(RULE 14a-101)

SCHEDULE 14A INFORMATION

 

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Securities Exchange Act of 1934

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The Annual Meeting of Shareholders of UFP Industries, Inc. (the “Company”) will be held at 3310 Eagle Park Dr NE, Grand Rapids, MI 49525, on Wednesday, April 24, 2024, at 8:30 a.m. EDT (registration begins at 8:00 a.m. EDT) for the following purposes:

 

 

Shareholders of record at the close of business on February 28, 2024, are entitled to notice of and to vote at the meeting. To vote by telephone, shareholders of record may call toll-free on a touch-tone telephone, 1-800-690-6903, enter the control number located on their proxy card or Notice of Internet Availability of Proxy Materials, and follow the recorded instructions. To vote via the Internet, shareholders of record may go to www.proxyvote.com, enter the control number located on their proxy card or Notice, and follow the instructions provided.

 

David A. Tutas,

General Counsel and Secretary

 

 

 

UFP Industries, Inc.

Annual Meeting of Shareholders

The following is information regarding the meeting and the voting process, presented in a question and answer format.

 

As of February 28, 2024, the Record Date for the Annual Meeting, we had issued and outstanding 61,529,910 shares of common stock. Shareholders are entitled to one vote for each share of our common stock registered in their names as of the close of business on the Record Date. Votes cast at the meeting and submitted by proxy are counted by the inspectors of the meeting, who are appointed by us.

The following table sets forth information as to each shareholder known to have been the beneficial owner of more than five percent (5%) of our outstanding shares of common stock as of February 28, 2024.

 

Our Board presently consists of nine members. These members are divided into three classes of equal number, with the classes to hold office for staggered terms of three years each. Our Board has nominated Matthew J. Missad, Thomas W. Rhodes and Brian C. Walker to three-year terms expiring at our 2027 Annual Meeting of Shareholders. Each incumbent director has been previously elected by our shareholders.

The persons named as proxy holders in the accompanying proxy will vote for the above-named nominees, unless a shareholder directs them differently by proxy. If a nominee is not available for election as a director at the time of the Annual Meeting (a situation which is not now anticipated), the Board may designate a substitute nominee, and the accompanying proxy will be voted for the substitute nominee.

The proxies cannot be voted for a greater number of persons than the number of nominees named. The proxy holders, to the extent they have been granted authority to vote in the election of directors, may or may not vote for a substitute nominee.

The vote required for the election of a director shall, except in a contested election, be the affirmative vote of a majority of the votes cast in the election of a nominee. A “majority of the votes cast” means that the number of votes cast “for” a director’s election must exceed the number of votes cast “against” that director’s election. “Abstentions” and “broker non-votes” are not counted as votes cast either “for” or “against” that director’s election. In a contested election, directors are elected by a plurality of the votes cast at a meeting of shareholders. An election is considered contested if there are more nominees for election than positions on the Board of Directors to be filled by election at that meeting.

In any non-contested election of directors, any director nominee who receives a greater number of votes cast against his or her election than in favor of his or her election is required to immediately tender his or her resignation to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation or whether other action should be taken. The Board will act on the Committee’s recommendation and publicly disclose its decision within 90 days from the date of the certification of the election results for that meeting.

The following table provides certain biographical information for each person who is nominated for election as a director at our Annual Meeting and for each person who is continuing as an incumbent director. The information was provided to us as of February 28, 2024, by the respective nominees and directors.

 

 

 

 

 

 

 

 

 

 

To see our Board Diversity Matrix as of March 1, 2023, please see our proxy statement filed with the SEC on March 17, 2023.

Our Board is committed to sound and effective corporate governance practices. The Board has documented those practices in our Corporate Governance Principles (the “Principles”). These Principles address director qualifications, director responsibilities, periodic performance evaluations, stock ownership guidelines and a variety of other corporate governance matters. The Principles also require the Board to have an Audit Committee, a Nominating and Corporate Governance Committee, and a Personnel and Compensation Committee. The Principles, along with the charters of each of these committees, are available for review on our website at www.ufpi.com under the tabs “Investors → Governance.”

We adopted a Code of Business Conduct and Ethics that applies to our employees, officers and directors. We also adopted a Code of Ethics for Senior Financial Officers. Each Code is posted on our website at www.ufpi.com under the tabs “Investors → Governance.” Any changes to or waivers of either Code for our chief executive officer or senior financial officers will be disclosed on our website at www.ufpi.com under the tabs “Investors → Governance.”

As required by the Principles, our Board has determined each of the following directors to be an “independent director” under the Nasdaq Stock Market Rules (the “Nasdaq Standard”): Joan A. Budden, William G. Currie, Benjamin J. McLean, Bruce A. Merino, Thomas W. Rhodes, Mary Tuuk Kuras, Brian C. Walker and Michael G. Wooldridge. There are no family relationships between or among the directors and our executive officers.

To assist our Board, the Nominating and Corporate Governance Committee reviewed the applicable legal standards for director and board committee independence, as well as the criteria applied to determine “audit committee financial expert” status and the answers to annual questionnaires completed by each of the directors. Based on this review, the Nominating and Corporate Governance Committee delivered a report to the full Board, and the Board made its independence and “audit committee financial expert” determinations based upon that report and each member’s review of the information made available to the Nominating and Corporate Governance Committee.

The effectiveness of each of our directors is monitored through the use of an annual assessment. Our Board does not have a mandatory retirement age policy, although the Nominating and Corporate Governance Committee considers a director’s tenure with the Company as a factor in nominating incumbent directors. We believe that the ability of a Board member to add value to our Company is not dependent on age; rather, it is based on the director’s actual performance. As a result, we expect that some directors will not serve until a typical retirement age, while others may serve longer. In addition, we evaluate the tenure of individual directors as well as the collective tenure of our Board. In connection with this evaluation, we strive to maintain a balanced composition of relatively new and meaningful tenured directors with the objective of fostering the input of new ideas and thoughts while maintaining a strong historical perspective and deep understanding of our business and the markets we serve.

