Syvrud
|
Paul M.
Murray
|
Timothy F.
Murphy
|
||||||||||
|
401(k) match
|
$
|
10,600
|
|
$
|
10,600
|
|
$
|
2,423
|
|
$
|
10,600
|
|
$
|
10,600
|
|
|
Financial and tax planning
|
7,500
|
|
5,000
|
|
—
|
|
7,500
|
|
2,500
|
|
|||||
|
Personal use of Company autos
|
5,268
|
|
15,962
|
|
5,111
|
|
10,841
|
|
11,103
|
|
|||||
|
Club dues
|
5,174
|
|
—
|
|
—
|
|
10,017
|
|
—
|
|
|||||
|
Healthcare benefits
|
1,942
|
|
5,671
|
|
3,677
|
|
9,870
|
|
3,000
|
|
|||||
|
Incidental moving expenses
|
—
|
|
11,780
|
|
—
|
|
—
|
|
—
|
|
|||||
|
Pay in lieu of time off
|
—
|
|
8,500
|
|
—
|
|
8,318
|
|
3,154
|
|
|||||
|
Signing bonus
|
—
|
|
—
|
|
60,000
|
|
—
|
|
—
|
|
|||||
|
Tax gross-ups
|
11,910
|
|
15,622
|
|
3,966
|
|
17,276
|
|
10,103
|
|
|||||
|
Total
|
$
|
42,394
|
|
$
|
73,135
|
|
$
|
75,177
|
|
$
|
74,422
|
|
$
|
40,460
|
|
Other payments noted above did not exceed $25,000 or 10% of the amount of total perquisites. Note that the Compensation Committee eliminated all tax gross-up payments beginning January 1, 2017.
28
Grants of Plan-Based Awards
|
Name
|
Grant Date
|
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards (1)
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards (2)
|
All Other
Stock
Awards:
Number
Of Shares
Of Stock Or Units
|
All Other
Option
Awards:
Number of
Securities
Underlying Options
|
Exercise
or Base
Price of
Option Awards
|
||||||||||||||||||||
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
|||||||||||||||||||||
|
Frank G. Heard
|
MICP
|
$
|
243,100
|
|
$
|
715,000
|
|
$
|
1,072,500
|
|
—
|
|
—
|
|
$
|
—
|
|
|||||||||
|
Feb. 1, 2016
|
$
|
—
|
|
$
|
679,246
|
|
$
|
3,396,230
|
|
—
|
|
—
|
|
$
|
—
|
|
||||||||||
|
Feb. 1, 2016 (3)
|
19,090
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Feb. 19, 2016 (4)
|
86,273
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Mar. 31, 2016 (4)
|
2,655
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Jun. 30, 2016 (4)
|
2,150
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Sep. 30, 2016 (4)
|
1,971
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Dec. 31, 2016 (4)
|
1,746
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Kenneth W. Smith
|
MICP
|
$
|
82,416
|
|
$
|
242,400
|
|
$
|
363,600
|
|
—
|
|
—
|
|
$
|
—
|
|
|||||||||
|
Feb. 1, 2016
|
$
|
—
|
|
$
|
403,991
|
|
$
|
2,019,955
|
|
—
|
|
—
|
|
$
|
—
|
|
||||||||||
|
Feb. 1, 2016 (3)
|
8,825
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Feb. 19, 2016 (4)
|
29,307
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Mar. 31, 2016 (4)
|
1,500
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Jun. 30, 2016 (4)
|
1,215
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Sep. 30, 2016 (4)
|
1,114
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Dec. 31, 2016 (4)
|
987
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Cherri L. Syvrud
|
MICP
|
$
|
26,775
|
|
$
|
78,750
|
|
$
|
118,125
|
|
—
|
|
—
|
|
$
|
—
|
|
|||||||||
|
April 4, 2016
|
$
|
—
|
|
$
|
112,469
|
|
$
|
562,345
|
|
—
|
|
—
|
|
$
|
—
|
|
||||||||||
|
June 10, 2016 (3)
|
1,821
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Paul M. Murray
|
MICP
|
$
|
29,988
|
|
$
|
88,200
|
|
$
|
132,300
|
|
—
|
|
—
|
|
$
|
—
|
|
|||||||||
|
Feb. 1, 2016
|
$
|
—
|
|
$
|
252,009
|
|
$
|
1,260,045
|
|
—
|
|
—
|
|
$
|
—
|
|
||||||||||
|
Feb. 1, 2016 (3)
|
3,058
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Feb. 17, 2016 (5)
|
3,000
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Feb. 19, 2016 (4)
|
10,657
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Mar. 31, 2016 (4)
|
936
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Jun. 30, 2016 (4)
|
758
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Sep. 30, 2016 (4)
|
695
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Dec. 31, 2016 (4)
|
615
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Timothy F. Murphy
|
MICP
|
$
|
20,400
|
|
$
|
60,000
|
|
$
|
90,000
|
|
—
|
|
—
|
|
$
|
—
|
|
|||||||||
|
Feb. 1, 2016
|
$
|
—
|
|
$
|
143,991
|
|
$
|
719,955
|
|
—
|
|
—
|
|
$
|
—
|
|
||||||||||
|
Feb. 1, 2016 (3)
|
1,165
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Feb. 17, 2016 (5)
|
3,000
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
Feb. 19, 2016 (4)
|
6,503
|
|
—
|
|
$
|
—
|
|
|||||||||||||||||||
|
(1)
|
Estimated future payouts represent the amount that was payable under the annual Management Incentive Compensation Plan (“MICP”) for performance in 2016. The maximum payment under this plan is limited to 150% of target.
|
|
(2)
|
Estimated future payouts represent the targeted amount payable under the long-term equity compensation plan due to the award of performance stock units (“PSUs”). On February 1, 2016, Messrs. Heard, Smith, Murray, and Murphy received 27,964, 16,632, 10,375, and 5,928 PSUs, respectively. On April 4, 2016, Ms. Syvrud received 2,935 PSUs. The number of units that were actually earned was based upon the Company’s return on invested capital during 2016 compared to target. The final award will be settled in cash based upon the 90-day rolling average of the Company’s stock price at the end of the three-year vesting period. The maximum payment under this award is equal to 500% of the grant date fair value. Additionally, the award limits the number of PSUs earned to 200% of the units granted. As noted above, units equal to 200% of the shares awarded were earned under the 2016 PSU grant based upon the performance of the Company.
|
|
(3)
|
Consists of restricted stock units issued under the Company’s Long-term Incentive Plan that convert to shares upon vesting.
|
29
|
(4)
|
Consists of restricted stock units issued under the Management Stock Purchase Plan (“MSPP”). Of the restricted stock units issued in 2016, 54,981, 19,957, 8,092, and 3,716 units issued to Messrs. Heard, Smith, Murray, and Murphy, respectively, represent units purchased through deferral of bonus and salary and 39,815, 14,166, 5,569, and 2,787 units issued to Messrs. Heard, Smith, Murray, and Murphy, respectively, represent the Company’s match. These restricted stock units convert into a hypothetical cash account upon vesting, which occurs upon both the attainment of age sixty (60) and termination of employment. If employment is terminated prior to the executive officer attaining sixty (60) years of age, matching units are forfeited. Upon termination of employment the balance in the hypothetical cash account is paid out as either a lump sum, over five years, or over ten years.
|
|
(5)
|
Consists of restricted stock unit awards issued under a program to award management with supplemental shares at the CEO's discretion.
