Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
The aggregate market
value of the voting and non-voting common stock held by non-affiliates of the registrant on April 27, 2018 was $750,262,999, which
aggregate market value was calculated using the closing sales price reported by the New York Stock Exchange as of the last business
day of the registrant’s most recently completed second fiscal quarter.
The number
of shares of common stock of the registrant outstanding on February 5, 2019 was 125,475,859.
This Amendment No. 1 on
Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of NCI Building Systems, Inc. (the “Company,”
“NCI,” “our” or “we”) for the fiscal year ended October 28, 2018 (“Fiscal 2018”)
that was originally filed with the Securities and Exchange Commission (“SEC”) on December 19, 2018 (the “Original
Filing”) and is being filed to provide the information required by Items 10, 11, 12, 13, and 14 of Part III of Form 10-K.
This information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits
the information in the above referenced items to be incorporated in the Form 10-K by reference from our definitive proxy statement
if such statement is filed no later than 120 days after our fiscal year end. On November 16, 2018, our board of directors (the
“Board” or “Board of Directors”) approved and changed the Company’s fiscal year from a 52/53 week
year with the Company’s fiscal year end on the Sunday closest to October 31 to a fiscal year of the 12 month period of January
1 to December 31 of each calendar year, to commence with the year ending December 31, 2019 (“Fiscal 2019”). As a result
of this change in fiscal year, on January 28, 2019, the Board approved and changed the date of the Company’s annual meeting
of shareholders for 2019 (the “Annual Meeting”) from the previously announced date of February 28, 2019 to May 23,
2019. Accordingly, we are filing this Amendment to include Part III information in our Form 10-K because a definitive proxy statement
containing this information will not be filed by us within 120 days after the end of the fiscal year covered by the Original Filing.
The reference on the cover of the Original Filing to the incorporation by reference to portions of our definitive proxy statement
into Part III of the Original Filing is hereby deleted.
In accordance with Rule
12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Part III, Items 10 through 14 of
the Original Filing are hereby amended and restated in their entirety, and Part IV, Item 15 of the Original Filing is hereby amended
and restated in its entirety, with the only changes being the addition of Exhibits 10.1, 31.1 and 31.3 filed herewith and related
footnotes. This Amendment does not amend or otherwise update any other information in the Original Filing. Accordingly, this Amendment
should be read in conjunction with the Original Filing and with our filings with the SEC subsequent to the Original Filing.
PART III
Item 10. Directors,
Executive Officers and Corporate Governance
Information Regarding
Our Directors and Executive Officers
Board of Directors
Our Amended and Restated
Certificate of Incorporation (the “Certificate of Incorporation”) and Sixth Amended and Restated By-Laws (the “By-Laws”),
together with the Stockholders Agreement, dated November 16, 2018 (the “New Stockholders Agreement”), between the Company
and each of Clayton, Dubilier & Rice Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R Fund VIII”),
CD&R Friends & Family Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R FF Fund VIII”
and, together with CD&R Fund VIII, the “CD&R Fund VIII Investors”), CD&R Pisces Holdings, L.P., a Cayman
Islands exempted limited partnership (“CD&R Pisces”, and together with CD&R Fund VIII Investors, individually,
the “CD&R Investors,” and collectively, the “CD&R Investor Group”), Atrium Intermediate Holdings,
LLC, a Delaware limited liability company (“Atrium”), GGC BP Holdings, LLC, a Delaware limited liability company (“GGC”),
and AIC Finance Partnership, L.P., a Cayman Islands exempted limited partnership (“AIC”, and together with Atrium and
GGC, each individually, a “Golden Gate Investor,” and collectively, the “Golden Gate Investor Group,” and
together with the CD&R Investor Group, the “Investors”), provide that the number of directors on our Board initially
following the consummation of the Merger (as defined below) shall be fixed at twelve, and shall be fixed from time to time exclusively
pursuant to a resolution adopted by a majority of our Board. The number of members constituting our Board is currently fixed at
twelve, including one vacancy as of the date hereof.
In accordance with our
Certificate of Incorporation and By-Laws, our Board is divided into three classes, as nearly equal in number as reasonably possible,
and members are elected for a term of office expiring at the third succeeding annual stockholders’ meeting following their
election to office or until a successor is duly elected and qualified. Except as otherwise provided by the New Stockholders Agreement,
under our By-Laws, newly created directorships resulting from any increase in the authorized number of directors or any vacancies
on our Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled
only by a majority of the votes that can be cast by directors then in office, though less than a quorum, and directors so chosen
hold office until the Annual Meeting of stockholders at which the term of office of the class to which the director has been elected
expires. The terms of office of each of the Class II directors expire at the Annual Meeting and the terms of office of each of
the Class I and Class III directors expire at the Annual Meetings in 2021 and 2020, respectively.
Kathleen J. Affeldt
Ms. Affeldt, age 70, has
served as a director since November 2009. Ms. Affeldt serves on the Nominating & Corporate Governance Committee, the Executive
Committee, the Affiliate Transactions Committee, and is the Chair of the Compensation Committee of our Board of Directors. Ms.
Affeldt retired from Lexmark International, a developer, manufacturer and supplier of printing and imaging solutions for offices
and homes, in February 2003, where she had been Vice President of Human Resources since July 1996. She joined Lexmark when it became
an independent company in 1991 as the Director of Human Resources. Ms. Affeldt began her career at IBM in 1969, specializing in
sales of supply chain systems. She later held a number of human resources management positions. Ms. Affeldt has served as a director
of SIRVA, Inc. and as chair of that board’s compensation committee. She also served as a director of Sally Beauty Holdings,
Inc., and as the chair of that board’s compensation committee. She currently serves as a director of BTE Technologies, Inc.,
and as a director and chair of the compensation committee of HD Supply Holdings, Inc. Ms. Affeldt attended the State University
of New York and Hunter College in New York City, majoring in Business Administration.
Director Qualifications:
Ms. Affeldt’s experience in large, multinational companies in general, as well as in the human resources field in particular,
provides our Board of Directors with insight into the attraction, motivation and retention of personnel. Additionally, her service
on the boards of other public companies brings to our Board of Directors valuable insight into the strategic, financial and personnel
challenges faced by companies similar to NCI.
George L. Ball
Mr. Ball, age 60, has
served as a director since February 2014. He serves on the Audit Committee, the Compensation Committee, the Executive Committee,
the Affiliate Transactions Committee, and is the Chair of the Routine Transaction Committee of our Board of Directors. Mr. Ball
is the Chief Financial Officer of Parsons Corporation, a global engineering and construction services company that was established
in 1944. Mr. Ball joined Parsons in 1995 and has held varying positions of increasing responsibility and was promoted to Chief
Financial Officer in 2008. Mr. Ball was formerly a senior accountant with Coopers & Lybrand LLP, now known as PricewaterhouseCoopers
LLP. Mr. Ball currently serves as a director of Wells Fargo Real Estate Investment Corporation, a publicly traded real estate investment
trust, and is a member of its audit committee. Mr. Ball earned his B.S. in Accounting from Drexel University.
Director Qualifications:
Mr. Ball’s background and experience as an executive in a large, multinational engineering and construction services company
provides the Board with perspective on strategic, financial, compensation, management development and sales issues. Mr. Ball’s
extensive experience and financial and accounting background as a chief financial officer provides the Audit Committee with valuable
experience. Mr. Ball’s extensive financial experience and knowledge of compensation program design provide the Compensation
Committee with valuable experience.
Gary L. Forbes
Mr. Forbes, age 75, has
served as a director since December 1991. Mr. Forbes serves on the Executive Committee, Affiliate Transactions Committee, and is
the Chair of the Audit Committee of our Board of Directors. In addition, Mr. Forbes is our designated Audit Committee financial
expert. Mr. Forbes was a Senior Vice President of Equus Total Return, Inc., an investment company, from November 1991 until his
retirement in March 2010. Mr. Forbes was a director of Consolidated Graphics, Inc., a publicly traded commercial printing company,
where he served on its audit committee, from 1993 until January 2014. Mr. Forbes previously served on the board of directors of
Carriage Services, Inc., a publicly traded funeral services company, from May 2007 to February 2009. Mr. Forbes earned a B.B.A.
in Accounting from the University of Texas at Austin and is a certified public accountant.
Director Qualifications:
Mr. Forbes’ background has provided our Board of Directors with valuable financial and accounting expertise as our financial
expert on the Audit Committee of our Board of Directors. Additionally, having served as a member of our Board of Directors since
1991, Mr. Forbes has a deep historical understanding of our business, operations and culture.
John J. Holland
Mr. Holland, age 68, has
served as a director since November 2009. He serves on the Audit Committee, the Nominating & Corporate Governance Committee
and the Affiliate Transactions Committee of our Board of Directors. Mr. Holland served as the President of the International Copper
Association from February 2012 until his retirement in November 2015. The International Copper Association is a marketing association
for the copper industry. Mr. Holland has been the President of Greentree Advisors, LLC since October 2004. Mr. Holland was the
President, Chief Operating Officer and Chief Financial Officer of MMFX Technologies Corporation, a privately held steel manufacturing
firm, from 2008 until 2009. Prior to that, Mr. Holland was the Executive Vice President and Chief Financial Officer of Alternative
Energy Sources, Inc., an ethanol producer, from August 2006 until June 2008. Mr. Holland previously was employed by Butler Manufacturing
Company, a producer of pre-engineered building systems, supplier of architectural aluminum systems and components and provider
of construction and real estate services for the nonresidential construction market, from 1980 until his retirement in 2004. Prior
to his retirement from Butler, Mr. Holland served as Chairman of the Board from 2001 to 2004, as Chief Executive Officer from
1999 to 2004 and as President from 1999 to 2001. Mr. Holland currently serves as a director and on the audit committee of Cooper
Tire & Rubber Co., and as a director and on the audit and compensation committees of Saia, Inc. (formerly SCS Transportation,
Inc.). Mr. Holland holds B.S. and M.B.A. degrees from the University of Kansas and is a certified public accountant.
Director Qualifications:
Mr. Holland’s extensive career in the metal building industry, including his role as a chief executive officer of a public
company, provides the Board with perspective on the particular strategic, manufacturing, sales and marketing, compensation and
personnel issues faced by companies in our industry. Further, Mr. Holland’s extensive financial and accounting background
as a former chief financial officer and a certified public accountant provides the Audit Committee with valuable expertise.
Lawrence J. Kremer
Mr. Kremer, age 77, has
served as a director since October 2009. Mr. Kremer serves on the Affiliate Transactions Committee of our Board of Directors. Mr.
Kremer retired in 2007 from Emerson Electric Co., having served as Corporate Vice President of Global Materials. Prior to that,
Mr. Kremer was employed by Whirlpool Corporation, a worldwide producer of appliances, as Senior Vice President of International
Operations and Global Materials. Mr. Kremer currently serves as a director of Fifth Third Bank Southern Region and St. Mary’s
Hospital System, a Midwest Regional Hospital. Mr. Kremer previously served as Chairman of the Board of Trustees of the University
of Evansville. Mr. Kremer holds a B.S. and an M.B.A. from the University of Evansville.
Director Qualifications:
Mr. Kremer’s leadership roles in global manufacturing bring to our Board of Directors an understanding of the global business
environment and valuable insight into the operations of large, complex manufacturing operations.
John Krenicki
Mr. Krenicki, age 56,
has served as lead director since November 16, 2018. He serves on the Compensation Committee, as Chair of the Nominating &
Corporate Governance Committee and as Chair of the Executive Committee of our Board of Directors. Mr. Krenicki served as Lead Director
of Ply Gem Holdings, Inc. from April 16, 2018 until the consummation of the Merger (as defined below). He is currently a Director
at Devon Energy Corp. Mr. Krenicki served as Vice Chairman of GE and as President and Chief Executive Officer of GE Energy (“GE”)
from July 2005 until December 2012. His responsibilities included oversight of GE’s oil and gas, power and water and energy
management businesses. He also serves as chairman of Brand Industrial Services Inc., Wilsonart International Holdings LLC, and
PowerTeam Services. He was a Member of GE’s Corporate Executive Council and the GE Capital Board of Directors. He previously
served as chairman of ServiceMaster Global Holdings and CHC Group and as a director of Hess Corp. He is a member of the National
Petroleum Council. He earned a B.S. degree in Mechanical Engineering from the University of Connecticut. He received an M.S. degree
in Management from Purdue University.
Director Qualifications:
Mr. Krenicki’s leadership roles in diverse manufacturing and services enterprises bring to our Board of Directors an understanding
of the global business environment, investment judgment, and valuable insight into the operations of large, complex manufacturing
operations.
George Martinez
Mr. Martinez, age 77,
has served as a director since March 2003. He serves on the Audit Committee and the Affiliate Transactions Committee of our Board
of Directors. Mr. Martinez is the Chairman and Chief Executive Officer of Allegiance Bancshares, Inc., a publicly traded bank holding
company (ABTX Nasdaq) which owns Allegiance Bank, a Texas banking association headquartered in Houston, Texas that opened for business
in October 2007. He has been active as a bank executive in Houston for over 40 years and is the former Chairman of Sterling Bancshares,
Inc., a publicly traded bank holding company (SBIB Nasdaq). Mr. Martinez served as President of Chrysalis Partners, LLC, a performance
consulting firm, from 1999 to 2008. He serves his community on the boards of directors of the University of St. Thomas and Collaborative
for Children. Mr. Martinez has a B.A. in Business Administration and Economics from Rice University.
Director Qualifications:
Mr. Martinez’s background and experience in performance consulting and as an executive in the banking industry allow him
to provide to the Board valuable financial, accounting and operational expertise. Additionally, having served as a member of our
Board of Directors since 2003, Mr. Martinez has a high degree of familiarity with our business, operations and culture.
James S. Metcalf
Mr. Metcalf, age 61, has
served as a director since May 2017, as the Chairman of our Board of Directors since January 1, 2018 and as our Chief Executive
Officer since November 16, 2018. He serves on the Executive Committee, the Routine Transaction Committee, and the Affiliate Transactions
Committee of our Board of Directors. Mr. Metcalf retired in October 2016 as the Chairman, President and Chief Executive Officer
of USG Corporation. At the time of his retirement, he had served as Chairman since December 2011 and had served as Chief Executive
Officer and President since January 2011. From January 2006 through January 2011, he was President and Chief Operating Officer
of USG. Prior to that, Mr. Metcalf held many positions at USG including president, Building Systems; president and chief executive
officer, L&W Supply; senior vice president, Sales and Marketing, USG Interiors, Inc.; vice president, National Accounts, United
States Gypsum Company; director, Retail Marketing, USG Corporation; director, Retail Sales, USG Interiors, Inc.; and national accounts
manager, United States Gypsum Company. Mr. Metcalf is a director of Tenneco Inc. Mr. Metcalf is a policy advisory board member
for the Joint Center for Housing Studies at Harvard University. Mr. Metcalf holds a bachelor’s degree from The Ohio State
University. He also holds a master’s degree in business administration from Pepperdine University and Stanford University
SEP.