Each member of the Audit Committee is “independent” under the Nasdaq Standard as well as the applicable rules of the SEC for audit committee membership. Our Board has determined that Mr. McLean, Ms. Tuuk Kuras and Mr. Walker each qualifies as an “audit committee financial expert,” as defined in Item 407(d) of Regulation S-K of the Securities Exchange Act of 1934 (the “Exchange Act”). The full responsibilities of the Audit Committee are set forth in the Audit Committee Charter. In general, the primary purpose of this Committee is to assist the Board in overseeing management’s conduct of our financial reporting processes and system of internal controls regarding finance, accounting, legal compliance and ethics. During 2023, the Audit Committee held four meetings.

Each member of this Committee is “independent” under the Nasdaq Standard. The Committee is responsible for reviewing and recommending to the Board the timing and amount of compensation for key employees, including salaries, bonuses and other benefits, as well as director compensation. This Committee is also responsible for reviewing succession planning for our Chief Executive Officer, as well as administering our equity-based incentive plans and reviewing compensation plans and awards as they relate to key employees. The Committee has the authority to retain consultants and third-party advisors for assistance. The Committee has the ultimate authority to determine matters of executive compensation; however, it may rely upon recommendations of our Chief Executive Officer for matters of compensation for officers and Named Executives (as defined in the Summary Compensation Table), other than the Chief Executive Officer. Additional information on the Committee’s role and practices involving executive compensation is described in the Compensation Discussion and Analysis in this proxy statement. The full responsibilities of the Personnel and Compensation Committee are set forth in its Charter. During 2023, the Personnel and Compensation Committee held two meetings.

Each member of the Nominating and Corporate Governance Committee is “independent” under the Nasdaq Standard. The Nominating and Corporate Governance Committee considers and proposes director nominees to the Board for election by our shareholders, selects candidates to fill Board vacancies as they may occur, makes recommendations to the Board regarding Board committee memberships, generally monitors our corporate governance practices, and performs any other functions or duties deemed appropriate by our Board. The full responsibilities of the Nominating and Corporate Governance Committee are set forth in its Charter. The Committee and Board adopted a Policy Governing Director Qualifications and Nominations, the details of which are described below, which include certain minimum qualification and board composition standards. The Committee is responsible for succession planning for Board members. In view of the age and tenure of certain members of the Board, the Committee has been active in seeking and evaluating qualified candidates, consistent with the Policy Governing Director Qualifications and Nominations,

to serve on the Board. This Committee is also responsible for overseeing the Company’s strategies and policies with respect to various environmental, social and governance (“ESG”) matters, including oversight of the Company’s related disclosure obligations. During 2023, the Nominating and Corporate Governance Committee held two meetings.

Our Articles of Incorporation contain certain procedural requirements applicable to shareholder nominations of directors. A shareholder who wishes to nominate a person to serve as a director must provide us with written notice. The notice must include: (1) the name and address of both the shareholder who intends to make the nomination and the person or persons nominated; (2) a representation that the shareholder is a current holder of record, will continue to hold those shares through the date of the meeting, and intends to appear in person or by proxy at the meeting; (3) a description of all arrangements between the shareholder and each nominee; (4) the information regarding each nominee as would be required to be included in a proxy statement filed under Regulation 14A of the Exchange Act had the nominee been nominated by the Board; and (5) the consent of each nominee to serve as a director. The nominee’s written consent to the nomination and sufficient background information regarding the candidate must be included to enable the Nominating and Corporate Governance Committee to make proper assessments as to his or her qualifications. Nominations must be addressed to the Chairman of the Nominating and Corporate Governance Committee at our headquarters and must be received no later than 30 days prior to our Annual Meeting of Shareholders, or within seven days after the date our notice of the Annual Meeting of Shareholders is given to our shareholders if our notice of that meeting is given less than 40 days prior to the date of that meeting.

Our Board has adopted a Policy Governing Director Qualifications and Nominations (the “Policy”). The substance of the Policy is incorporated into the Nominating and Corporate Governance Committee’s Charter, which is available on our website. The Policy sets forth the general process the Committee is required to follow for identifying and evaluating director nominees, including nominees recommended by shareholders. Under the Policy, the Committee has the authority to seek director candidates from any source deemed appropriate, including recommendations of candidates submitted by shareholders. The Policy requires the Committee to evaluate all proposed director candidates in the same manner, irrespective of the source of the initial recommendation of the proposed candidate.

The Policy includes minimum qualification standards, Board composition standards and additional qualification criteria. With respect to the former, the Policy requires that the Committee be satisfied that each recommended nominee meets the following qualifications:

In addition to these minimum qualification criteria, the Committee is required to recommend Board candidates to help ensure that a majority of our Board is independent, that each of the Audit, Personnel and Compensation, and Nominating and Corporate Governance Committees is comprised entirely of independent directors, and that at least one member of the Audit Committee qualifies as an audit committee financial expert. The Committee and our Board also consider diversity in their identification of director candidates. Diversity in business and professional experience, education and background benefits our Company by increasing the range of skills and perspectives available to our Board. Director nominees are selected without regard to race, gender, sexual orientation, religious belief or national origin. Our Board believes that adherence to these principles will provide an environment and practices that will yield the best return for our shareholders.

The Committee has, to date, not paid any third-party fees to assist in identifying and evaluating nominees. As of the date of this Proxy Statement, the Committee has not received any recommended nominations from any of our shareholders in connection with our 2024 Annual Meeting of Shareholders.

Our Bylaws provide for majority voting in connection with the election of directors. This majority voting standard is described above in the “Election of Directors” section.

