DEF 14A 1 swbi-def14a_20210927.htm DEF 14A swbi-def14a_20210927.htm

 

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  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

 

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

 

Definitive Proxy Statement

 

 

Definitive Additional Materials

 

 

Soliciting Material Pursuant to § 240.14a-12

 

Smith & Wesson Brands, Inc.

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

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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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Smith & Wesson® 2021 NOTICE OF ANNUAL SHAREHOLDER MEETING AND PROXY STATEMENT

 

 


 

 

 

 

 

NOTICE OF

ANNUAL MEETING OF

STOCKHOLDERS

 

 

 

 

Date:

Tuesday,

September 27, 2021

 

Time:

12pm Eastern Time

 

Location:

www.virtualshareholderme eting.com/SWBI2021

 

The Annual Meeting of Stockholders of Smith & Wesson Brands, Inc., a Nevada corporation, will be held at 12:00 p.m., Eastern Time, on Monday, September 27, 2021. The Annual Meeting of Stockholders will be a virtual meeting of stockholders. You will be able to attend the Annual Meeting of Stockholders, vote, and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/SWBI2021 and entering the 16-digit control number included on your proxy card or in the instructions that accompanied your proxy materials. The Annual Meeting of Stockholders will be held for the following purposes:

 

PROPOSAL

RECOMMENDED

VOTE

1

To elect directors to serve until our next annual meeting of stockholders and until their successors are elected and qualified.

for

2

To provide a non-binding advisory vote on the compensation of our named executive officers for fiscal 2021 (“say-on-pay”).

for

3

To ratify the appointment of Deloitte & Touche LLP, an independent registered public accounting firm, as the independent registered public accountant of our company for the fiscal year ending April 30, 2022.

for

4

To approve our 2021 Employee Stock Purchase Plan.

for

5

To vote upon a stockholder proposal, if properly presented at the meeting.

against

6

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

 

These items of business are more fully described in the proxy statement accompanying this notice.

Only stockholders of record at the close of business on August 4, 2021 are entitled to notice of and to vote at the meeting or any adjournment or postponement thereof.

All stockholders are cordially invited to attend the meeting and vote electronically during the meeting. To assure your representation at the meeting, however, you are urged to vote by proxy as soon as possible over the Internet as instructed in the Notice of Internet Availability of Proxy Materials or, if you receive paper copies of the proxy materials by mail, you can also vote by telephone or by mail by following the instructions on the proxy card. You may vote electronically during the meeting even if you have previously given your proxy.

Sincerely,

 

 

Deana L. McPherson

Executive Vice President,

Chief Financial Officer,

Treasurer, and Assistant Secretary

Springfield, Massachusetts

August 18, 2021

 

 

 


 

 

 

TABLE OF

CONTENTS

 

 

 

 

 

 

 

 

 

 


 

 

 

VOTING AND

OTHER MATTERS

 

 

 

 

SMITH & WESSON BRANDS, INC.

2100 Roosevelt Avenue

Springfield, Massachusetts 01104

 

PROXY STATEMENT

 

 

General

The enclosed proxy is being solicited on behalf of Smith & Wesson Brands, Inc., a Nevada corporation, by our Board of Directors for use at our Annual Meeting of Stockholders to be held at 12:00 p.m., Eastern Time, on Monday, September 27, 2021, or at any adjournment or postponement thereof, for the purposes set forth in this proxy statement and in the accompanying notice. The Annual Meeting of Stockholders will be a virtual meeting. You will be able to attend the Annual Meeting of Stockholders during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/SWBI2021 and entering the 16-digit control number included on your proxy card or in the instructions that accompanied your proxy materials.

In accordance with rules adopted by the Securities and Exchange Commission, or the SEC, that allow companies to furnish their proxy materials over the Internet, we are mailing a Notice of Internet Availability of Proxy Materials instead of a paper copy of our proxy statement and our 2021 Annual Report to most of our stockholders. The Notice of Internet Availability of Proxy Materials contains instructions on how to access those documents and vote over the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions on how to request a paper copy of our proxy materials, including our proxy statement, our 2021 Annual Report, and a form of proxy card. We believe this process will allow us to provide our stockholders the information they need in a more timely manner, while reducing the environmental impact and lowering our costs of printing and delivering the proxy materials.

These proxy solicitation materials were first released on or about August 18, 2021 to all stockholders entitled to vote at the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on September 27, 2021. These proxy materials, which include the notice of annual meeting, this proxy statement, and our 2021 Annual Report for the fiscal year ended April 30, 2021, are available at www.proxyvote.com.

How Does the Board of Directors Recommend That You Vote

The Board of Directors recommends that you vote as follows:

 

FOR the election of each of the nominee directors (Proposal One);

 

 

 

    2021 Proxy Statement I 1

 


 

Voting and Other Matters

 

 

 

 

 

 

FOR the advisory vote on the compensation of our named executive officers for fiscal 2021 (Proposal Two);

 

FOR the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accountant of our company for the fiscal year ending April 30, 2022 (Proposal Three);

 

FOR the approval of our 2021 Employee Stock Purchase Plan (Proposal Four); and

 

AGAINST approval of the stockholder proposal (Proposal Five).

Stockholders Entitled to Vote; Record Date; How to Vote

Stockholders of record at the close of business on August 4, 2021, which we have set as the record date, are entitled to notice of and to vote at the meeting. On the record date, there were outstanding 48,046,090 shares of our common stock. Each stockholder voting at the meeting, either electronically during the meeting or by proxy, may cast one vote per share of common stock held on all matters to be voted on at the meeting.

If, on August 4, 2021, your shares were registered directly in your name with our transfer agent, Issuer Direct Corporation, then you are a stockholder of record. As a stockholder of record, you may vote electronically during the meeting. Alternatively, you may vote by proxy over the Internet as instructed above or, if you receive paper copies of the proxy materials by mail, by using the accompanying proxy card or by telephone. Whether or not you plan to attend the meeting, we urge you to vote by proxy over the Internet as instructed in the Notice of Internet Availability of Proxy Materials or, if you receive paper copies of the proxy materials by mail, by filling out and returning the enclosed proxy card, or by telephone as instructed on the enclosed proxy card to ensure your vote is counted. Even if you have submitted a proxy before the meeting, you may still attend the meeting and vote electronically during the meeting.

If, on August 4, 2021, your shares were held in an account at a brokerage firm, bank, or similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the meeting. As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account. You should have received voting instructions with these proxy materials from that organization rather than from us. You should follow the instructions provided by that organization to submit your proxy. You are also invited to attend the meeting. However, since you are not the stockholder of record, you may not vote your shares electronically during the meeting unless you obtain a “legal proxy” from the broker, bank, or other nominee that holds your shares giving you the right to vote the shares at the meeting.

How to Attend the Meeting; Asking Questions

You are entitled to attend the meeting only if you were a stockholder of record at the close of business on August 4, 2021, which we have set as the record date, or you hold a valid proxy for the meeting. You may attend the meeting by visiting www.virtualshareholdermeeting.com/SWBI2021 and using your 16-digit control number included on your proxy card or in the instructions that accompanied your proxy materials to enter the meeting. If, on August 4, 2021, your shares were held in an account at a brokerage firm, bank, or similar organization, then you are the beneficial owner of shares held in “street name,” and you will be required to provide proof of beneficial ownership, such as your most recent account statement as of the record date, a copy of the voting instruction form provided by your broker, bank, trustee, or nominee, or other similar evidence of ownership. If you do not comply with the procedures outlined above, you will not be admitted to the virtual annual meeting.

Stockholders who wish to submit a question for the meeting may do so live during the meeting at www.virtualshareholdermeeting.com/SWBI2021.

 

 

 

2 I 2021 Proxy Statement    

 


 

 

Voting and Other Matters

 

 

 

Quorum

The presence, in person or by proxy, of the holders of a majority of the total number of shares of common stock entitled to vote constitutes a quorum for the transaction of business at the meeting. Votes cast electronically during the meeting or by proxy at the meeting will be tabulated by the election inspector appointed for the meeting, who will determine whether a quorum is present.

Required Vote

Assuming that a quorum is present, the affirmative vote of a majority of the votes cast will be required for the election of each director nominee, to ratify the appointment of Deloitte & Touche LLP, an independent registered public accounting firm, as the independent registered public accountant of our company for the fiscal year ending April 30, 2022, to approve our 2021 Employee Stock Purchase Plan, and to approve the stockholder proposal. The advisory vote on the compensation of our named executive officers for fiscal 2021 (“say-on-pay”) is non-binding, but our Board of Directors will consider the input of stockholders based on a majority of votes cast for the say-on-pay proposal.

Broker Non-Votes and Abstentions

Brokers, banks, or other nominees that hold shares of common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion if permitted by the stock exchange or other organization of which they are members. Brokers, banks, and other nominees are permitted to vote the beneficial owner’s proxy in their own discretion as to certain “routine” proposals when they have not received instructions from the beneficial owner, such as the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accountant of our company for the fiscal year ending April 30, 2022. If a broker, bank, or other nominee votes such “uninstructed” shares for or against a “routine” proposal, those shares will be counted towards determining whether or not a quorum is present and are considered entitled to vote on the “routine” proposals. However, where a proposal is not “routine,” a broker, bank, or other nominee is not permitted to exercise its voting discretion on that proposal without specific instructions from the beneficial owner. These non-voted shares are referred to as “broker non-votes” when the nominee has voted on other non-routine matters with authorization or voted on routine matters. These shares will be counted towards determining whether or not a quorum is present, but will not be considered entitled to vote on the “non-routine” proposals.

Please note that brokers, banks, and other nominees may not use discretionary authority to vote shares on the election of directors, the say-on-pay proposal, the proposal to approve our 2021 Employee Stock Purchase Plan, or the stockholder proposal if they have not received specific instructions from their clients. For your vote to be counted in the election of directors, the say-on-pay proposal, the proposal to approve our 2021 Employee Stock Purchase Plan, and the stockholder proposal, you will need to communicate your voting decisions to your broker, bank, or other nominee before the date of the meeting.

As provided in our bylaws, a majority of the votes cast means that the number of shares voted “for” a nominee for election to our Board of Directors or any other proposal exceeds the number of shares voted “against” such nominee or other proposal. Because abstentions and broker non-votes do not represent votes cast “for” or “against” a proposal, abstentions and broker non-votes will have no effect on the election of directors, the say-on-pay proposal, the proposal to ratify the appointment of Deloitte & Touche LLP as the independent registered public accountant of our company for the fiscal year ending April 30, 2022, the proposal to approve our 2021 Employee Stock Purchase Plan, or the stockholder proposal, as each such proposal is determined by reference to the votes actually cast by the shares present in person or by proxy at the meeting and entitled to vote.

In accordance with our director resignation policy, an incumbent director who does not receive the requisite majority of votes cast in an uncontested election is expected to submit his or her offer of resignation to our Board of Directors. Our Board of Directors, upon recommendation of the Nominations and Corporate Governance Committee, will make a determination as to whether to accept or reject the offered resignation

 

 

 

    2021 Proxy Statement I 3

 


 

Voting and Other Matters

 

 

 

 

within 90 days after the stockholder vote. A director whose offered resignation is under consideration will abstain from any decision or recommendation regarding the offered resignation, but will otherwise continue to serve as a director until our Board of Directors makes its determination regarding the offered resignation. We will publicly disclose our Board of Directors’ decision regarding the tendered resignation and the rationale behind the decision in a filing of a Current Report on Form 8-K with the SEC.

Voting of Proxies

When a proxy is properly executed and returned, the shares it represents will be voted at the meeting as directed. Except as provided above under “Broker Non-Votes and Abstentions,” if no specification is indicated, the shares will be voted (1) “for” the election of each of the eight director nominees set forth in this proxy statement, (2) “for” the approval of the compensation of our named executive officers for fiscal 2021, (3) “for” the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accountant of our company for the fiscal year ending April 30, 2022, (4) “for” the approval of our 2021 Employee Stock Purchase Plan, and (5) “against” the stockholder proposal. If any other matter is properly presented at the meeting, the individuals specified in the proxy will vote your shares using their best judgment.

Revocability of Proxies

Any person giving a proxy may revoke the proxy at any time before its use by delivering to us either a written notice of revocation or a duly executed proxy bearing a later date or by attending the meeting and voting electronically during the meeting (as provided under “Stockholders Entitled to Vote; Record Date; How to Vote”). Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.

Solicitation

We will bear the cost of this solicitation. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for expenses incurred in forwarding solicitation materials to such beneficial owners. Proxies also may be solicited by certain of our directors and officers, personally or by telephone or e-mail, without additional compensation.

We have retained Morrow Sodali LLC, a proxy solicitation firm, to perform various solicitation services in connection with the Annual Meeting of Stockholders. We will pay Morrow Sodali a fee of $10,000, plus phone and other related expenses, in connection with its solicitation services. Morrow Sodali has engaged approximately 15 of its employees to assist us in connection with the solicitation of proxies.

Annual Report and Other Matters

Our 2021 Annual Report to Stockholders, which was made available to stockholders with or preceding this proxy statement, contains financial and other information about our company, but is not incorporated into this proxy statement and is not to be considered a part of these proxy materials or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The information contained in the “Compensation Committee Report” and the “Report of the Audit Committee” shall not be deemed “filed” with the SEC or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Exchange Act.

We will provide, without charge, a copy of our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 as filed with the SEC to each stockholder of record as of the record date that requests a copy in writing. Any exhibits listed in our Annual Report on Form 10-K also will be furnished upon request at the actual expense we incur in furnishing such exhibits. Any such requests should be directed to our Secretary at the address of our executive offices set forth in this proxy statement.