Director Qualifications:
Mr. Metcalf’s extensive career in a building materials company, including his former role as a chief executive officer and
chairman of its board of directors, provides him with the necessary skills to be Chairman of our Board of Directors. As a result
of his experience, he has a deep understanding of the industry in which we participate and insight into corporate governance practices,
strategy, operations, finance, technology, innovation, and compensation policies and practices generally and, as our Chief Executive
Officer for the last two months, our Company in particular.
Timothy O’Brien
Mr. O’Brien, age
55, has served as a director since November 16, 2018. He serves on the Nominating & Corporate Governance Committee of our Board
of Directors. Mr. O’Brien has served as the President and Chief Executive Officer of Wilsonart Engineered Surfaces since
January 2013. Prior to joining Wilsonart, Tim served as Vice President and General Manager of SABIC Innovative Plastic, responsible
for the engineering resins business in the Americas and Europe. SABIC Innovative Plastics, a business unit of Saudi Basic Industries
Corporation (“SABIC”), was founded in 2007 with the acquisition of GE Plastics. Prior to SABIC, Tim began his career
at General Electric as a Sales Representative for GE Lighting. Throughout his 24-year career at GE, he also held roles of increasing
responsibility in Sales, Production Management and General Management, including Vice President of Sales and Distribution Operations
for the Asia Pacific, based in Singapore. Mr. O’Brien ultimately served as Senior Vice President for Commercial Finance with
GE Capital until 2003, running a global computer leasing business. Mr. O’Brien earned his Bachelor’s Degree from Northeastern
University in Massachusetts and his MBA from Baldwin Wallace College in Ohio.
Director Qualifications:
Mr. O’Brien’s leadership roles in global manufacturing bring to our Board of Directors an understanding of the global
business environment and valuable insight into the operations of large, complex manufacturing operations.
Nathan K. Sleeper
Mr. Sleeper, age 45, has
served as a director since October 2009. Mr. Sleeper serves on the Compensation Committee and the Executive Committee of our Board
of Directors. Mr. Sleeper is a partner of Clayton, Dubilier & Rice, LLC (“CD&R, LLC”), the successor to the
investment management business of CD&R, Inc., which he joined in 2000. Prior to joining CD&R, Inc., he was employed by
Goldman, Sachs & Co. in the Investment Banking Division. He has also been employed by Tiger Management. He currently serves
as a director of PowerTeam Services LLC, Wilsonart International Holdings LLC, Brand Energy & Infrastructure Services, Inc.,
Beacon Roofing Supply, Inc., a public company, SunSource Holdings, Inc., and Core & Main LP. Mr. Sleeper was a director of
Atkore International Group, Inc., a public company, HD Supply Holdings, Inc., a public company, Hussmann International, Inc., U.S.
Foods, Inc., Hertz Global Holdings, a public company, and CHC Group Ltd. Mr. Sleeper holds a B.A. from Williams College and an
M.B.A. from Harvard Business School.
Director Qualifications:
Mr. Sleeper’s broad experience in the financial and investment communities brings to our Board of Directors important insights
into business strategy and areas to improve our financial performance.
Jonathan L. Zrebiec
Mr. Zrebiec, age 39, has
served as a director since November 2009. Mr. Zrebiec is a partner of CD&R, LLC, having joined CD&R, Inc. in 2004. He serves
on the Routine Transaction Committee of our Board of Directors. Prior to joining CD&R, Inc., he was employed by Goldman, Sachs
& Co. in the Investment Banking Division. He currently serves as a director of Atkore International Group, Inc., a public company,
Wilsonart International Holdings LLC, Brand Energy & Infrastructure Services, Inc., Core & Main LP and SunSource Holdings,
Inc. Mr. Zrebiec was a director of Roofing Supply Group, LLC from May 2012 to September 2015 and was a director of Hussmann International,
Inc. from October 2011 to April 2016. Mr. Zrebiec holds a B.S. in Economics from the University of Pennsylvania and holds an M.B.A.
from Columbia University.
Director Qualifications:
Mr. Zrebiec’s experience in the financial and investing community provides our Board with insight into business strategy,
improving financial performance and the economic environment in which we operate. Mr. Zrebiec is a CD&R Investor Nominee (as
defined in the New Stockholders Agreement).
Executive Officers
Our current executive
officers are as follows:
Name
|
|
Position
|
|
|
|
James S. Metcalf
|
|
Chairman and Chief Executive Officer
|
Brian P. Boyle
|
|
Senior Vice President, Chief Accounting Officer and Treasurer
|
John L. Buckley
|
|
President, Siding Business Unit - Residential
|
Todd R. Moore
|
|
Executive Vice President, Chief Legal, Risk & Compliance Officer and Corporate Secretary
|
Shawn K. Poe
|
|
Executive Vice President, Chief Financial Officer
|
Donald R. Riley
|
|
Chief Executive Officer, Commercial Business Unit and Head of Supply Chain & Technology
|
Arthur W. Steinhafel
|
|
President, U.S. Windows Business Unit - Residential
|
Katy K. Theroux
|
|
Executive Vice President, Chief Human Resources Officer
|
Information concerning
the business experience of Mr. James S. Metcalf is provided under the section titled “Board of Directors.”
Brian P. Boyle
,
age 46, has served as Senior Vice President, Chief Accounting Officer and Treasurer since November 16, 2018. Mr. Boyle was Ply
Gem Industries, Inc.’s Chief Accounting Officer and Treasurer from 2016 until November 16, 2018. Prior to this role, Mr.
Boyle served as Ply Gem’s Corporate Controller from 2008-2016 participating in Ply Gem’s initial public offering process
in 2013. Prior to joining Ply Gem, Mr. Boyle was a senior manager in the audit practice with PricewaterhouseCoopers LLP in Raleigh,
NC working predominantly with manufacturing clients. Mr. Boyle graduated from the University of North Carolina-Chapel Hill in 1995
with a BSBA and a Master of Accounting.
John L. Buckley
,
age 54, has served as our President, Siding Business Unit - Residential (formerly known as the Siding Division) since November 16, 2018.
Prior to that, Mr. Buckley served as Ply Gem Industries, Inc.’s President of Siding, Fencing and Stone group from 2012 until
November 16, 2018. Mr. Buckley joined Ply Gem in 1999, and prior to his appointment as President of the Siding, Fencing and Stone
group he had served as Senior Vice President of Sales for Ply Gem’s siding and accessories subsidiaries. Prior to joining
Ply Gem, Mr. Buckley worked for CertainTeed from 1991 to 1999, holding a variety of sales management positions. Mr. Buckley currently
serves as the Chairman of the VSI Board of Directors and Chairman of the VSI Steering Committee and Primary Marketing Committee.
Mr. Buckley received a BA in communications from the University of Michigan in 1986, and a MSA from Madonna University in 1991.
Todd R. Moore
,
age 59, has served as our Executive Vice President, Chief Legal, Risk & Compliance Officer and Corporate Secretary since May
2017. Mr. Moore served as our Executive Vice President and General Counsel from December 2007 to May 2017, and as our Vice President
and General Counsel from March 2003 to December 2007. Mr. Moore has served as a Vice President and General Counsel of all NCI divisions
since January 1999 and as our Corporate Secretary since March 2005. Before joining NCI in January 1999, Mr. Moore was a partner
in the Trial Section of Gardere Wynne Sewell LLP, a law firm based in Texas. Mr. Moore has a B.A. in Political Science from Southern
Methodist University and a J.D. from the University of Tulsa College of Law. He is licensed to practice law in the State of Texas.
Shawn K. Poe
, age
56, has served as Executive Vice President, Chief Financial Officer since November 16, 2018. Mr. Poe was Chief Financial Officer
and Executive Vice President of Ply Gem Holdings, Inc. from August 2004 until November 16, 2018. He served as Vice President of
Finance of Ply Gem Holdings Inc. from March 2000 to August 2004. He served as Corporate Controller and various other accounting
positions at Nordyne, Inc., joining in 1990. Mr. Poe graduated from Southeast Missouri State University in 1984 with a BS in Accounting.
Mr. Poe graduated from Fontbonne College in 1994 with an MBA.
Donald R. Riley
,
age 56, has served as our Chief Executive Officer, Commercial Business Unit (formerly known as the NCI Division) and Head of Supply
Chain & Technology since November 2018. Mr. Riley served as our Chief Executive Officer from July 2017 to November 2018, as
President from January 2016 to November 2018 and as President of our Group Business Segment from December 2014 to January 2016.
Mr. Riley has also served on the Board of Directors and on its Executive Committee from July 2017 to November 2018. Before joining
NCI, Mr. Riley was employed by Probuild Holdings, LLC, a supplier of building materials to production builders, custom builders,
local contractors and project oriented consumers, where he served as Executive Vice President from November 2011 to November 2014.
As Executive Vice President, Mr. Riley managed the supply chain, manufacturing, construction services, marketing, pricing, information
technology, strategy and business project management office functions. Prior to joining Probuild Holdings, Mr. Riley was employed
by Mohawk Industries, Inc., a floor covering company, from September 2004 to November 2011, serving in various capacities such
as Chief Information Officer, Senior Vice President Logistics, and Interim Flooring Executive Vice President Customer Experience.
At Mohawk Industries, Mr. Riley was responsible for its global information systems, North America logistic functions, and the flooring
segment’s customer service function. Mr. Riley has a B.S. in Engineering from the University of Tennessee at Knoxville.
Arthur
W. Steinhafel
, age 52, has served as President, U.S. Windows Business Unit - Residential (formerly known as the U.S.
Windows Division) since November 16, 2018. Prior to that, Mr. Steinhafel served as Ply Gem Industries, Inc.’s President
of U.S. Windows and Doors group from 2013 to November 15, 2018. Mr. Steinhafel joined Ply Gem in 2010, and prior to his
appointment to President of the Ply Gem’s U.S. Window and Door group had served as Senior Vice President of Sales for
Ply Gem’s U.S. Window and Door group. Prior to joining Ply Gem, Mr. Steinhafel worked for Atrium Windows from 2008 to
2010 as President of the Central Region and for Peachtree Window Companies in various capacities from 1999 to 2007. Mr.
Steinhafel received a BS in Industrial Technology from the University of Wisconsin-Stout in 1992.
Katy K. Theroux
,
age 50, has served as our Executive Vice President, Chief Human Resources Officer since November 2018. Ms. Theroux served as our
Executive Vice President, Corporate Marketing and Chief Human Resources Officer from July 2017 to November 2018, and as our Vice
President, Chief Human Resources officer from September 2014 to June 2017. Before joining NCI, Ms. Theroux was employed by 1WORLDSYNC,
where she served as Chief Marketing and Administrative Officer from 2012 to 2013, and was responsible for the integration of two
multinational technology services companies. Prior to joining 1WORLDSYNC, Ms. Theroux served as Senior Vice President, Customer
Engagement & Solutions for its parent, GS1 US and 1SYNC from 2007 to 2012, and was responsible for customer support, marketing,
human resources and facilities shared services for all operating units. Ms. Theroux also served as its Chief Human Resources Officer
from 2006 to 2012. Ms. Theroux served as Chairman of the Board of Peirce College until June 2015. Ms. Theroux has a B.S. from Syracuse
University and an M.B.A. from Saint Peter’s University.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Exchange
Act requires our directors and officers and persons who beneficially own more than 10% of any of our equity securities to file
initial reports of ownership and reports of changes in ownership with the SEC. Our employees prepare these reports for our directors
and executive officers who request it on the basis of the information obtained from them and from NCI’s records. Our directors
and officers are required by the Exchange Act to furnish us with copies of all Section 16(a) forms they file.
To the Company’s
knowledge, based solely on our review of the copies of the forms received by us with respect to Fiscal 2018, or written representations
from the reporting persons, we believe that all Section 16(a) executive officers, directors and greater than 10% beneficial stockholders
of NCI complied with applicable Section 16(a) requirements during Fiscal 2018; except that one report, covering one transaction,
was filed late by Mr. Metcalf.
Code of Ethics
We have adopted a Code
of Business Conduct and Ethics relating to the conduct of our business by our directors, officers and employees, which is posted
on our website at
www.ncibuildingsystems.com
under the heading “Investors — Committees & Charters.”
Any amendments to or waivers from the Code of Business Conduct and Ethics that apply to our executive officers and directors will
be posted to our website in the same section as the Code of Business Conduct and Ethics as noted above. However, the information
on our website is not incorporated by reference into this Form 10-K.
Board Meetings
Our Board met seven times
during the fiscal year ended October 28, 2018. Each of our directors attended 75% or more of the aggregate of the total number
of meetings of our Board of Directors held during the period in which he or she was a director and the total number of meetings
held by all board committees on which he or she served during the periods that he or she served. It is our policy to schedule a
meeting of our Board of Directors on the date of the Annual Meeting, and we encourage all of our directors to attend both meetings.
All of our then-current directors attended last year’s Annual Meeting.
Our non-management directors
meet without the presence of management at regularly scheduled executive sessions. These executive sessions typically occur before
or after regularly scheduled meetings of our Board of Directors. The presiding director of these executive sessions is the Chair
of the Nominating and Corporate Governance Committee, if such person is an independent director; otherwise, the Chair of the Audit
Committee serves as presiding director. For information on how you can communicate with our non-management directors, please see
“Communications with Our Board.”
Board Committees
Our Board has six standing
committees – the Executive Committee, the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance
Committee, the Affiliate Transactions Committee and the Routine Transactions Committee. Below is a table disclosing our Board of
Directors and committee compositions as of the date of this Amendment.
BOARD
AND COMMITTEE APPOINTMENTS
Name
|
|
Board
|
|
Class
|
|
Expiration
|
|
Audit
|
|
Compensation
|
|
Nominating
&
Corporate
Governance
|
|
Executive
|
|
Affiliate
Transactions
(b)
|
|
Routine
Transactions
Committee
|
Kathleen J. Affeldt
|
|
Member
|
|
III
|
|
2020
|
|
|
|
Chair
|
|
Member
|
|
Member
|
|
Member
|
|
|
George L. Ball
|
|
Member
|
|
III
|
|
2020
|
|
Member
|
|
Member
|
|
|
|
Member
|
|
Member
|
|
Chair
|
Gary L. Forbes
|
|
Member
|
|
II
|
|
2019
(a)
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Chair
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Member
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Member
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John J. Holland
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Member
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I
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2021
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Member
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Member
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Member
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Lawrence J. Kremer
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Member
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I
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2021
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Member
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John Krenicki
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Member
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I
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2021
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Member
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Chair
|
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Chair
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George Martinez
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Member
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II
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2019
(a)
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Member
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Member
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James S. Metcalf
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Chairman
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II
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2019
(a)
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Member
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Member
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Member
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Timothy O’Brien
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Member
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III
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2020
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Member
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Nathan K. Sleeper
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Member
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III
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2020
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Member
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Member
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Jonathan L. Zrebiec
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Member
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II
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2019(a)
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Member
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(a)
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Messrs. Forbes, Martinez, Metcalf, and Zrebiec are Class II directors. The Class II directors are
to be elected at the Annual Meeting for a term expiring at the Annual Meeting to be held in 2022.