Generally, shareholders who have questions or concerns regarding our Company should contact Investor Relations at 800-598-9663. However, any shareholder who wishes to address questions regarding the business or affairs of our Company directly with the Board or any individual director should direct his or her questions in writing to our Secretary at 2801 East Beltline NE, Grand Rapids, MI 49525. Our Secretary has been directed to promptly forward all communications to the full Board or the specific director indicated in the letter. Our Board and management team are committed to actively engaging with our shareholders. During 2023, members of our executive team attended several investor conferences at which they met with existing shareholders as well as prospective shareholders. In addition, we regularly meet with investors, prospective investors and investment analysts in person or via video conferencing. These meetings foster constructive dialogue and provide our executives with a better and deeper understanding of our shareholders’ priorities.

Each director is expected to make a reasonable effort to attend all meetings of our Board, applicable committee meetings and the Annual Meeting. All of our directors in office at that time attended our 2023 Annual Meeting. During the last fiscal year, there were four regular meetings of the Board, and the Board acted by unanimous written consent on nine occasions. Each of our directors attended at least 80% of the Board and committee meetings for which they were eligible to attend. During fiscal 2023, the independent members of our Board met in executive session, without the presence of management, on two occasions.

Our Board has adopted an anti-hedging and anti-pledging policy, restricting our executive officers and directors from engaging in hedging or pledging transactions without prior approval. Our policy defines a hedging transaction as any transaction or series of related transactions that are designed to hedge or offset any decrease in the market value of our stock or otherwise eliminate risk related to the ownership of our stock. Pledging transactions are defined to mean any pledge or grant of a security interest in the Company’s securities as collateral for a loan or other obligations to a third-party. Our executive officers and directors are prohibited from engaging in any such transactions without prior approval from the Nominating and Corporate Governance Committee. As of the date of this proxy statement, no such approvals have been made.

We believe the roles of chief executive officer and chairman of the board should normally be separated. However, to facilitate the execution of our existing succession plans, on February 2, 2023 our Board of Directors combined the roles by appointing Matthew J. Missad as Chairman of the Board. Our Board also appointed Thomas W. Rhodes as Lead Independent Director.

Mr. Rhodes will chair sessions of Board meetings that are exclusively attended by independent directors. He will communicate actions requested by the independent directors and serve as a liaison between the independent directors and our Chief Executive Officer. We believe that this structure provides the most effective governance of the Board at this time.

Our Board of Directors, through its three committees, has an advisory role in risk oversight for our Company. Company management maintains primary responsibility for the risk management of our Company. The current trends toward increased regulation, litigation and political volatility make it extremely difficult to predict the type and magnitude of risks facing our Company. Despite this unpredictability, our Board relies on the representations of management, periodic reports from our independent auditors, internal audit services performed by a third party, our Company’s systems of internal controls, our Company’s insurance advisors and the historically conservative practices of our Company to provide comfort as to our Company’s ability to manage its risks. Management’s discussion of current risk factors is set forth in our Company’s Annual Report on Form 10-K.

In addition to the regular and ongoing review and evaluation of succession planning for the members of the Company’s Board of Directors by the Board’s Nominating and Corporate Governance Committee, the Board and management regularly review and monitor succession planning for our current leadership positions. During a majority of the regularly scheduled Board meetings during 2023, the Board reviewed and discussed our CEO succession plan for the Chief Executive Officer position, including succession plans in the event of an emergency situation. As part of that planning process, Mr. Missad, our current CEO, was appointed to the position of the Chairman of the Board of Directors of the Company. In addition to succession planning for the CEO position, the Board regularly reviews and evaluates succession planning for each segment lead as well as the Company’s other functional leadership positions.

Our environmental, social and governance (ESG) initiatives are driven by our business philosophy: Take care of your customers, your employees, and your communities, and good financial results will follow. Our goals are to be recognized by our customers as the preferred supplier; by our employees as a safe and inclusive workforce; and by the communities in which we operate as a good corporate citizen.

Our manufacturing operations have a long history of environmental stewardship through efficiency and energy savings, waste management and responsible product sourcing. We quantify our Scope 1 and Scope 2 greenhouse gas (GHG) emissions and are committed to taking the following steps:

Continuous improvement is a key focus in our operations planning, and, through it, we aim to reduce energy usage as a percentage of unit sales. Our energy management team, which is responsible for continuously seeking opportunities to make our operations more efficient and sustainable, has made meaningful strides by upgrading electrical equipment, including motors, lighting and panels.

We prevent waste through our unique sourcing model, which promotes the use of as much of a canted log as possible in our products. Parts are utilized by one or more of our three business segments, depending on the appearance, the engineering characteristics and the utility for particular applications. What can’t be used in our products is converted to material that is recycled or upcycled by other industries. For example, our wood dust is recycled in quantities exceeding 25,000 tons per year.

Our primary raw material, wood, is renewable, sustainable, recyclable, durable and biodegradable.

Using Life Cycle Assessment and a Total Embodied Energy perspective, wood is a clear winner over competing building materials. Lumber stores its carbon away in structures for decades. As wood is our primary source of raw material, our Company has a vested interest in the health and growth of the planet’s forests. Because of its superior strength-to-weight ratio, wood requires much less energy to manufacture and deliver to job sites compared to other building materials like steel, concrete or plastic. According to The State of America’s Forests report, less than two percent of the standing tree inventory in the U.S. is harvested each year.

In Canada, where much of our lumber is sourced, less than one percent of the managed forest is harvested annually. In both countries, responsible forest management has resulted in more than 50 consecutive years of forest growth that exceeds annual harvest. As a result of these trends, forests in both countries have sequestered high levels of carbon in recent decades.

We source lumber from around the world and review vendors’ operations through regular dialogue and on-site visits. Our mill vendors have a practice of planting more trees each year than they harvest, which is important to us and drives our sourcing decisions. Our expectations of suppliers, with whom we have many long-standing relationships, extend to their practices in waste management, health and safety, labor rights, conflict minerals, and human rights. We operate with the highest standard of integrity and sustainability and expect our suppliers to do the same. We have certified chain-of-custody credentials for both Sustainable Forestry Initiative (SFI) and Forest Stewardship Council (FSC).