|
Outstanding Equity Awards at Fiscal Year End
|
Name
|
Option Awards
|
Stock Awards
|
||||||||||||||||||||
|
Number of
Securities
Underlying
Unexercised
Options Exercisable
|
Number of
Securities
Underlying
Unexercised
Options Unexercisable
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
|
Option
Exercise Price
|
Option
Expiration Date
|
Number of
Shares or
Units of
Stock that
Have Not Vested (1)
|
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 (2)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested
|
||||||||||||||
|
Frank G. Heard
|
—
|
|
25,000
|
|
—
|
|
$
|
25.44
|
|
12/31/2025
|
96,818
|
|
$
|
4,032,470
|
|
195,654
|
|
$
|
8,109,068
|
|
||
|
Kenneth W. Smith
|
—
|
|
12,500
|
|
—
|
|
$
|
25.44
|
|
12/31/2025
|
66,440
|
|
$
|
1,721,118
|
|
89,345
|
|
$
|
2,184,600
|
|
||
|
Cherri L. Syvrud
|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
—
|
|
1,821
|
|
$
|
75,845
|
|
5,870
|
|
$
|
242,607
|
|
|
|
Paul M. Murray
|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
—
|
|
34,152
|
|
$
|
1,422,431
|
|
53,138
|
|
$
|
2,196,194
|
|
|
|
Timothy F. Murphy
|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
—
|
|
22,880
|
|
$
|
952,952
|
|
28,456
|
|
$
|
1,176,086
|
|
|
|
(1)
|
Restricted stock units vest as follows: Mr. Heard - 8,339 units vesting at a rate of 50% a year beginning June 26, 2017, 30,000 units vesting at a rate of 33% a year beginning December 29, 2017, 14,389 units vesting at a rate of 33% a year beginning January 2, 2017, 19,090 units vesting at a rate of 25% a year beginning February 1, 2016, and 25,000 that cliff vest on December 31, 2018; Mr. Smith - 2,387 units that vest on January 2, 2017, 4,581 units vesting at a rate of 50% a year beginning January 2, 2017, 8,147 units vesting at a rate of 33% a year beginning January 2, 2017, 8,825 units vesting at a rate of 25% a year beginning February 1, 2017, 30,000 units that vest upon his retirement from the Company, and 12,500 units that cliff vest on December 31, 2018; Ms. Syvrud - 1,821 units vesting at a rate of 25% a year beginning June 10, 2017; Mr. Murray - 758 units that vest on January 2, 2017, 1,514 units vesting at a rate of 50% a year beginning January 2, 2017, 2,822 units vesting at a rate of 33% a year beginning January 2, 2017, 3,058 units vesting at a rate of 25% a year beginning February 1, 2017, 23,000 units that vest upon his retirement from the Company, and 3,000 units that cliff vest on February 17, 2019; and Mr. Murphy - 243 units that vest on January 2, 2017, 508 units vesting at a rate of 50% a year beginning January 2, 2017, 964 units vesting at a rate of 33% a year beginning January 2, 2017, 1,165 units vesting at a rate of 25% a year beginning February 1, 2016, 17,000 units that vest on October 7, 2023 and upon his retirement from the Company, and 3,000 units that cliff vest on February 17, 2019.
|
|
(2)
|
Represents performance stock units (“PSUs”) earned during their respective performance periods which will be converted to cash as follows (based upon the trailing 90-day stock price): (a) on February 1, 2018, 68,826, 51,956, 32,388, and 16,600 PSUs earned by Messrs. Heard, Smith, Murray, and Murphy, respectively; (b) on February 1, 2019, 55,928, 33,264, 20,750, and 11,856 PSUs earned by Messrs. Heard, Smith, Murray, and Murphy, respectively; and (c) on April 4, 2019, 5,870 PSUs earned by Ms. Syvrud. Additionally, this represents another 70,900 and 35,450 TSR PSUs estimated to be earned under a grant to Messrs. Heard and Smith, respectively, on December 31, 2015. These TSR PSUs will be earned over a three-year performance period ending December 31, 2018 when the vested TSR PSUs will convert to shares of Gibraltar stock and are represented at their fair value as of December 31, 2016.
|
30
Option Exercises and Stock Vested
|
|
Option Awards
|
Stock Awards
|
||||||||
|
Number of Shares Acquired on Exercise
|
Value Realized on Exercise
|
Number of Shares Acquired on Vesting
|
Value Realized on Vesting
|
|||||||
|
Frank G. Heard
|
—
|
|
$
|
—
|
|
18,965
|
|
$
|
676,291
|
|
|
Kenneth W. Smith
|
—
|
|
$
|
—
|
|
10,039
|
|
$
|
255,392
|
|
|
Cherri L. Syvrud
|
—
|
|
$
|
—
|
|
—
|
|
$
|
—
|
|
|
Paul M. Murray
|
—
|
|
$
|
—
|
|
3,282
|
|
$
|
83,494
|
|
|
Timothy F. Murphy
|
9,000
|
|
$
|
147,535
|
|
1,089
|
|
$
|
27,704
|
|
Non-qualified Deferred Compensation
|
Name
|
Executive Contributions in Last FY
|
Registrant Contributions in Last FY (2)
|
Aggregate Earnings (Losses) in Last FY
|
Aggregate Withdrawals/Distributions
|
Aggregate Balance at Last FYE
|
||||||||||||||
|
Frank G. Heard
|
$
|
1,198,750
|
|
(1)
|
$
|
854,375
|
|
(1)
|
$
|
1,657,607
|
|
(3)
|
$
|
—
|
|
$
|
4,204,585
|
|
(5)
|
|
Kenneth W. Smith
|
$
|
447,500
|
|
(1)
|
$
|
310,376
|
|
(1)
|
$
|
3,027,814
|
|
(3)
|
$
|
—
|
|
$
|
7,174,810
|
|
|
|
Cherri L. Syvrud
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
||||
|
Paul M. Murray
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,126
|
|
(4)
|
$
|
—
|
|
$
|
36,495
|
|
|
|
$
|
189,000
|
|
(1)
|
$
|
126,000
|
|
(1)
|
$
|
1,345,009
|
|
(3)
|
$
|
—
|
|
$
|
3,206,137
|
|
|
|
|
Timothy F. Murphy
|
$
|
76,875
|
|
(1)
|
$
|
57,656
|
|
(1)
|
$
|
448,040
|
|
(3)
|
$
|
—
|
|
$
|
1,046,438
|
|
(5)
|
|
(1)
|
Represents the deferred amount of the annual incentive compensation award earned under the Management Incentive Compensation Plan during 2015 and salary deferrals in 2016 together with related matching contributions from the Company.
|
|
(2)
|
Amounts reported are included as compensation in the Summary Compensation Table above.
|
|
(3)
|
Represents the associated earnings on the balance of each participating executive officer's account under the Management Stock Purchase Plan during 2016.
|
|
(4)
|
Represents the associated earnings on the balance of the participating executive officer’s account under the Gibraltar 401(k) Restoration Plan during 2016.
|
|
(5)
|
Amount includes $1,146,554 and $258,216 attributable to matching RSUs for Messrs. Heard and Murphy, respectively, that will vest on each of their sixtieth (60
th
) birthdays if they continue their employment through such date.
|
POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
In 2015, Gibraltar's President and Chief Executive Officer (“CEO”), Frank Heard, entered into an amended employment agreement that provides for a severance payment equal to 1.75 times his respective base salary upon his termination without cause or a voluntary termination with good cause. The employment agreement also establishes benefits that would be accrued in the event of death or disability.
The awards of restricted stock units (“RSUs”) which the Company has made to its executive officers provide that the RSUs will be paid in shares of the Company’s stock if the employment of the executive officer is terminated by the Company without cause or in the case of the CEO for “good reason”. In each case, a termination without cause will be considered to have occurred if the executive officer's employment is terminated by the Company for any reason other than a determination by the Compensation Committee that the executive officer has engaged in egregious acts or omissions which have resulted in material injury to the Company and its business.
The awards of performance stock units (“PSUs”) which the Company has made to its executive officers provide that if employment of an executive officer's employment is terminated by the Company without cause or after the executive officer has attained age 60 and completed at least five years of service to the Company, the executive officer will be entitled to payment for the PSUs earned prior to termination. Additionally, the awards of PSUs provide that if a change in control of the Company occurs, the executive officers will be entitled to payment for PSUs earned prior to the change in control together with payment, at the targeted performance level, for performance periods ending after the date the change in control occurs.
31
The Company has also entered into change in control agreements (the “Change in Control Agreements”) with the CEO, Senior Vice President and Chief Financial Officer ("Kenneth Smith" or “CFO”), and Retired Senior Vice President of Human Resources and Organizational Development ("Paul Murray" or “Retired SVP of HR”). All Change in Control Agreements contain double trigger payment provisions. Accordingly, upon the occurrence of a change in control and termination of employment, the CEO, CFO, and Retired SVP of HR are entitled to receive severance payments equal to 275%, 200%, and 100%, respectively, of their annual cash compensation. These payments are made in one lump sum, except in the case of the CEO whose benefit includes an amount equal to his base salary payable over twelve months with the balance of the benefit payable in a lump sum.