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(b)
|
No chair exists for the Affiliate Transactions Committee.
|
Executive Committee
The Executive Committee
is generally authorized to act on behalf of our Board between scheduled meetings of our Board of Directors, except as provided
by the New Stockholders Agreement and by our By-Laws, to the fullest extent permitted by Delaware corporate law. However, the Executive
Committee does not have the authority to approve amendments to our charter or By-Laws or specified extraordinary corporate transactions.
The Executive Committee operates under a charter adopted by our Board of Directors, a copy of which is available on our website
at www.ncibuildingsystems.com under the heading “Investors — Committees & Charters.”
As of the end of Fiscal
2018, the members of the Executive Committee were Mr. James Berges, Mr. Forbes, Mr. Metcalf, Mr. Riley and Mr. Sleeper, with
Mr. Berges serving as Chairman. The Executive Committee did not meet during the fiscal year ended October 28, 2018. In connection
with their resignation from the Board, Messrs. Berges and Riley resigned from the Executive Committee, effective November 16, 2018.
The Board appointed Messrs. Krenicki and O’Brien to the Executive Committee, effective November 16, 2018. As of the date
of this Amendment, the members of the Executive Committee were Ms. Affeldt, Mr. Ball, Mr. Forbes, Mr. Krenicki, Mr. Metcalf and
Mr. Sleeper, with Mr. Krenicki serving as Chairman.
Audit Committee
The Audit Committee assists
our Board in fulfilling its responsibilities relating to our corporate accounting and reporting practices and the quality and integrity
of our financial reports. The Audit Committee assists the Board in monitoring the integrity of our financial statements, the independence,
qualifications and performance of our independent auditors; the performance of our internal audit function, our compliance with
legal and regulatory requirements, and the preparation of our Audit Committee’s report included in our proxy statements.
In discharging its duties, our Audit Committee has the authority to retain independent legal, accounting and other advisors and
has the sole authority to appoint, retain, replace or terminate the independent auditor.
As of the end of Fiscal
2018, the members of the Audit Committee were Mr. Ball, Mr. Forbes, Mr. Holland and Mr. Martinez, with Mr. Forbes serving as Chair.
The Audit Committee met six times during the fiscal year ended October 28, 2018.
The Audit Committee is
composed solely of directors who are not our officers or employees, have the requisite financial literacy to serve on the Audit
Committee, as determined by our Board of Directors, and whom our Board of Directors has determined are “independent”
under the listing standards of the NYSE and the rules and regulations of the SEC, including the heightened independence standards
for Audit Committee members under Section 303A.06 of the NYSE Listed Company Manual, the Exchange Act, and Rule 10A-3 promulgated
thereunder.
Our Board of Directors,
after reviewing all of the relevant facts, circumstances and attributes, has determined that Mr. Forbes, the Chair of our Audit
Committee, is an “audit committee financial expert” as defined by Item 407(d)(5)(ii) of Regulation S-K.
The Audit Committee operates
under a written Audit Committee Charter adopted by our Board of Directors, a copy of which is available on our website at
www.ncibuildingsystems.com
under the heading “Investors — Committees & Charters.”
Compensation
Committee
The Compensation Committee
assists our Board in fulfilling its responsibilities relating to our compensation practices. The Compensation Committee discharges
the Board’s responsibilities relating to compensation of directors, officers and senior managers, oversees, evaluates, and
advises our Board regarding NCI’s overall compensation policies and structure, including benefit plans and programs, prepares
reports on executive compensation required for inclusion in our proxy statements and discusses these reports with our management.
The Compensation Committee is permitted to delegate its authority on all matters for which it is responsible to subcommittees consisting
of one or more members. The Compensation Committee met three times during the fiscal year ended October 28, 2018.
As of the end of Fiscal
2018, the members of the Compensation Committee were Ms. Affeldt, Mr. Ball, Mr. Holland, Mr. Martinez, Mr. Metcalf and Mr. Sleeper,
with Ms. Affeldt serving as Chairperson. Effective as of November 16, 2018, Messrs. Holland and Martinez resigned from the Compensation
Committee. The Board appointed Mr. Krenicki to the Compensation Committee, effective November 16, 2018. As of the date of this
Amendment, the members of the Compensation Committee were Ms. Affeldt, Mr. Ball, Mr. Krenicki and Mr. Sleeper, with Ms. Affeldt
serving as Chairperson. The Compensation Committee is composed solely of directors who are not our officers or employees.
The Compensation Committee
operates under a Compensation Committee Charter adopted by our Board, a copy of which is available on our website at
www.ncibuildingsystems.com
under the heading “Investors — Committees & Charters.”
Nominating &
Corporate Governance Committee
The Nominating and Corporate
Governance Committee is responsible, subject to and in accordance with the New Stockholders Agreement, for identifying or assisting
in the identification of, and recommending qualified candidates to serve on our Board and, subject to and in accordance with the
New Stockholders Agreement, recommending to our Board the director nominees to be elected by our stockholders at each annual or
special meeting. In addition, the Nominating and Corporate Governance Committee is responsible for developing and advising our
Board with respect to guidelines for the governance of NCI, including monitoring compliance with those guidelines, as well as overseeing
succession planning and the evaluation and review of the performance of our Board.
As of the end of Fiscal
2018, the members of the Nominating and Corporate Governance Committee were Mr. Berges, Mr. Holland, Mr. Forbes, Mr. Kremer,
Mr. Metcalf and Mr. VanArsdale, with Mr. Berges serving as Chairman. In connection with their resignation from the Board, Messrs.
Berges and VanArsdale resigned from the Nominating and Corporate Governance Committee, effective November 16, 2018. Messrs. Forbes,
Kremer and Metcalf also resigned from the Nominating & Corporate Governance Committee, effective November 16, 2018. The Board
appointed Ms. Affeldt, Mr. Krenicki and Mr. O’Brien to the Nominating and Corporate Governance Committee, effective November
16, 2018. As of the date of this Amendment, the members of the Nominating & Corporate Governance Committee were Ms. Affeldt,
Mr. Holland, Mr. Krenicki and Mr. O’Brien, with Mr. Krenicki serving as Chairman. The Nominating and Corporate Governance
Committee met two times during the fiscal year ended October 28, 2018.
The Nominating and Corporate
Governance Committee operates under a Nominating and Corporate Governance Committee Charter adopted by our Board, a copy of which
is available on our website at www.ncibuildingsystems.com under the heading “Investors — Committees & Charters.”
Our Corporate Governance Guidelines adopted by our Board, a copy of which is available at our website at www.ncibuildingsystems.com
under the heading “Investors — Committees & Charters,” include the criteria our Board believes are important
in the selection of director nominees.
Pursuant to and in accordance
with the New Stockholders Agreement, for so long as the CD&R Investors own at least 7.5% of the outstanding shares of Common
Stock, the CD&R Investors are entitled to nominate for election, fill vacancies and appoint replacements for a number of Board
members in proportion to the CD&R Investors’ percentage beneficial ownership of outstanding Common Stock, but never to
exceed one less than the number of independent, non-CD&R-affiliated directors serving on the Board (the “CD&R Investor
Director Number”). At each annual meeting or special meeting of stockholders at which any directors of NCI are to be elected,
we will take all corporate and other actions necessary to cause the applicable CD&R Investors’ nominees or designees
to be nominated for election to our Board and we will solicit proxies in favor of the election of such nominees or designees to
be elected at such meeting.
Further, pursuant to and
in accordance with the New Stockholders Agreement, for so long as stockholders unaffiliated with the CD&R Investors own in
the aggregate at least 7.5% of the voting power of NCI, our Board at all times must be comprised of (i) the Chief Executive Officer
of NCI, (ii) such number of CD&R Investor Directors (as defined in the New Stockholders Agreement), not to exceed the CD&R
Investor Director Number, (iii) directors who will not be appointed or designated by the CD&R Investors and will be independent
of both the CD&R Investors and NCI (the “Independent Non-CD&R Investor Directors”), and (iv) up to one (1)
additional director that is not a CD&R Investor Director or the Chief Executive Officer of NCI (the “Unaffiliated Shareholder
Director”), who upon election would not be an Independent Non-CD&R Investor Director, provided that if the election or
appointment of such person would have the effect of reducing the CD&R Investor Director Number, no such person shall be nominated
or appointed without the approval of the CD&R Investor Directors.
Further, pursuant to the
New Stockholders Agreement, for so long as the CD&R Investor Voting Interest (as defined in the New Stockholders Agreement)
is at least 20% of the voting power of NCI, the CD&R Investors are entitled to representation proportionate to the CD&R
Investor Voting Interest (rounded to the nearest whole number) on all committees of the Board, provided that, notwithstanding the
foregoing, the CD&R Investors are entitled to have a minimum of one (1) CD&R Investor Director serving on each committee
of the Board, subject to applicable restrictions set forth in the New Stockholders Agreement, applicable law and New York Stock
Exchange rules.
Pursuant to the New Stockholders
Agreement, the CD&R Directors who are members of the Nominating and Corporate Governance Committee (or, if none serve thereon,
the remaining CD&R Directors or, if no CD&R Directors remain in office, the CD&R Investors) have the right to designate
the CD&R Investor Director(s) to serve as members of a board committee, and the Unaffiliated Shareholder Directors shall have
the right to designate the Unaffiliated Shareholder Director to serve as a member of a committee, in each case in accordance with
Section 3.1(e)(i) of the New Stockholders Agreement.
In identifying and evaluating
nominees for director other than directors nominated by the CD&R Investors pursuant to the New Stockholders Agreement, the
Nominating and Corporate Governance Committee first looks at the overall size and structure of our Board to determine the need
to add or remove directors and to determine if there are any specific qualities or skills that would complement the existing strengths
of our Board.
The Board codified standards
for directors in the Board’s Corporate Governance Guidelines and Nominating and Corporate Governance Committee Charter. The
Corporate Governance Guidelines provide that our Board of Directors should encompass a diverse range of talent, skill and expertise
sufficient to provide sound and prudent guidance with respect to our operations and interests. The Corporate Governance Guidelines
also provide that at all times a majority of the Board must be “independent directors” as defined from time to time
by the listing requirements of the NYSE and any specific requirements established by the Board. Each director also is expected
to:
|
·
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exhibit high personal and professional ethics, strength of character, integrity, and values;
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·
|
possess commitment and independence of thought and judgment;
|
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·
|
possess education, experience, intelligence, independence, fairness, practical wisdom and vision to
exercise sound, mature judgments;
|
|
·
|
use his or her skills and experiences to provide independent oversight of our business;
|
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·
|
possess personality, tact, sensitivity, and perspective to participate in deliberations in a constructive
and collegial manner;
|
|
·
|
be willing to devote sufficient time to carrying out his or her duties and responsibilities effectively;
|
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·
|
devote the time and effort necessary to learn our business; and
|
|
·
|
represent the long-term interests of all stockholders.
|
In addition, our Board
has determined that the Board as a whole must have the right diversity, mix of characteristics and skills for the optimal functioning
of its oversight of NCI. To that end, our Board places a premium on its members’ professional experience in positions such
as a senior manager, chief operations officer, chief financial officer, or chief executive officer of a relatively complex organization
such as a corporation, university, or foundation. Ultimately, our Board believes it should be comprised of persons with skills
in areas that may include some of the following: finance; manufacturing; sales and markets; strategic planning; development of
strategies for sustainability; human resources; safety; legal; international business; and information technology. Under our By-Laws,
no person may stand for election as a director if, on the date of any annual or special meeting held for the purpose of electing
directors, such person shall have surpassed the age of 75; however, those directors who are then serving on the board of directors
and have already reached the age of 75 as of November 16, 2017 may stand for election as a director if, on the date of any annual
or special meeting held for the purpose of electing directors, such person shall not have surpassed the age of 78.
In addition to the targeted
skill areas, the Nominating and Corporate Governance Committee looks for a strong record of achievement in key knowledge areas
that it believes are critical for directors to add value to our Board, including:
|
·
|
Strategy – knowledge of our business model, the formulation of corporate strategies, and knowledge
of key competitors and global markets;
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·
|
Leadership – skills in coaching senior executives and the ability to assist the CEO in his development;
|
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·
|
Organizational Issues – understanding of strategy implementation, change management processes,
group effectiveness, and organizational design;
|
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·
|
Relationships – understanding how to interact with customers, vendors, governments, investors,
financial analysts, and communities in which we operate;
|
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·
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Functional – understanding of financial matters, financial statements and auditing procedures,
legal issues, information technology, and marketing; and
|
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·
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Ethics – the ability to identify and raise key ethical issues concerning our activities and
senior management as they affect the business community and society.
|
As part of its periodic
self-assessment process, our Board annually determines the diversity of specific skills and experiences necessary for the optimal
functioning of our Board in its oversight of NCI over both the short and long term.
The Corporate Governance
Guidelines state our policy regarding the director selection process that requires the Nominating and Corporate Governance Committee
to review the skills and characteristics that the Board seeks in its members individually and in relation to the composition of
our Board as a whole. As part of this process, the Board will assess the skill areas currently represented on our Board and those
skill areas represented by directors expected to retire or leave our Board in the near future against the target skill areas established
annually by our Board, as well as recommendations of directors regarding skills that could improve the overall quality and ability
of our Board to carry out its function.
The Nominating and Corporate
Governance Committee then establishes the specific target skill areas, characteristics or experiences that are to be the focus
of a director search, if necessary. Specific qualities or experiences could include matters such as experience in our industry,
financial or technological expertise, experience in situations comparable to ours (e.g., growth companies, companies that have
grown through acquisitions, or companies that have restructured their organizations successfully), leadership experience and relevant
geographical experience. The Board’s current composition reflects diversity in skills and experiences.
The Nominating and Corporate
Governance Committee uses multiple sources for identifying and evaluating nominees for directors other than directors nominated
by the CD&R Investors pursuant to the New Stockholders Agreement, including referrals from our current directors and management,
as well as input from third-party executive search firms. The Chairman of the Nominating and Corporate Governance Committee and
our Chairman of the Board will then interview qualified candidates. Qualified candidates are then invited to meet the remaining
members of the Nominating and Corporate Governance Committee. The remaining directors also have an opportunity to meet and interview
qualified candidates. The Nominating and Corporate Governance Committee then determines, based on the background information and
the information obtained in the interviews, whether to recommend to the Board that a candidate be nominated to our Board.