In our composite decking operations, 100% of the wood component is post-industrial recycled material and 90% of the plastic comes from post-consumer and post-industrial recycled sources.

We are driven by operational excellence throughout the enterprise and by cultivating a unique culture that provides significant opportunity for professional and personal growth. In managing our human capital, we have focused our efforts on employee health and safety, equal opportunity for all, pay equity, and learning and development.

We invest in industry-leading training and programs. We perform annual audits and regular, continuous oversight of Regional Safety Directors to ensure that our team members maintain their health and return safely home after their workday. Every employee is responsible for following Company health and safety guidelines to ensure their own safety and reduce the risk of injury for all in the workplace. Our accident frequency rates are low when compared with others in our industry. Additionally, we provide safety training to our employees and contractors in several formats to accommodate diverse needs.

We value equal opportunity for all as an integral part of our Company and continually broaden our recruiting efforts to connect with diverse groups who may be unaware of our Company or the opportunities we offer. To that end, we engage with local organizations who help low-income candidates connect with employment opportunities. Our recruitment team ensures that external job postings are available to all, and we specifically drive them to low-income areas and unemployment agencies. We look forward to advancing our strategy to increase the diversity of our workforce, while continuing to be a destination workplace for people who seek challenge, opportunity and success.

We offer a variety of opportunities that promote ongoing learning and development for our employees. Among them are advanced education courses through the UFP Business School, which focus on technical skills and programming across business functions. Most of our courses offer remote accessibility to provide flexibility. As we continue to grow, our goal is to expand the pool of job candidates, provide excellent training and education, and encourage equal growth opportunities within our Company. By expanding our outreach and providing additional education we aim to add more diverse team members who have the desire and ability to be promoted to leadership positions.

Matters of sustainability, health and safety, employee welfare, supply chain management and community engagement are managed by our executive team, with oversight from our Nominating and Corporate Governances, and Personnel and Compensation Committees. We shared our ESG Report in March of 2023, via publication on our website in which we detail our progress and our expectations going forward.

On February 1, 2024, our Board of Directors unanimously approved, subject to shareholder approval, an amendment to the first paragraph of Article III of the Company’s Articles of Incorporation (“Articles”) to read as follows:

“The total number of shares of all classes of stock which the Corporation shall have authority to issue is two hundred sixty-one million (261,000,000) shares, of which two hundred sixty million (260,000,000) shares shall be of a single class of common stock and one million (1,000,000) shares shall be series preferred stock.”

This amendment would increase the Company’s authorized common stock from 160,000,000 shares to 260,000,000 shares of common stock. There would be no change in the number of authorized preferred shares. The Company has no series preferred stock issued or outstanding. The purpose of the amendment is to provide additional shares for future issuance. As of February 28, 2024, issued shares of common stock totaled 61,529,910 shares. Of the remaining authorized but unissued shares of common stock, a total of 2,311,269 shares are reserved for issuance pursuant to the Company’s Employee Stock Purchase Plan, Director Compensation Plan, Employee Stock Gift Program, and Long-Term Stock Incentive Plan.

The Board of Directors believes it is advisable to have additional shares of common stock available for possible future acquisitions, public offerings, stock dividends, and stock splits. The Board of Directors of the Company will determine whether and on what terms the issuance of shares of common stock or preferred stock may be warranted and appropriate. Based upon the prevailing per-share stock price of our common stock, and subject to the approval of the proposed amendment, the Board may consider authorizing a three-for-one stock split of our shares of common stock. The approval of the proposed amendment would be required to effect a three-for-one stock split as there exists only 96,158,821 shares of common stock available for future issuance by the Board of Directors of the Company. Except for a potential stock split and the future issuance of shares under our equity compensation plans, the Company has no specific plan, understanding, or agreement related to the issuance of its common stock whether in connection with future acquisitions or otherwise.

All of the additional shares resulting from the increase in the Company’s authorized common stock would be of the same class with the same dividend, voting, and liquidation rights as the shares of common stock presently outstanding. The shares would be unreserved and available for issuance. No further authorization for the issuance of common shares by shareholder vote is required under the Company’s existing Articles, and none would be required prior to the issuance of the additional common shares by the Company. Shareholders have no preemptive rights to acquire any shares issued by the Company under its existing Articles, and shareholders would not acquire any such rights with respect to any additional shares under the proposed amendment to its Articles.

While the Company is not aware of any pending or threatened effort to gain control of the Company, shareholders should be aware that the authority of the Board to issue common or preferred stock might be considered as having the effect of discouraging an attempt by another person or entity to effect a takeover or otherwise gain control of the Company, because the issuance of preferred stock with voting powers, or the issuance of additional common stock, would dilute the voting power of the stock then outstanding. Moreover, since the terms of the preferred stock remain to be fixed by the Board of Directors, such stock (or rights to acquire such stock) might contain terms (including class voting rights or rights to exchange such stock or warrants for stock of an acquiring company) which could make acquisition of a controlling interest in the Company more difficult or costly.

Other provisions of the Articles could also be viewed as potential impediments to efforts to acquire control of the Company. Specifically, those provisions of the Articles (i) requiring the election of only one-third of the directors of the Company every year, (ii) requiring the Board to evaluate and determine that any exchange or tender offer for the Company’s common stock or proposed merger, consolidation, or acquisition of all or substantially all of the Company’s assets is in compliance with all applicable laws and is in the best interests of the Company and its shareholders, and (iii) imposing a super-majority vote requirement applicable to any proposed combination or reorganization of the Company, could be used in a manner calculated to prevent the removal of management and make more difficult or discourage a change in control of the Company. The Company has no present intention of soliciting the vote of shareholders on any other proposal, or series of proposals, to deter changes in control of the Company.