The Change in Control Agreements define annual cash compensation as the sum of (i) the executive’s annual base salary, including any deferred cash compensation, during the calendar year preceding the year when the change of control occurred and (ii) the highest annual bonus paid to him during the three years immediately preceding the year in which the change in control occurs. The payments and benefits payable in the event of a change in control are not subject to any limitations that would prevent them from being considered “excess parachute payments” subject to excise or corporate tax deduction disallowance under the Internal Revenue Code. Therefore, the lump sum payments could require excise tax payments on the part of the executive, and result in a deduction disallowance on the part of our Company.
In all Change in Control Agreements, a change in control will be deemed to occur if: (i) any person or group, other than an affiliate of the Company, acquires 35% or more of the common stock of our Company without approval of the Board of Directors; (ii) there is a change in a majority of the members of the Board of Directors in any twelve-month period and the new directors were not endorsed by the majority of the old directors; or (iii) we enter into certain merger or consolidation transactions, and the executive’s employment is terminated without cause or the executive resigns for good reason.
The following tables set forth the amount of compensation which would be payable to the executive officers upon a termination of their employment under the circumstances described. Except for retirement, the amounts payable have been determined as if the employment of the executive officer was terminated on December 31, 2016, on which date, the closing price per share of the Company’s stock was $41.65. With respect to amounts payable at retirement, we have assumed that the executive officer retired on December 31, 2016 and that, at the time of such retirement, the executive satisfied the applicable age and service requirements for payment of a retirement benefit under the applicable benefit program.
Payments upon Termination of Employment
Frank G. Heard
|
Source of Payment
|
Voluntary Termination
|
Voluntary Termination for Good Reason
|
Retirement
|
Termination without Cause
|
Termination for Cause
|
Death
|
Disability
|
||||||||||||||
|
Employment Agreement (1)
|
$
|
176,301
|
|
$
|
1,251,250
|
|
$
|
—
|
|
$
|
1,251,250
|
|
$
|
—
|
|
$
|
—
|
|
$
|
429,000
|
|
|
Management Stock Purchase Plan (2)
|
$
|
2,477,346
|
|
$
|
2,477,346
|
|
$
|
4,204,585
|
|
$
|
2,477,346
|
|
$
|
2,477,346
|
|
$
|
2,477,346
|
|
$
|
2,477,346
|
|
|
Long-term Incentive Plan (3)
|
$
|
—
|
|
$
|
12,546,788
|
|
$
|
5,156,083
|
|
$
|
12,546,788
|
|
$
|
—
|
|
$
|
12,546,788
|
|
$
|
12,546,788
|
|
|
Non-equity Incentive Compensation (4)
|
$
|
959,888
|
|
$
|
959,888
|
|
$
|
1,679,804
|
|
$
|
959,888
|
|
$
|
—
|
|
$
|
959,888
|
|
$
|
959,888
|
|
|
Total
|
$
|
3,613,535
|
|
$
|
17,235,272
|
|
$
|
11,040,472
|
|
$
|
17,235,272
|
|
$
|
2,477,346
|
|
$
|
15,984,022
|
|
$
|
16,413,022
|
|
|
(1)
|
The amount shown under the voluntary termination column represents 90 days of severance pay. The amount shown under the voluntary termination for good reason and the termination without cause columns represent the aggregate payments that would be made upon Mr. Heard’s termination for those reasons, equal to 175% of his salary. The amount shown under the disability column represents the current value of the annual payment provided for by Mr. Heard’s employment agreement. The disability payment of $429,000, calculated as defined in his employment agreement, is payable annually until Mr. Heard reaches 65 years of age, and is reduced by amounts he would receive from the federal and state governments and insurance, pension, or profit sharing plans maintained by the Company.
|
|
(2)
|
The amounts shown in this row represent the market value of restricted stock units that would vest and convert to a cash balance upon the occurrence of the events in each column. The amount is payable in accordance with his deferral election, with interest compounding at the average of quarterly ten-year treasury rates plus two percent (2%) on the undistributed balance of his deferral. Mr. Heard is not over sixty (60) years old, and therefore would not vest in the Company’s matching contributions upon the occurrence of the events shown in each column except retirement which presumes Mr. Heard is sixty (60) years of age.
|
32
|
(3)
|
The amounts shown in this row represent the market value of non-qualified stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”) that vested or would vest upon the occurrence of the events in each column as of December 31, 2016. The actual payments of RSUs and PSUs occur six months after the event occurs and three years after grant, respectively, except for death, in which case payment is immediate. The amount shown in the retirement column presumes Mr. Heard is sixty (60) years old.
|
|
(4)
|
The amounts shown in this row represent the amount earned under the Management Incentive Compensation Plan for 2016 which was deferred into the Management Stock Purchase Plan by Mr. Heard and therefore the amount in the retirement column includes the Company match as we assume Mr. Heard is over sixty (60) to calculate retirement payments. It is the Company’s policy to pay amounts due under the Management Incentive Compensation Plan to participants on a prorated basis when their employment is terminated without cause.
|
Kenneth W. Smith
|
Source of Payment
|
Voluntary Termination
|
Retirement
|
Termination Without Cause
|
Termination for Cause
|
Death
|
Disability
|
||||||||||||
|
Supplemental Salary Continuation Plan (1)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
62,154
|
|
|
Management Stock Purchase Plan (2)
|
$
|
7,174,810
|
|
$
|
7,174,810
|
|
$
|
7,174,810
|
|
$
|
7,174,810
|
|
$
|
7,174,810
|
|
$
|
7,174,810
|
|
|
Long-term Incentive Plan (3)
|
$
|
1,779,622
|
|
$
|
5,301,764
|
|
$
|
5,768,744
|
|
$
|
1,779,622
|
|
$
|
7,968,487
|
|
$
|
7,968,487
|
|
|
Non-equity Incentive Compensation (4)
|
$
|
—
|
|
$
|
577,973
|
|
$
|
577,973
|
|
$
|
—
|
|
$
|
577,973
|
|
$
|
577,973
|
|
|
Total
|
$
|
8,954,432
|
|
$
|
13,054,547
|
|
$
|
13,521,527
|
|
$
|
8,954,432
|
|
$
|
15,721,270
|
|
$
|
15,783,424
|
|
|
(1)
|
The amount shown in the disability column represents payments Mr. Smith would receive under the Supplemental Salary Continuation Plan. This plan, a supplement to our short-term disability coverage, covers all full-time employees in our corporate offices. Mr. Smith qualifies for eight weeks of salary continuation under this plan based on years of service.
|
|
(2)
|
The amounts shown in this row represent the market value of restricted stock units that would vest and convert to a cash balance upon the occurrence of the events in each column. The amount is payable in accordance with his deferral election, with interest compounding at the average of quarterly ten-year treasury rates plus two percent (2%) on the undistributed balance of his deferral. Mr. Smith is over sixty (60) years old, and therefore will vest in the Company’s matching contributions upon the occurrence of the events shown in each column.
|
|
(3)
|
The amounts shown in this row represent the market value of non-qualified stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”) that vested or would vest upon the occurrence of the events in each column as of December 31, 2016. The actual payments of RSUs and PSUs occur six months after the event occurs and three years after grant, respectively, except for death, in which case payment is immediate.
|
|
(4)
|
The amounts shown in this row represent the amount earned under the Management Incentive Compensation Plan for 2016 which was deferred into the Management Stock Purchase Plan by Mr. Smith and therefore includes the vested Company match as Mr. Smith is over sixty (60). It is the Company’s policy to pay amounts due under the Management Incentive Compensation Plan to participants on a prorated basis when their employment is terminated without cause.