The Nominating and Corporate
Governance Committee will consider qualified nominees recommended by stockholders. Stockholders may submit recommendations to the
Nominating and Corporate Governance Committee in care of our Chairman of the Board and Corporate Secretary at our address set forth
on the cover page of this Amendment in the form and timing provided in our By-Laws. Subject to the requirements of the New Stockholders
Agreement described above, nominees for director who are recommended by our stockholders will be evaluated in the same manner as
any other nominee for director.
Nominations by stockholders
for seats on the Board not required to be filled by the CD&R Investors’ designees may also be made at an annual meeting
of stockholders in the manner provided in our By-Laws. Our By-Laws provide that a stockholder entitled to vote for the election
of directors may make nominations of persons for election to our Board at a meeting of stockholders by complying with required
notice procedures. To be timely, nominations must be received at our principal executive offices not later than the close of business
on the 90
th
day nor earlier than the close of business on the 120
th
day prior to the first anniversary of
the preceding year’s annual meeting. If, however, the date of the annual meeting is more than 30 days before or more than
70 days after such anniversary date, notice by the stockholder must be delivered not earlier than the close of business on the
120
th
day prior to the annual meeting and not later than the close of business on the later of the 90
th
day
prior to such annual meeting or the 10
th
day following the day on which the public announcement of the date of such
meeting is first made by us.
The notice must specify:
|
·
|
as to each person the stockholder proposes to nominate for election or re-election as a director:
|
|
–
|
the name, age, business address and residence address of the person;
|
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–
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the principal occupation or employment of the person;
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–
|
the class and number of shares of our capital stock that are owned of record or beneficially by the
person on the date of the notice; and
|
|
–
|
any other information relating to the person that is required to be disclosed in solicitations for
proxies with respect to nominees for election as directors pursuant to Section 14 of the Exchange Act; and
|
|
·
|
as to the stockholder giving the notice:
|
|
–
|
the name and record address of the stockholder and any other stockholder known by that stockholder
to be supporting the nominee; and
|
|
–
|
the class and number of shares of our capital stock that are owned of record or beneficially by the
stockholder making the nomination and by any other supporting stockholders.
|
We may require that the
proposed nominee furnish us with other information as we may reasonably request to assist us in determining the eligibility of
the proposed nominee to serve as a director. At any meeting of stockholders, the presiding officer may disregard the purported
nomination of any person not made in compliance with these procedures. Please refer to the full text of our advance notice by-law
provisions for additional information and requirements. A copy of our By-Laws may be obtained by writing to our Corporate Secretary
at the address shown on the cover page of this Amendment.
Affiliate Transactions
Committee
The Affiliate Transactions
Committee is responsible for reviewing, considering and approving certain transactions between NCI and its controlled affiliates,
on the one hand, and the CD&R Investors and their affiliates, on the other hand. This committee is made up of (x) the Unaffiliated
Shareholder Directors then in office and (y) one CD&R Investor Independent Director (as defined in the New Stockholders Agreement),
if a CD&R Investor Independent Director is then serving on the Board, and otherwise, the Chief Executive Officer of the Company
serving as a director on the Board. As of the end of Fiscal 2018, the members of the Affiliate Transactions Committee were Mr.
Ball, Mr. Forbes, Mr. Holland and Mr. Martinez. Effective November 16, 2018, the Board appointed Ms. Affeldt, Mr. Metcalf and Mr.
Kremer to the Affiliate Transactions Committee. As of the date of this Amendment, the members of the Affiliate Transactions Committee
were Ms. Affeldt, Mr. Ball, Mr. Forbes, Mr. Holland, Mr. Kremer, Mr. Martinez and Mr. Metcalf. The Affiliate Transactions Committee
has no chair.
The Affiliate Transactions
Committee operates under an Affiliate Transactions Committee Charter adopted by our Board of Directors, a copy of which is available
on our website at www.ncibuildingsystems.com under the heading “Investors — Committees & Charters.”
Routine Transactions
Committee
On December 12, 2018,
the Board delegated certain responsibilities and duties relating to certain matters of NCI to a Routine Transactions Committee
to assist the Board in fulfilling certain of the Board’s oversight responsibilities. The Routine Transactions Committee is
responsible for reviewing, considering and approving the following proposed transactions: (i) expenditures of capital or other
assets outside the ordinary course and not part of the annual capital expenditure plan; (ii) mergers or acquisitions; (iii) non-ordinary
course asset divestitures; and (iv) any non-ordinary course joint ventures or similar arrangements with third-parties. The initial
members of the Routine Transactions Committee were Mr. Ball, Mr. Metcalf and Mr. Zrebiec, with Mr. Ball serving as Chairperson.
Risk Analysis of Our
Compensation Plans
The Compensation Committee
has reviewed our compensation policies as generally applicable to our employees and believes that our policies do not encourage
excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material
adverse effect on NCI.
Item 11. Executive
Compensation
Compensation Discussion
and Analysis
Introduction
This Compensation Discussion
& Analysis (“CD&A”) provides information regarding NCI’s compensation programs for our former Chief Executive
Officer (“CEO”), our former interim Chief Financial Officer (“CFO”), our former CFO, and our three other
most highly compensated executive officers for Fiscal 2018 and also describes certain compensation actions taken following Fiscal
2018. (Throughout the CD&A we occasionally refer to other fiscal years of NCI in the same manner.) The CD&A is also intended
to place in perspective the information for Fiscal 2018 contained in the executive compensation tables that follow this discussion.
The CD&A does not
include information regarding compensation programs for NCI’s current CEO, James S. Metcalf, or our current CFO, Shawn K.
Poe, both of whom were appointed after the end of Fiscal 2018 in connection with the closing of the Merger (as defined below).
For a discussion of the compensation arrangements with Mr. Metcalf and Mr. Poe, please refer to the sections entitled “Appointment
of James S. Metcalf as Chairman and Chief Executive of the Company” and “Appointment of Shawn K. Poe as Chief Financial
Officer of the Company” in Item 5.02. Departure of Directors and Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers” of our Current Report on Form 8-K filed on November 20,
2018.
Throughout this discussion,
the following individuals are referred to collectively as the “Named Executive Officers” or “NEOs” and
are included in the Summary Compensation Table that follows this discussion:
|
·
|
Donald R. Riley, former President and Chief Executive Officer, and current Chief Executive Officer,
Commercial Business Unit and Head of Supply Chain & Technology;
|
|
·
|
Mark E. Johnson, former Executive Vice President, Chief Financial Officer and Treasurer;
|
|
·
|
Bradley S. Little, former interim Chief Financial Officer and Treasurer, and current Senior Vice President,
Finance, Commercial Business Unit;
|
|
·
|
John L. Kuzdal, President of Group Manufacturing Segment;
|
|
·
|
Todd R. Moore, Executive Vice President, Chief Legal, Risk & Compliance Officer and Corporate
Secretary;
|
|
·
|
Katy K. Theroux, Executive Vice President, Chief Human Resources Officer; and
|
|
·
|
Norman C. Chambers, former Executive Chairman.
|
Summary of Compensation
Matters for Fiscal 2018
Our financial and operational
performance during Fiscal 2018 achieved many of the Company’s goals important to realizing the firm’s longer-term targets.
On July 17, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ply Gem Parent,
LLC, a Delaware limited liability company (“Ply Gem”), and for certain limited purposes set forth in the Merger Agreement,
CD&R, LLC. At a Special Meeting held on November 15, 2018 (the “Special Shareholder Meeting”), our shareholders
approved (i) the Merger Agreement, pursuant to which, at the closing of the merger, Ply Gem was merged with and into the Company,
with the Company continuing its existence as a corporation organized under the laws of the State of Delaware (the “Merger”)
and (ii) the issuance in the Merger of 58,709,067 shares of NCI common stock, par value $0.01 per share (the “NCI Common
Stock”) in the aggregate, on a pro rata basis, to the holders of all of the equity interests in Ply Gem (the “Stock
Issuance”). Our shareholders also approved the three additional proposals described in the Company’s proxy statement
relating to the Special Shareholder Meeting.
The Merger was consummated
on November 16, 2018 pursuant to the Merger Agreement.
During Fiscal 2018:
|
·
|
Revenues increased by 13% to $2.00 billion, up from $1.77 billion in Fiscal 2017;
|
|
·
|
Gross profit was $462.7 million, compared to $416.1 million in Fiscal 2017;
|
|
·
|
Net income increased to $63.1 million, up from $54.7 million in Fiscal 2017;
|
|
·
|
Adjusted EBITDA was $201.6 million, up 20.4% from Fiscal 2017’s $167.5 million; and
|
|
·
|
Net income per diluted share of Common Stock increased to $0.94, up from $0.77 per diluted share of
Common Stock in Fiscal 2017. Adjusted net income per diluted share of Common Stock was $1.45 in Fiscal 2018, up from $0.80 in Fiscal
2017.
|
For an understanding of
how these measures relate to generally accepted accounting principles, please refer to the section entitled “Non-GAAP Measures”
in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Original
Filing.
During Fiscal 2018, we
continued our compensation policies developed in prior years and only took a limited number of significant actions, as described
in greater detail below:
|
·
|
As part of the Company’s long-standing succession plan, on December 31, 2017, Mr. Chambers resigned
as the Company’s Executive Chairman. Effective as of January 1, 2018, Mr. Metcalf was appointed as Chairman.
|
|
·
|
On April 4, 2018, Mr. Johnson announced that he would resign as the Company’s CFO and Treasurer,
effective June 29, 2018. Also effective as of June 29, 2018, Mr. Little was appointed by the Board as the Company’s interim
CFO and Treasurer. In connection with his appointment, Mr. Little received an increase in incremental compensation. See “Executive
Compensation—Summary Compensation Table.”
|
Shortly after the end
of Fiscal 2018 and in connection with the completion of the Merger, we took several significant actions, as are also described
in greater detail below:
|
·
|
In November 2018, the Company granted equity awards to certain key employees considered critical to
the success of the combined company, including our NEOs, which consisted of options, restricted stock units and performance share
units. See “Executive Compensation”—Narrative to the Summary Compensation Table and Grants of Plan-Based Awards
Table—Fiscal 2018 and Fiscal 2019 Long-Term Incentive Awards.”
|
|
·
|
Also in November 2018, the Company appointed Mr. Metcalf as its Chairman and Chief Executive Officer.
For a discussion of the compensation arrangements with Mr. Metcalf, please refer to the section entitled “Appointment of
James S. Metcalf as Chairman and Chief Executive of the Company” in “Item 5.02. Departure of Directors and Certain
Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers” of our Current
Report on Form 8-K filed on November 20, 2018.
|
At our most recent shareholder
advisory vote on executive compensation at our 2017 Annual Meeting, more than 98% of the votes cast on the advisory “say-on-pay”
resolution were voted in favor of
the compensation philosophy, policies
and procedures and the compensation of the NEOs
as disclosed in our 2017 proxy statement. The Compensation Committee viewed
the result of this advisory vote as strongly supportive of our pay-for-performance philosophy. The Compensation Committee took
these views into account when considering our annual and long-term incentives described above. Our Compensation Committee continually
evaluates NCI’s compensation practices so as to best align the interests of our senior executives and our stockholders and
will continue to do so such that they remain aligned with our compensation objectives. Our Board, Compensation Committee and management
team all value the opinions of our stockholders and are committed to considering their opinions in making these important decisions.
In light of these results, for Fiscal 2018, the Compensation Committee did not make any significant changes to our executive compensation
programs from Fiscal 2017, and only made such changes to the long-term incentive compensation program following the end of Fiscal
2018 that were necessary to align the goals of the Company’s management team and provide a unified incentive structure following
the Merger. See “Compensation Discussion & Analysis — Long-Term Incentive Compensation.”
Compensation Philosophy
and Objectives of NCI’s Compensation Program
Our executive compensation
philosophy remains that executive pay should be linked to the performance of NCI and the individual executives. Our Compensation
Committee has established the following objectives for our executive compensation programs:
|
·
|
attract, retain and motivate exceptional executives;
|
|
·
|
reward performance measured against established goals;
|
|
·
|
provide incentives for future performance; and
|
|
·
|
align executives’ long-term interests with the interests of our stockholders.
|
In order to reach these
goals, we have designed our compensation programs to reward excellent short-term performance and to encourage executives’
commitment to NCI’s long-term, strategic business goals. Long-term incentives balance the emphasis on long-term versus short-term
business objectives and reinforce that one should not be achieved at the expense of the other. We believe that long-term incentive
compensation helps to further NCI’s compensation objectives, including the retention of high-performing, experienced executives
whose interests are strongly aligned with the interests of stockholders. Further, a multi-year vesting period for grants of restricted
stock or restricted stock units, stock options and performance share units helps to ensure that the value received by executives
depends on the strong performance of NCI over time. We balance short- and long-term compensation through salary and performance
bonuses, and the grant of restricted stock or restricted stock units, stock options, and performance share units, respectively.
Our goal is to increase the proportion of long-term compensation as an executive’s responsibility within our company increases.
NCI has a clawback policy
(“Clawback Policy”) designed to better align our compensation practices with our stockholders’ interests by providing
a mechanism to recover incentive compensation that is based on inaccurate financial information. Our Clawback Policy, which covers
all current and former executive officers (including the NEOs), allows for recovery of cash, equity or other incentive compensation
in the event NCI is required to prepare a material financial restatement due to noncompliance with any financial reporting requirement
under the U.S. securities laws, where the noncompliance is the result of misconduct. The Clawback Policy applies to all incentive
compensation that is earned or vested after the date the policy was adopted (regardless of when granted) and which is determined
in whole or in part based on application of performance measures. Upon a determination that the Clawback Policy will be applied,
the Board may recover up to the excess of the amount of the compensation actually received by a covered officer over the amount
that would have been received if the restatement had not occurred, for the three completed fiscal years preceding the fiscal year
in which the Board determines the restatement is necessary. The Board, with input from the Compensation Committee and the Audit
Committee, has sole discretion to determine whether and how to apply the Clawback Policy. In determining whether to recover compensation,
the Board may take into account any and all factors that it determines to be appropriate and relevant under the circumstances,
including the likelihood and costs of recovery, compliance with applicable law, the ability of the executive officer to repay such
amount, the tax consequences of the original payment and/or the recoupment to the executive officer (including whether recoupment
shall be on a pre-tax or post-tax basis), and any other potentially adverse consequences for the Company or the executive officer
arising from seeking enforcement of the policy.
We also have an “anti-hedging”
policy, which prohibits our executive officers and non-employee directors from engaging in transactions designed to hedge the economic
risks associated with ownership of Company securities, and from pledging Company securities as collateral for loans. For purposes
of this policy, securities held by CD&R, LLC and its affiliated investment funds are not considered to be owned or held by
a non-employee director who is affiliated with CD&R, LLC.