If the proposed amendment to increase the authorized shares of capital stock is approved, common or preferred stock may, as noted, be issued without further action by the shareholders and without first offering such shares to the Company’s shareholders for purchase. Issuance of common or preferred stock otherwise than on a pro rata basis to all current shareholders would reduce current shareholders’ proportionate interests.

The affirmative vote of the holders of a majority of the outstanding shares of common stock of the Company is required for approval of the proposed amendment to the Articles. Both abstentions and broker non-votes will have the effect of a negative vote. Unless otherwise directed by a shareholder’s proxy, the persons named as proxy voters in the accompanying proxy will vote FOR the amendment. The approval of the proposal is not a condition to the approval of any other proposals submitted to our shareholders.

 

The Audit Committee selected Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for the fiscal year ending December 28, 2024 (“Fiscal 2024”). The services provided to our Company and our shareholders by Deloitte for fiscal years 2023 and 2022 are described below under the caption “Independent Registered Public Accounting Firm – Disclosure of Fees.”

We are asking our shareholders to ratify the selection of Deloitte as our independent registered public accounting firm. Although ratification is not legally required, the Board is submitting the selection of Deloitte to our shareholders for ratification as a matter of good corporate governance. Representatives of Deloitte are expected to be present at our Annual Meeting to respond to appropriate questions and to make such statements as they may desire. The affirmative vote of the holders of a majority of the shares voted on this item will be required for ratification. Broker non-votes and abstentions will not be treated as votes cast on this proposal. Unless otherwise instructed by you, brokers, banks and other street name holders will have the discretionary authority to vote your shares on this matter.

If our shareholders do not ratify the appointment, the appointment will be reconsidered by the Audit Committee and the Board. Even if the selection is ratified, the Audit Committee, at its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of our Company and our shareholders.

As explained above, Deloitte served as our independent registered public accounting firm for the fiscal years ended December 30, 2023 and December 31, 2022. The following table sets forth the fees we paid to Deloitte for those years, all of which were pre-approved by the Audit Committee.

 

The Audit Committee has established a pre-approval policy and procedures for audit, audit-related and tax services that can be performed by our independent registered public accounting firm. The policy sets out the specific services that must be pre-approved by the Audit Committee and places limitations on the scope of these services while ensuring that the independence of the auditors to audit our financial statements is not impaired. The policy prohibits us from retaining Deloitte for services which are proscribed by rules of the SEC. In addition, the policy requires disclosure of non-audit services performed by our auditors. The pre-approval policy does not include a delegation of the Audit Committee’s responsibilities and authority under the pre-approval policy. All services provided by Deloitte under the captions “Audit Fees,” “Tax Services (Time and Materials)” and “Other Services” were approved by the Audit Committee under this policy.

On February 28, 2024, the Audit Committee submitted to the Board of Directors the following report:

The Committee has reviewed and discussed with management our Company’s audited financial statements as of and for the year ended December 30, 2023.

The Committee has discussed with our independent auditors the matters covered by Public Company Accounting Oversight Board (“PCAOB”) standards, AU Section 380 Communication with Audit Committees.

The Committee has received from Deloitte the written disclosures and letter required by the applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence, has discussed with Deloitte their independence, and has satisfied itself as to Deloitte’s independence.

Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements referred to above be included in our Company’s Annual Report on Form 10-K for the year ended December 30, 2023.

Brian C. Walker, Chairman

Benjamin J. McLean

Mary Tuuk Kuras

The report of the Audit Committee shall not be deemed to be soliciting material filed or by reference in any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934.

Consistent with our Board’s recommendation, as approved by our shareholders, and as required under the Securities Exchange Act, we allow our shareholders the opportunity to vote, on an advisory and annual basis, on the compensation paid to our Named Executives. Because your vote is advisory, it will not be binding on our Board. However, our Board will review the voting results and take them into consideration when making future decisions regarding executive compensation.

Our Company has had a long-standing tradition of delivering results to our shareholders. Because the compensation of our executives has been closely linked to Company performance, our executive compensation programs have played a major role in our ability to drive strong financial results and attract and retain a highly experienced, successful team to manage our Company.

Our compensation programs are substantially tied to our key business objectives and the success of our shareholders. If the value we deliver to our shareholders declines, so does the compensation we pay to our executives. We closely monitor the compensation programs and pay levels of executives of companies of similar size and complexity, with the objective that our compensation programs are within a range of market practices and remain competitive.

We believe our executive compensation programs are effective and structured in a manner that (a) is consistent with our compensation philosophy and objectives (as described in our Compensation Discussion and Analysis below), (b) promotes our business objectives, and (c) supports our culture and traditions that have existed for 69 years.

The advisory vote on executive compensation was conducted at our Annual Meeting of Shareholders in 2023, based on the disclosure of our executive compensation in the proxy statement for that meeting. Approximately 95% of the shares voted at that meeting approved of the compensation paid to our Named Executives. The Board considered the results of this vote as highly supportive of the Company’s compensation policies and programs.

Accordingly, our Board of Directors recommends that you vote in favor of the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, narrative disclosure, and related material disclosed in the Company’s proxy statement for its 2024 Annual Meeting of Shareholders, is hereby APPROVED.”

 

The following table contains information with respect to ownership of our common stock by each director, each nominee for election as director, each Named Executive in the tables under the caption “Executive Compensation” and all executive officers and directors as a group. The information in this table was furnished by our officers, directors, and nominees for election of directors, and represents our understanding of circumstances in existence as of February 28, 2024:

 

We believe our employees are our most important asset. Our executive compensation program has been designed to motivate, reward, attract and retain management personnel that we deem essential to promote our success. The program seeks to align executive compensation with Company objectives, business strategy and financial performance. In applying these principles, we seek to:

We believe the compensation of our executives should reflect the performance of the business units in which they are involved and for which they are responsible. We further believe the performance of our executives in managing our Company, considered in light of general economic and specific Company, industry and competitive conditions, should be the basis for determining their overall compensation.