 

 

 

 

4 I 2021 Proxy Statement    

 


 

 

 

 

COMPANY

UPDATES

 

 

 

 

Executive Officer and Director Changes

In connection with the previously announced spin-off of our outdoor products and accessories business, or the Separation, to American Outdoor Brands, Inc., or AOUT, our Board of Directors appointed Mark P. Smith, formerly Co-President and Co-Chief Executive Officer of our company, as President and Chief Executive Officer and as a director of our company and appointed Deana L. McPherson, formerly Vice President, Chief Accounting Officer, Corporate Controller, and Assistant Treasurer of our company, as Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary of our company. Susan J. Cupero was named an executive officer of our company on June 23, 2021. Effective August 24, 2020, in connection with the Separation, Brian D. Murphy resigned as Co-President and Co-Chief Executive Officer of our company to serve as the President and Chief Executive Officer of AOUT as a new independent, publicly traded company; and Gregory J. Gluchowski, Jr. and I. Marie Wadecki resigned from our Board of Directors to become directors of AOUT. In connection with the Separation, Jeffrey D. Buchanan, who served as Executive Vice President, Chief Financial Officer, Chief Administrative Officer, and Treasurer of our company, formalized his previously announced retirement from our company as of the close of business on August 23, 2020. Effective August 1, 2020, Lane A. Tobiassen, former President, Firearm division of our company, separated from our company.  Effective August 1, 2021, Robert J. Cicero retired as Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary of our company. Mitchell A. Saltz served on our Board of Directors for many years until his death in October 2020.

The Separation

On August 24, 2020, we completed the Separation and AOUT became an independent, publicly traded company holding, directly or indirectly through its subsidiaries, the assets and legal entities, subject to any related liabilities, associated with the former outdoor products and accessories business of our company. The Separation was completed by way of a pro rata distribution, or the Distribution, of all the outstanding shares of AOUT common stock to the stockholders of record of our company as of the close of business on August 10, 2020, the record date for the Distribution, or the Record Date. Each stockholder of our company received one share of AOUT common stock for every four shares of common stock of our company held by such stockholder as of the close of business on the Record Date. The distribution of these shares was made in book-entry form, which means that no physical share certificates were delivered.

Name Change

In preparation for the Separation, we changed our name to Smith & Wesson Brands, Inc. on May 29, 2020. During fiscal 2021, the management and the Board of Directors of our company devoted significant time and attention to reorganize and restructure our company in preparation for the Separation.

 

 

 

    2021 Proxy Statement I 5

 


 

Company Updates

 

 

 

 

Adjustments to Outstanding Stock-Based Awards

In connection with the Separation, our outstanding stock-based awards, including restricted stock units, or RSUs, and performance-based restricted stock units, or PSUs, were adjusted in a manner intended to maintain the intrinsic value of the RSUs and PSUs immediately prior to the Separation. The RSUs and PSUs held by our directors and executives generally were converted into RSUs or PSUs of our company and AOUT, such that each such holder would (i) continue to hold the existing RSU or PSU in our company covering the same number of shares of our common stock that were subject to the RSU or PSU prior to the Separation and (ii) receive an identical RSU or PSU covering one share of AOUT common stock for each four shares of our common stock covered by the RSU or PSU in our company, resulting in the RSUs or PSUs for our company, and AOUT, having a combined intrinsic value immediately after the Separation as before the Separation, taking into account any necessary adjustments to the exercise price (if any) to maintain such intrinsic value. In addition, to the extent the existing award of our company is subject to the achievement of certain company performance-based target goals, appropriate adjustments will be made to such target goals and incorporated into the new awards to reflect the changes to the businesses of each of our company and AOUT as a result of the Separation. The number of shares covered by RSUs in our company held by other employees were adjusted so that the RSUs had the same intrinsic value immediately following the Separation as before the Separation. To the extent the existing award of our company is subject to vesting based upon continued service with our company, the new awards will also remain subject to the same vesting conditions based upon continued employment with the holder’s post-Separation employer.

 

 

 

 

 

6 I 2021 Proxy Statement    

 


 

 

 

PROPOSAL ONE –

ELECTION OF

DIRECTORS

 

 

 

 

Nominees

Our articles of incorporation and bylaws provide that the number of directors shall be fixed from time to time by resolution of our Board of Directors. The number of directors is currently fixed at eight. Our articles of incorporation and bylaws provide that all directors are elected at each annual meeting of our stockholders for a term of one year and hold office until their successors are elected and qualified.

A board of eight directors is to be elected at this meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them “for” each of the nominees named below. All of the nominees currently are directors of our company. In the event that any nominee is unable or declines to serve as a director at the time of the meeting, the proxies will be voted for any nominee designated by our current Board of Directors to fill the vacancy. It is not expected that any nominee will be unable or will decline to serve as a director.

 

 

 

 

 

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE NOMINEES LISTED BELOW

 

 

The following table sets forth certain information regarding the nominees for directors of our company:

 

Name

 

Age

 

Position

Robert L. Scott

 

75

 

Chairman of the Board (1)(2)

Michael F. Golden

 

67

 

Vice Chairman of the Board (4)

Anita D. Britt

 

58

 

Director (1)(3)(4)

Fred M. Diaz

 

55

 

Director (3)(4)

John B. Furman

 

77

 

Director (1)(2)(3)

Barry M. Monheit

 

74

 

Director (2)(3)

Mark P. Smith

 

45

 

President, Chief Executive Officer, and Director

Denis G. Suggs

 

55

 

Director (1)(2)

 

(1)

Member of the Audit Committee.

(2)

Member of the Nominations and Corporate Governance Committee.

(3)

Member of the Compensation Committee.

(4)

Member of the Environmental, Social, and Governance Committee.

 

 

 

    2021 Proxy Statement I 7

 


 

Proposal One – Election of Directors

 

 

 

 

 

 

 

 

 

Robert L. Scott

 

 

 

 

 

Age: 75

Tenure: Since 1999

Committee: Audit Committee and Nominations and Corporate Governance Committee

Independent

 

Robert L. Scott has served as a director of our company since December 1999 and was appointed as Chairman of the Board on August 23, 2020. Mr. Scott is the Chairman of the National Shooting Sports Foundation and a Governor of the Sporting Arms and Ammunition Institute. Mr. Scott served as a consultant to our company from May 2004 until February 2006; President of our company from December 1999 until September 2002; Chairman of our wholly owned subsidiary, Smith & Wesson Corp., from January 2003 through December 2003; and President of Smith & Wesson Corp. from May 2001 until December 2002. From December 1989 to December 1999, Mr. Scott served as Vice President of Sales and Marketing and later as Vice President of Business Development of Smith & Wesson Corp. prior to its acquisition by our company. Prior to joining Smith & Wesson Corp., Mr. Scott was employed for eight years in senior positions with Berkley & Company and Tasco Sales Inc., two leading companies in the outdoor industry. Mr. Scott previously served as a director and a member of the Compensation Committee of OPT Holdings, a private company marketing hunting accessories. We believe Mr. Scott’s prior extensive service with our company and his very extensive industry knowledge and expertise provide the requisite qualifications, skills, perspectives, and experience that make him well qualified to serve on our Board of Directors.

 

 

 

 

 

Michael F. Golden

 

 

 

 

 

Age: 67

Tenure: Since 2004

Committee: Environmental, Social, and Governance Committee

Independent

 

Michael F. Golden has served as a director of our company since December 2004 and was appointed Vice Chairman of the Board on August 23, 2020. Mr. Golden served as the President and Chief Executive Officer of our company from December 2004 until his retirement in September 2011. Mr. Golden served on the board of directors of Quest Resource Holding Corporation, a publicly traded environmental solutions company that serves as a single source provider of recycling and environment-related programs, services, and information, from October 2012 to March 2021. Mr. Golden was employed in various executive positions with the Kohler Company from February 2002 until joining our company, with his most recent position being the President of its Cabinetry Division. Mr. Golden was the President of Sales for the Industrial/Construction Group of the Stanley Works Company from 1999 until 2002; Vice President of Sales for Kohler’s North American Plumbing Group from 1996 until 1998; and Vice President — Sales and Marketing for a division of The Black & Decker Corporation where he was employed from 1981 until 1996. Since February 2013, Mr. Golden has served as a member of the board of directors of Trex Company, Inc., a New York Stock Exchange-listed manufacturer of high-performance wood-alternative decking and railing, and serves as a member of the Nominating/Corporate Governance Committee and Chairman of the Compensation Committee. We believe Mr. Golden’s service as the former President and Chief Executive Officer of our company, his intimate knowledge and experience with all aspects of the operations, opportunities, and challenges of our company, and his long business career at major companies provide the requisite qualifications, skills, perspectives, and experience that make him well qualified to serve on our Board of Directors.

 

 

 

8 I 2021 Proxy Statement    

 


 

 

Proposal One – Election of Directors

 

 

 

 

 

 

 

 

Anita D. Britt

 

 

 

 

 

Age: 58

Tenure: Since 2018

Committee: Audit Committee, Compensation Committee, and Environmental, Social, and Governance Committee

Independent

 

Anita D. Britt has served as a director of our company since February 2018. Ms. Britt served as Chief Financial Officer for Perry Ellis International, Inc., a publicly traded apparel company, from March 2009 until her retirement in March 2017. From August 2006 to February 2009, Ms. Britt served as Executive Vice President and Chief Financial Officer of Urban Brands, Inc., a privately held apparel company. From 1993 to 2006, Ms. Britt served in various positions, including that of Executive Vice President, Finance, for Jones Apparel Group, Inc., an apparel company. Ms. Britt has served as a member of the Board of Directors since 2018 and is a member of the Audit Committee and the Corporate Governance Committee of Delta Apparel, Inc., a New York Stock Exchange-listed designer, manufacturer, and marketer of lifestyle basics and branded active wear apparel, headwear, and related accessory products. Ms. Britt has served as a member of the Board of Directors, the chair of the Audit Committee, and a member of the Compensation Committee and Nominations and Corporate Governance Committee since June 2021 of urban-gro, Inc. a Nasdaq-listed provider of integrated design, engineering, and cultivation systems for the indoor horticulture market.  Ms. Britt previously served on the Board of Trustees and Finance Committee of St. Thomas University from April 2013 to January 2018 and as its Chief Financial Officer from January 2018 to March 2018. Ms. Britt is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants. Ms. Britt is also a Board Leadership Fellow, as designated by the National Association of Corporate Directors.  We believe Ms. Britt’s extensive financial leadership at a number of public and private companies and her extensive experience with consumer-oriented companies provide the requisite qualifications, skills, perspectives, and experience that make her well qualified to serve on our Board of Directors.

 

 

 

 

 

Fred M. Diaz

 

 

 

 

 

Age: 55

Tenure: Since 2021

Committee: Compensation Committee and Environmental, Social, and Governance Committee

Independent

 

Fred M. Diaz has served as a director of our company since May 2021.  Mr. Diaz served as President and Chief Executive Officer of Mitsubishi Motor North America, Inc. from 2018 to 2020 and as General Manager, Performance Optimization Global Marketing and Sales of Mitsubishi Motors Corporation in Tokyo, Japan from 2017 to 2018.  Mr. Diaz served in various executive level positions with Nissan North America Inc. for four years and Chrysler Corporation LLC for 24 years as the President and Chief Executive Officer of both the Ram Truck Brand and Chrysler of Mexico.  Mr. Diaz currently serves on the board of directors of SiteOne Landscape Supply, Inc., a publicly owned company that is the largest and only national wholesale distributor of landscaping products in the United States and Canada.  We believe Mr. Diaz’s executive positions, including that of chief executive officer for multiple companies, his management and marketing experience, and his experience as a public company director provide the requisite qualifications, skills, perspectives, and experience that make him well qualified to serve on our Board of Directors.

 

 

 

    2021 Proxy Statement I 9

 


 

Proposal One – Election of Directors

 

 

 

 

 

 

 

 

 

John B. Furman

 

 

 

 

 

Age: 77

Tenure: Since 2004

Committee: Audit Committee, Nominations and Corporate Governance Committee, and Compensation Committee

Independent

 

John B. Furman has served as a director of our company since April 2004. Since leaving the practice of law in August 1998, Mr. Furman has served as a consultant to or an executive of a number of companies, including serving as the chief executive officer of two public companies, with his focus being on restructurings, business transactions, capital formation, and product commercialization. From February 2009 until December 2009, Mr. Furman was the President and Chief Executive Officer of Infinity Resources LLC (now Quest Resource Holding Corporation), a privately held environmental solutions company that served as a single-source provider of recycling programs. Mr. Furman served as President and Chief Executive Officer of GameTech International, a publicly traded company involved in interactive bingo systems, from September 2004 until July 2005. Mr. Furman served as President and Chief Executive Officer and a director of Rural/Metro Corporation, a publicly traded provider of emergency and fire protection services, from August 1998 until January 2000. Mr. Furman was a senior member of the law firm of O’Connor, Cavanagh, Anderson, Killingsworth & Beshears, a professional association, from January 1983 until August 1998; he was Associate General Counsel of Waste Management, Inc., a New York Stock Exchange- listed provider of waste management services, from May 1977 until December 1983; and Vice President, Secretary, and General Counsel of the Warner Company, a New York Stock Exchange-listed company involved in industrial mineral extractions and processing, real estate development, and solid and chemical waste management, from November 1973 until April 1977. Mr. Furman previously served as a director and Chairman of the Compensation Committee of MarineMax, Inc., a New York Stock Exchange-listed company that is the nation’s largest recreational boat dealer. We believe Mr. Furman’s experience as a chief executive officer and a consultant to multiple companies, his experience as a lawyer in private practice and for corporations, and his experience as a public company director provide the requisite qualifications, skills, perspectives, and experience that make him well qualified to serve on our Board of Directors.