Determination and Administration
of Compensation Programs and Amounts
Decisions regarding executive
compensation are based primarily on the assessment by the Compensation Committee of each Named Executive Officer’s leadership
and operational performance and potential to enhance long-term value to NCI’s stockholders. In Fiscal 2014, Fiscal 2015,
and Fiscal 2017, a compensation consultant, Frederic W. Cook & Co. (“FW Cook”), has been retained to assist the
Compensation Committee in its comprehensive review of NCI’s executive compensation program. In Fiscal 2018, FW Cook continued
to advise the Compensation Committee regarding compensation packages for new hires and promotions and other governance related
matters, as well as our director compensation arrangements (see “Executive Compensation — Compensation of Directors”).
The Compensation Committee also relies on its judgment, prior experience, and the judgment of our CEO about each individual Named
Executive Officer in determining the amount and combination of compensation elements and whether each payment or award appropriately
encourages and rewards performance. Key factors considered by the Compensation Committee in this regard include:
|
·
|
actual performance compared to the financial, operational and strategic goals established for NCI
and the Named Executive Officer’s reporting unit at the beginning of the year;
|
|
·
|
the nature, scope and level of the Named Executive Officer’s responsibilities;
|
|
·
|
individual contribution to NCI’s financial results, particularly with respect to key measures
such as cash flow, revenue, earnings and return on assets (“ROA”);
|
|
·
|
effectiveness in leading our initiatives to enhance quality and value provided to customers; and
|
|
·
|
individual contribution to a culture of honesty, integrity and compliance with our Code of Business
Conduct and Ethics and applicable laws.
|
The Compensation Committee
also considered each Named Executive Officer’s current salary and prior-year bonus, if any, the appropriate balance between
incentives for long-term and short-term performance, and internal “pay equity” – in other words, the relative
differences in compensation among the executive officers.
Role of Management
and Independent Advisors
The Compensation Committee
meets regularly in separate executive sessions without management personnel present and also requests periodically that our officers
or employees attend meetings. During Fiscal 2018, Mr. Riley and other senior executives attended certain Compensation Committee
meetings at the committee’s request to advise the committee regarding our performance and to recommend proposed modifications
to our compensation and benefits. Our management, under the leadership of our CEO, plays an important role in establishing and
maintaining our Named Executive Officer compensation programs. Management’s role includes recommending plans and programs
to the Compensation Committee, implementing the Compensation Committee’s decisions regarding the plans and programs and assisting
and administering plans in support of the Compensation Committee. The Compensation Committee also relied to a certain extent on
Mr. Riley’s evaluations of other Named Executive Officers whose day-to-day performance was not as visible to the committee
as it was to Mr. Riley.
The Compensation Committee’s
charter provides that it may retain advisors, including compensation consultants, in its sole discretion. In engaging FW Cook,
the Compensation Committee determined that FW Cook did not have any economic interest or other relationship that would create a
conflict with its services to the Compensation Committee.
In assessing compensation
elements and making compensation decisions for our executive officers, our Compensation Committee considers the executive compensation
practices of a peer group of companies of similar size to the Company in related industries. The following peer group was used
in making compensation decisions for our NEOs in Fiscal 2018:
Advanced Drainage Systems, Inc.
|
|
Griffon Corporation
|
|
Schnitzer Steel Industries, Inc.
|
Apogee Enterprises, Inc.
|
|
Interface, Inc.
|
|
Universal Forest Products, Inc.
|
Armstrong World Industries, Inc.
|
|
Masonite International Corporation
|
|
U.S. Concrete, Inc.
|
Atkore International Group Inc.
|
|
Nortek, Inc.
|
|
USG Corporation
|
Beacon Roofing Supply, Inc.
|
|
Ply Gem Holdings, Inc.
|
|
Valmont Industries, Inc.
|
Gibraltar Industries, Inc.
|
|
Quanex Building Products Corporation
|
|
Worthington Industries, Inc.
|
Based on (1) FW Cook’s
Fiscal 2018 report, (2) discussions with and recommendations by Mr. Riley in Fiscal 2018 and (3) our pay-for-performance policies,
the Compensation Committee determined to continue the long-term incentive program for Fiscal 2018 in substantially the same form
as Fiscal 2017. As a result, in December 2017, we granted restricted stock units and performance share units to our NEOs (see “Compensation
Discussion & Analysis — Long-Term Incentive Compensation — Long-Term Incentive Awards Granted in Fiscal 2018 to
NEOs”). For Fiscal 2019, and in part due to the Merger and related integration activities, the Compensation Committee determined
to make certain changes to the long-term incentive program shortly following Fiscal 2018 in order to align the goals of the Company’s
management team and provide a unified incentive structure, including changes to the types of awards granted, timing of awards and
to the vesting criteria and schedules of such awards (see “Compensation Discussion & Analysis — Long-Term Incentive
Compensation — Long-Term Incentive Awards Granted in Fiscal 2019 to NEOs – Founders Awards”).
Also in connection with
the Merger, in November 2018 and with the assistance of FW Cook, our Compensation Committee substantially updated the compensation
peer group to reflect changes to the Company’s size, projected revenue and scope of business resulting from the Merger. The
following peer group, which includes three companies that were in the Fiscal 2018 peer group, will be used in making compensation
decisions for our NEOs in Fiscal 2019:
A. O. Smith Corporation
|
|
HD Supply Holdings, Inc.
|
|
Universal Forest Products, Inc.
|
Beacon Roofing Supply, Inc.
|
|
JELD-WEN Holding, Inc.
|
|
Valmont Industries, Inc.
|
BMC Stock Holdings, Inc.
|
|
Lennox International, Inc.
|
|
Vulcan Materials Company
|
Builders FirstSource, Inc.
|
|
Masco Corporation
|
|
WESCO International, Inc.
|
EMCOR Group, Inc.
|
|
Martin Marietta Materials, Inc.
|
|
|
Fortune Brands Home & Security, Inc.
|
|
Owens Corning
|
|
|
Elements of Executive
Compensation
The principal elements
of compensation provided to our Named Executive Officers consist of a base salary supplemented with the opportunity to earn a bonus
under NCI’s annual cash bonus program (the “Bonus Program”) and long-term incentive compensation in the form
of restricted stock units and performance share units under the NCI Building Systems, Inc. 2003 Long-Term Stock Incentive Plan
(As Amended and Restated effective January 27, 2018) (the “Incentive Plan”). In the past, NCI has granted certain NEOs
stock options and restricted stock, but had ceased the practice since the last grant of stock options in Fiscal 2012 and the last
grant of restricted stock in Fiscal 2015. In connection with the Merger, in November 2018 the Company granted long-term incentive
awards that consisted of options, restricted stock units and performance share units. See “Executive Compensation —
Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table — Fiscal 2018 and Fiscal 2019 Long-Term
Incentive Awards.”
We also maintain retirement
plans for certain of our employees, including a deferred compensation plan (a “Deferred Compensation Plan” or “DCP”)
under which our Named Executive Officers can elect to defer a portion of their base salary and bonus. In addition, we provide limited
perquisites that enhance our ability to be competitive in attracting and retaining talented executive officers and allow executive
officers more time to focus on business objectives.
Base Salary
The Compensation Committee
annually reviews base salaries and makes adjustments in light of competitive data regarding compensation from other companies as
well as a Named Executive Officer’s responsibilities, experience and performance levels relative to other executives and
the potential for making significant contributions in the future, to ensure that salary levels remain appropriate and competitive.
Because the rate of any increase in base salary levels helps to provide incentives for continuous improvement in individual performance,
we view individual factors as more significant than overall company performance in a particular year when determining base salary
levels. Base salary also provides the foundation for calculating other benefits such as annual cash bonus and discretionary and
restoration matching under the Deferred Compensation Plan and 401(k) plan so the executive’s individual performance has a
significant impact on both salary and the benefits derived from salary. During Fiscal 2018, Mr. Kuzdal’s salary was increased
in the ordinary course from $400,000 to $416,000. As part of Mr. Little’s acceptance of the interim CFO and Treasurer roles,
he received an incremental increase in compensation in the amount of $15,000 per month from the date of his acceptance through
the Closing Date (as defined below) when he stepped down from the position. Following the end of Fiscal 2018, based on FW Cook’s
recommendations and in light of increased responsibilities resulting from the Merger, Mr. Riley’s base salary was increased
from $750,000 to $900,000, Mr. Moore’s base salary was increased from $377,000 to $430,000 and Ms. Theroux’s base salary
was increased from $400,000 to $450,000. In addition, in connection with the Merger, Mr. Little received a one-time cash retention
bonus of $222,500, of which $74,167 was paid on the Closing Date, and the remainder of which will become payable in May 2019 subject
to Mr. Little’s continued employment through such date.
Effective upon the closing
date of the Merger (the “Closing Date”), the Company appointed Mr. Metcalf as its Chairman and Chief Executive Officer.
For a discussion of the compensation arrangements with Mr. Metcalf, including base salary and annual bonus entitlement, please
refer to the section entitled “Appointment of James S. Metcalf as Chairman and Chief Executive of the Company” in Item
5.02. Departure of Directors of Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers” of our Current Report on Form 8-K filed on November 20, 2018.
Annual Bonus
Short-term annual cash
incentive compensation is provided through our Bonus Program, under which annual cash bonuses may be paid to executives to reward
their contributions to our business during the year. In Fiscal 2014, our stockholders approved our Senior Executive Bonus Plan,
which continues to remain in effect. The Senior Executive Bonus Plan provides that the maximum aggregate bonus payable to any NEO
cannot exceed 3% of the Company’s Adjusted EBITDA for the applicable performance period.
As in Fiscal 2017, Adjusted
EBITDA was the sole performance criteria on which annual bonuses were based for Fiscal 2018. Our Compensation Committee believes
that Adjusted EBITDA is the most important driver of value and that having solely an Adjusted EBITDA performance criterion creates
a strong link between individual contribution and Company performance.
In Fiscal 2018, each NEO
was assigned a target annual bonus equal to a percentage of his or her base salary, as set forth in the table below. As under the
prior Bonus Program, Mr. Riley’s target annual bonus was equal to 100% of his base salary, and, for the other Named Executive
Officers, the target annual bonus is equal to 75% of base salary. See “Executive Compensation — Narrative to the Summary
Compensation Table and Grants of Plan-Based Awards Table — Employment Agreements.”
Named Executive Officer
|
|
Fiscal 2018 Base Salary
|
|
|
Target Fiscal 2018 Bonus
|
|
Donald R. Riley
(2)
|
|
$
|
750,000
|
|
|
|
750,000
|
|
Mark E. Johnson
(1)
|
|
$
|
458,000
|
|
|
|
343,500
|
|
Bradley S. Little
|
|
$
|
265,000
|
|
|
|
198,750
|
|
John L. Kuzdal
|
|
$
|
416,000
|
|
|
|
312,000
|
|
Todd R. Moore
(2)
|
|
$
|
377,000
|
|
|
|
282,750
|
|
Katy K. Theroux
(2)
|
|
$
|
400,000
|
|
|
|
300,000
|
|
Norman C. Chambers
(1)
|
|
$
|
825,000
|
|
|
|
551,000
|
|
|
(1)
|
Base salaries for Mr. Johnson and Mr. Chambers reflect annualized rates of pay. Mr. Johnson resigned
from the Company on June 29, 2018. Mr. Chambers resigned from the Company on December 31, 2017.
|
|
(2)
|
The amounts reported in the “Fiscal 2018 Base Salary” for Mr. Riley, Mr. Moore and Ms.
Theroux do not take into account increases in base salary in Fiscal 2019 in connection with the Merger ($150,000 for Mr. Riley,
$53,000 for Mr. Moore and $50,000 for Ms. Theroux).
|
Under the Fiscal 2018
Bonus Program, in order for any bonuses to be paid, Adjusted EBITDA must equal or exceed 75% of the performance goal set by our
Compensation Committee. For performance above this 75% threshold, payments under the Bonus Program are made as follows:
|
·
|
If Adjusted EBITDA equals 75% of the performance goal, 35% of the target annual bonus will be paid
to each NEO.
|
|
·
|
If Adjusted EBITDA equals 100% of the performance goal, 100% of the target annual bonus will be paid
to each NEO.
|
|
·
|
If Adjusted EBITDA equals 125% of the performance goal, 200% of the target annual bonus will be paid
to each NEO (which 200% amount is also the maximum bonus level that may be paid under the Bonus Program).
|
Adjusted EBITDA performance
between these three levels is determined by linear interpolation. Total annual bonuses may not exceed the maximum amounts payable
under the Senior Executive Bonus Plan.
For Fiscal 2018, NCI achieved
Adjusted EBITDA of $202 million against target Adjusted EBITDA of $199 million. This achievement level corresponded to a bonus
payout at 105.2% of target bonus levels. The Compensation Committee did not exercise any discretion to increase or decrease these
payout levels, resulting in the bonuses shown in the following table:
Named Executive Officer
|
|
Fiscal 2018 Bonus Earned
|
|
|
Total Bonus as a Percentage of
Salary Base
|
|
Donald R. Riley
|
|
$
|
789,000
|
|
|
|
105
|
%
|
Mark E. Johnson
|
|
$
|
0
|
|
|
|
0
|
%
|
Bradley S. Little
|
|
$
|
268,260
|
|
|
|
101
|
%
|
John L. Kuzdal
|
|
$
|
328,224
|
|
|
|
79
|
%
|
Todd R. Moore
|
|
$
|
297,453
|
|
|
|
79
|
%
|
Katy K. Theroux
|
|
$
|
315,600
|
|
|
|
79
|
%
|
Norman C. Chambers
|
|
$
|
144,650
|
|
|
|
18
|
%
|
We expect the Fiscal 2019
Bonus Program for NEOs to be substantially similar to the Fiscal 2018 Bonus Program, including being based solely on Adjusted EBITDA.
Long-Term Incentive
Compensation
Generally
Our long-term incentive
compensation is provided under the Incentive Plan, a stockholder-approved equity-based compensation plan that allows NCI to grant
a variety of awards, including stock options, restricted stock, restricted stock units, stock appreciation rights, performance
share awards, phantom stock awards and performance-based and other cash awards. Long-term incentive grants have typically been
made in December of each year. In connection with the Merger, however, long-term incentive grants to our Named Executive Officers
were made in November 2018 (see “Long-Term Incentive Compensation — Long-Term Incentive Awards Granted in Fiscal 2019
to NEOs – Founders Awards”).
We believe that equity
awards to our Named Executive Officers must be sufficient in size to provide a strong, long-term performance and retention incentive
for executives and to increase their vested interest in NCI. The value of the equity awards granted to Named Executive Officers
is based on individual performance assessments of each of the Named Executive Officers as well as other members of executive management.