Our compensation program is designed to reward overall financial performance as well as each person’s individual contribution to our Company. In measuring an individual’s contribution to our Company, the Personnel and Compensation Committee (the “Committee”) considers numerous factors, including the individual’s contribution to Company performance, individual performance relative to pre-established goals, and general economic conditions in the markets we serve.

The Committee has responsibility for establishing, implementing and monitoring adherence to our compensation philosophy and established programs. The Committee seeks to ensure that the total compensation paid to our executives is fair, reasonable and competitive.

The principal components of our executive compensation consist of (a) base salary, (b) annual performance incentives, and (c) long-term incentive compensation (generally payable in the form of equity-based compensation awards).

It has been our practice to provide modest base salaries, relative to the market, and place a greater emphasis on performance-based compensation. We believe that this is consistent with motivating our management team to create shareholder value and with what our shareholders expect. If we perform well and create value for our shareholders, our management team is compensated well for those results. We measure financial performance by our return on investment (“ROI”) in the business (described below), a metric we believe correlates well with the creation of shareholder value.

In 2023, the Company once again performed very well, relative to our targeted ROI. For the year, we achieved an overall ROI of 22.49% (our threshold ROI is 6.0% for the corporate incentive compensation pool and 8.5% for each segment pool). This resulted in meaningful incentive compensation awards. Our annual cash incentive compensation is limited to two times each executive’s prevailing base salary. Any amounts earned in excess of this limitation is paid in the form of long-term equity-based compensation.

As explained in more detail below, any incentive compensation paid in the form of our shares is subject to future service conditions. Consequently, each executive must continue working for the Company for an additional service period to receive the balance of the incentive compensation earned in 2023 and paid as long-term compensation. For 2023, the variable compensation earned by all of

the Company’s Business Units (defined below) totaled approximately $132 million in annual cash incentive compensation and $30 million in long-term incentive compensation. The long-term incentive amount was paid in the form of (a) restricted stock grants that vest five years from the grant date and (b) stock performance units that vest and are payable three years from the date of grant, based upon Company performance.

Base Salaries. Base salaries are set for our executive officers at the Committee’s first meeting each year, generally at the end of January or the beginning of February. At this meeting, our Chief Executive Officer makes compensation recommendations to the Committee with respect to our executive officers, excluding his own compensation. The Committee may accept or adjust such recommendations. It makes the sole determination of the compensation for our Chief Executive Officer, subject to the approval of our Board.

The Committee considers a variety of objective and subjective factors in considering the establishment of base salaries. In addition, the Committee reviews and monitors the executive compensation programs and pay levels of executives among our Company’s peer group.¹ Based upon its review, the Committee concluded that our compensation program for executive officers is generally competitive and is effective in providing the requisite incentives and rewards to our leadership team.

For fiscal 2024, the Committee approved salary increases to the Named Executives, identified in the Summary Compensation Table, as follows:

 

As noted above, at our Annual Meeting of Shareholders in 2023, based on the disclosure of our executive compensation in the proxy statement for that meeting, approximately 95% of the shares voted at that meeting approved of the compensation paid to our Named Executives.

Chief Executive Officer. The Committee annually reviews, and recommends for Board approval, our Chief Executive Officer’s base salary. Mr. Missad’s salary is based on comparable compensation data, the Committee’s assessment of his past performance, and its expectation as to his future contributions in leading our Company. Mr. Missad’s base salary fell in the mid-range of the salaries of comparable executives in our peer group. The Committee has complete discretion in recommending the base salary for Mr. Missad (who does not have an employment agreement with our Company).

CEO Pay Ratio. As of December 31, 2023 the ratio of the median of the annual total compensation of all of our active employees as of December 31, 2023 excluding our Chief Executive Officer, ($52,138) to the annual total compensation of our Chief Executive Officer ($8,441,616) was 162:1. The compensation of our median employee was determined by: (1) calculating the annual total compensation of all of our active employees as of December 31, 2023 (the “Determination Date”); (2) ranking the annual total compensation of all employees (except our Chief Executive Officer) from lowest to highest (which comprised a total of 16,241 employees); and (3) selecting the employee who ranked as the median (8,121 on the list of 16,241). We included all of our full-time and part-time employees as of the Determination Date and annualized the total compensation for those full-time and part-time employees who were employed by us for less than one year as of the Determination Date. We applied applicable foreign exchange rates, relative to the U.S. dollar, for our non-U.S. employees. Total annual compensation for each employee, other than the CEO, is based on our payroll records and includes each element of compensation listed in the Summary Compensation Table below, with the exception of employer contributions to any 401(k) or similar qualified, defined contribution plan, and shares granted

but not vested, are excluded from the total annual compensation for each employee other than our CEO. For ease of administration, bonus dollars for all employees, except the CEO, reflect actual bonus compensation paid in 2023 but earned in 2022. However, as required for the Summary Compensation Table, the bonus dollars for the CEO reflect bonus dollars and associated stock grants earned in 2023 and paid in February 2024.

Annual Incentive Compensation. Our incentive compensation program provides for the contribution of a fixed percentage of pre- incentive compensation operating profit to each of a number of pools, based upon the pre-incentive compensation ROI of each plant, business unit and segment (each of which is referred to as a “Profit Center”), as well as a separate Corporate incentive compensation pool. Combined, these incentive compensation pools are the source of our Company’s aggregate incentive compensation awards.

ROI is determined based upon the Profit Center’s pre-incentive compensation operating profit, less income taxes, divided by the average investment of the Profit Center. Average investment is defined as the average of inventory, plus accounts receivable, plus net property, plant and equipment, plus intangibles, less accumulated amortization and less accounts payable.

At the beginning of each year, each Named Executive is allocated a fixed percentage of the incentive compensation pool of his or her respective Profit Center. The amount of an employee’s percentage of his or her pool is generally reflective of that person’s relative degree of responsibility for the operations and results of that Profit Center, as well as his or her performance and tenure with the Company. If the Profit Center generates profits which result in an incentive compensation pool, the participant receives the allocated percentage as incentive compensation. The dollar amount of that pool is based upon the Profit Center aggregate ROI. As ROI increases, a higher percentage of pre-incentive compensation operating profit is contributed to the pool.