|
Cherri L. Syvrud
|
Source of Payment
|
Voluntary Termination
|
Retirement
|
Termination Without Cause
|
Termination for Cause
|
Death
|
Disability
|
||||||||||||
|
Long-term Incentive Plan (1)
|
$
|
—
|
|
$
|
242,607
|
|
$
|
318,452
|
|
$
|
—
|
|
$
|
318,452
|
|
$
|
318,452
|
|
|
Non-equity Incentive Compensation (2)
|
$
|
—
|
|
$
|
148,579
|
|
$
|
84,902
|
|
$
|
—
|
|
$
|
84,902
|
|
$
|
84,902
|
|
|
Total
|
$
|
—
|
|
$
|
391,186
|
|
$
|
403,354
|
|
$
|
—
|
|
$
|
403,354
|
|
$
|
403,354
|
|
|
(1)
|
The amounts shown in this row represent the market value of restricted stock units (“RSUs”) and performance stock units (“PSUs”) that vested or would vest upon the occurrence of the events in each column as of December 31, 2016. The actual payments of RSUs and PSUs occur six months after the event occurs and three years after grant, respectively, except for death, in which case payment is immediate. The amount shown in the retirement column presumes Ms. Syvrud is sixty (60) years old.
|
|
(2)
|
The amounts shown in this row represent the amount earned under the Management Incentive Compensation Plan for 2016 which was deferred into the Management Stock Purchase Plan by Ms. Syvrud and therefore the amount in the retirement column includes the Company match as we assume Ms. Syvrud is over sixty (60) to calculate retirement payments. It is the Company’s policy to pay amounts due under the Management Incentive Compensation Plan to participants on a prorated basis when their employment is terminated without cause.
|
33
Paul M. Murray
|
Source of Payment
|
Voluntary Termination
|
Retirement
|
Termination Without Cause
|
Termination for Cause
|
Death
|
Disability
|
||||||||||||
|
Supplemental Salary Continuation Plan (1)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
77,538
|
|
|
Management Stock Purchase Plan (2)
|
$
|
3,206,137
|
|
$
|
3,206,137
|
|
$
|
3,206,137
|
|
$
|
3,206,137
|
|
$
|
3,206,137
|
|
$
|
3,206,137
|
|
|
Long-term Incentive Plan (3)
|
$
|
1,138,544
|
|
$
|
3,334,738
|
|
$
|
3,618,625
|
|
$
|
1,138,544
|
|
$
|
3,618,625
|
|
$
|
3,618,625
|
|
|
Non-equity Incentive Compensation (4)
|
$
|
—
|
|
$
|
219,177
|
|
$
|
219,177
|
|
$
|
—
|
|
$
|
219,177
|
|
$
|
219,177
|
|
|
401(k) Restoration Plan (5)
|
$
|
36,495
|
|
$
|
36,495
|
|
$
|
36,495
|
|
$
|
36,495
|
|
$
|
36,495
|
|
$
|
36,495
|
|
|
Total
|
$
|
4,381,176
|
|
$
|
6,796,547
|
|
$
|
7,080,434
|
|
$
|
4,381,176
|
|
$
|
7,080,434
|
|
$
|
7,157,972
|
|
|
(1)
|
The amount shown in the disability column represents payments Mr. Murray would receive under the Supplemental Salary Continuation Plan. This plan, a supplement to our short-term disability coverage, covers all full-time employees in our corporate offices. Mr. Murray qualifies for sixteen weeks of salary continuation under this plan based on years of service.
|
|
(2)
|
The amounts shown in this row represent the market value of restricted stock units that would vest and convert to a cash balance upon the occurrence of the events in each column. The amount is payable in accordance with his deferral election, with interest compounding at the average of quarterly ten-year treasury rates plus two percent (2%) on the undistributed balance of his deferral. Mr. Murray is over sixty (60) years old, and therefore will vest in the Company’s matching contributions upon the occurrence of the events shown in each column.
|
|
(3)
|
The amounts shown in this row represent the market value of restricted stock units (“RSUs”) and performance stock units (“PSUs”) that vested or would vest upon the occurrence of the events in each column as of December 31, 2016. The actual payments of RSUs and PSUs occur six months after the event occurs and three years after grant, respectively, except for death, in which case payment is immediate.
|
|
(4)
|
The amounts shown in this row represent the amount earned under the Management Incentive Compensation Plan for 2016 which was deferred into the Management Stock Purchase Plan by Mr. Murray and therefore includes the vested Company match as Mr. Murray is over sixty (60). It is the Company’s policy to pay amounts due under the Management Incentive Compensation Plan to participants on a prorated basis when their employment is terminated without cause.
|
|
(5)
|
The amounts represent the balance of Mr. Murray’s 401(k) Restoration Plan account as of December 31, 2016, which may be paid six months after the event in annual installments over a period of five to ten years, except in the event of Mr. Murray’s death, in which case the amount would be paid immediately.
|
Timothy F. Murphy
|
Source of Payment
|
Voluntary Termination
|
Retirement
|
Termination Without Cause
|
Termination for Cause
|
Death
|
Disability
|
||||||||||||
|
Supplemental Salary Continuation Plan (1)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
73,846
|
|
|
Management Stock Purchase Plan (2)
|
$
|
680,087
|
|
$
|
1,046,438
|
|
$
|
680,087
|
|
$
|
680,087
|
|
$
|
680,087
|
|
$
|
680,087
|
|
|
Long-term Incentive Plan (3)
|
$
|
1,884,136
|
|
$
|
2,129,038
|
|
$
|
—
|
|
$
|
2,129,038
|
|
$
|
2,129,038
|
|
|||
|
Non-equity Incentive Compensation (4)
|
$
|
—
|
|
$
|
143,063
|
|
$
|
81,750
|
|
$
|
—
|
|
$
|
81,750
|
|
$
|
81,750
|
|
|
Total
|
$
|
680,087
|
|
$
|
3,073,637
|
|
$
|
2,890,875
|
|
$
|
680,087
|
|
$
|
2,890,875
|
|
$
|
2,964,721
|
|
|
(1)
|
The amount shown in the disability column represents payments Mr. Murphy would receive under the Supplemental Salary Continuation Plan. This plan, a supplement to our short-term disability coverage, covers all full-time employees in our corporate offices. Mr. Murphy qualifies for sixteen weeks of salary continuation under this plan based on years of service.
|
|
(2)
|
The amounts shown in this row represent the market value of restricted stock units that would vest and convert to a cash balance upon the occurrence of the events in each column. The amount is payable in accordance with his deferral election, with interest compounding at the average of quarterly ten-year treasury rates plus two percent (2%) on the undistributed balance of his deferral. Mr. Murphy is not over sixty (60) years old, and therefore would not vest in the Company’s matching contributions upon the occurrence of the events shown in each column except retirement which presumes Mr. Murphy is sixty (60) years of age.
|
34
|
(3)
|
The amounts shown in this row represent the market value of restricted stock units (“RSUs”) and performance stock units (“PSUs”) that vested or would vest upon the occurrence of the events in each column as of December 31, 2016. The actual payments of RSUs and PSUs occur six months after the event occurs and three years after grant, respectively, except for death, in which case payment is immediate. The amount shown in the retirement column presumes Mr. Murphy is sixty (60) years old.
|
|
(4)
|
The amounts shown in this row represent the amount earned under the Management Incentive Compensation Plan for 2016 which was deferred into the Management Stock Purchase Plan by Mr. Murphy and therefore the amount in the retirement column includes the Company match as we assume Mr. Murphy is over sixty (60) to calculate retirement payments. It is the Company’s policy to pay amounts due under the Management Incentive Compensation Plan to participants on a prorated basis when their employment is terminated without cause.
|
Payments upon Change in Control
The following tables set forth the amount of compensation which would be payable to the executive officers of the Company with whom the Company has entered into Change in Control Agreements as described above. For purposes of the payments to be made upon a change in control, the tables reflect amounts which would be paid to the executive officers if the change in control occurred and the executive officers were terminated on December 31, 2016, on which date, the closing price per share of the Company’s stock was $41.65.