Long-Term
Incentive Awards Granted to NEOs in 2018 – Treatment of Fiscal 2018 Awards in Connection with the Merger
In December 2017, our
Compensation Committee made its annual grant of long-term incentives to our NEOs, referred to below as the “FY 2018 Awards.”
Of the total value granted to an NEO, 40% of the value of the award consisted of restricted stock units and 60% of the value of
the award consisted of performance share units. The performance share units were scheduled to vest in part based on satisfaction
of performance goals measured over a period of two consecutive fiscal years ending with the 2019 fiscal year, and in part based
on the achievement of performance goals measured over a period of three consecutive fiscal years, ending with the 2020 fiscal year,
in each case subject to continued employment.
The Merger was a “change
in control” under the Incentive Plan. Accordingly, consistent with the terms of the Incentive Plan, in connection with the
Merger:
|
·
|
the performance share units (“PSUs”) were converted to restricted stock units at target
level that vest on the first December 15
th
(or the first business day thereafter) following the end of the Company’s
2019 fiscal year (see “Compensation Discussion & Analysis — Other Compensation — Termination and Change in
Control Agreements); and
|
|
·
|
the time-vesting restricted stock units (“RSUs”) will become vested if, during the two
years following the Merger, the NEO’s employment is terminated by NCI without cause or the NEO resigns with good reason.
|
Upon any future change
in control, awards that remain outstanding will be assumed or replaced by economically equivalent alternative awards of the successor
to NCI in the change in control, or will fully vest only to the extent that they are not assumed or replaced with alternative awards
(see “Executive Compensation — Potential Payments upon Termination or Change in Control — FY 2017 Awards and
FY 2018 Awards”).
The number of FY 2018
Awards granted to each NEO and the number of each NEO’s PSUs converted to RSUs is set forth in the following table:
Named Executive Officer
|
|
Number of Time-
Vesting RSUs Granted
in FY 2018
|
|
|
Number of PSUs
Granted in FY 2018
|
|
|
Number of FY 2018
PSUs Converted to
RSUs
|
|
Donald R. Riley
|
|
|
49,593
|
|
|
|
74,389
|
|
|
|
74,389
|
|
Mark E. Johnson
|
|
|
21,077
|
|
|
|
31,616
|
|
|
|
31,616
|
|
Bradley S. Little
|
|
|
4,960
|
|
|
|
7,439
|
|
|
|
7,439
|
|
John L. Kuzdal
|
|
|
11,159
|
|
|
|
16,738
|
|
|
|
16,738
|
|
Todd R. Moore
|
|
|
11,159
|
|
|
|
16,738
|
|
|
|
16,738
|
|
Katy K. Theroux
|
|
|
11,159
|
|
|
|
16,738
|
|
|
|
16,738
|
|
Norman C. Chambers
|
|
|
19,837
|
|
|
|
—
|
|
|
|
—
|
|
Long-Term Incentive
Awards Granted in Fiscal 2019 to NEOs – Founders Awards
On November 16, 2018,
in connection with the closing of the Merger, the Company granted equity awards (the “Founders Awards”) to certain
key employees considered critical to the success of the combined company, including certain of our NEOs. The Founders Awards consist
of (i) options to purchase shares of the Company’s common stock with a per share exercise price of $12.16 and having a 10-year
term (the “Founders Options”), (ii) restricted stock units (the “Founders RSUs”), each representing the
right to acquire on vesting one share of the Company’s common stock, and (iii) except for Mr. Kuzdal, performance share units
(the “Founders PSUs”), each representing the right to acquire a number of shares of the Company’s common stock
to be determined based upon the achievement of performance metrics as measured during the three years following the grant date,
subject to the grantee’s continued employment with the Company. We believe that the combination of Founders Options, Founders
RSUs and Founders PSUs and their accompanying vesting schedules will align the interests of our NEOs and shareholders, reward our
NEOs for delivering the intended benefits of the Merger, and help us retain executives who are critical to the successful execution
of our business strategy. The Founders Awards are “employment inducement awards” as described in the employment inducement
exemption to New York Stock Exchange Rule 303A.08. The Founders Awards, although not granted pursuant to the Incentive Plan, are
subject to the same terms and provisions as awards of the same type granted under the Incentive Plan unless otherwise expressly
set forth in each Award (see the Company’s Registration Statement on Form S-8 filed on November 19, 2018).
In order to better align
the goals of the Company’s management team and provide a unified incentive structure, the Company, in consultation with FW
Cook, determined that our annual grant of long-term incentives to our key executive officers should be combined with the Founders
Awards granted to these individuals. As a result, the Founders Awards granted to Messrs. Riley, Kuzdal and Moore and Ms. Theroux
also include the officer’s annual grant of long-term incentive awards for Fiscal 2019.
The aforementioned NEOs
received the following Founders Awards on November 16, 2018:
Named Executive Officer
|
|
Number of
Founders Options
Granted
|
|
|
Number of
Founders RSUs
Granted
|
|
|
Number of
Founders PSUs
Granted
|
|
Donald R. Riley
|
|
|
204,988
|
|
|
|
102,493
|
|
|
|
51,246
|
|
John L. Kuzdal
|
|
|
96,539
|
|
|
|
66,611
|
|
|
|
0
|
|
Todd R. Moore
|
|
|
100,210
|
|
|
|
50,104
|
|
|
|
25,052
|
|
Katy K. Theroux
|
|
|
122,393
|
|
|
|
61,196
|
|
|
|
30,598
|
|
Retirement Benefits
Our executive officers,
including our NEOs, are eligible to participate in our tax-qualified 401(k) plan. In addition, we believe that benefit programs
that address the unique circumstances of executives in light of limitations imposed on benefits payable from qualified welfare,
profit-sharing and retirement plans are critical in attracting and retaining quality executives. Therefore, we have adopted a Deferred
Compensation Plan that allows key employees to defer a portion of their annual salary and annual cash bonus, and allows our non-employee
directors to defer a portion of their annual and meeting attendance fees, subject to certain specified maximum deferral amounts.
The DCP also provides discretionary matching contributions in certain circumstances. For Fiscal 2018, we determined to make discretionary
matching contributions only if the Company achieved ROA of 15%. If the target ROA was achieved, we would match the amount of an
executive officer’s salary and bonus that he or she has voluntarily deferred under the DCP, up to a maximum of 15% of his
or her salary and bonus. Because our ROA exceeded 15%, this discretionary matching contribution was made for Fiscal 2018. For Fiscal
2019, discretionary matching contributions will be made only if the Company achieves ROA of 15%. Amounts deferred under the DCP
are deemed invested in one or more phantom investment funds and additional amounts are credited to participants’ accounts
based on the hypothetical earnings of such investments. Common Stock is also an investment option for certain of our executive
officers. Amounts deferred into the Common Stock fund remain invested in the Common Stock fund until distribution. See “Executive
Compensation — Nonqualified Deferred Compensation” for additional details regarding the terms of the DCP.
Other Compensation
Termination
and Change in Control Agreements
Certain compensation arrangements
of NCI include provisions providing special payments or benefits upon specified termination events or upon the occurrence of a
change in control of NCI. However, these arrangements do not include “gross-ups” for golden parachute excise taxes
or other taxes. We believe that these termination and change in control benefits provide our Named Executive Officers an incentive
to act in the stockholders’ best interests during a takeover despite the risk of losing their jobs or a significant change
in the nature of their benefits and responsibilities. We also believe that, in some cases, our termination and change in control
benefits are necessary to attract and retain certain executives. For a description of the terms of the employment agreements, consulting
agreement and equity awards, see “Executive Compensation — Potential Payments upon Termination or Change in Control.”
The Company has entered
into employment agreements with each of its NEOs. Except for the agreements with Mr. Riley, the term of the employment agreements
for each NEO who has an employment agreement runs for a period of two years, subject to automatic one-year extensions thereafter,
unless either party gives notice of non-renewal. The initial term of Mr. Riley’s agreement will expire on June 30, 2020,
subject to one-year extensions thereafter, unless either party gives a one year notice of non-renewal. The term of the agreements
with Mr. Johnson and Mr. Chambers expired in connection with their respective resignations from the Company on June 29, 2018 and
December 31, 2017, see “Summary of Compensation Matters for Fiscal 2018.”
The employment agreements
provide for severance payments and termination benefits upon a future termination of an NEO’s employment in a qualifying
termination (i.e. upon termination by the Company without “cause” or by the employee with “good reason”),
both prior to and following a change in control of the Company. Where a qualifying termination occurs other than during a potential
change in control period or following a change in control of the Company, each employment agreement (except for the agreement with
Mr. Little) provides for (1) payment of one times (two times, in the case of Mr. Riley) the executive’s then-current base
salary, payable in equal installments on regular payroll dates over the course of the one year period immediately following the
date of termination, (2) a pro-rated annual bonus based on actual performance in the year of termination and (3) twelve months
of continued COBRA coverage (in the case of Mr. Riley, a lump sum cash payment equal to eighteen months of the premium cost of
family medical coverage at the active-employee rate).
In the case of Mr. Riley,
where a qualifying termination occurs during a potential change in control period or two years following a change in control of
the Company, the employment agreement provides for a payment equal to the sum of two times his base salary plus three times his
target annual bonus. For Mr. Moore and Ms. Theroux, where a qualifying termination occurs during a potential change in control
period or two years following a change in control of the Company, each employment agreement provides for (1) the same cash severance
payment as is payable upon a qualifying termination prior to a change in control (except that, to the maximum extent practicable,
such payment is to be made in a lump sum), (2) an additional lump-sum cash severance payment in an amount equal to the sum of (x)
one times the executive’s then-current base salary and (y) two times the executive’s target annual bonus for the fiscal
year in which the termination occurs, (3) a pro-rated annual bonus payment based on actual performance in the year of termination
and (4) an additional six months of continued COBRA coverage. For Mr. Little, where a qualifying termination occurs during a potential
change in control period or two years following a change in control of the Company, his employment agreement provides for (1) a
lump-sum cash payment equal to two times Mr. Little’s annual base salary at the highest annualized rate in effect during
the one-year period immediately preceding the date of termination, (2) a pro-rated annual bonus based on actual performance in
the year of termination and (3) eighteen months of continued COBRA coverage.
For purposes of the employment
agreements, “change in control” means (A) any person who becomes the beneficial owner of 25% or more of the combined
voting power of NCI, (B) as a result of, or in connection with, a tender or exchange offer, merger or other business combination,
persons who were directors immediately before the transaction cease to constitute the majority of NCI’s Board of Directors,
(C) NCI is merged or consolidated with another company or transfers substantially all of its assets to another company and, as
a result, either (i) less than 50% of the outstanding voting securities of the resulting company are owned in the aggregate by
former NCI stockholders or (ii) 50% or more of the outstanding voting securities of the resulting company continue to be owned
in the aggregate by former NCI stockholders but other than in substantially the same relative proportions as immediately prior
to the transaction, or (D) a tender or exchange offer is made for 25% or more of the combined voting power of NCI. To the extent
payments under the employment agreements to our Named Executive Officer constitute “parachute payments” within the
meaning of Section 280G of the Internal Revenue Code, the payments to be received by the officer may be reduced to the extent a
reduction in the payment amount would put the officer in a better after-tax position than he or she would be in if the excise tax
under Section 4999 were imposed on such payments.
The Merger was a change
in control for purposes of the employment agreements. Therefore, if an NEO with an employment agreement experiences a qualifying
termination prior to November 16, 2020, then he or she will be entitled to enhanced change in control severance as described above.
The Merger was also a
change in control for purposes of outstanding equity awards under the Incentive Plan. Therefore, in connection with the Merger,
RSUs and PSUs held by officers (including our NEOs) that were granted prior to May 31, 2016 and certain restricted stock awards
held by Mr. Riley and Ms. Theroux vested in full, with all applicable performance metrics deemed satisfied at maximum, as described
in the Company’s Proxy Statement related to the Special Shareholder Meeting filed October 17, 2018.
PSUs held by officers
that were granted on or following May 31, 2016 were converted into service-vesting RSUs upon the effective time of the Merger,
and will continue to vest based on continued service through the end of the applicable performance period or upon an earlier qualifying
termination. The number of shares of Common Stock subject to the service-vesting RSUs following this conversion was determined
based on a formula described in the Company’s Proxy Statement related to the Special Shareholder Meeting filed October
17, 2018.
The table below sets forth,
for each NEO, the number of awards that vested or converted in connection with the Merger:
Named Executive
Officer
|
|
Restricted
Stock
Vested in
the Merger
|
|
|
RSUs Vested
in the Merger
|
|
|
RSUs That Did
Not Become
Vested in the
Merger
|
|
|
Unvested PSUs
Converted in
the Merger to
Service-
Vesting RSUs
|
|
|
PSUs Vested in
the Merger
|
|
Donald R. Riley
|
|
|
5,513
|
|
|
|
8,489
|
|
|
|
55,687
|
|
|
|
84,529
|
|
|
|
53,246
|
|
Mark E. Johnson
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Bradley S. Little
|
|
|
—
|
|
|
|
7,491
|
|
|
|
5,673
|
|
|
|
14,239
|
|
|
|
19,016
|
|
John L. Kuzdal
|
|
|
—
|
|
|
|
6,670
|
|
|
|
12,351
|
|
|
|
30,590
|
|
|
|
41,835
|
|
Todd R. Moore
|
|
|
—
|
|
|
|
5,761
|
|
|
|
11,686
|
|
|
|
28,245
|
|
|
|
36,131
|
|
Katy K. Theroux
|
|
|
1,900
|
|
|
|
4,851
|
|
|
|
15,015
|
|
|
|
25,899
|
|
|
|
30,426
|
|
Norman C. Chambers
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
385,610
|
|
In addition to the change
in control arrangements described above, outstanding shares of restricted stock, RSUs, options and PSUs granted to the Named Executive
Officers, including RSUs and PSUs held by our NEOs that did not vest in connection with the Merger, may vest in connection with
certain termination events during the two years following the effective time of the Merger or in connection with a subsequent change
in control of the Company (see “Executive Compensation — Potential Payments upon Termination or Change in Control —
Equity Incentive Awards”).
Perquisites and Personal
Benefits
We offer only de minimis
perquisites or personal benefits.
Gross-Ups
With the exception of
limited, one-time tax indemnification in connection with the incurrence of relocation expenses under our relocation policy, NCI
does not provide for any tax assistance or “gross-ups” for any of its executives.
CEO Compensation
The Compensation Committee
is directly responsible for determining the salary level of the CEO and all awards and grants to the CEO under the Bonus Program,
Incentive Plan and the DCP. In Fiscal 2018, 77% of the compensation of our CEO in Fiscal 2018, Mr. Riley, was “at-risk,”
meaning it was comprised of long- and short-term incentive equity awards and our Bonus Program, none of which are guaranteed to
be paid. The CEO’s overall compensation package has also been set at a level that we believe provides appropriate differentiation
between CEO compensation and the compensation of other executive officers hired from time to time. Information on Fiscal 2018 compensation
for Mr. Riley is set forth in the compensation tables following this CD&A.