For the Corporate Profit Center, the minimum contribution percentage of 4.70% of pre-incentive compensation operating profit occurs at the lowest level of ROI, which is 6.00%. The maximum contribution percentage of 7.5% occurs at a ROI of at least 22.00%. Following the achievement of ROI of 6.0%, and subject to the maximum contribution rate of 7.5%, for every hundred basis point improvement in ROI, the Company contributes an approximate additional 2.5 basis points of pre-incentive compensation operating profit to the Corporate Profit Center incentive compensation pool. Two of our Named Executives participated in the Corporate Profit Center incentive compensation pool in 2023. For our segment pools, the minimum contribution percentage of 1.8% of pre-incentive compensation operating profit occurs at the lowest level of ROI, which is 8.5%. The maximum contribution percentage of 2.2% occurs at an ROI of at least 22.0%. Subject to the maximum contribution percentage of 2.2%, for every hundred basis point improvement in ROI, the Company contributes approximately .35 basis points in pre-incentive compensation operating profit to each segment incentive compensation pool.

There are tiered performance thresholds for both the size of each incentive compensation pool as well as individual incentive compensation payments. This effectively resulted in the reallocation of approximately $50 million of otherwise incentive compensation to our shareholders. Under this program, each performance pool was preliminarily allocated funds based upon the formula described in the preceding paragraph. Each pool is then subject to threshold amounts. For the Corporate Profit Center incentive compensation pool, the thresholds were $850 million (Tier 1) and $950 million (Tier 2). To the extent the pool exceeds Tier 1, 25% of the pool in excess of Tier 1 and below Tier 2 is deducted from the pool and effectively reallocated to shareholders; 50% of the pool in excess of Tier 2 is effectively reallocated to shareholders. The segment pools are subject to the same reallocations at $300 million (Tier 1) and $350 million (Tier 2). In addition to the adjustments made to the incentive compensation pools, and subsequent to those adjustments, preliminary individual incentive compensation allocations for the leaders of each pool, as well as each other Named Executive, are subject to similar adjustments. For 2023, each Named Executive was subject to payment thresholds of $1 million (Tier 1) and $1.5 million (Tier 2). For preliminary bonus payments in excess of Tier 1, 25% of the amount between Tier 1 and Tier 2 was reallocated to other, non-Named Executive participants; 50% of the preliminary bonus payment above Tier 2 was similarly reallocated.

For 2023, we achieved an overall ROI of 22.49%. Following the adjustments described above, the total contribution to the Corporate Profit Center incentive compensation pool for fiscal 2023 was $61,778,463, which equaled 7.5% of pre-incentive compensation operating profit. The performance incentive for each of the Named Executives (other than Messrs. Benton, Schwartz, and Worthington) was based upon our Company’s total ROI. The performance bonuses for Messrs. Benton, Schwartz, and Worthington were based upon the ROI of their respective segments.

The incentive compensation amount for Mr. Missad was determined by the Company’s ROI as a whole. Based upon that performance and subject to the above-described adjustments, we contributed the calculated amount of pre-incentive compensation operating profit to the Corporate Profit Center incentive compensation pool. For 2023, Mr. Missad was eligible to receive an initial 20% allocation of the net Corporate Profit Center pool. The initial allocation to Mr. Missad, as well as allocations for each of the other Named Executives, is subject to the adjustments described above. Following the application of those adjustments, not more than 2.0 times an executive’s base salary may be paid in the form of annual cash incentive compensation. As a result, Mr. Missad’s received cash incentive compensation of $1,743,747 for 2023, which was 2.82% of the Corporate Profit Center incentive compensation pool. Mr. Missad’s total allocation of the 2023 Corporate Profit Center incentive compensation pool was 12.06%.

The amount of incentive compensation earned by an employee in excess of the annual cash incentive compensation limitation is paid in the form of equity-based compensation awards under our Long-Term Stock Incentive Plan (“Long-Term Compensation”). Ninety percent (90%) of the equity awards granted to the Named Executives in 2024, based upon 2023 performance, were paid in the form of shares of restricted Company common stock that cliff vest on the fifth anniversary of the award date. The balance of the awards were issued in the form of performance units. The number of shares that may be issued for each performance unit is determined at the end of the three-year performance period, based upon the Company’s actual, cumulative pre-incentive compensation operating profit relative to the budgeted amount of pre-incentive compensation operating profit for that three-year period (“Budget PBOP”). The Budget PBOP is determined as of the beginning of each three-year performance period. The actual number of shares issuable is based upon the product of (1) the number of target shares that are subject to the award, and (2) the earnout percentage, based upon the following:

 

In addition, no shares are issuable under our performance unit award agreements unless the Company achieves the targeted pre-incentive compensation return on investment (“PBROI”) during the three-year performance period. For awards granted in 2023, the target level PBROI was 12%.

The following table discloses and explains the determination of incentive compensation earned by the Named Executives for 2023.

 

Long-Term Stock Incentive Plan. We provide long-term incentive compensation to our executive officers and key employees through grants of restricted shares, conditional stock grants and other equity-based awards under the terms of our Long-Term Stock Incentive Plan (the “LTSIP”). The Committee has complete discretion in determining eligibility for participation and the type and number of shares subject to awards made under the LTSIP, except for those awarded to our CEO, which are determined by the Board.