Frank G. Heard
|
Lump Sum Cash Payment
|
Value of MSPP RSUs
|
Value of Outstanding Options
|
Value of LTIP RSUs (1)
|
Value of LTIP PSUs (2)
|
Non-equity Incentive Compensation
|
Total
|
||||||||||||||
|
$
|
4,771,250
|
|
$
|
4,204,585
|
|
$
|
405,250
|
|
$
|
4,032,470
|
|
$
|
8,109,068
|
|
$
|
1,679,804
|
|
$
|
23,202,427
|
|
|
(1)
|
Represents the value of LTIP RSUs currently issued.
|
|
(2)
|
Represents the value of LTIP PSUs currently issued, adjusted for actual performance relative to the 2014, 2015, and 2016 performance periods.
|
Kenneth W. Smith
|
Lump Sum Cash Payment
|
Value of MSPP RSUs
|
Value of Retirement RSUs
|
Value of Outstanding Options
|
Value of LTIP RSUs (1)
|
Value of LTIP PSUs (2)
|
Non-equity Incentive Compensation
|
Excise Tax Gross-up (3)
|
Total
|
||||||||||||||||||
|
$
|
1,501,000
|
|
$
|
7,174,810
|
|
$
|
1,249,500
|
|
$
|
202,625
|
|
$
|
1,517,726
|
|
$
|
4,998,635
|
|
$
|
577,973
|
|
$
|
1,382,665
|
|
$
|
18,604,934
|
|
|
(1)
|
Represents the value of LTIP RSUs currently issued.
|
|
(2)
|
Represents the value of LTIP PSUs currently issued, adjusted for actual performance relative to the 2014, 2015, and 2016 performance periods.
|
|
(3)
|
Mr. Smith's Change in Control Agreement includes a provision to provide a tax gross-up payment in the event any excise taxes are due on a change in control payment.
|
Cherri L. Syvrud
|
Lump Sum Cash Payment
|
Value of LTIP RSUs (1)
|
Value of LTIP PSUs (2)
|
Non-equity Incentive Compensation
|
Total
|
||||||||||
|
$
|
—
|
|
$
|
75,845
|
|
$
|
242,607
|
|
$
|
148,579
|
|
$
|
467,031
|
|
|
(1)
|
Represents the value of LTIP RSUs currently issued.
|
|
(2)
|
Represents the value of LTIP PSUs currently issued, adjusted for actual performance relative to the 2016 performance period.
|
Paul M. Murray
|
Lump Sum Cash Payment
|
Value of MSPP RSUs
|
Value of Retirement RSUs
|
Value of LTIP RSUs (1)
|
Value of LTIP PSUs (2)
|
401(k) Restoration Plan Payment
|
Non-equity Incentive Compensation
|
Total
|
||||||||||||||||
|
$
|
378,000
|
|
$
|
3,206,137
|
|
$
|
957,950
|
|
$
|
464,481
|
|
$
|
2,196,194
|
|
$
|
36,495
|
|
$
|
219,177
|
|
$
|
7,458,434
|
|
|
(1)
|
Represents the value of LTIP RSUs currently issued.
|
|
(2)
|
Represents the value of LTIP PSUs currently issued, adjusted for actual performance relative to the 2014, 2015, and 2016 performance periods.
|
35
Timothy F. Murphy
|
Lump Sum Cash Payment
|
Value of MSPP RSUs
|
Value of Retirement RSUs
|
Value of LTIP RSUs (1)
|
Value of LTIP PSUs (2)
|
Non-equity Incentive Compensation
|
Total
|
||||||||||||||
|
$
|
—
|
|
$
|
1,046,438
|
|
$
|
708,050
|
|
$
|
244,902
|
|
$
|
1,176,086
|
|
$
|
143,063
|
|
$
|
3,318,539
|
|
|
(1)
|
Represents the value of LTIP RSUs currently issued.
|
|
(2)
|
Represents the value of LTIP PSUs currently issued, adjusted for actual performance relative to the 2014, 2015, and 2016 performance periods.
|
PROPOSAL 4
APPROVAL OF THE MATERIAL TERMS OF THE
SPECIAL
PERFORMANCE STOCK UNIT GRANT
Proposal
We seek stockholder approval of material terms of the Company’s special grant of Performance Stock Units (“TSR PSUs”) to the CEO on February 1, 2017 so that compensation payable under the performance-based equity award may qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code (“Section 162(m)”).
Section 162(m) limits the deduction that a publicly-held corporation may claim for compensation paid to its Chief Executive Officer and certain other executive officers (“Covered Employees”). Section 162(m) generally provides that amounts paid to a Covered Employee in excess of $1 million are not deductible.
The deduction limitation of Section 162(m) does not apply to “performance-based compensation.” Compensation can qualify as “performance-based” under Section 162(m) only if a number of requirements are satisfied. One requirement of Section 162(m) is that the Company’s stockholders must approve the material terms of the performance criteria pursuant to which the compensation is payable. For this purpose, the material terms of the performance criteria must include (1) the employees eligible to receive performance-based compensation, (2) the business criteria on which the performance targets may be based, and (3) the maximum amount that an employee may receive for achieving the performance goals. Section 162(m) also requires that the material terms of the performance criteria be submitted to stockholders on a recurring basis.
The TSR PSU award is intended to provide compensation that qualifies as performance-based compensation under Section 162(m). Stockholders are being asked to approve material terms of the special TSR PSU grant in accordance with the regulations so compensation under the TSR PSU award can qualify as performance-based compensation that is deductible by the Company without regard to the limitation of Section 162(m).
Purpose
The objective of the special TSR PSU award was to provide meaningful financial incentives to the Chief Executive Officer ("CEO") of the Company consistent with interests of our stockholders. The Compensation Committee sought to accomplish this objective by providing the CEO a grant of TSR PSUs that may convert into shares of Gibraltar stock based upon achievement of the Company's total stockholder return relative to a peer group of companies. The Compensation Committee believes the TSR PSU awards closely align executive compensation with stockholder value creation.
Description of the Special PSU Grant
The TSR PSUs are earned by the CEO based on the Company's relative total stockholder return ("TSR") generated over a performance period beginning February 2, 2017 and ending February 1, 2020 compared to the TSR of companies within the S&P SmallCap 600 Industrial Sector Index. The payout factor applied to the target TSR PSUs granted is based upon meeting a threshold of the 40
th
percentile. At the 40
th
percentile, 100% of the target TSR PSUs will be issuable. If Gibraltar's TSR does not exceed the 40
th
percentile, no TSR PSUs will be issuable. A ranking between the 40
th
and 90
th
percentiles results in an adjustment of the number of TSR PSUs issuable on a straight-line basis until the maximum award limit is reached at the 90th percentile where the executive will be entitled to the issuance of 150% of the TSR PSUs awarded. All awards will be settled in shares of Gibraltar stock upon vesting on February 1, 2020.
The number of PSUs granted, performance criteria, targeted and threshold performance levels were established by the Compensation Committee of the Board of Directors. The Compensation Committee believes the long-term equity based incentive compensation structure described above promotes the interests of the Company's stockholders by providing incentives to the CEO to maximize the Company's TSR.
36
Eligible Employees
The special PSU grant was made to the CEO on February 1, 2017.
Performance Goals
The incentive compensation earned under the PSU grant is intended to qualify as performance-based compensation within the meaning of Section 162(m) and will be subject to attainment of performance targets relating to the performance criteria identified by the Compensation Committee. The performance goal is based solely on TSR relative to a peer group as described above.
Maximum Amount of Compensation that Can Be Paid to an Individual Under the Performance Goal
The maximum number of PSUs that may be converted to stock for the CEO is set equal to 150% of the PSUs granted, or 30,000 shares.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE MATERIAL TERMS OF THE SPECIAL PSU GRANT IN PROPOSAL 4.
|
PROPOSAL 5
APPROVAL OF THE MATERIAL TERMS OF THE
ANNUAL PERFORMANCE STOCK UNIT GRANT
Proposal
PSU awards issued under the LTIP historically settled in cash. PSU awards issued under the LTIP beginning in 2017 will settled in shares. We seek stockholder approval of material terms of the Company's annual grant of performance-based equity awards of Performance Stock Units ("PSUs") so that compensation payable under the performance-based equity award may qualify as "performance-based compensation" under Section 162(m).
As noted above, compensation can qualify as “performance-based” under Section 162(m) only if a number of requirements are satisfied. One requirement of Section 162(m) is that the Company’s stockholders must approve the material terms of the performance criteria pursuant to which the compensation is payable. For this purpose, the material terms of the performance criteria must include (1) the employees eligible to receive performance-based compensation, (2) the business criteria on which the performance targets may be based, and (3) the maximum amount that an employee may receive for achieving the performance goals. Section 162(m) also requires that the material terms of the performance criteria be submitted to stockholders on a recurring basis.