On November 16, 2018,
on the Closing Date, the Company appointed Mr. Metcalf as its Chairman and Chief Executive Officer. For a discussion of the compensation
arrangements with Mr. Metcalf, please refer to the section entitled “Appointment of James S. Metcalf as Chairman and Chief
Executive of the Company” in “Item 5.02. Departure of Directors of Certain Officers; Election of Directors; Appointment
of Certain Officers; Compensatory Arrangements of Certain Officers” of our Current Report on Form 8-K filed on November 20,
2018.
Deductibility of Compensation
Section 162(m) of the
Internal Revenue Code (“Section 162(m)”) imposes a $1 million limit on the amount that a public company may deduct
each year for compensation paid to certain executive officers. As in effect during Fiscal 2018, deduction limitations applied to
the Company’s chief executive officer and three other most highly compensated executive officers (other than the chief financial
officer) employed as of the end of the year. During the Company’s Fiscal 2018, this limitation did not apply to compensation
paid by the Company contingent upon the executive’s performance meeting pre-established objective goals based on performance
criteria approved by our stockholders. Where possible and considered appropriate, we took action during Fiscal 2018 to preserve
the deductibility of compensation paid to our CEO and our three other highest paid executives (other than the CFO).
However, these deductions
will no longer be available to the Company beginning in Fiscal 2019 as a result of the 2017 Tax Cuts and Jobs Act, which eliminated
the “performance based compensation” exception to the Section 162(m) deduction limitations, beginning with the
next tax year that commences after December 31, 2017 (which, in NCI’s case, begins with Fiscal 2019). Accordingly, we may
choose to award compensation that might not be fully tax deductible if we determine that such compensation is nonetheless in the
best interests of NCI and its stockholders. While NCI seeks to take advantage of favorable tax treatment for executive compensation
where appropriate, we believe that the primary drivers for determining the amount and form of executive compensation must be the
retention and motivation of superior executive talent.
We will continue to review
NCI’s executive compensation practices and will seek to preserve tax deductions for executive compensation to the extent
consistent with our objective of providing compensation arrangements necessary and appropriate to foster achievement of NCI’s
business goals.
Stock Ownership Guidelines
In November 2016, our
Board approved the NCI Building Systems, Inc. Executive Stock Ownership Guidelines, which were further amended in August 2017.
Pursuant to the stock ownership guidelines, certain of our executives, including our NEOs, and non-employee directors are required
to acquire and hold a certain level of our common stock based on a multiple of salary or cash retainer, as applicable. The stock
ownership guidelines were developed with the assistance of FW Cook and were adopted to further align the interests of our senior
management team with those of our stockholders.
Under the stock ownership
guidelines, each of our NEOs is required to acquire and hold a number of shares of our common stock having a value equal to a multiple
of his or her annual salary as set forth in the table below. The number of shares required to be held by each NEO will be calculated
based on his or her annual salary as of the Annual Meeting of the Stockholders, which in 2019 will be May 23, 2019, and the average
of our month-end closing stock prices throughout the previous fiscal year.
Covered Person
|
|
Multiple of Salary
|
Chief Executive Officer
|
|
5x
|
President
|
|
2x
|
Chief Financial Officer
|
|
2x
|
Other Executive Vice Presidents and Vice Presidents
|
|
1x
|
Non-employee directors
are required to acquire and hold a number of shares of our common stock having a value equal to five times (5x) their annual retainer
fee, as set forth in the table found in the “Executive Compensation — Compensation of Directors” section below.
Under the stock ownership
guidelines, the required holdings do not have to be met within a specified period of time. However, until the required number of
shares is attained, upon (i) the exercise of stock options, (ii) the settlement of performance shares and (iii) the vesting of
restricted shares, our NEOs must retain the number of shares received upon the occurrence of these events having a value equal
to 50% of the after-tax profit realized upon the occurrence of these events. Once the required number of shares is attained, compensation
increases and changes in stock price will no longer have an effect on holding requirements and retention guidelines. As long as
the executive continues to hold the required number of shares, he or she will be in compliance with the stock ownership guidelines.
Finally, under the stock ownership guidelines, any sale of shares by covered executives and directors, including our NEOs, must
be reviewed by our legal department to ensure continued compliance with the guidelines.
Impact of Fiscal Year
Change on Executive Compensation
We do not anticipate any
significant changes to our compensation programs as a result of the Company’s change in fiscal year. It will, however, affect
the timing of our equity award grants. We have historically granted equity awards in December of each year, following the end of
our fiscal year end at the end of October. Beginning in Fiscal 2019 and continuing in subsequent years, we anticipate that we will
grant equity awards in February, following our new fiscal year end at the end of December.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
During Fiscal 2018, no
member of the Compensation Committee served as an executive officer of the Company, and, except as described in “Transactions
with Related Persons” below, no such person had any relationship with the Company requiring disclosure herein. During Fiscal
2018, there were no Compensation Committee interlocks with other companies.
COMPENSATION COMMITTEE REPORT
The Compensation Committee
has reviewed and discussed the above CD&A with management and, based on such review and discussions, the Compensation Committee
recommended to the Board of Directors that the CD&A be included in this Amendment.
KATHLEEN J. AFFELDT (Chair)
GEORGE L. BALL
NATHAN K. SLEEPER
John Krenicki
EXECUTIVE COMPENSATION
Fiscal Year 2018
Summary Compensation Table
The following table shows
information regarding the total compensation paid to the Named Executive Officers for each of our last three completed fiscal years.
The compensation reflected for each individual was for their services provided in all capacities to us.
Name & Principal Position
|
|
Year
|
|
Salary
($)(a)
|
|
|
Bonus
($)(b)
|
|
|
Stock
Awards
($)(c)
|
|
|
Option
Awards
($)(d)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)(e)
|
|
|
All Other
Compensation
($)(f)
|
|
|
Total ($)
|
|
Donald R. Riley
|
|
2018
|
|
|
750,000
|
|
|
|
—
|
|
|
|
2,436,246
|
|
|
|
—
|
|
|
|
789,000
|
|
|
|
43,620
|
|
|
|
4,018,866
|
|
Former President and Chief
|
|
2017
|
|
|
594,231
|
|
|
|
250,000
|
|
|
|
1,203,286
|
|
|
|
—
|
|
|
|
434,044
|
|
|
|
30,253
|
|
|
|
2,511,814
|
|
Executive Officer
|
|
2016
|
|
|
517,385
|
|
|
|
—
|
|
|
|
1,151,553
|
|
|
|
—
|
|
|
|
550,534
|
|
|
|
79,804
|
|
|
|
2,299,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark E. Johnson
|
|
2018
|
|
|
381,639
|
|
|
|
—
|
|
|
|
1,035,417
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,319
|
|
|
|
1,436,375
|
|
Former Executive Vice
|
|
2017
|
|
|
436,000
|
|
|
|
—
|
|
|
|
1,022,855
|
|
|
|
—
|
|
|
|
218,358
|
|
|
|
40,191
|
|
|
|
1,717,404
|
|
President, Chief Financial
|
|
2016
|
|
|
434,139
|
|
|
|
—
|
|
|
|
1,099,578
|
|
|
|
—
|
|
|
|
439,419
|
|
|
|
21,593
|
|
|
|
1,994,729
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley S. Little
|
|
2018
|
|
|
338,442
|
|
|
|
—
|
|
|
|
243,640
|
|
|
|
—
|
|
|
|
268,260
|
|
|
|
8,974
|
|
|
|
859,316
|
|
Former Interim Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasurer(g)(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Kuzdal
|
|
2018
|
|
|
413,231
|
|
|
|
—
|
|
|
|
548,176
|
|
|
|
—
|
|
|
|
328,224
|
|
|
|
20,350
|
|
|
|
1,309,981
|
|
President of Group
Manufacturing Segment
|
|
2017
|
|
|
400,000
|
|
|
|
—
|
|
|
|
562,578
|
|
|
|
—
|
|
|
|
200,328
|
|
|
|
18,231
|
|
|
|
1,181,137
|
|
|
|
2016
|
|
|
393,231
|
|
|
|
—
|
|
|
|
892,608
|
|
|
|
—
|
|
|
|
403,137
|
|
|
|
20,946
|
|
|
|
1,709,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd R. Moore
|
|
2018
|
|
|
373,885
|
|
|
|
—
|
|
|
|
548,176
|
|
|
|
—
|
|
|
|
297,453
|
|
|
|
8,360
|
|
|
|
1,227,874
|
|
Executive Vice President,
|
|
2017
|
|
|
359,000
|
|
|
|
—
|
|
|
|
485,868
|
|
|
|
—
|
|
|
|
179,794
|
|
|
|
12,137
|
|
|
|
1,036,799
|
|
Chief Legal, Risk &
|
|
2016
|
|
|
357,477
|
|
|
|
—
|
|
|
|
549,803
|
|
|
|
—
|
|
|
|
361,815
|
|
|
|
3,158
|
|
|
|
1,272,253
|
|
Compliance Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Katy K. Theroux
|
|
2018
|
|
|
400,000
|
|
|
|
—
|
|
|
|
548,176
|
|
|
|
—
|
|
|
|
315,600
|
|
|
|
9,251
|
|
|
|
1,273,027
|
|
Executive Vice President,
|
|
2017
|
|
|
372,404
|
|
|
|
—
|
|
|
|
509,158
|
|
|
|
—
|
|
|
|
186,639
|
|
|
|
8,108
|
|
|
|
1,076,309
|
|
Corporate Marketing and
|
|
2016
|
|
|
357,477
|
|
|
|
—
|
|
|
|
494,487
|
|
|
|
—
|
|
|
|
361,815
|
|
|
|
3,158
|
|
|
|
1,216,937
|
|
Chief Human Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norman C. Chambers
|
|
2018
|
|
|
345,865
|
|
|
|
—
|
|
|
|
389,797
|
|
|
|
—
|
|
|
|
144,650
|
|
|
|
859,109
|
|
|
|
1,739,421
|
|
Former Executive
|
|
2017
|
|
|
825,000
|
|
|
|
—
|
|
|
|
2,557,122
|
|
|
|
—
|
|
|
|
550,902
|
|
|
|
63,747
|
|
|
|
3,996,771
|
|
Chairman(g)
|
|
2016
|
|
|
825,000
|
|
|
|
—
|
|
|
|
2,893,601
|
|
|
|
—
|
|
|
|
1,108,626
|
|
|
|
41,798
|
|
|
|
4,869,025
|
|
|
(a)
|
The amounts reported in the “Salary” column are calculated by taking into account the
NEOs’ increases in base salary in Fiscal 2018, Fiscal 2017, and Fiscal 2016, but do not take into account any increases following
Fiscal 2018 in connection with the Merger. See “Compensation Discussion & Analysis — Base Salary” above.
|
|
(b)
|
The amount reported in the “Bonus” column for Mr. Riley reflects a one-time $250,000 cash
promotion bonus for Fiscal 2017 in connection with his appointment as CEO.
|
|
(c)
|
The amounts reported in the “Stock Awards” column reflects the aggregate grant date fair
value of the awards granted under our Incentive Plan in the relevant fiscal years and as Founders Awards in November 2018 in connection
with the Merger, computed in accordance with FASB ASC Topic 718. See Note 7 of the consolidated financial statements in NCI’s
Annual Report on Form 10-K for the fiscal year ended October 28, 2018 for additional detail regarding assumptions underlying
the valuation of equity awards of RSUs and PSUs. See “Compensation Discussion & Analysis — Long-Term Incentive
Compensation.”
|
|
(d)
|
The amounts reported in the “Option Awards” column reflect the aggregate grant date fair
value of the option awards, computed in accordance with FASB ASC Topic 718. See Note 7 of the consolidated financial statements
in NCI’s Annual Report on Form 10-K for the fiscal year ended October 28, 2018 for additional detail regarding assumptions
underlying the valuation of equity awards of options. See “Compensation Discussion & Analysis — Long-Term Incentive
Compensation.”
|
|
(e)
|
The amounts in this column reflect the amounts earned for the relevant fiscal years under the Company’s
Bonus Program. See “Compensation Discussion & Analysis — Annual Bonus.”
|
|
(f)
|
The “All Other Compensation” column includes NCI 401(k) matching contributions and DCP
contributions with respect to the named executive officers described below, the taxable value of a life insurance benefit, a transportation
allowance for Messrs. Johnson, Kuzdal, Moore and Chambers and, with respect to Mr. Chambers, a one-time $825,000 severance payment
(equal to one year of his then-current base salary) pursuant to the terms of his employment agreement with the Company entered
into on September 1, 2015.
|
In Fiscal 2018,
NCI 401(k) matching contributions were made with respect to each of our Named Executive Officers, and DCP matching contributions
were made with respect to Messrs. Riley, Johnson and Chambers.
The DCP matching
contribution made in Fiscal 2018 of $31,449, $11,523 and $33,158 were paid with respect to Messrs. Riley, Johnson and Chambers.
|
(g)
|
Mr. Johnson served as the Company’s CFO and Treasurer until his resignation, effective June
29, 2018. From June 29, 2018 to November 16, 2018, Mr. Little served as the Company’s interim CFO and Treasurer. As described
in the Current Report on Form 8-K filed on November 20, 2018, in connection with the Merger, Shawn K. Poe succeeded Mr. Little
as CFO of the Company and Brian P. Boyle succeeded Mr. Little as Treasurer of the Company on November 16, 2018. Mr. Chambers served
as Executive Chairman of the Board until his resignation, effective December 31, 2017.
|
|
(h)
|
Mr. Little was not a Named Executive Officer in Fiscal 2017 or Fiscal 2016.
|
Fiscal Year 2018 Grants
of Plan-Based Awards Table
The following table sets
forth information concerning grants of plan-based awards to each of the Named Executive Officers under the Bonus Program and the
Incentive Plan during Fiscal 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards;
|
|
|
Grant
Date
|
|
|
|
|
|
|
|
Estimated
Future Payouts Under Non-
|
|
|
Estimated
Future Payouts Under
|
|
|
Number
of
|
|
|
Fair
Value of
|
|
|
|
|
|
|
|
Equity
Incentive Plan Awards(a)
|
|
|
Equity
Incentive Plan Awards
|
|
|
Shares
of
|
|
|
Stock
and
|
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Stock
or
|
|
|
Option
|
|
Name
|
|
Grant
Date
|
|
Award
Type
|
|
($)(b)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
Units
(#)
|
|
|
Awards
($)(c)
|
|
Mr.