Based upon the formula described above, our Named Executives received restricted stock awards and performance units in the following amounts for 2023 performance under our long-term incentive compensation program:

 

Minimum Stock Ownership Policy. We encourage and promote ownership of Company stock by our employees and directors, and have a Minimum Stock Ownership Policy that sets requirements for ownership of our common stock by our key employees and independent directors, as follows:

 

Deferred Compensation Plan. We maintain a Deferred Compensation Plan (“DCP”) which allows key employees to defer a portion of their salary and/or cash incentive compensation. Our Named Executives may not defer more than $15,000 of salary or more than $100,000 of incentive compensation per year. Participants in the DCP may elect to invest the deferred amounts in certain investment alternatives, including our common stock. Also, under the DCP, if a key employee’s ownership of our common stock is below certain targeted thresholds, the amount of the deferral must be used to invest in shares of our common stock. All amounts deferred to the DCP that are invested in our common stock are invested at a price per share representing a 15% discount to the prevailing market price of our stock. In general, each employee receives a payout of his or her DCP account one year from the date he or she terminates employment with our Company, unless termination of employment is due to retirement, death or change in control, in which case the employee or his or her beneficiary may receive the distribution earlier, subject to DCP provisions.

Executive Stock Grant Program. Our Company maintains an Executive Stock Grant Program (the “ESGP”) pursuant to which we grant shares of restricted Company common stock to eligible employees who invest in shares of the Company’s common stock under the DCP. Under the ESGP, approximately $0.85 worth of Company stock is awarded for each $1.00 deferred and invested in Company stock under the DCP (the “Match Shares”). The Match Shares vest in full on the fifth anniversary of the grant date, subject to certain acceleration events.

Employee Stock Purchase Plan. We have a shareholder-approved Employee Stock Purchase Plan (the “ESPP”) which allows our employees to make payroll deductions or lump sum contributions, or both, for the purchase of our common stock. Shares of our common stock are purchased with the money in the employee’s account on the last trading day of the quarter, at a 15% discount from the then prevailing market price of our common stock. All eligible employees with at least one year of service may participate in the ESPP. Under the ESPP, an employee may not acquire more than $25,000 of our common stock in any one plan year, based upon the fair market value of our stock as of the date of purchase.

Employee Stock Gift Program. We have a Stock Gift Program under which eligible employees receive a modest amount of our common stock on specified service anniversaries with us.

Executive Retirement Plan. Under our Executive Retirement Plan (the “ERP”), officers with twenty or more years of Company service and at least ten years of service as an officer are entitled to certain retirement benefits. The ERP provides for a retirement benefit at age 62 or later of 150% of base salary (based upon the executive’s highest annual base salary during the three-year period preceding retirement), and is payable over three years after retirement, death, or disability. Our CEO does not participate in the ERP.

Clawback Policy. Our Board has adopted a Clawback Policy that requires the Company to recoup or otherwise recover certain incentive compensation paid to the Company’s executive officers in the event of a restatement of the Company’s financial statements, as described in the policy. The Clawback Policy also permits our Board, in its discretion, to recoup certain incentive compensation paid to an executive officer who has engaged in certain improper misconduct, as described in the policy.

Say on Pay Results and Shareholder Engagement. Historically, our shareholders have expressed meaningful support of the Company’s executive compensation practices and programs. As noted above, we have favored a practice of providing modest base salaries, relative to our peers and the market, in return for a greater emphasis on performance-based compensation. Our financial performance over the past several years indicates that this practice has yielded significant benefits for our shareholders (from 2021 through 2023, the Company’s share price has increased 126% and its compound annual growth rate over that three-year period has been 31%). As noted above, at our Annual Meeting of Shareholders of 2023, based on the disclosure of our executive compensation in the proxy statement for that meeting, approximately 95% of the shares voted at that meeting approved of the compensation paid to our Named Executives.

The primary purpose of the Personnel and Compensation Committee (the “Committee”) is to assist the Board in discharging its responsibilities related to the compensation of our Company’s executives. The Committee’s responsibilities are more fully described in its Charter, which is available on our website.

The Committee reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Effective as of March 8, 2024, based upon that review and those discussions, the Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Thomas W. Rhodes, Chairman

Joan A. Budden

Bruce A. Merino

Michael G. Wooldridge

The report of the Committee shall not be deemed to be soliciting material filed or by reference in any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934.

The following table includes information regarding the compensation for our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers for each of our last three fiscal years (the “Named Executives”).

 

We provide benefit programs to executive officers and other employees. The following table generally identifies such benefit plans and those employees who may be eligible to participate:

 

We believe perquisites for executive officers should be limited in scope and value. As a result, we have historically provided nominal perquisites. The following table generally illustrates the perquisites we do and do not provide and identifies those employees who may be eligible to receive them.

 

The following table reflects the grant of plan-based awards earned in fiscal 2023 by the Named Executives:

 

The following table sets forth information concerning equity awards held by the Named Executives as of December 30, 2023:

The following table provides information on the number and value of options exercised and stock grants vested in 2023 by the Named Executives:

 

The following table provides certain information relating to each deferred compensation plan that provides for the deferral of compensation on a basis that is not tax qualified. The aggregate amounts are based on employee deferrals and earnings on these deferrals.

 

Our Deferred Compensation Plan allows key employees to defer a portion of their incentive compensation and base salary. The maximum amount a Named Executive can defer is $100,000 from incentive compensation and $15,000 from base salary, per year. As described in the Compensation Discussion and Analysis, amounts deferred must be invested in our common stock until certain ownership requirements are met. Payouts occur as provided at the time of employee deferral, or if not specified by the employee, upon separation from employment.

Under our Executive Retirement Plan (which currently excludes our Chief Executive Officer), officers with twenty or more years of service with the Company and at least ten years of service as an officer are entitled to certain retirement benefits. This plan provides for a retirement benefit at age 62 or later of 150% of base salary (based upon the executive’s highest annual base salary during the three-year period preceding retirement) and is payable over three years after retirement, death or disability.

The following table quantifies the incremental amounts that would have been vested and become payable on December 30, 2023 to each Named Executive in the event of death, permanent disability, retirement or change in control. In the event of a change in control, payments to our CEO and other officers are conditioned upon both the change in control and his or her actual or constructive termination of employment in connection with the change in control (commonly referred to as a double trigger change in control benefit).