 

 

 

 

10 I 2021 Proxy Statement    

 


 

 

Proposal One – Election of Directors

 

 

 

 

 

 

 

 

Barry M. Monheit

 

 

 

 

 

Age: 74

Tenure: Since 2004

Committee: Nominations and Corporate Governance Committee and Compensation Committee

Independent

 

Barry M. Monheit has served as a director of our company since February 2004, including as Chairman of the Board from October 2004 until the Separation when he became Chairman of the Board of AOUT. Mr. Monheit has served as Chairman of the Board of American Outdoor Brands, Inc., a publicly traded outdoor products and accessories company and our former subsidiary, since its spin-off from our company in August 2020. Mr. Monheit has been, since July 1, 2020, a Senior Managing Director of J.S Held, LLC, formerly Simon Consulting, L.L.C., a consulting company providing services in forensic accounting, fraud investigations, receivership and restructuring, and lost profit examinations. Mr. Monheit has been, since December 2015, Vice Chairman of the Board of That’s Eatertainment Corp. (formerly Modern Round Entertainment Corporation), a company formed to create and roll out nationally an entertainment concept centered around a virtual interactive shooting experience utilizing laser technology-based replica firearms and extensive food and beverage offerings, and was a principal of its predecessor, Modern Round LLC, from February 2014 until December 2015. Mr. Monheit served as the President and Chief Executive Officer of Quest Resource Holding Corporation, a publicly traded environmental solutions company that serves as a single-service provider of recycling and environment-related programs, services, and information, from June 2011 until July 2013 and served as a director of that company or its predecessors from June 2011 until July 2019. Mr. Monheit served as a financial and operational consultant from April 2010 until June 2011. From May 2009 until April 2010, Mr. Monheit was a Senior Managing Director of FTI Palladium Partners, a financial consulting division of FTI Consulting, Inc., a New York Stock Exchange-listed global advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory, and economic environment. Mr. Monheit was a consultant focusing on financial and operational issues in the corporate restructuring field from January 2005 until May 2009. From July 1992 until January 2005, Mr. Monheit was associated in various capacities with FTI Consulting, Inc., serving as the President of its Financial Consulting Division from May 1999 through November 2001. Mr. Monheit was a partner with Arthur Andersen & Co. from August 1988 until July 1992, serving as partner-in-charge of its New York Consulting Division and partner-in-charge of its U.S. Bankruptcy and Reorganization Practice. We believe Mr. Monheit’s extensive experience in financial and operational consulting gained as an executive of major restructuring firms and his executive experience with major and emerging companies provide the requisite qualifications, skills, perspectives, and experience that make him well qualified to serve on our Board of Directors.

 

 

 

    2021 Proxy Statement I 11

 


 

Proposal One – Election of Directors

 

 

 

 

 

 

 

 

 

 

Mark P. Smith

 

 

 

 

 

Age: 45

Tenure: Since 2020

Committee: Not Applicable

Not Independent

 

Mark P. Smith has served as President and Chief Executive Officer and as a director of our company since August 2020. Mr. Smith served as Co-President and Co-Chief Executive Officer of our company from January 2020 until August 2020. Mr. Smith served as President, Manufacturing Services of our company and as President of Manufacturing Services for Smith & Wesson Sales Company (formerly known as American Outdoor Brands Sales Company and Smith & Wesson Corp.), a subsidiary of our company, from March 2016 until January 2020. Mr. Smith served as Vice President of Manufacturing and Supply Chain Management from May 2011 until March 2016 and served as Vice President of Supply Chain Management from May 2010 until May 2011. He was Director Supply Chain Solutions for Alvarez & Marsal Business Consulting, LLC from April 2007 until April 2010. Mr. Smith held various positions for Ecolab, Inc., a developer and marketer of programs, products, and services for the hospitality, foodservice, healthcare, industrial, and energy markets, from March 2001 until April 2007, including Program Manager, Acquisition Integration Manager, Senior Manufacturing Planner, Plant Engineer, and Senior Production / Quality Supervisor. Mr. Smith was a Production Supervisor for Bell Aromatics, a manufacturer of flavors and fragrances, from August 1999 until March 2001.  We believe Mr. Smith’s position as President and Chief Executive Officer of our company, as President, Manufacturing Services of our company, as President of Manufacturing Services for Smith & Wesson Sales Company, his experience in marketing and supply chain management for various companies, and other executive positions with various companies provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.

 

 

 

 

 

Denis G. Suggs

 

 

 

 

 

Age: 55

Tenure: Since 2021

Committee: Audit Committee and Nominations and Corporate Governance Committee

Independent

 

Denis G. Suggs has served as a director of our company since May 2021.  Mr. Suggs has served as the Chief Executive Officer of LCP Transportation LLC, a non-emergency medical transportation provider, since 2020. Mr. Suggs served as President and Chief Executive Officer of Strategic Materials, Inc., a glass recycler, from 2014 to 2020.  Mr. Suggs previously served in executive capacities with Belden, Inc., Danaher Corporation, and Public Storage Inc.  Mr. Suggs currently serves on the board of Patrick Industries, a publicly owned company that is a major manufacturer of components, building products and materials for the recreation vehicle, marine, manufactured housing, and industrial markets in the United States and Canada.  We believe Mr. Suggs’ executive positions, including that of chief executive officer for multiple companies, his managerial experience, and his experience as a public company director make him well qualified to serve on our Board of Directors.

There are no family relationships among any of our directors and executive officers.

 

 

 

 

 

12 I 2021 Proxy Statement    

 


 

 

 

CORPORATE

GOVERNANCE

 

 

 

 

Director Independence

Our Board of Directors has determined, after considering all of the relevant facts and circumstances, that Anita D. Britt, Fred M. Diaz, John B. Furman, Michael F. Golden, Barry M. Monheit, Robert L. Scott, and Denis G. Suggs are independent directors, as “independence” is defined by the listing standards of the Nasdaq Stock Market, or Nasdaq, and by the SEC, because they have no relationship with us that would interfere with their exercise of independent judgment in carrying out their responsibilities as a director. Mark P. Smith is an employee director. Gregory J. Gluchowski, Jr., and I. Marie Wadecki served on our Board of Directors during a portion of fiscal 2021. Mr. Gluchowski and Ms. Wadecki resigned from our Board of Directors in August 2020 in connection with the Separation to join the Board of Directors of AOUT as provided for in the Separation. Mr. Gluchowski and Ms. Wadecki were independent directors, as “independence” is defined by the listing standards of Nasdaq and by the SEC, because they had no relationship with us that would interfere with their exercise of independent judgment in carrying out their responsibilities as a director.

Committee Charters, Corporate Governance Guidelines, and Codes of Conduct and Ethics

Our Board of Directors has adopted charters for the Audit; Compensation; Nominations and Corporate Governance; and Environmental, Social, and Governance Committees describing the authority and responsibilities delegated to each committee by our Board of Directors. Our Board of Directors has also adopted Corporate Governance Guidelines, a Code of Conduct, and a Code of Ethics for the CEO and Senior Financial Officers. We post on our website, at www.smith-wesson.com, the charters of our Audit; Compensation; Nominations and Corporate Governance; and Environmental, Social, and Governance Committees; our Corporate Governance Guidelines, Code of Conduct, and Code of Ethics for the CEO and Senior Financial Officers, and any amendments or waivers thereto; and any other corporate governance materials specified by SEC or Nasdaq regulations. These documents are also available in print to any stockholder requesting a copy in writing from our Secretary at the address of our executive offices set forth in this proxy statement.

Policy on Corporate Political Contributions and Expenditures

Our Board of Directors has adopted a Policy on Corporate Political Contributions and Expenditures which is posted on our website at www.smith-wesson.com. In accordance with this policy, for each fiscal year beginning in 2015, we have posted on our website during the applicable fiscal year an annual report disclosing all political contributions or expenditures in the United States that are not deductible as “ordinary and necessary” business expenses under Section 162(e) of the Internal Revenue Code in excess of $50,000. Non-deductible amounts generally include contributions to or expenditures in support of or opposition to political candidates, political parties, or political committees.

Executive Sessions

We regularly schedule executive sessions in which independent directors meet without the presence or participation of management. The Chairman of our Board of Directors serves as the presiding director of such executive sessions.

 

 

 

    2021 Proxy Statement I 13

 


 

Corporate Governance

 

 

 

 

Board Committees

Our bylaws authorize our Board of Directors to appoint from among its members one or more committees consisting of one or more directors. Our Board of Directors has established an Audit Committee; a Compensation Committee; a Nominations and Corporate Governance Committee; and an Environmental, Social, and Governance Committee, each consisting entirely of independent directors as “independence” is defined by the listing standards of Nasdaq and by the SEC.

The Audit Committee

The purpose of the Audit Committee includes overseeing the financial and reporting processes of our company and the audits of the financial statements of our company and providing assistance to our Board of Directors with respect to its oversight of the integrity of the financial statements of our company, our company’s compliance with legal and regulatory matters, our company’s policies and practices related to information security, the independent registered public accountant’s qualifications and independence, and the performance of our company’s independent registered public accountant. The primary responsibilities of the Audit Committee are set forth in its charter and include various matters with respect to the oversight of our company’s accounting and financial reporting process and audits of the financial statements of our company on behalf of our Board of Directors. The Audit Committee also selects the independent registered public accountant to conduct the annual audit of the financial statements of our company; reviews the proposed scope of such audit; reviews accounting and financial controls of our company with the independent registered public accountant and our financial accounting staff; and reviews and approves any transactions between us and our directors, officers, and their affiliates, also referred to as related-person transactions.

The Audit Committee currently consists of Messrs. Furman, Scott, and Suggs and Ms. Britt, with Ms. Britt serving as the chair. Our Board of Directors has determined that each of Messrs. Furman, Scott, and Suggs and Ms. Britt, whose backgrounds are described above, qualifies as an “audit committee financial expert” in accordance with applicable rules and regulations of the SEC. During a portion of fiscal 2021, Ms. Wadecki also served on the Audit Committee before joining the Board of Directors of AOUT. Mr. Suggs was appointed to the Audit Committee following fiscal 2021 in connection with his appointment to our Board of Directors.

The Compensation Committee

The purpose of the Compensation Committee includes determining, or, when appropriate, recommending to our Board of Directors for determination, the compensation of the Chief Executive Officer and other executive officers of our company and discharging the responsibilities of our Board of Directors relating to compensation programs of our company. The Compensation Committee currently makes all decisions with respect to executive compensation. The Compensation Committee currently consists of Messrs. Diaz, Furman, and Monheit and Ms. Britt with Mr. Monheit serving as the chair. During a portion of fiscal 2021, Mr. Gluchowski and Ms. Wadecki also served on the Compensation Committee before joining the Board of Directors of AOUT, and Mr. Furman served as chair of the Compensation Committee, until the Separation. Mr. Diaz was appointed to the Compensation Committee following fiscal 2021 in connection with his appointment to our Board of Directors.

The Nominations and Corporate Governance Committee

The purpose of the Nominations and Corporate Governance Committee includes the selection or recommendation to our Board of Directors of nominees to stand for election as directors at each election of directors, the oversight of the selection and composition of committees of our Board of Directors, the oversight of the evaluations of our Board of Directors and management, and the development and recommendation to our Board of Directors of corporate governance principles applicable to our company. The Nominations and Corporate Governance Committee currently consists of Messrs. Furman, Monheit, Scott, and Suggs, with Mr. Furman serving as chair. During a portion of fiscal 2021, Mr. Gluchowski and Ms. Wadecki also served on the Nominations and Corporate Governance Committee, with Ms. Wadecki

 

 

 

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Corporate Governance

 

 

 

serving as the chair, before joining the Board of Directors of AOUT. Mr. Suggs was appointed to the Nominations and Corporate Governance Committee following fiscal 2021 in connection with his appointment to our Board of Directors.

The Nominations and Corporate Governance Committee will consider persons recommended by stockholders for inclusion as nominees for election to our Board of Directors if the information required by our bylaws is submitted in writing in a timely manner addressed and delivered to our Secretary at the address of our executive offices set forth in this proxy statement. The Nominations and Corporate Governance Committee identifies and evaluates nominees for our Board of Directors, including nominees recommended by stockholders, based on numerous factors it considers appropriate, some of which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity, and the extent to which the nominee would fill a present need on our Board of Directors.

The Environmental, Social, and Governance Committee

The purpose of the Environmental, Social, and Governance, or ESG, Committee is to assist the Board of Directors and the various committees of the Board of Directors, as applicable, in fulfilling the oversight responsibilities of the Board of Directors with various environmental, social, health, safety, and governance policies and operational control matters relevant to our company, particularly those that do not come within the purview of other standing committees of the Board of Directors or the Board of Directors itself.  Among other things, the ESG Committee plans to focus on environmental matters, including energy use, water use, sustainability, recycling, pollution, and hazardous waste; social, health, and safety matters, including workplace health and safety, working conditions, employee opportunities, employee training, diversity and inclusion, and corporate giving and philanthropy; and governance matters, including privacy and workplace ethics and compliance.