PSU awards are intended to provide compensation that qualifies as performance-based compensation under Section 162(m). Stockholders are being asked to approve the material terms of annual PSU grants in accordance with the regulations so compensation under PSU awards can qualify as deductible performance-based compensation not subject to the limitation of Section 162(m).
Purpose
The objectives of PSU awards are to provide meaningful financial incentives to executive officers and other key employees of the Company and its subsidiaries consistent with interests of the Company's stockholders. The Compensation Committee seeks to accomplish this objective by providing executive officers and key employees of the Company with PSUs that may convert into shares of Gibraltar stock if the Company achieves certain targeted levels of performance. The Company believes PSU awards align management compensation with stockholder value creation.
Description of the Performance Stock Unit Grant
PSUs are earned by executive officers based on the Company's return on invested capital ("ROIC") for the annual performance period beginning January 1 and ending December 31 against targets set by the Compensation Committee. If the Company's ROIC for a performance period is less than the threshold set by the Compensation Committee, the number of performance units earned for the performance period will be zero. If the Company's ROIC for a performance period is greater than the threshold, the Company's ROIC will be compared to the ROIC target. If the Company's ROIC is equal to target, the executive officers will earn performance units equal to the targeted award. If the Company's ROIC for the applicable performance period is less than target, the number of performance units earned by executive officers will be less than the targeted number of performance share units with the possibility of not earning any performance units. Conversely, if the Company's ROIC for a performance period exceeds target, the number of performance units earned by the executive officers will be increased up to a maximum of two hundred percent (200%) of the targeted performance unit award. All awards will be settled in shares of Gibraltar stock two years after the performance period.
37
The Compensation Committee believes that the long-term equity based incentive compensation structure described above promotes the interests of the Company's stockholders by providing incentives to executive officers and other key employees to continue their employment with the Company and improve return on invested capital, which we believe will lead to shareholder value creation. Furthermore, executive officers are provided an incentive to increase the value of the Company's common stock over the long term because this long-term incentive compensation program is share settled.
Eligible Employees
The annual PSU grant is awarded to executive officers and other key management of the Company and its subsidiaries identified by senior management. Approximately 15 employees are awarded PSUs which include members of senior management that our executive officers believe have the ability to improve return on invested capital and the value of the Company.
Performance Goals
The incentive compensation earned under the annual PSU grant that is intended to qualify as performance-based compensation within the meaning of Section 162(m) is subject to attainment of performance targets relating to the performance criteria identified by the Compensation Committee and senior management. As noted above, the performance targets are based on a comparison of the Company's ROIC for each annual performance period against the targeted ROIC for each performance period.
Maximum Amount of Compensation that Can Be Paid to an Individual Under the Performance Goal
Consistent with the Gibraltar Industries, Inc. 2015 Equity Incentive Plan, the maximum number of PSUs that may be credited to an individual for performance that exceeds the Index's performance is capped at two hundred percent (200%) of the PSUs granted.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE MATERIAL TERMS OF THE ANNUAL PERFORMANCE STOCK UNIT GRANT IN PROPOSAL 5.
|
PROPOSAL 6
APPROVAL OF FIRST AMENDMENT TO THE GIBRALTAR
INDUSTRIES, INC. 2015 EQUITY INCENTIVE PLAN
The Board of Directors approved the first amendment (the “2015 Plan Amendment” or the “Amendment”) to the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the “Plan”). The 2015 Plan Amendment includes a provision to limit the number of stock options, stock appreciation rights, performance shares, or performance stock units a participant can receive for any calendar year to the equivalent of less than 500,000 shares of the Company's common stock. We seek stockholder approval of the Amendment so that compensation payable from the exercise of non-qualified stock options issued from the Plan may qualify as "performance-based compensation" under Section 162(m).
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE FIRST AMENDMENT TO THE GIBRALTAR INDUSTRIES, INC. 2015 EQUITY INCENTIVE PLAN IN PROPOSAL 6.
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s Directors and executive officers, and any persons who own more than ten percent (10%) of a registered class of the Company’s equity securities, to file reports of initial ownership of Common Stock and subsequent changes in that ownership with the Securities and Exchange Commission and to furnish the Company with copies of all forms they file pursuant to Section 16(a).
On January 7, 2016, five Form 4 disclosures were issued to correct the number of shares of the Company's common stock issued as a result of the vesting of restricted stock units for Frank Heard, Kenneth Smith, Paul Murray, and Timothy Murphy which were inadvertently reported inaccurately due to an administrative oversight. Additionally, on May 12, 2016 and May 19, 2016, Form 4 disclosures were issued to correct the number of stock and restricted stock awards outstanding for Kenneth Smith and Frank Heard, respectively, which were inadvertently reported inaccurately due to an administrative oversight.
38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Certain Beneficial Owners
The following table sets forth information as of March 20, 2017 (except as otherwise noted) with respect to all stockholders known by the Company to be the beneficial owners of more than 5% and certain other holders of its outstanding Common Stock:
|
Name and Address
|
Number of Shares and Nature of Beneficial Ownership (1)
|
Percent of Class
|
|
BlackRock, Inc. (2)
55 East 52nd Street New York, NY 10055 |
3,501,062
|
11.1
|
|
Dimensional Fund Advisors LP (3)
Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746 |
2,499,960
|
7.9
|
|
The Vanguard Group (4)
100 Vanguard Blvd. Malvern, PA 19355 |
1,955,856
|
6.2
|
|
Barrow, Hanley, Mewhinney & Strauss, LLC (5) 2200 Ross Avenue, 31st Floor Dallas, TX 75201-2761
|
1,598,861
|
5.1
|
|
(1)
|
Unless otherwise indicated in the footnotes each of the stockholders named in this table has the sole voting and investment power with respect to the shares shown as beneficially owned by such stockholder, except to the extent that authority is shared by spouses under applicable law.
|
|
(2)
|
Based on information set forth in a statement on Schedule 13G filed with the SEC reflecting information as of December 31, 2016 available on NASDAQ.com, filed on January 12, 2017 by BlackRock, Inc. Number of shares disclosed above includes 70,704 shares over which BlackRock, Inc. does not have the sole voting power.
|
|
(3)
|
Based on information set forth in a statement on Schedule 13G filed with the SEC reflecting information as of December 31, 2016 and available on NASDAQ.com, filed on February 9, 2017 by Dimensional Fund Advisors LP. Number of shares disclosed above includes 87,653 shares over which Dimensional Fund Advisors LP does not have the sole voting power.
|
|
(4)
|
Based on information set forth in a statement on Schedule 13G filed with the SEC reflecting information as of December 31, 2016 and available on NASDAQ.com, filed on February 13, 2017 by The Vanguard Group. Number of shares disclosed above includes 1,902,708 shares over which The Vanguard Group does not have the sole voting power.
|
|
(5)
|
Based on information set forth in a statement on Schedule 13G filed with the SEC reflecting information as of December 31, 2016 available on NASDAQ.com, filed on February 9, 2017 by Barrow, Hanley, Mewhinney & Strauss, LLC. Number of shares disclosed above includes 677,283 shares over which Barrow, Hanley, Mewhinney, & Strauss, LLC does not have the sole voting power.
|
39
Management
The following table sets forth information as of March 20, 2017 (except as otherwise noted) with respect to each director, director nominee, each executive officer named in the Summary Compensation table above, and all executive officers and directors as a group:
|
Name and Address (1)
|
Number of Shares and
Nature of Beneficial Ownership (2)
|
Percent of Class
|
||
|
Kenneth W. Smith (3)
|
57,414
|
|
*
|
|
|
William P. Montague (4)
|
38,774
|
|
*
|
|
|
Frank G. Heard (5)
|
23,664
|
|
*
|
|
|
Timothy F. Murphy (6)
|
9,733
|
|
*
|
|
|
Jane L. Corwin (7)
|
6,039
|
|
*
|
|
|
Vinod M. Khilnani (8)
|
5,854
|
|
*
|
|
|
Craig A. Hindman (9)
|
3,465
|
|
*
|
|
|
Sharon M. Brady (10)
|
1,322
|
|
*
|
|
|
James B. Nish (11)
|
1,322
|
|
*
|
|
|
All Directors and Executive Officers as a Group
|
147,587
|
|
0.5
|
|
|
*
|
Less than 1%.