The ESG Committee currently consists of Ms. Britt and Messrs. Golden and Diaz, with Mr. Golden serving as the chair.  In view of the wide range of matters considered by the ESG Committee, various high-level executives serve as ex-officio members, including our company’s Chief Financial Officer, Corporate Controller, Senior Manager of Internal Audit, Vice President of Operations, and Senior Director of Human Resources.  The ESG Committee was established as an ad hoc committee during fiscal 2021 and formalized as a standing committee in early fiscal 2022 with the plan to meet at least quarterly on a go-forward basis.

Risk Assessment of Compensation Policies and Practices

We have assessed the compensation policies and practices with respect to our employees, including our executive officers, and have concluded that they do not create risks that are reasonably likely to have a material adverse effect on our company.

Board’s Role in Risk Oversight

Risk is inherent in every business. As is the case in virtually all businesses, we face a number of risks, including operational, economic, financial, legal, regulatory, and competitive risks. Our management is responsible for the day-to-day management of the risks we face. Our Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management.

In its oversight role, our Board of Directors’ involvement in our business strategy and strategic plans plays a key role in its oversight of risk management, its assessment of management’s risk appetite, and its determination of the appropriate level of enterprise risk. Our Board of Directors receives updates at least quarterly from senior management and periodically from outside advisors regarding the various risks we face, including operational, economic, financial, cyber security, legal, regulatory, and competitive risks. Our Board of Directors also reviews the various risks we identify in our filings with the SEC as well as risks relating to various specific developments, such as acquisitions, securities repurchases, debt and equity

 

 

 

    2021 Proxy Statement I 15

 


 

Corporate Governance

 

 

 

 

placements, and new product introductions. In addition, our Board of Directors regularly receives reports from our Senior Manager of Internal Audit and our General Counsel and Chief Compliance Officer.

Our board committees assist our Board of Directors in fulfilling its oversight role in certain areas of risk. Pursuant to its charter, the Audit Committee oversees the financial and reporting processes of our company and the audit of the financial statements of our company and provides assistance to our Board of Directors with respect to the oversight and integrity of the financial statements of our company, our company’s compliance with legal and regulatory matters, our company’s policies and practices related to information security, the independent registered public accountant’s qualification and independence, and the performance of our independent registered public accountant. The Compensation Committee considers the risk that our compensation policies and practices may have in attracting, retaining, and motivating valued employees and endeavors to assure that it is not reasonably likely that our compensation plans and policies would have a material adverse effect on our company. Our Nominations and Corporate Governance Committee oversees governance related risk, such as board independence, conflicts of interest of members of the Board of Directors and executive officers, and management and succession planning.

Board Diversity

We seek diversity in experience, viewpoint, education, skill, and other individual qualities and attributes to be represented on our Board of Directors. We believe directors should have various qualifications, including individual character and integrity; business experience; leadership ability; strategic planning skills, ability, and experience; requisite knowledge of our industry and finance, accounting, and legal matters; communications and interpersonal skills; and the ability and willingness to devote time to our company. We also believe the skill sets, backgrounds, and qualifications of our directors, taken as a whole, should provide a significant mix of diversity in personal and professional experience, background, viewpoints, perspectives, knowledge, and abilities. Nominees are not to be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability, or any other basis proscribed by law. The assessment of prospective directors is made in the context of the perceived needs of our Board of Directors from time to time.  Our eight-person Board of Directors currently includes one woman and two minority members.

All of our directors have held senior-level positions in business or professional service firms and have experience in dealing with complex issues. We believe that all of our directors are individuals of high character and integrity, are able to work well with others, and have committed to devote sufficient time to the business and affairs of our company. In addition to these attributes, the description of each director’s background set forth above indicates the specific qualifications, skills, perspectives, and experience necessary to conclude that each individual should continue to serve as a director of our company.

Board Leadership Structure

We believe that effective board leadership structure can depend on the experience, skills, and personal interaction between persons in leadership roles as well as the needs of our company at any point in time. Our Corporate Governance Guidelines support flexibility in the structure of our Board of Directors by not requiring the separation of the roles of Chief Executive Officer and Chairman of the Board.

We currently maintain separate roles between the Chief Executive Officer and Chairman of the Board in recognition of the differences between the two responsibilities. Our Chief Executive Officer is responsible for setting our strategic direction and day-to-day leadership and performance of our company. The Chairman of the Board provides input to the Chief Executive Officer, sets the agenda for board meetings, and presides over meetings of the full Board of Directors as well as executive sessions of the Board of Directors.

 

 

 

16 I 2021 Proxy Statement    

 


 

 

Corporate Governance

 

 

 

Director and Officer Derivative Trading and Hedging

We have a policy prohibiting our directors and officers, including our executive officers, and any family member residing in the same household, from engaging in derivatives trading and hedging involving our securities or pledging or margining our common stock.

Stock Ownership Guidelines

We maintain stock ownership guidelines for our non-employee directors and executive officers. Our non-employee directors and executive officers are required to own shares of our common stock or share equivalents with a value equal to at least the lesser of the following:

 

Non-Employee DirectorsThree times cash retainer or 21,000 shares or share equivalents

 

Chief Executive OfficerThree times base salary or 161,000 shares or share equivalents

 

Chief Financial OfficerTwo times base salary or 34,000 shares or share equivalents

 

Other Executive OfficersTwo times base salary or 26,000 shares or share equivalents

Each individual has five years from the date of their appointment as a director or an executive officer to achieve the required ownership levels. We believe that these guidelines promote the alignment of the long-term interests of our executive officers and members of our Board of Directors with our stockholders.

Stock ownership generally includes the shares directly owned by the individual (including any shares over which the individual has sole ownership, voting, or investment power); the number of shares owned by the individual’s minor children and spouse and by other related individuals and entities over whose shares the individual has custody, voting control, or power of disposition; shares underlying RSUs that have vested and are deliverable or will be vested and deliverable within 60 days; shares underlying PSUs that have vested but are not deliverable within 60 days if the performance requirements have been satisfied; shares underlying stock options that have vested or will vest within 60 days; and shares held in trust for the benefit of the individual or the individual’s immediate family members.

If an individual achieves the required ownership level on the first day of any fiscal year, the value of the individual’s stock ownership on that date will be converted into a number of shares to be maintained in the future by dividing the value of such stock ownership by the price of our common stock on the prior day, which is the last day of the preceding fiscal year.

The failure to satisfy the required ownership level may result in the ineligibility of the individual to receive stock-based compensation in the case of an executive officer or director or the inability to be a nominee for election to the Board of Directors in the case of a director.

Clawback Policy

We maintain a compensation recovery, or clawback, policy. In the event we are required to prepare an accounting restatement of our financial results as a result of a material noncompliance by us with any financial reporting requirement under the federal securities laws, we will have the right to use reasonable efforts to recover from any current or former executive officers who received incentive compensation (whether cash or equity) from us during the three-year period preceding the date on which we were required to prepare the accounting restatement, any excess incentive compensation awarded as a result of the misstatement. This policy is administered by the Compensation Committee of our Board of Directors. Once final rules are adopted by the SEC regarding clawback requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, we will review this policy and make any amendments necessary to comply with the new rules.

 

 

 

    2021 Proxy Statement I 17

 


 

Corporate Governance

 

 

 

 

Corporate Stewardship Policy

We maintain a Corporate Stewardship Policy. In accordance with this policy, to meet our objective of being a good corporate steward, we take into account our responsibilities with respect to (i) employee, safety, and governance risks, including the risks caused by the unlawful or improper use of firearms, and (ii) preserving the right to bear arms enshrined in the U.S. Constitution.

Whistleblower Policy

We maintain a Whistleblower Policy covering the policies and procedures for (i) the receipt, retention, and treatment of complaints that we receive regarding accounting, internal controls, or auditing matters; and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

Compensation Committee Interlocks and Insider Participation

During our fiscal year ended April 30, 2021, Messrs. Furman, Gluchowski, and Monheit and Mses. Britt and Wadecki served on the Compensation Committee. None of these individuals had any material contractual or other relationships with us during such fiscal year except as directors. During our fiscal year ended April 30, 2021, none of our executive officers served on the compensation committee or board of directors of any entity whose executive officers serve as a member of our Board of Directors or Compensation Committee.

Board and Committee Meetings

Our Board of Directors held a total of 19 meetings during the fiscal year ended April 30, 2021. During the fiscal year ended April 30, 2021, the Audit Committee held six meetings, the Compensation Committee held nine meetings, and the Nominations and Corporate Governance Committee held six meetings. No director attended fewer than 75% of the aggregate of (i) the total number of meetings of our Board of Directors, and (ii) the total number of meetings held by all committees of our Board of Directors on which he or she was a member.

Annual Meeting Attendance

We encourage each of our directors to attend each annual meeting of stockholders. To that end, and to the extent reasonably practicable, we regularly schedule a meeting of our Board of Directors on the same day as our annual meeting of stockholders. All of our then current directors attended our 2020 Annual Meeting of Stockholders.

Majority Voting for Directors

We have a director resignation policy that provides that any incumbent director who does not receive the requisite majority of votes cast in an uncontested election is expected to submit his or her offer of resignation to our Board of Directors. For more detailed information regarding this policy, see “Voting and Other Matters — Broker Non-Votes and Abstentions.”

Proxy Access

Our bylaws allow for “proxy access,” a means for our stockholders to include stockholder-nominated director candidates in our proxy materials for annual meetings of stockholders. A stockholder, or group of not more than 20 stockholders, that meet specific eligibility requirements are generally permitted to nominate the greater of (i) two director nominees or (ii) 20% of the total number of directors in office at the deadline for proxy access nominations. In order to be eligible to use the proxy access process, an eligible stockholder must, among other requirements, have owned 3% or more of our outstanding common

 

 

 

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Corporate Governance

 

 

 

stock continuously for at least three years. Use of the proxy access process to submit stockholder nominees is subject to additional eligibility, procedural, and disclosure requirements as set forth in our bylaws.

Investor Engagement

Our relationship with our stockholders is an important part of our corporate governance commitment. We meet with a broad base of investors throughout the year to discuss strategy and other important matters, including executive compensation. We consider investor feedback on emerging issues, which allows us to better understand our stockholders’ priorities and perspectives. This year-round engagement process provides us with useful input concerning our corporate strategy and enables us to consider developments proactively and to act responsibly. During the solicitation for the 2020 Annual Meeting of Stockholders, we reached out to stockholders holding approximately 24% of our outstanding shares and had discussions with stockholders holding approximately 16% of our outstanding shares.

Communications with Directors

Interested parties may communicate with our Board of Directors or specific members of our Board of Directors, including our independent directors and the members of our various board committees, by submitting a letter addressed to the Board of Directors of Smith & Wesson Brands, Inc., c/o any specified individual director or directors, at the address of our executive offices set forth in this proxy statement. Any such letters are sent to the indicated directors.

 

 

 

 

 

    2021 Proxy Statement I 19

 


 

 

 

COMPENSATION

DISCUSSION AND

ANALYSIS

 

 

 

 

Company and Leadership Changes During Fiscal 2021

Executive Officer Changes

On August 24, 2020, we completed the Separation and AOUT became an independent, publicly traded company holding, directly or indirectly through its subsidiaries, the assets and legal entities, subject to any related liabilities, associated with the former outdoor products and accessories business of our company. In connection with the Separation, Mr. Smith, formerly Co-President and Co-Chief Executive Officer of our company, became the sole President and Chief Executive Officer of our company, and Deana L. McPherson, formerly Senior Vice President, Chief Accounting Officer, and Controller of our company, became the Executive Vice President, Chief Financial Officer, and Treasurer of our company. Susan J. Cupero was named an executive officer on June 23, 2020. In conjunction with the Separation, Brian D. Murphy resigned as Co-President and Co-Chief Executive Officer of our company and became the President and Chief-Executive Officer of AOUT and Jeffrey D. Buchanan retired as previously announced as Executive Vice President, Chief Financial Officer, Chief Administrative Officer, and Treasurer of our company. Lane A. Tobiassen, former President, Firearm division of our company, separated from our company effective August 1, 2020. Robert J. Cicero retired as Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary of our company effective August 1, 2021. See “Executive Compensation — Employment Agreements and Severance Arrangements with Our Named Executive Officers — Retirement Agreement with Mr. Buchanan” for a more detailed discussion of the retirement arrangements with Mr. Buchanan.

Employment Agreements

On April 4, 2020, we entered into a separate employment agreement with each of Mark P. Smith and Brian D. Murphy, as Co-President and Co-Chief Executive Officer of our company, effective as of January 15, 2020. Our agreement with Mr. Murphy specified that he would resign his positions with our company effective as of the Separation and would become the President and Chief Executive Officer of AOUT. Our agreement with Mr. Smith specified that he would be the sole President and Chief Executive Officer of our company effective as of the Separation. See “Executive Compensation — Employment Agreements and Severance Arrangements with Our Named Executive Officers — Employment Agreements with Mr. Smith and Mr. Murphy” for a more detailed discussion of the employment arrangements of Messrs. Smith and Murphy.

COVID-19

In fiscal 2021, we were subject to the ongoing effects of the COVID-19 pandemic. Those effects included keeping our workplace safe, dealing with various supply-chain issues, and navigating changes and challenges in the retail landscape while operating our business at increased demand levels.

Results from Continuing Operations

For purposes of this Compensation Discussion and Analysis, all amounts pertaining to financial statement performance relate to continuing operations only and exclude any results from the outdoor products and accessories business.

 

 

 

20 I 2021 Proxy Statement    

 


 

 

Compensation Discussion and Analysis

 

 

 

Executive Summary

Named Executive Officers

This Compensation Discussion and Analysis describes our executive compensation program, outlines the core principles behind that program, and reviews the actions taken by our Compensation Committee concerning the fiscal 2021 compensation of the executive officers named in the Fiscal 2021 Summary Compensation Table below, or the named executive officers. These named executive officers are as follows:

 

Mark P. Smith

President and Chief Executive Officer since August 24, 2020; Co-President and Co-Chief Executive Officer from May 1, 2020 until August 24, 2020.

Brian D. Murphy

Former Co-President and Co-Chief Executive Officer who served in those roles from May 1, 2020 until August 24, 2020.

Deana L. McPherson

Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary since August 24, 2020; Vice President, Chief Accounting Officer, Corporate Controller, and Assistant Treasurer from May 1, 2020 until August 24, 2020.

Jeffrey D. Buchanan

Former Executive Vice President, Chief Financial Officer, Chief Administrative Officer, and Treasurer who served in those roles from May 1, 2020 until August 23, 2020.

Robert J. Cicero

Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary.

Susan J. Cupero

Vice President, Sales.

Lane Tobiassen

Former President, Firearm division who served in that role from May 1, 2020 until August 1, 2020.

 

Messrs. Smith and Murphy served as Co-Presidents and Co-Chief Executive Officers from May 1, 2020 until August 24, 2020.  Effective August 24, 2020, Mr. Smith and Ms. McPherson assumed their current positions with our company. Effective with the date of the Separation on August 24, 2020, Mr. Murphy left our company and became the sole President and Chief Executive Officer of AOUT and Mr. Buchanan retired as an executive officer.  Mr. Tobiassen separated from our company effective August 1, 2020. Mr. Cicero retired as an executive officer of our company effective August 1, 2021.

Summary of the Fiscal 2021 Compensation Program

In spite of the uncertainty regarding our ability to continue operating during the COVID-19 pandemic, whether consumer demand would continue at the heightened levels that began in March 2020, and the time commitments required to complete the Separation, the Compensation Committee increased the fiscal 2021 financial performance metrics for the annual cash incentive bonus relative to the prior year. The fiscal 2021 metrics were established to provide the executive officers with objectives that were difficult, but attainable, in order to motivate and incentivize them to drive increases in net sales and Adjusted EBITDAS over the prior year’s results. While challenging conditions did, in fact, continue throughout fiscal 2021, the executive officers successfully maintained operations while striving to provide a safe work environment for our employees, increased production volume by more than 60%, hired approximately 300 new employees, overcame significant challenges within the supply chain,  successfully managed numerous changes to the organization resulting from planning and completing the Separation, and yet drove our company to deliver a strong financial performance, including significantly increasing net sales and Adjusted EBITDAS for fiscal 2021. Given these positive results and recognizing potential retention issues caused by firearm and firearm-related industry factors beyond the control of management, the Compensation Committee believes it is important to continue to incentivize and retain our executive officers on a pay-for-performance basis with compensation programs similar to previous years using objective financial metrics

 

 

 

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that take into account the business, social, political, and corporate environment in which our company operates consistent with our compensation philosophy of pay-for-performance and executive retention. See Appendix A – Adjusted EBITDAS for a reconciliation of Net Income to Adjusted EBITDAS.

The following highlights aspects of our fiscal 2021 compensation program:

 

Base Salary — As it has done in the past, the Compensation Committee in April 2020, with advice from its independent compensation consultant, reviewed the base salaries of our executive officers compared with competitive market data. As a result of this review, and given that Mr. Smith, Ms. McPherson, and Ms. Cupero had all received raises during the prior fiscal year as a result of promotions that they received relative to their new roles or impending roles subsequent to the Separation and that Messrs. Murphy, Buchanan, and Tobiassen would be separating from our company at or around the time of the Separation, the Compensation Committee did not increase the base salary for any named executive officer.

 

Annual Cash Incentive Bonuses — Our Executive Annual Cash Incentive Program for fiscal 2021 continued, as in the past, to focus on the achievement of objective annual financial goals, specifically, net sales and Adjusted EBITDAS. Named executive officer cash incentive compensation as a percentage of base salary were 200% in the case of our President and Chief Executive Officer and 130% for our other named executive officers. Our bonus plan considered the difficult and unpredictable environment for our business, and the relative lack of control that our management has over external, social, political, health, and economic factors that impact our company, when setting the financial performance goals at the beginning of the 2021 fiscal year. In accordance with the pay-for-performance philosophy of the Compensation Committee, each of our named executive officers (other than those who left our company prior to the end of fiscal 2021) was awarded a cash incentive bonus payout at maximum based on our company’s outstanding financial performance and the achievement of the prior established targets under our fiscal 2021 Executive Annual Cash Incentive Program. During the last five prior fiscal years, there was one-year, fiscal 2018, when none of our executive officers received cash incentive bonuses for company-wide or division financial performance because we did not achieve our pre-established company-wide or division financial performance targets under the cash incentive programs.

 

Long-Term Incentive Compensation — As in the past, the stock-based awards granted to our executive officers in fiscal 2021 consisted of a mix of RSUs and PSUs. The RSUs vest one-fourth following each of the first, second, third, and fourth anniversaries of the date of grant. The number of shares of common stock, if any, to be delivered under the PSUs depends on the relative performance of our common stock compared with the performance of the Russell 2000 Index, or RUT, with a target payout requiring performance to be equal to or higher than the RUT over the three-year performance period. Reflecting our pay-for-performance philosophy, for the first time in four years, shares were distributed in fiscal 2021 under the PSUs that were granted in fiscal 2018 for the three-year performance period ended May 1, 2021 since the market performance criterion was achieved.

 

Independent Competitive Market Analysis — As in the past, the Compensation Committee’s independent compensation consultant assisted the Compensation Committee by providing a market analysis of executive compensation as well as updating the committee on current trends and developments in executive compensation.

 

Focus on Performance — We increased both the net sales and Adjusted EBITDAS metrics for our company for fiscal 2021 so that no payment would be made to any executive officer if net sales and Adjusted EBITDAS targets did not at least achieve the prior fiscal year’s results. This was despite concerns about the demand for firearms and firearm-related products and the uncertainty caused by COVID-19 and the work related to the Separation.

Our Compensation Committee believes that, in the context of the various factors facing the primary industry in which we operate, our executive compensation program continues to illustrate our company’s strong commitment to align pay with performance. In light of our operational accomplishments and taking

 

 

 

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into consideration potential management retention issues in a difficult environment, as well as the Compensation Committee’s pay-for-performance philosophy, the Compensation Committee recommends that our stockholders vote “FOR” this year’s resolution to approve on an advisory basis the compensation of our named executive officers for fiscal 2021 as described in this proxy statement. Our recommendation is particularly strong given our management’s performance during fiscal 2021 despite the COVID-19 pandemic that closed down the operations of many companies and the substantial time commitment to the Separation. Our management team was able to keep our entire business operating due to a broad range of safety procedures and cleaning protocols, which were implemented early and aggressively to significantly reduce the risk of COVID-19 transmission and keep our employees safe. The ability of our business to remain operational during that period allowed our business to address an increase in consumer demand that began during the fourth quarter of the prior fiscal year. Our management’s actions were instrumental in delivering strong results for fiscal 2021 and beyond.

Factors Affecting Fiscal 2021 Compensation

Historically, the firearm and firearm-related industries have been very cyclical, with previous expansions and contractions due, in large part, to unpredictable political, economic, social, legislative, and regulatory factors beyond the control of industry participants and their management teams. During fiscal 2021, managing our company was made even more challenging by the ongoing changes being made in preparation for the Separation and the continuing effects of the COVID-19 pandemic (including keeping our workforce safe while operating our business at increased demand levels). The factors that we believe affected all participants in the firearm industry, as well as our company, included changes in the social and political environment, unsettling news events, potential legislative restrictions on the sale or design of firearms, actual and potential legislative and regulatory actions at the federal and state levels, economic changes, fears surrounding crime and terrorism, and, most recently, the COVID-19 pandemic. Our fiscal 2021 performance was also affected by other factors that may have resulted in an increase in demand for our products in fiscal 2021, including a perception by consumers that the political and regulatory environment was less favorable toward consumer firearm ownership and the effects of the COVID-19 pandemic.

Despite this very challenging and changing internal as well as industry environment, we achieved a number of significant accomplishments in fiscal 2021 that demonstrated our ongoing progress toward our objective of being the undisputed market leader in the firearm industry. The highlights of these accomplishments include the following:

 

In accordance with our pay-for-performance philosophy, the two most important measures in determining executive cash compensation, net sales and Adjusted EBITDAS, increased 100.0% and 295.5%, respectively, over the prior fiscal year.

 

Net sales were $1.1 billion, an increase of $529.6 million, or 100.0%, over the prior fiscal year.

 

Net income was $243.6 million, or $4.40 per diluted share, compared with net income of $27.7 million, or $0.50 per diluted share for the prior fiscal year.  

 

Adjusted EBITDAS was $366.6 million, or 34.6% of net sales, compared with $92.7 million, or 17.5% of net sales for the prior fiscal year, a 295.5% increase.

 

Gross margin increased to 42.4% from 31.3% in fiscal 2020.

 

Unit shipments of our products outpaced Adjusted National Instant Criminal Background Check System (NICS) growth by nearly 28%.  Adjusted NICS checks are generally considered to be the best available proxy for consumer firearm demand at the retail counter. NICS generally does not directly correlate to our shipments or market share in any given time period but, given the low level of inventory in the channel, the correlation is likely a bit more direct during the recent increase in demand.

 

Unit shipments for our handguns increased by 65.9% compared with fiscal 2020, while unit shipments for our long guns increased by 77.6% compared with fiscal 2020.

 

 

 

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Net sales for our handguns increased 93.4% while net sales for our long-guns increased 149.5% compared with fiscal 2020.

 

We strengthened our balance sheet with no bank borrowings outstanding at fiscal year-end and $113.0 million cash and cash equivalents on hand.  In addition to the net repayment of $160.0 million in borrowings, we funded $25.0 million to AOUT as part of the Separation, began paying dividends for the first time in our history, and purchased $110.0 million of our common stock through our share repurchase program.

 

The Separation of AOUT into an independent, publicly traded company was completed.

 

The initiation of our first ever dividend, paying $8.2 million during fiscal 2021.

 

The repurchase of $110.0 million of outstanding shares as part of a share repurchase program developed to return value to our stockholders.

Corporate Governance Policies and Practices

We maintain corporate governance policies and practices designed to align executive and director compensation with stockholder interests.

 

Stock Ownership Guidelines — We have stock ownership guidelines for our directors and executive officers. For more detailed information regarding our stock ownership guidelines, see “Corporate Governance — Stock Ownership Guidelines.”

 

Board Leadership Structure — We have an independent Chairman of our Board of Directors, independent committee chairs, and regular executive sessions at which only the independent directors participate.

 

Clawback Policy — We have a compensation recovery, or clawback policy, that allows us to recoup incentive compensation resulting from non-compliant financial reporting.

 

Derivatives Trading and Hedging Policy — We have a policy prohibiting our directors and officers, including our executive officers, and any family member(s) residing in the same household, from engaging in derivatives trading and hedging involving our securities or pledging or margining our common stock.

 

No Tax Gross-Ups — We do not provide any tax gross-up treatment on any severance or change-in-control payments for our executive officers.

 

Double Trigger Vesting — All unvested stock-based awards granted to our executive officers have “double-trigger” vesting acceleration in the event of a change-in-control of our company. These stock-based awards will receive vesting acceleration only if the executive officer experiences a qualifying termination of employment in connection with a change-in-control.

 

Independent Compensation Consultant — Our compensation program is developed by the Compensation Committee with assistance from the Compensation Committee’s independent compensation consultant in an effort to ensure that our compensation programs are appropriately designed to attract, reward, and retain our key executive officers in a manner that is in our best interests and those of our stockholders.

 

Risk — The Compensation Committee considers the risks inherent in our compensation plans and policies and endeavors to ensure that it is not reasonably likely that our compensation plans and policies would have a material adverse effect on our company.

 

Say-on-Pay — We carefully monitor the compensation of our peer group companies, conduct stockholder outreach, and consider the views of proxy advisory firms. Our Compensation Committee also gets substantial input from an experienced and highly regarded compensation consultants in making executive compensation decisions. In addition, the Compensation Committee considers, in the context of the highly cyclical industry environment in which our company operates, the fiscal year operating budget prepared by management,

 

 

 

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and other matters deemed relevant from time to time. The Committee then develops the Annual Executive Cash Incentive Program for the upcoming fiscal year after the foregoing peer group review, compensation consultant advice, stockholder input, and review of proxy advisory firm policies. The Committee attempts to design an incentive plan, that is challenging but attainable and that incentivizes management at budget targets as well as at various levels of out-performance given industry conditions. Approximately 93% of our stockholders, on an advisory basis at our 2020 Annual Meeting of Stockholders, voted in favor of the compensation of our named executive officers as described in our proxy statement regarding the say-on-pay proposal. In designing our fiscal 2021 Annual Executive Cash Incentive Program, the Compensation Committee increased the level of the Adjusted EBITDAS threshold gate below which no cash incentive bonus could be earned.  In addition, for fiscal 2021, the Compensation Committee increased the level of financial performance for net sales and Adjusted EBITDAS above which a target or out-perform bonus could be earned.