|
|
(1)
|
The address of each executive officer and director is 3556 Lake Shore Road, PO Box 2028, Buffalo, New York 14219.
|
|
(2)
|
Unless otherwise indicated in the footnotes each of the stockholders named in this table has the sole voting and investment power with respect to the shares shown as beneficially owned by such stockholder, except to the extent that authority is shared by spouses under applicable law.
|
|
(3)
|
Consists of 57,414 shares of common stock registered in the name of the reporting person.
|
|
(4)
|
Consists of 38,774 shares of common stock registered in the name of the reporting person, including 8,039 restricted shares with respect to which Mr. Montague exercises voting power but does not currently have dispositive power.
|
|
(5)
|
Consists of 23,664 shares of common stock registered in the name of the reporting person.
|
|
(6)
|
Consists of 9,733 shares of common stock registered in the name of the reporting person.
|
|
(7)
|
Consists of 6,039 shares of common stock registered in the name of the reporting person, including 6,039 restricted shares with respect to which Ms. Corwin exercises voting power but does not currently have dispositive power.
|
|
(8)
|
Consists of 5,854 shares of common stock registered in the name of the reporting person, including 3,465 restricted shares with respect to which Mr. Khilnani exercises voting power but does not currently have dispositive power.
|
|
(9)
|
Consists of 3,465 shares of common stock registered in the name of the reporting person, including 3,465 restricted shares with respect to which Mr. Hindman exercises voting power but does not currently have dispositive power.
|
|
(10)
|
Consists of 1,322 shares of common stock registered in the name of the reporting person, including 1,322 restricted shares with respect to which Ms. Brady exercises voting power but does not currently have dispositive power.
|
|
(11)
|
Consists of 1,322 shares of common stock registered in the name of the reporting person, including 1,322 restricted shares with respect to which Mr. Nish exercises voting power but does not currently have dispositive power.
|
40
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORT
The Nominating and Corporate Governance Committee currently consists of four directors who are independent as defined in the listing standards of NASDAQ applicable to members of nominating committees. A brief description of the responsibilities of the Nominating and Corporate Governance Committee is set forth above under the caption “The Board of Directors and its Committees.”
The current nominees for director were recommended for election to the Board at a meeting of the Nominating and Corporate Governance Committee held on February 15, 2017. Messrs. Hindman, Khilnani, and Montague did not participate in their recommendations for election to the Board. No communications from stockholders regarding nominations were received by the Committee. The Nominating and Corporate Governance Committee recommended that Sharon Brady, Craig Hindman, Vinod Khilnani, William Montague, and James Nish each be nominated as Directors for a one-year term.
In evaluating potential nominees, the Nominating and Corporate Governance Committee considers a nominee’s experience as a senior executive at a publicly traded corporation, or as a management consultant, investment banker, partner at a law firm or registered public accounting firm, professor at an accredited law or business school, experience in the management or leadership of a substantial private business enterprise, educational, religious, governmental or not-for-profit organization, or such other professional experience as the Nominating and Corporate Governance Committee determines shall qualify an individual for Board service; whether such person is “independent” within the meaning of such term in accordance with the applicable listing standards of NASDAQ and the rules promulgated by the Securities and Exchange Commission; financial expertise of a potential nominee; and particular or unique needs of the Company at the time a nominee is being considered.
NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS OF
GIBRALTAR INDUSTRIES, INC.
Jane L. Corwin
Craig A. Hindman
Vinod M. Khilnani
William P. Montague
PROPOSAL 7
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee of the Company’s Board has selected the firm of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017, and recommends that the stockholders vote for the ratification of that selection. Ernst & Young LLP has audited the Company’s consolidated financial statements for the past twelve fiscal years including 2016. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will be given the opportunity to make a statement if they so desire and to respond to appropriate questions.
The Audit Committee is responsible for the appointment, oversight, and compensation of the Company’s independent registered public accounting firm, which is evaluated on an annual basis. Before selecting Ernst & Young LLP, the Audit Committee carefully considered that firm’s qualifications as the independent registered public accounting firm for the Company and the audit scope. Stockholder ratification of the Audit Committee’s selection of Ernst & Young LLP as the Company’s independent registered public accounting firm is not required by the Company’s bylaws or otherwise. The Company’s Board of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification and will reconsider whether to retain Ernst & Young LLP if the stockholders fail to ratify the Audit Committee’s selection. In addition, even if the stockholders ratify the selection of Ernst & Young LLP, the Audit Committee may in its discretion appoint a different independent accounting firm at any time during the year if the Audit Committee determines that a change is in the best interests of the Company.
|
THE AUDIT COMMITTEE RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM IN PROPOSAL 7.
|
41
INFORMATION ABOUT OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Ernst & Young LLP (“EY”) as the Company’s independent registered public accounting firm for the 2016 fiscal year. EY served as our independent registered public accounting firm and audited our consolidated financial statements for the fiscal years ended December 31, 2016 and 2015 and expressed an opinion as to whether the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016 and 2015. Additionally, EY performed certain non-audit services during fiscal 2016 and 2015 that are permitted under the Sarbanes-Oxley Act and related rules of the Securities and Exchange Commission ("SEC").
The Audit Committee determined that the provision of the audit-related and permitted non-audit services provided by EY during fiscal 2016 and 2015 was compatible with maintaining their independence pursuant to the auditor independence rules of the SEC for each of these years.
Fees Billed to the Company by EY during Fiscal Year 2016 and 2015
Audit Fees
The aggregate fees billed by EY for each of the fiscal years ended December 31, 2016 and 2015, for services rendered for the audit of the Company’s annual financial statements and internal control over financial reporting included the Company’s annual reports on Form 10-K and review of the interim financial statements included in the Company’s quarterly reports on Form 10-Q, including services related thereto, were $1,118,285 and $1,109,906, respectively.
Audit-Related Fees
The aggregate fees billed by EY for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements (including advice related to mergers and acquisitions) were $290,141 for the fiscal year ended December 31, 2015. No fees were billed by EY for these services during 2016.
Tax Fees
The aggregate fees billed by EY for the fiscal years ended December 31, 2016 and 2015 for services rendered for tax compliance (including tax planning, tax advice, and other tax services) were $163,024 and $36,467, respectively.
All Other Fees
The aggregate fees billed for other products and services was $2,170 and $2,170 for the fiscal years ended December 31, 2016 and 2015, respectively.
Pre-Approval for Non-Audit Services Policies and Procedures of the Audit Committee
The Audit Committee has adopted procedures for pre-approving audit and non-audit services to be provided by EY. In considering such approval, the Audit Committee may request all such information and documentation from the Company as it deems necessary in order for it to make its decision with respect to the requested engagement. The Audit Committee may discuss the potential engagement with the independent registered public accounting firm, with its counsel or other professional advisors. The Audit Committee shall consider whether or not the performance of the requested non-audit services complies with law, including but not limited to the Sarbanes-Oxley Act and the regulations promulgated by the SEC thereunder. It shall also consider whether the services provided will have a negative effect upon the integrity of the Company’s financial reporting, whether by approving such engagement the Audit Committee is complying with and promoting its purposes, duties, and functions as set forth in its Charter, and it shall also consider any potential negative effect which the engagement may have on the Company, including the possible appearance of a conflict of interest or impropriety.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee is responsible for reviewing and approving transactions and business relationships with any significant shareholder, director, executive officer or other member of senior management, or their family members on an ongoing basis. The Audit Committee requests and receives from the Company on an annual basis, a list and description of transactions with related parties, as described above, to the extent such transactions are required to be reported in the Company’s Definitive Proxy Statement pursuant to Regulation S-K, Item 404(a). The Audit Committee reviews and discusses such transactions with management and the independent auditor, and approves or ratifies such transactions on an annual basis. Prior to approval or ratification of such transactions, the Audit Committee considers the qualifications of the related party, fees charged to the Company, and the significance of the transaction to the Company and the related party.