The Compensation Committee

Our Board of Directors has appointed a Compensation Committee, consisting exclusively of independent directors. The charter of the Compensation Committee authorizes the Compensation Committee to determine and approve, or to make recommendations to our Board of Directors with respect to, the compensation of our Chief Executive Officer and other executive officers. Our Board of Directors has authorized the Compensation Committee to make all decisions with respect to such executive compensation. Among other things, the Compensation Committee is authorized to determine and approve the base salary of our Chief Executive Officer and other executive officers. Additionally, the Compensation Committee establishes annual cash and stock-based incentive compensation programs for our Chief Executive Officer and other executive officers, providing our executives with variable compensation opportunities, a majority of which are based on the achievement of key operating measures, determined at the beginning of the fiscal year, tying pay to performance. Once the Compensation Committee determines key operating measures for the upcoming fiscal year, the measures generally are not subject to material changes during the fiscal year. The Compensation Committee, with advice from its independent compensation consultant, also determines the compensation of our Board of Directors.

Overview

Our executive compensation program consists primarily of base salary, annual performance-based cash incentive compensation opportunities, stock-based compensation, severance and change-in-control payments and benefits, health and welfare benefits generally available to most employees and other executives of our company, and limited perquisites as described herein. The Compensation Committee considers each element of compensation individually and collectively with other elements of compensation when establishing the various forms, elements, and levels of compensation for our executive officers.

Our philosophy with respect to executive compensation is to pay base salaries to our executive officers at levels that, in the context of unfavorable industry factors beyond the control of management, enable us to attract, motivate, and retain highly qualified executives. In addition, our executive compensation program is designed to link annual performance-based cash incentive compensation to the achievement of pre-established performance objectives, based primarily on our company’s financial results. For more detailed information regarding our annual performance-based cash incentive compensation plan, see “Compensation Discussion and Analysis — Components of Compensation — Annual Performance-Based Cash Incentive Compensation.” Similarly, our executive compensation program is designed so that stock-based compensation focuses our executive officers’ efforts on increasing stockholder value by aligning their economic interests with those of our stockholders. To that end, our stock-based compensation generally is intended to result in more limited rewards if the market price of our common stock does not appreciate or does not appreciate in an amount equal to or above certain levels, but may provide substantial rewards to our executive officers (as well as to our stockholders in general) if our common stock appreciates or appreciates in an amount equal to or above certain levels. For more detailed information regarding our

 

 

 

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Compensation Discussion and Analysis

 

 

 

 

stock-based compensation program, see “Compensation Discussion and Analysis — Components of Compensation — Stock-Based Compensation.”

Total compensation levels for our executive officers reflect corporate positions, responsibilities, and achievement of performance objectives. As a result of our continuing “pay-for-performance” philosophy, compensation levels may vary significantly from year-to-year and among our various executive officers. In general, we expect the compensation level of our Chief Executive Officer will be higher than that of our other executive officers. This assumes relatively equal achievement of individual performance objectives, since the Compensation Committee sets our base salaries, cash incentive compensation, and stock-based compensation after reviewing similar compensation elements of the executives at comparable companies, which generally compensate their chief executive officers at higher levels because of the significance of their roles and their importance to overall company success. We believe that the overall compensation levels for our executive officers, including our named executive officers, are and continue to be in alignment with our “pay-for-performance” philosophy and have been consistent with our performance.

The Compensation Committee has developed an executive compensation program that demonstrates our ongoing commitment to good corporate governance practices and aligns our executive officers’ interests with those of our stockholders. This includes maintaining a compensation recovery, or clawback, policy and stock ownership guidelines, maintaining both incentive stock and cash bonus plans that are intended to align our incentive award grant practices with current market practices and to set forth the principles to which our stockholders expect us to adhere to in designing and administering compensation programs, and prohibiting the repricing of stock options and stock appreciation rights, or SARs, without approval by our stockholders. In addition, we do not provide for any tax gross-ups in connection with severance or change-in-control payments.

Goals

The goals of our executive compensation program are as follows:

 

attract, motivate, and retain highly qualified executives, especially in the context of the present very difficult business environment;

 

reflect our company’s culture and approach to total rewards, which include health and welfare benefits, a safe work environment, and professional development opportunities;

 

reflect our philosophy of “pay-for-performance”;

 

provide a rational and consistent approach to compensation, which is understood by senior leadership;

 

align compensation with the interests of our company as a whole as well as our stockholders; and

 

recognize corporate stewardship and fiscal responsibility.

Role of the Compensation Committee and Chief Executive Officer

The Compensation Committee determines the compensation of our Chief Executive Officer and our other executive officers. At least annually, the Compensation Committee determines the compensation of the Chief Executive Officer and other executive officers in light of the goals and objectives of our compensation program for that fiscal year. The Compensation Committee, together with our Chief Executive Officer, annually assesses the performance of our other executive officers. After receiving recommendations from our Chief Executive Officer, the Compensation Committee, with input from its independent compensation consultant, determines the compensation for our other executive officers.

At the request of the Compensation Committee, our Chief Executive Officer may attend a portion of some of the Compensation Committee meetings, including meetings at which our independent compensation consultant is present. This enables the Compensation Committee to review with our Chief

 

 

 

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Executive Officer the corporate and individual goals that the Chief Executive Officer regards as important to achieve our overall success. The Compensation Committee also requests that our Chief Executive Officer assess the performance of and our goals for our other executive officers. However, the Compensation Committee, with the assistance of its independent compensation consultant, rather than our Chief Executive Officer, makes the decisions regarding individual and corporate goals and targets for our other executive officers. Our Chief Executive Officer does not attend any portion of meetings at which his compensation is determined.  We had Co-Presidents and Co-Chief Executive Officers for a portion of fiscal 2021.

Compensation Surveys and Independent Compensation Consultant

In determining compensation levels, the Compensation Committee periodically reviews compensation levels of executives of companies that it deems to be generally similar to our company based on their size, industry, and competitive factors to enable our company to attract executives from other industries and to establish compensation levels that it deems appropriate to retain and motivate our executive officers. The Compensation Committee uses this peer group information as well as published executive compensation survey data from a broader group of companies with similar revenue to our company as points of reference but does not benchmark or target our compensation levels against this competitive information.

The Compensation Committee retains the services of an independent compensation consultant to review trends in executive compensation, assist with the identification of relevant peer companies, and conduct an assessment and analysis of executive market compensation. The Compensation Committee makes all determinations regarding the engagement, fees, and services of its compensation consultant and its compensation consultant reports directly to the Compensation Committee. From time to time, the Compensation Committee may retain the services of outside legal counsel to advise on compensation matters.

Components of Compensation

Our executive compensation program continues to emphasize our “pay-for-performance” philosophy and helps us to attract, motivate, and retain highly qualified executives.  Our compensation program provides the opportunity for our executives to receive higher total compensation based on successful performance against objective metrics, financial and otherwise, and above market stock price appreciation.

Base Salary

The Compensation Committee sets the base salaries of our executive officers at levels that it believes are required to attract, motivate, and retain highly qualified individuals assuming that they will not receive incentive compensation, but reflecting the possible receipt of incentive compensation. Base salaries for our executive officers are established based on an individual’s position, responsibilities, skills, experience, performance, and contributions. In determining base salaries, the Compensation Committee also considers individual performance and contributions, future potential, competitive salary levels for comparable positions at other companies, salary levels relative to other positions within our company, corporate needs, and the advice of the Compensation Committee’s independent compensation consultant. The Compensation Committee’s evaluation of the foregoing factors is subjective and the Compensation Committee does not assign a particular weight to any one factor.

The Compensation Committee independently determines the base salary of our Chief Executive Officer. The base salaries for our other executive officers, other than the Chief Executive Officer, are determined by the Compensation Committee following consultation with the Chief Executive Officer. The Compensation Committee considers the recommendations of our Chief Executive Officer as one of the factors described above.  We had Co-Chief Executive Officers for a portion of fiscal 2021.

 

 

 

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Given the high-profile nature of the firearms industry, it has become increasingly difficult to attract, motivate, and retain highly qualified individuals willing to be associated with our company and the firearms industry as a whole. The Compensation Committee has become increasingly aware of the impact this factor has had not only on existing and potential future employees but also the pressures this factor places on the families of these individuals.

The Compensation Committee generally sets base salary levels for our executive officers at the beginning of each fiscal year, although it can make changes to base salary levels at any time during the fiscal year. For more detailed information regarding the amounts paid as base salary to our named executive officers in fiscal 2021, see “Compensation Discussion and Analysis — Fiscal 2021 Compensation — Base Salaries.”

Annual Performance-Based Cash Incentive Compensation

As it has in the past, at the start of fiscal 2021, the Compensation Committee established a performance-based cash incentive compensation plan for our executive officers. In designing the cash incentive compensation plan for any particular year or period, the Compensation Committee establishes performance objectives, based primarily on the financial results of our company and the achievement of other corporate goals. In some limited cases, the Compensation Committee also considers individual objectives, responsibilities, and performance in determining the amounts payable under the plan, but did not do so in fiscal 2021. The target annual compensation opportunities for our executive officers are determined by the Compensation Committee. These objective target incentive compensation opportunities are subject to change from year to year, based on the Compensation Committee’s periodic review of economic, industry, and competitive data; changes in individual responsibilities; and our overall compensation philosophy. The Compensation Committee confirms, with its independent compensation consultant and our company’s independent audit firm, the achievement and approves the payment, if any, of annual cash incentive compensation in the first quarter of the following fiscal year. For more detailed information regarding the amounts paid as annual performance-based cash incentive compensation to our named executive officers for fiscal 2021, see “Compensation Discussion and Analysis — Fiscal 2021 Compensation — Annual Performance-Based Cash Incentive Compensation.”

Stock-Based Compensation

The Compensation Committee strongly believes in tying executive rewards directly to our long-term success and focusing our executive officers’ efforts on increasing stockholder value by aligning their interests with those of our stockholders. To that end, our stock-based compensation generally is intended to result in more limited rewards if the price of our common stock does not appreciate or does not appreciate above certain levels but may provide substantial rewards to our executive officers (as well as to our stockholders in general) if our common stock appreciates above certain levels. Our stock-based compensation also enables our executive officers to earn and maintain a significant stock ownership position in our company. The amount of stock-based compensation granted takes into account the performance of our company; the grant date value of awards; previous grants to an executive officer; an executive officer’s position with our company; the performance, contributions, skills, experience, and responsibilities of the executive officer; the cost to our company; the executive officer’s total compensation in relation to our peer companies; and other factors that the Compensation Committee deems necessary or appropriate from time to time, including retention, overhang, and burn rate.

Our stock-based compensation consists primarily of RSUs and PSUs. The Compensation Committee generally sets the vesting schedule for RSUs over multiple year periods to encourage executive retention. The Compensation Committee generally establishes multi-year performance requirements for the earning of PSUs to reward long-term company performance. PSUs are earned only if the relative performance of our common stock achieves the then-applicable pre-established metric compared with the performance of the RUT. In addition, we generally maintain a value cap on PSUs.

 

 

 

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As has been true in the case of base salary and cash-based incentive compensation, given the high-profile nature of the firearm industry, it has become increasingly difficult to attract, motivate, and retain highly qualified individuals willing to be associated with the industry as a whole and therefore our company. Accordingly, the Compensation Committee continues to recognize the importance of long-term incentive stock-based compensation.

Benefits and Perquisites

Our executive officers are eligible to participate in those health, welfare, and retirement plans, including our profit sharing, 401(k), employee stock purchase plan, and medical and disability plans generally available to employees of our company who meet applicable eligibility requirements. For more detailed information regarding the retirement benefits for which our named executive officers are eligible and contributions made to retirement plans on behalf of our named executive officers, see “Executive Compensation — Retirement Plans.”

In addition, from time to time, we provide certain of our executive officers with other benefits and perquisites that we believe are reasonable. These benefits and perquisites include severance and change-in-control benefits, car allowances, housing allowances, relocation assistance, a nonqualified supplemental deferred compensation plan, and reimbursement of insurance premiums. For more detailed information regarding these other benefits and perquisites for which our named executive officers are eligible, see “Executive Compensation.”

We do not view perquisites and other personal benefits as a significant element of our executive compensation program but do believe they can be useful in attracting, motivating, and retaining the executive talent for which we compete. We believe that these additional benefits may assist our executive officers in performing their duties and provide time efficiencies for our executive officers in appropriate circumstances.

In the future, we may provide additional benefits and perquisites to our executive officers as an element of their overall compensation. All future practices regarding benefits and perquisites will be approved and subject to periodic review by the Compensation Committee.

Policies for the Pricing and Timing of Stock-Based Compensation

The Compensation Committee sets the value of RSUs and PSUs at the fair market value of our common stock, which is the closing price of our common stock on the Nasdaq Global Select Market on the effective date of grant. The Compensation Committee generally grants stock-based compensation to our executive officers annually within the same time frame each year. In the case of new hires, grant prices generally are determined by the closing price of our common stock on the 15th day of the month following the date on which the employee reports for service. The Compensation Committee authorizes our Chief Executive Officer to grant stock-based compensation to employees who are not executive officers, subject to limitations on amount and subsequent reporting to the Compensation Committee.

Fiscal 2021 Compensation

Compensation Consultant

The Compensation Committee engaged Compensia, Inc., or Compensia, an independent national compensation consulting firm, to assist in the design of our executive compensation program for fiscal 2021. The Compensation Committee has the sole authority to retain and dismiss its compensation consultant and approve the fees of its compensation consultant. No member of the Compensation Committee or any named executive officer has any affiliation with Compensia, and Compensia did not provide any services to our company during fiscal 2021 other than services to the Compensation Committee. In accordance with the requirements of applicable SEC rules, the Compensation Committee has reviewed the independence of Compensia and has determined that Compensia did not have any conflicts of interest under the criteria established under such rules.

 

 

 

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Peer Group

As a part of its evaluation of our executive compensation program, Compensia assisted the Compensation Committee in determining an appropriate group of peer companies. The Compensation Committee uses the peer companies as the primary source of competitive market information for executive compensation benchmarking. In selecting peer companies for the Compensation Committee’s consideration, Compensia identified companies deemed generally relevant to us with a focus on companies involved in leisure or cyclical and consumer products companies, especially those with high dollar value products, and supplemented this list with companies involved in manufacturing. Within these industries, Compensia used a “rules-based” approach to select companies based on similar financial characteristics. Specifically, Compensia selected companies with revenue from 50% to 200% of our revenue and market capitalizations from 33% to 300% of our market capitalization at the time of the peer group review.

The selected peer group used to make decisions for fiscal 2021 executive compensation, as approved by the Compensation Committee, consisted of the following companies:

 

Bassett Furniture Industries

National Presto Industries, Inc.

Delta Apparel, Inc.

NN, Inc.

Ethan Allen Interiors, Inc.

Rocky Brands, Inc.

Haverty Furniture, Inc.

Sportsman's Warehouse, Inc.

Hooker Furniture Corporation

Standex International Corporation

Johnson Outdoors Inc.

Stoneridge, Inc.

Malibu Boats, Inc.

Sturm, Ruger & Company, Inc.

Marine Products Corp.

Universal Electronics Inc.

MasterCraft Boat Holdings, Inc.

Vince Holding Corp.

Motorcar Parts of America, Inc.

ZAGG Inc.

Movado Group, Inc.

 

 

The Compensation Committee continued to include a supplemental peer company, Vista Outdoor, because of its close business similarities to our company despite the fact that it exceeds our revenue selection range. Information from Vista Outdoor was not included in the overall peer market data, however, but was shown on a supplemental basis to help the Compensation Committee better understand how companies in our industry compensate their key executives.

Compensia provided an assessment and analysis of the compensation practices of our peer companies, determined the positioning of each executive officer’s compensation by element among the peer companies and the survey data, developed recommendations and guidelines for the structure of our executive compensation program, and reviewed the overall compensation package and advised the Compensation Committee regarding the appropriateness of our executive compensation program.

 

 

 

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Base Salaries

As is our practice, the Compensation Committee generally, although not always, sets base salaries for our executive officers at the beginning of the fiscal year based on a review of the position and function of each executive officer, the competitiveness of their current base salaries in comparison to the peer and market data, and their individual performance on a subjective basis. Based on an evaluation of the foregoing factors, the Compensation Committee’s desire to reward and retain the key executive officers who it believes are instrumental to our success, the general industry range for base salary increases, and the competitiveness of our base salaries as measured against the peer and market data, the Compensation Committee set the annual base salaries for our executive officers during fiscal 2021 as follows:

 

Name and Position

 

Annualized

Fiscal 2020

Base Salary

 

 

 

Annualized

Fiscal 2021

Base Salary

 

Percentage

Change

 

Mark P. Smith

 

$

500,000

 

(1)

 

$

500,000

 

 

 

 

0.0

%

President and Chief Executive Officer since August 24, 2020; Co-President and Co-Chief Executive Officer from May 1, 2020 until August 24, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brian D. Murphy

 

$

500,000

 

(1)

 

$

500,000

 

 

 

 

0.0

%

Co-President and Co-Chief Executive Officer from May 1, 2020 until August 24, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deana L. McPherson

 

$

365,000

 

(2)

 

$

365,000

 

 

 

 

0.0

%

Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary since August 24, 2020; Vice President and Chief Accounting Officer, Corporate Controller, and Assistant Treasurer from May 1, 2020 until August 24, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey D. Buchanan

 

$

423,602

 

 

 

$

423,602

 

(3)

 

 

0.0

%

Executive Vice President, Chief Financial Officer, Chief Administrative Officer, and Treasurer from May 1, 2020 until August 23, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert J. Cicero

 

$

357,414

 

 

 

$

357,414

 

(4)

 

 

0.0

%

Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Susan J. Cupero

 

$

275,000

 

(5)

 

$

275,000

 

 

 

 

0.0

%

Vice President, Sales.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lane A. Tobiassen

 

$

315,087

 

(6)

 

$

315,087

 

 

 

 

0.0

%

President, Firearm division from May 1, 2020 until August 1, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Effective with their appointment as of January 15, 2020 as Co-President and Co-Chief Executive Officer, the annual base salaries of Messrs. Smith and Murphy were each increased to $500,000 and their target bonus percentages to 100%.  Effective with the Separation, Mr. Murphy resigned from his position as Co-President and Co-Chief Executive Officer.

 

(2)

In anticipation of her promotion to Chief Financial Officer at the time of the Separation, the salary of Ms. McPherson was increased to $365,000 effective on January 15, 2020.

 

(3)

Effective August 23, 2020, as anticipated, Mr. Buchanan retired from the company as Executive Vice President, Chief Financial Officer, Chief Administration Officer, and Treasurer.  He served in a consulting role until September 30, 2020.

 

(4)

Effective August 1, 2021, Mr. Cicero retired as an executive officer of our company.

 

(5)

Effective with her appointment as Vice President, Sales, the salary of Ms. Cupero was increased to $275,000 on March 9, 2020.

 

(6)

Effective August 1, 2020, Mr. Tobiassen resigned from his position as President, Firearm division.

For more information regarding the amounts paid as base salary to our named executive officers, see “Executive Compensation — Fiscal 2021 Summary Compensation Table.”

 

 

 

    2021 Proxy Statement I 31

 


 

Compensation Discussion and Analysis

 

 

 

 

Annual Performance-Based Cash Incentive Compensation

Our fiscal 2021 Executive Annual Cash Incentive Program is an annual performance-based cash incentive program. The program provides each participant, including our named executive officers, with an opportunity to earn cash incentive compensation based on attainment of pre-established objective financial performance metrics and, from time to time, individual performance goals. Each participant is assigned an incentive bonus opportunity expressed as a percentage of base pay, or a target percentage, and objective financial performance metrics are established with varying weightings totaling 100%. For each financial performance metric, threshold, target, and maximum performance levels are set. A participant’s final cash incentive compensation is calculated by multiplying the participant’s target percentage by the weighted average percentage calculated for each financial performance metric. A participant’s cash incentive compensation cannot exceed 200% of the individual’s bonus opportunity, and eligibility for the payment of any award is subject to the continued employment of the participant through the end of the fiscal year.

Fiscal 2021 Performance Metrics

For fiscal 2021, the Compensation Committee established Net Sales and Adjusted EBITDAS as the performance metrics for the named executive officers with a weighting of 40% for Net Sales and 60% for Adjusted EBITDAS.  

Adjusted EBITDAS also served as the threshold, for which the failure to achieve such performance metric would result in no bonus payments regardless of the achievement of the other performance metrics.

“Adjusted EBITDAS,” for the purposes of compensation, means our company's net income as reported in our Form 10-K adding back interest, taxes, depreciation, amortization, non-cash stock compensation expense, and any nonrecurring expenses as determined by the Committee as set forth in the Program or at any time thereafter.  For fiscal year 2021, the Committee has determined that such nonrecurring expenses shall include (i) accelerated expenses related to the repurchase or refinance of the Company’s outstanding bonds or Credit Facility, if any; (ii) fair value inventory step-up and backlog expense; (iii) all acquisition or merger related expenses associated with negotiating, conducting diligence, and closing for any acquired company or merger; (iv) any severance, retention, or other costs related to the reorganization and restructure of the firearms business after the spin-off of the Outdoor Products & Accessories division only if, and to the extent, the costs are incurred with respect to matters incurred or created by virtue of the existence and operations of Outdoor Products/Accessories Division prior to its having been spun-off (specifically excluding from the preceding restriction the company’s shared services division); (v) changes in contingent consideration; (vi) impairment charges for goodwill, tangible, or intangible assets; (vii) costs incurred relating to shareholder activism; (viii) any transition costs directly related to the successful completion of the spin-off (excluding costs which would be normally incurred as a public company); (ix) extraordinary costs directly related to responding to the COVID-19 pandemic, including costs of any premium pay and purchase of personal protective equipment, but excluding costs that would generally be associated with responding to non-pandemic forms of a surge; (x) any costs/impact related to the implementation of any new accounting pronouncements that become effective during the fiscal year; and (xi) the tax effect of non-GAAP adjustments.  To the extent practicable, each amount was calculated based upon the numbers used in the audited financial statements and, if possible, in the same amount as reported in the Form 10-K.

Target Award Percentages

The target award percentages for fiscal 2021 as a percentage of base pay were 100% for Mr. Smith and 65% for Mr. Cicero and Mses. McPherson, and Cupero. Messrs. Murphy, Buchanan, and Tobiassen were not eligible for bonuses for fiscal 2021 as they were not expected to be employed by our company at the end of fiscal 2021.

Individual Performance Goals

There were no individual performance goals for fiscal 2021.

 

 

 

32 I 2021 Proxy Statement    

 


 

 

Compensation Discussion and Analysis

 

 

 

Discretionary Bonuses

Ms. McPherson and Mr. Cicero each received a discretionary bonus of $25,000 that was granted in fiscal 2020 and paid in fiscal 2021 in recognition of their efforts with respect to the Separation.

Performance Metrics

The financial performance metrics established under the fiscal 2021 program were as follows:

 

Performance Metrics

 

Target

Performance

(in 000's)

 

 

Potential

Maximum

Payout of

Target

Bonus

 

 

Performance

Required

to Earn

Maximum

Payout

(as a % of

Target

Performance)

 

Net Sales

 

$

600,000

 

 

 

200.0

%

 

 

116.7

%

Adjusted EBITDAS

 

$

125,000

 

 

 

200.0

%

 

 

136.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The failure to reach the threshold metric of at least $104,250,000, or 83.4% of Target, for the Adjusted EBITDAS metric for our company would result in no bonus payments regardless of the achievement of the net sales metrics.

In fiscal 2021, net sales and Adjusted EBITDAS, for purposes of compensation, were $1.1 billion and $366.6 million, respectively, compared with $529.6 million and $92.7 million, respectively, in fiscal 2020. This growth in net sales of 100.0% and 295.5%, respectively, compared very favorably to the financial performance of our industry competitors, Vista Outdoor, Inc. that reported increases in net sales and Adjusted EBITDAS of 26.7% and 203.0%, respectively, for its fiscal year ended March 31, 2021, and Sturm, Ruger & Company, Inc. that reported increases in net sales and Adjusted EBITDAS of 38.6% and 111.0%, respectively, for its trailing 12 months ended March 31, 2021.

The table below sets forth for each named executive officer the annual fiscal 2021 base salary, the target bonus percentage, the annualized target cash bonus opportunity, and the actual bonus paid for fiscal 2021 reflected as a percentage of target bonus opportunity and in cash:

 

Name

 

Annual

Fiscal 2021

Base

Salary (1)

 

 

Target

Bonus

Percentage

 

 

Annualized

Target Cash

Bonus

Opportunity

 

 

Actual Bonus

paid for

Fiscal 2021

(as a % of

Target

Bonus

Opportunity

 

 

Actual

Bonus

Paid for

Fiscal 2021

 

Mark P. Smith

 

$

500,000

 

 

 

100

%

 

$

500,000

 

 

 

200

%

 

$

1,000,000

 

Brian D. Murphy (1)

 

$

500,000

 

 

 

 

 

$

 

 

 

 

 

$

 

Deana L. McPherson

 

$

365,000

 

 

 

65

%

 

$

237,250

 

 

 

200

%

 

$

474,500

 

Jeffrey D. Buchanan (1)

 

$

423,602

 

 

 

 

 

$

 

 

 

 

 

$

 

Robert J. Cicero

 

$

357,414

 

 

 

65

%

 

$

232,319

 

 

 

200

%

 

$

464,638

 

Susan J. Cupero

 

$

275,000

 

 

 

65

%

 

$

178,750

 

 

 

200

%

 

$

357,500

 

Lane A. Tobiassen (1)

 

$

315,087

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

As part of Mr. Murphy’s Separation Agreement, Mr. Tobiassen’s departure arrangement, and Mr. Buchanan’s Retirement Agreement, they were not eligible for a bonus for fiscal year 2021. None of them were employed by our company at the end of fiscal 2021.

Stock-Based Compensation

During fiscal 2021, grants of annual stock-based compensation to our named executive officers consisted of RSUs and PSUs. In determining the equity awards granted to each executive officer during

 

 

 

    2021 Proxy Statement I 33

 


 

Compensation Discussion and Analysis

 

 

 

 

fiscal 2021, the Compensation Committee considered the dollar value of the awards granted to each executive officer; previous grants to our executive officers; each executive officer’s position with our company; the performance, contributions, skills, experience, and responsibilities of each executive officer; the cost of the stock-based compensation to our company; each executive officer’s total compensation in relationship to the market data; and the overall performance of our company.