42
During 2016, an officer of certain of the Company's subsidiaries, Mr. Richard Reilly, was the owner of certain real estate properties leased for manufacturing and distribution purposes by those subsidiaries. The leases are in effect until June 2018 and June 2020. For the years ended December 31, 2016 and 2015, the Company incurred $1,039,000 and $523,000 of lease expense for these properties.
The Audit Committee reviewed and approved all the transactions described above for 2016 in accordance with the policy, as described above, which is included in the Audit Committee Charter.
AUDIT COMMITTEE REPORT
The Audit Committee currently consists of three directors who are independent as defined in the listing standards of NASDAQ applicable to members of audit committees. A brief description of the responsibilities of the Audit Committee is set forth above under the caption “Corporate Governance”.
The Audit Committee has reviewed and discussed the Company’s audited financial statements for the year ended December 31, 2016 with management of the Company and Ernst & Young LLP, the Company’s independent registered public accounting firm. During 2016, management evaluated the Company’s internal control over financial reporting in response to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and based on the framework in
Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Throughout the year, management kept the Audit Committee apprised of the progress of its evaluation of internal controls and the Audit Committee provided oversight of the evaluation process. At the end of the year, management issued a report on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee reviewed this report and discussed with management and Ernst & Young LLP the adequacy of the Company’s internal control over financial reporting and disclosure controls. The Audit Committee also discussed with Ernst & Young LLP the matters required to be discussed by the Public Company Accounting Oversight Board’s (“PCAOB”) auditing standard section 380,
The Auditor’s
Communication with Those Charged with Governance,
which relates to the conduct of the audit, including the auditor’s judgment about the quality of the accounting principles applied in the Company’s 2016 audited financial statements. The Audit Committee also has reviewed the written disclosures and the letter from Ernst & Young LLP required by Rule 3526 of the PCAOB,
Communication with
Audit Committees Concerning Independence
, and has discussed with Ernst & Young LLP its independence.
Based on the review and the discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS OF
GIBRALTAR INDUSTRIES, INC.
Jane L. Corwin
William P. Montague
James B. Nish
OTHER MATTERS
The Company’s management does not currently know of any matters to be presented for consideration at the Annual Meeting other than the matters described in the Notice of Annual Meeting. However, if other matters are presented, the accompanying proxy confers upon the person or persons entitled to vote the shares represented by the proxy, discretionary authority to vote such shares in respect of any such other matter in accordance with their best judgment.
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OTHER INFORMATION
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS SOLICITED, ON
THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY’S ANNUAL REPORT ON
FORM 10-K, FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO GIBRALTAR INDUSTRIES,
INC., 3556 LAKE SHORE ROAD, PO BOX 2028, BUFFALO, NEW YORK 14219-0228,
ATTENTION: TIMOTHY F. MURPHY. EACH SUCH REQUEST
MUST SET FORTH A GOOD FAITH REPRESENTATION THAT, AS OF MARCH 20, 2017, THE PERSON
MAKING THE REQUEST WAS A BENEFICIAL OWNER OF SECURITIES ENTITLED TO VOTE AT THE
ANNUAL MEETING OF STOCKHOLDERS.
STOCKHOLDERS’ PROPOSALS
Proposals of stockholders intended to be presented at the 2018 Annual Meeting must be received by the Company’s Secretary by December 22, 2017 to be considered for inclusion in the Company’s Definitive Proxy Statement and form of proxy relating to that meeting. Proposals should be sent to the attention of the Secretary at the Company’s headquarters located at 3556 Lake Shore Road, PO Box 2028, Buffalo, NY 14219-0228.
The accompanying Notice and this Definitive Proxy Statement are sent by Order of the Board of Directors.
Jeffrey J. Watorek
Secretary
Dated: April 4, 2017
STOCKHOLDERS ARE URGED TO EXECUTE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING. A STOCKHOLDER MAY NEVERTHELESS VOTE IN PERSON IF HE OR SHE DOES ATTEND.
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APPENDIX A
GIBRALTAR INDUSTRIES, INC.
2015 EQUITY INCENTIVE PLAN
_______________________________
First Amendment
_______________________________
Effective as of May 7, 2015, Gibraltar Industries, Inc., a Delaware corporation with offices at 3556 Lake Shore Road, Buffalo, New York (the “Company”), adopted an equity based incentive compensation plan known as the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the “Plan”) for the purpose of carrying into effect its objective to provide its employees and its non-employee directors, consultants and other service providers with equity based incentives to increase their motivation to improve the profitability of the Company. Capitalized terms used but not otherwise defined in this Amendment shall have the meaning ascribed to such terms by the Plan.
The Plan provides the Company a structure which will allow the Company to issue Options, Performance Shares, Performance Units and Rights which the Company intends to treat as performance based compensation for purposes of Internal Revenue Code Section 162(m).
The terms of Reg. §1.162-27(e)(4)(iv) (as adopted by the Secretary of the Treasury) set forth certain conditions which must be satisfied in order for, Options, Performance Shares, Performance Units and Rights to be treated as performance based compensation under Internal Revenue Code Section 162(m).
The Company desires to amend the Plan to permit Options, Performance Shares, Performance Units and Rights which may be granted under the terms of the Plan to be treated as performance based compensation.
In connection with the foregoing, the Company hereby adopts the following as the First Amendment to the Gibraltar Industries, Inc. 2015 Equity incentive Plan effective as of May 7, 2015:
1.
Section 2.03 of the Plan is hereby amended by: (a) deleting the word “or” as it appears before “(f)” within such Section; (b) adding a semi-colon after the last word “Award” in subclause (f) of such Section and adding a new subclause (g) to such Section to read as follows:
“(g) a Participant will be granted, as equity based incentive compensation for any one calendar year period, Options, Rights, Performance Shares, or Performance Units which would result in the issuance to the Participant of more than Five Hundred Thousand (500,000) Shares or payment to the Participant of cash compensation having a value in excess of Five Hundred Thousand (500,000) Shares.”
2.
Except as specifically provided above, the terms of the Plan shall be and remain in full force and effect following the date hereof, without any amendment or modification of the same.
IN WITNESS WHEREOF, Gibraltar Industries, Inc. has caused this Plan to be executed as of the _____ day of May, 2017.
GIBRALTAR INDUSTRIES, INC.
By:_________________________
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GIBRALTAR INDUSTRIES, INC.
3556 LAKE SHORE ROAD
P.O. BOX 2028
BUFFALO, NY 14219
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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If voting by Internet or Phone, do not return your proxy card.
TABLE OF CONTENTS
DEFINITIVE PROXY STATEMENTPROPOSAL 1 ELECTION OF DIRECTORSCORPORATE GOVERNANCEDIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANYCOMPENSATION OF DIRECTORSPROPOSAL 2 TIMING OF ADVISORY VOTE ON EXECUTIVE COMPENSATION (SAY-WHEN-ON-PAY)PROPOSAL 3 ADVISORY VOTE ON EXECUTIVE COMPENSATION (SAY-ON-PAY)COMPENSATION DISCUSSION & ANALYSISExecutive SummaryCompensation Overview and Pay-for-PerformanceDistinguishing Awarded Compensation from Realized CompensationSay-on-Pay Vote ResultsDesign of the Compensation ProgramElements of Our Compensation ProgramEmployment AgreementsClawback PolicyTax ConsiderationsConclusionCOMPENSATION COMMITTEE REPORTCOMPENSATION OF EXECUTIVE OFFICERSSummary Compensation TableGrants of Plan-Based AwardsOutstanding Equity Awards at Fiscal Year EndOption Exercises and Stock VestedNonqualified Deferred CompensationPOTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROLPROPOSAL 4 APPROVAL OF THE MATERIAL TERMS OF THE SPECIAL PERFORMANCE STOCK UNIT GRANTPROPOSAL 5 APPROVAL OF THE MATERIAL TERMS OF THE ANNUAL PERFORMANCE STOCK UNIT GRANTPROPOSAL 6 APPROVAL OF THE FIRST AMENDMENT TO THE GIBRALTAR INDUSTRIES, INC. 2015 EQUITY INCENTIVE PLANSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTNOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORTPROPOSAL 7 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMINFORMATION ABOUT OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSAUDIT COMMITTEE REPORTOTHER MATTERSOTHER INFORMATIONSTOCKHOLDERS PROPOSALSAPPENDIX A A- 1