During fiscal 2021, we granted the following PSUs to our named executive officers:

 

Name

 

PSUs at

Threshold

 

 

PSUs at

Target

 

 

PSUs at

Maximum

 

Mark P. Smith

 

 

11,001

 

 

 

28,951

 

 

 

57,902

 

Brian D. Murphy

 

 

 

 

 

 

 

 

 

Deana L. McPherson

 

 

 

 

 

 

 

 

 

Jeffrey D. Buchanan

 

 

 

 

 

 

 

 

 

Robert J. Cicero

 

 

 

 

 

 

 

 

 

Susan J. Cupero

 

 

2,796

 

 

 

7,357

 

 

 

14,714

 

Lane A. Tobiassen

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Messrs. Smith and Cicero and Ms. McPherson received an annual grant of PSUs in April 2020 (fiscal 2020) and a new annual grant in May 2021 (fiscal 2022).  Ms. Cupero received a grant in June 2020 (fiscal 2021) upon being named an executive officer. In recognition of his efforts in connection with the Separation and his promotion to sole President and Chief Executive Officer, Mr. Smith received a grant of PSUs in August 2020. As part of Mr. Murphy’s Separation Agreement, Mr. Tobiassen’s Separation Agreement, and Mr. Buchanan’s Retirement Agreement, they were not eligible to receive PSU awards in fiscal 2021.

These PSUs are earned and vest based on the relative performance of our common stock against the RUT over the approximately three-year performance period following the date of grant. If the relative performance of our common stock (measured based on the average closing price of our common stock during the 90-calendar-day-period preceding approximately the third anniversary of the date of grant against the average closing price of our common stock during the 90-calendar-day-period immediately following the date of grant) does not equal or exceed the relative performance of the RUT (measured based on the average closing price of the RUT during the 90-calendar-day-period preceding approximately the third anniversary of the date of grant against the average closing price of the RUT during the 90-calendar-day-period immediately following the date of grant), then no PSUs subject to the awards will be earned and vest. If the relative performance of our common stock equals the relative performance of the RUT, then 38% of the PSUs subject to the awards (at target) will be earned and vest, or the threshold award. If the relative performance of our common stock exceeds the relative performance of the RUT by up to five points, then the PSUs subject to the awards will be earned and vest on a straight-line basis from the threshold award level up to the target award level, with 100% of the PSUs subject to the awards (the target number of PSUs) being earned and vesting if the relative performance of our common stock exceeds the relative performance of the RUT by five points. If the relative performance of our common stock exceeds the relative performance of the RUT by over five points up to a level of 10 points, then the PSUs subject to the awards will be earned and vest on a straight-line basis up to the maximum award, with 200% of the PSUs subject to the awards (the maximum number of PSUs) being earned and vesting if the relative performance of our common stock exceeds the relative performance of the RUT by 10 points or more.

The underlying shares of our common stock earned, if any, relating to these PSUs will be delivered as soon as practical after the ending date of the performance period and certification by the Compensation Committee of the performance achievement. The maximum number of shares that can be delivered with respect to the fiscal 2021 PSU awards is limited to a dollar value, determined as of the vesting date, of 600% of the grant date value. See “Compensation Discussion and Analysis — Introduction — Summary of Fiscal 2021 Compensation Program.”

Upon a change in control of our company prior to the three year anniversary of the date of any PSU grant, each PSU award recipient will earn a number of PSUs subject to the award in accordance with the

 

 

 

34 I 2021 Proxy Statement    

 


 

 

Compensation Discussion and Analysis

 

 

 

formula described above, provided that (i) the relative performance of our common stock will be measured based on the consideration offered for one share of our common stock in the change in control to calculate our market capitalization (or in the event of a change in control that does not involve an acquisition of our stock, based on the trading price of our common stock on the date of the change in control to calculate our market capitalization) against the average closing price of our common stock during the 90-calendar-day period immediately following the date of grant; and (ii) the relative performance of the RUT will be measured based on the average closing price of the RUT during the 90-calendar-day-period immediately prior to the change in control against the average closing price of the RUT during the 90-calendar-day-period immediately following the date of grant. The PSUs earned pursuant to the formula described above will then be converted into RSUs that will vest upon the earlier of (i) a qualifying termination of employment or (ii) the original vesting date.

During fiscal 2021, we also granted the following RSUs to our named executive officers:

 

Name

 

 

 

 

 

RSUs

 

Mark P. Smith (1)

 

 

 

 

 

 

28,952

 

Brian D. Murphy

 

 

 

 

 

 

 

Deana L. McPherson (1)

 

 

 

 

 

 

10,000

 

Jeffrey D. Buchanan

 

 

 

 

 

 

 

Robert J. Cicero (1)

 

 

 

 

 

 

10,000

 

Susan J. Cupero (1)(2)

 

 

 

 

 

 

19,509

 

Lane A. Tobiassen (3)

 

 

 

 

 

 

3,473

 

 

 

 

 

 

 

 

 

 

 

 

(1)

In recognition of their efforts in connection with the Separation and their increasing responsibilities, in August 2020, Mr. Smith received RSUs covering 28,952 shares of common stock and Mr. Cicero and Mses. McPherson and Cupero each received RSUs covering 10,000 shares of common stock. These RSU’s vest one-fourth on each of the first, second, third, and fourth anniversaries of the date of grant, subject to each named executive officer’s continued service with us. These RSUs will vest in the event of a qualifying termination of employment following a change in control of our company (as defined in the applicable award agreements).

 

(2)

Ms. Cupero also received RSUs covering 2,152 shares of common stock as part of the Separation to replace the value of prior awards where the value of the awards was reduced due to the Separation.  See “Company Updates - Adjustments to Outstanding Stock-Based Awards.”  Finally, as part of her annual grant, Ms. Cupero received RSUs covering 7,357 shares of common stock in September 2020.  These RSU’s vest one-fourth on each of the first, second, third, and fourth anniversaries of the date of grant, subject to each named executive officer’s continued service with us. These RSUs will vest in the event of a qualifying termination of employment following a change in control of our company (as defined in the applicable award agreements).

 

(3)

Mr. Tobiassen received RSUs covering 3,473 shares of common stock as part of the Separation to replace the value of prior awards where the value of the awards was reduced due to the Separation.  See “Adjustments to Outstanding Stock-Based Awards.”

For more information regarding the grants of stock-based compensation to our named executive officers in fiscal 2021, see “Executive Compensation — Fiscal 2021 Grants of Plan-Based Awards.”

Each named executive officer forfeits the unvested portion, if any, of this stock-based compensation if his service to our company is terminated for any reason, except as otherwise set forth in the applicable award agreement, in any employment or severance agreement between our company and the named executive officer, in any policy or plan of our company applicable to the named executive officer, or as may otherwise be determined by the administrator of the applicable equity plan. See “Executive Compensation — Potential Payments Upon Termination or Change in Control.”

Certain Stock-Based Compensation Arrangements Granted in Prior Fiscal Years

Results for Previous PSU Awards

The PSUs granted in fiscal 2018 to our executive officers, which had a three-year performance period ending May 1, 2021, were earned because the market capitalization of our company combined with the market capitalization of AOUT met the maximum performance requirements compared with the RUT. Over the three-year performance period, our market capitalization combined with market capitalization of AOUT appreciated 101.6% while the RUT appreciated 36.2%. As a result, the Compensation Committee confirmed that this outperformance resulted in the PSUs granted in fiscal 2018 being earned, and therefore,

 

 

 

    2021 Proxy Statement I 35

 


 

Compensation Discussion and Analysis

 

 

 

 

our named executive officers that had received the 2018 award received 200% of the target shares of common stock underlying the PSUs granted in fiscal 2018.

Adjustments for the Separation

In connection with the Separation, our existing stock-based awards for certain named executive officers were converted into awards with respect to equity interests in our company and AOUT, subject to certain adjustments, such that the combined awards would have a combined intrinsic value of the existing awards prior to the Separation. See “Company Updates - Adjustments to Outstanding Stock-Based Awards.”

Other Elements of Fiscal 2021 Compensation

Clawback Policy

We maintain a compensation recovery, or clawback, policy. In the event we are required to restate our financial results as a result of a material noncompliance by us with any financial reporting requirement under the federal securities laws, we will have the right to use reasonable efforts to recover from any current or former executive officer who received incentive compensation (whether cash or equity) from us during the three-year period preceding the date on which we were required to prepare the accounting restatement, any excess incentive compensation awarded as a result of the misstatement. This policy is administered by the Compensation Committee. If final rules are adopted by the SEC regarding clawback requirements under the Dodd-Frank Act, we will review this policy and make any amendments as necessary to comply with the new rules.

This clawback policy applies to all cash and stock-based incentive compensation programs.

Derivative Trading and Hedging

We have a policy prohibiting our directors and officers, including our executive officers, and any family member residing in the same household, from engaging in derivatives trading and hedging involving our securities or pledging or margining our common stock.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Section 162(m) of the Code generally limits our deductibility, for federal income tax purposes, of compensation paid to each of our named executive officers in excess of $1 million per person per year.

Taxation of “Parachute” Payments

Sections 280G and 4999 of the Code, or Sections 280G and 4999, provide that executive officers and directors and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of a company that exceeds certain prescribed limits and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any named executive officer, with a “gross-up” or other reimbursement payment for any tax liability that the executive officer might owe as a result of the application of Sections 280G and 4999 during fiscal 2021 and we have not agreed and are not otherwise obligated to provide any executive officer with such a “gross-up” or other reimbursement.

 

 

 

36 I 2021 Proxy Statement    

 


 

 

Compensation Discussion and Analysis

 

 

 

Accounting for Stock-Based Compensation

We account for stock-based employee compensation arrangements in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation — Stock Compensation,” or ASC Topic 718. ASC Topic 718 requires companies to measure the compensation expense for all stock-based payment awards made to employees and directors, including stock options and deferred stock units, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award. In determining stock-based compensation, the Compensation Committee considers the potential expense of these awards under ASC Topic 718 and the impact on our company.

 

 

 

 

 

    2021 Proxy Statement I 37

 


 

 

 

COMPENSATION

COMMITTEE REPORT

 

 

 

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement and, based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Dated August 18, 2021

Respectfully submitted,

Barry M. Monheit, Chairman

Anita D. Britt

Fred M. Diaz

John B. Furman

 

 

 

 

 

38 I 2021 Proxy Statement    

 


 

 

 

EXECUTIVE

COMPENSATION

 

 

 

Fiscal 2021 Summary Compensation Table

The following table sets forth, for the fiscal years ended April 30, 2021, 2020, and 2019, information with respect to compensation for services in all capacities to us and our subsidiaries earned by our President and Chief Executive Officer, our Former Co-President and Co-Chief Executive Officer, our Executive Vice President and Chief Financial Officer, our former Chief Financial Officer, each of our two other executive officers, and one additional individual who served as an executive officer during the fiscal year ended April 30, 2021 but was not serving as an executive officer on April 30, 2021, or collectively our named executive officers.

 

Name and Principal Position

 

Year

 

Salary

 

 

Bonus

(1)

 

 

Stock

Awards

(2)

 

 

Option

Awards

 

 

Non-Equity

Incentive Plan

Compensation

(3)

 

 

All Other

Compensation

(4)

 

 

Total (5)

 

Mark P. Smith (6)

 

2021

 

$

519,231

 

 

$

 

 

$

1,068,599

 

 

$

 

 

$

1,000,000

 

 

$

117,110

 

 

$

2,704,939

 

President and Chief

 

2020

 

$

394,193

 

 

$

 

 

$

643,457

 

 

$

 

 

$

359,341

 

 

$

31,616

 

 

$

1,428,607

 

Executive Officer

 

2019

 

$

346,541

 

 

$

 

 

$

258,800

 

 

$

 

 

$

509,889

 

 

$

28,683

 

 

$

1,143,913

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brian Murphy (7)

 

2021

 

$

173,077

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

$

33,242

 

 

$

206,319

 

Former Co- President and

 

2020

 

$

359,265

 

 

$

 

 

$

643,457

 

 

$

 

 

$

275,957

 

 

$

83,330

 

 

$

1,362,008

 

Co-Chief Executive Officer

 

2019

 

$

291,551

 

 

$

 

 

$

258,800

 

 

$

 

 

$

262,461

 

 

$

87,014

 

 

$

899,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deana L. McPherson (8)

 

2021

 

$

379,038

 

 

$

25,000

 

 

$

173,500

 

 

$

 

 

$

474,500

 

 

$

66,976

 

 

$

1,119,014

 

Executive Vice President,

 

2020

 

$

307,965

 

 

 

 

 

 

$

265,913

 

 

$

 

 

$

182,650

 

 

$

30,489

 

 

$

787,018

 

Chief Financial Officer,

Treasurer, and Assistant

Secretary

 

2019

 

$

280,458

 

 

 

 

 

 

$

52,578

 

 

$

 

 

$

253,249

 

 

$

27,468

 

 

$

613,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey D. Buchanan (9)

 

2021

 

$

161,304

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

$

23,108

 

 

$

184,413

 

Former Executive Vice

 

2020

 

$

423,270

 

 

$

 

 

$

 

 

$

 

 

$

288,338

 

 

$

59,468

 

 

$

771,076

 

President,

 

2019

 

$

411,078

 

 

$

 

 

$

453,198

 

 

$

 

 

$

697,900

 

 

$

54,372

 

 

$

1,616,548

 

Chief Financial Officer,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

-

 

 

 

 

 

Chief Administrative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

-

 

 

 

 

 

Officer, and Treasurer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert J. Cicero (10)

 

2021

 

$

371,161

 

 

$

25,000

 

 

$

173,500

 

 

$

 

 

$

464,638

 

 

$

66,416

 

 

$

1,100,716

 

Senior Vice President,

 

2020

 

$

357,134

 

 

$

 

 

$

280,125

 

 

$

 

 

$

210,847

 

 

$

31,489

 

 

$

879,595

 

General Counsel, Chief