Riley
|
|
12/15/2017
|
|
Bonus Program
|
|
|
262,500
|
|
|
|
750,000
|
|
|
|
1,500,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12/15/2017
|
|
RSA and PSU
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
74,389
|
|
|
|
148,778
|
|
|
|
49,593
|
|
|
|
2,436,246
|
|
Mr. Johnson
|
|
12/15/2017
|
|
Bonus Program
|
|
|
120,225
|
|
|
|
343,500
|
|
|
|
687,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12/15/2017
|
|
RSA and PSU
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
31,616
|
|
|
|
63,232
|
|
|
|
21,077
|
|
|
|
1,035,417
|
|
Mr. Little
|
|
12/15/2017
|
|
RSA and PSU
|
|
|
69,563
|
|
|
|
198,750
|
|
|
|
397,500
|
|
|
|
–
|
|
|
|
7,439
|
|
|
|
14,878
|
|
|
|
4,960
|
|
|
|
243,640
|
|
Mr. Kuzdal
|
|
12/15/2017
|
|
Bonus Program
|
|
|
109,200
|
|
|
|
312,000
|
|
|
|
624,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12/15/2017
|
|
RSA and PSU
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
16,738
|
|
|
|
33,476
|
|
|
|
11,159
|
|
|
|
548,176
|
|
Mr. Moore
|
|
12/15/2017
|
|
Bonus Program
|
|
|
98,963
|
|
|
|
282,750
|
|
|
|
565,500
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12/15/2017
|
|
RSA and PSU
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
16,738
|
|
|
|
33,476
|
|
|
|
11,159
|
|
|
|
548,176
|
|
Ms. Theroux
|
|
12/15/2017
|
|
Bonus Program
|
|
|
105,000
|
|
|
|
300,000
|
|
|
|
600,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12/15/2017
|
|
RSA and PSU
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
16,738
|
|
|
|
33,476
|
|
|
|
11,159
|
|
|
|
548,176
|
|
Mr. Chambers
|
|
12/15/2017
|
|
Bonus Program
|
|
|
192,850
|
|
|
|
551,000
|
|
|
|
1,102,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12/15/2017
|
|
RSA and PSU
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
19,837
|
|
|
|
389,797
|
|
|
(a)
|
Represents target and maximum amounts potentially payable under NCI’s Bonus Program for Fiscal
2018. See “Compensation Discussion & Analysis — Annual Bonus — Fiscal 2018.”
|
|
(b)
|
Payouts under the Fiscal 2018 Bonus Program were determined based on Adjusted EBITDA, and no payment
would have been made if Adjusted EBITDA did not exceed $149,000,000 in Fiscal 2018. See “Compensation Discussion & Analysis
— Annual Bonus.” Actual payments made under the Fiscal 2018 Bonus Program are reported in the Summary Compensation
Table.
|
|
(c)
|
Except for Fiscal 2018 Awards based on total shareholder return that have a fair value of $24.59 per
share, the grant date fair value of plan-based awards granted to each of our NEOs is based on a price per share of $19.65, which
was our closing stock price on December 15, 2017, and the assumption that the FY 2018 Awards vested at target levels.
|
Narrative to the
Summary Compensation Table and Grants of Plan-Based Awards Table
Employment
Agreements
The Company has entered
into employment agreements with each of its NEOs. Mr. Johnson and Mr. Chambers each had an employment agreement while employed
by the Company. Mr. Johnson’s employment terminated in connection with his resignation from the Company on June 29, 2018.
Mr. Chambers’s employment terminated in connection with his resignation from the Company on December 31, 2017. For a description
of the material terms of the current employment agreements and for a discussion of enhanced severance benefits upon certain terminations
in connection with a change in control of the Company, see “Compensation Discussion & Analysis — Other Compensation
— Termination and Change in Control Agreements.”
On the Closing Date, the
Company appointed Mr. Metcalf as its Chairman and Chief Executive Officer, and entered into an employment agreement with him. For
a discussion of the terms of Mr. Metcalf’s employment agreement, please refer to the section entitled “Appointment
of James S. Metcalf as Chairman and Chief Executive of the Company” in Item 5.02. Departure of Directors of Certain Officers;
Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers” of our Current Report
on Form 8-K filed on November 20, 2018.
Fiscal
2018 Bonus Program
Our short-term incentive
compensation program for our Named Executive Officers for Fiscal 2018 was dependent upon our attainment of a specified level of
Adjusted EBITDA. The amount payable to a recipient of a Fiscal 2018 award under the Bonus Program is determined based on the Adjusted
EBITDA level actually attained by us for Fiscal 2018 and is equal to a specified percentage of the recipient’s base salary.
For Fiscal 2018, our Compensation Committee did not exercise any discretion to increase or reduce bonuses otherwise payable by
reason of the applicable performance criteria. See “Compensation Discussion & Analysis — Annual Bonus” for
additional information.
Fiscal
2018 and Fiscal 2019 Long-Term Incentive Awards
In December 2017, our
Compensation Committee granted RSUs and PSUs to our NEOs. In November 2018, our Compensation Committee granted options, RSUs and
PSUs to our NEOs. See “Compensation Discussion & Analysis — Long-Term Incentive Compensation — Long-Term
Incentive Awards Granted in Fiscal 2018 to NEOs” and “Compensation Discussion & Analysis — Long-Term Incentive
Compensation — Long-Term Incentive Awards Granted in Fiscal 2019 to NEOs – Founders Awards.” Mr. Johnson forfeited
his equity incentive plan awards upon his termination of employment with the Company.
Outstanding Equity
Awards at Fiscal Year-End
The following table sets
forth information concerning unexercised stock options and unvested restricted stock, RSUs and PSUs held by each of our Named Executive
Officers as of October 28, 2018.
Option
Awards
|
|
Stock
Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(a)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Grant Award
Date
|
|
Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#)
(b)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)
(c)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have Not
Vested
(#)
(d)
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)
(e)
|
|
Mr. Riley
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/08/14
|
|
|
5,513
|
|
|
|
68,637
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/15
|
|
|
8,489
|
|
|
|
105,688
|
|
|
|
37,450
|
|
|
|
466,253
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/16
|
|
|
13,969
|
|
|
|
173,914
|
|
|
|
31,272
|
|
|
|
389,336
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
07/01/17
|
|
|
15,370
|
|
|
|
191,357
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/17
|
|
|
49,593
|
|
|
|
617,433
|
|
|
|
74,389
|
|
|
|
926,143
|
|
Mr. Johnson
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/15
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/16
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/17
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Mr. Little
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/15
|
|
|
7,491
|
|
|
|
93,263
|
|
|
|
13,375
|
|
|
|
166,519
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/16
|
|
|
4,628
|
|
|
|
57,619
|
|
|
|
10,359
|
|
|
|
128,970
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/17
|
|
|
4,960
|
|
|
|
61,752
|
|
|
|
7,439
|
|
|
|
92,616
|
|
Mr. Kuzdal
|
|
|
86,599
|
|
|
|
—
|
|
|
|
8.85
|
|
|
|
12/09/19
|
|
|
12/15/15
|
|
|
6,670
|
|
|
|
83,042
|
|
|
|
29,425
|
|
|
|
366,341
|
|
|
|
|
29,167
|
|
|
|
—
|
|
|
|
12.00
|
|
|
|
12/12/20
|
|
|
12/15/16
|
|
|
9,604
|
|
|
|
119,570
|
|
|
|
21,500
|
|
|
|
267,675
|
|
|
|
|
34,382
|
|
|
|
—
|
|
|
|
10.18
|
|
|
|
12/21/21
|
|
|
12/15/17
|
|
|
11,159
|
|
|
|
138,930
|
|
|
|
16,738
|
|
|
|
208,388
|
|
Mr. Moore
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/15
|
|
|
5,761
|
|
|
|
71,724
|
|
|
|
25,413
|
|
|
|
316,392
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/16
|
|
|
8,294
|
|
|
|
103,260
|
|
|
|
18,568
|
|
|
|
231,172
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/17
|
|
|
11,159
|
|
|
|
138,930
|
|
|
|
16,738
|
|
|
|
208,388
|
|
Ms. Theroux
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
09/02/14
|
|
|
1,900
|
|
|
|
23,655
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/15
|
|
|
4,851
|
|
|
|
60,395
|
|
|
|
21,400
|
|
|
|
266,430
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/16
|
|
|
6,985
|
|
|
|
86,963
|
|
|
|
15,636
|
|
|
|
194,668
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
07/01/17
|
|
|
3,993
|
|
|
|
49,713
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/17
|
|
|
11,159
|
|
|
|
138,930
|
|
|
|
16,738
|
|
|
|
208,388
|
|
Mr. Chambers
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
02/24/15
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/15
|
|
|
—
|
|
|
|
—
|
|
|
|
133,748
|
|
|
|
1,665,163
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
12/15/16
|
|
|
—
|
|
|
|
—
|
|
|
|
97,724
|
|
|
|
1,216,664
|
|
|
(a)
|
All exercisable stock options previously granted (i) have an exercise price not less than the closing
price of NCI’s Common Stock on the day before the grant date, (ii) became exercisable with respect to 25% of the total option
shares each year, starting on the first anniversary of the grant date, and (iii) were granted for a term of 10 years. Additional
terms governing the stock option awards are described in the narrative above entitled “Executive Compensation — Narrative
to the Summary Compensation Table and Grants of Plan-Based Awards Table — Restricted Stock and Restricted Stock Unit Awards
and Stock Options.”
|
|
(b)
|
Reflects (1) the restricted stock portion of the FY 2018, FY 2017 Awards and FY 2016 Awards
granted to the Named Executive Officers on December 15, 2017, December 15, 2016 and December 15, 2015, respectively, and (2)
the one-time awards of restricted stock granted in July 2017 to Mr. Riley and Ms. Theroux. For a description of the vesting
of these awards, see “Compensation Discussion & Analysis — Long-Term Incentive Compensation” in our
Fiscal 2016 proxy and “Executive Compensation — Narrative to the Summary Compensation Table and Grants of
Plan-Based Awards Table — Restricted Stock and Restricted Stock Unit Awards and Stock Options.”
|
|
(c)
|
This column represents the closing price of our Common Stock on October 26, 2018, the last business
day of Fiscal 2018, which is $12.45, multiplied by the number of shares of restricted stock.
|
|
(d)
|
This column represents the performance share unit awards granted to the Named Executive Officers on
December 15, 2017, determined assuming the target level of performance is achieved.
|
|
(e)
|
This column represents the closing price of our Common Stock on October 26, 2018, the last business
day of Fiscal 2018, which is $12.45, multiplied by the number of shares underlying the performance share units, determined assuming
the target level of performance is achieved.
|
Option Exercises
and Stock Vested
The following table sets
forth information concerning the exercise of options and vesting of restricted stock, RSUs, and PSUs of each of our Named Executive
Officers during Fiscal 2018:
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares Acquired
on Exercise (#)
|
|
|
Value Realized
on Exercise
($)(a)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized on
Vesting ($)(b)
|
|
Mr. Riley
|
|
|
—
|
|
|
|
—
|
|
|
|
38,496
|
|
|
|
756,036
|
|
Mr. Johnson
|
|
|
—
|
|
|
|
—
|
|
|
|
33,093
|
|
|
|
638,695
|
|
Mr. Little
|
|
|
—
|
|
|
|
—
|
|
|
|
10,583
|
|
|
|
204,252
|
|
Mr. Kuzdal
|
|
|
20,000
|
|
|
|
207,766
|
|
|
|
18,252
|
|
|
|
352,264
|
|
Mr. Moore
|
|
|
—
|
|
|
|
—
|
|
|
|
15,550
|
|
|
|
300,115
|
|
Ms. Theroux
|
|
|
—
|
|
|
|
—
|
|
|
|
16,742
|
|
|
|
326,514
|
|
Mr. Chambers
|
|
|
33,334
|
|
|
|
243,338
|
|
|
|
410,783
|
|
|
|
7,912,929
|
|
|
(a)
|
The value realized on exercise represents the difference between the market value of our common stock
at the time the applicable option was exercised and the exercise price of the option.
|
|
(b)
|
This column represents the closing price of our common stock on December 14, 2017 (which is the
day before the vesting date of the applicable restricted stock) multiplied by the number of shares of restricted stock held
by each NEO, except with respect to 294,997 shares held by Mr. Chambers that vested on December 29, 2017 in connection with
is retirement, 5,954 held by Mr. Chambers that vested on February 3, 2018, 7,684 shares held by Mr. Riley that vested on July
1, 2018
and 1,996
shares held by
Ms. Theroux
that vested on
July 1, 2018 per the
terms of their respective awards.
|
Pension Benefits
We do not sponsor or maintain
any plans that provide for specified retirement payments or benefits, such as tax-qualified defined benefit plans or supplemental
executive retirement plans, for our Named Executive Officers.
Nonqualified Deferred
Compensation
The following table sets
forth information concerning nonqualified deferred compensation benefits of each of our Named Executive Officers under the DCP
for Fiscal 2018:
Name
|
|
Executive
Contributions
in Last FY
($)(a)
|
|
|
Registrant
Contributions
in Last FY ($)
|
|
|
Aggregate
Earnings in
Last FY ($)
|
|
|
Aggregate
Withdrawals/
Distributions ($)
|
|
|
Aggregate
Balance at Last
FYE ($)(b)
|
|
Mr. Riley
|
|
|
31,846
|
|
|
|
31,449
|
|
|
|
-422
|
|
|
|
—
|
|
|
|
128,275
|
|
Mr. Johnson
|
|
|
27,177
|
|
|
|
11,523
|
|
|
|
23,220
|
|
|
|
46,591
|
|
|
|
308,968
|
|
Mr. Little
|
|
|
—
|
|
|
|
—
|
|
|
|
529
|
|
|
|
—
|
|
|
|
40,841
|
|
Mr. Kuzdal
|
|
|
—
|
|
|
|
—
|
|
|
|
-2,452
|
|
|
|
—
|
|
|
|
93,082
|
|
Mr. Moore
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ms. Theroux
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Mr. Chambers
|
|
|
67,720
|
|
|
|
33,158
|
|
|
|
46,525
|
|
|
|
1,646,980
|
|
|
|
694,861
|
|
|
(a)
|
Contributions made by the Named Executive Officers during Fiscal 2018 are included in each such executive’s
salary and bonus amounts, as applicable, as reported in the “Summary Compensation Table.”
|
|
(b)
|
Of the totals in the “Aggregate Balance at Last FYE” column, the following amounts
were reported as compensation in the “Summary Compensation Table” of our proxy statements in Fiscal 2018 and
previous years pursuant to the SEC’s current disclosure rules: Mr. Riley, $62,558; Mr. Johnson, $287,639; Mr. Little,
$40,312; Mr. Kuzdal $95,264; and Mr. Chambers, $2,194,438. Mr. Moore and Ms. Theroux do not participate in the DCP. Mr.
Little was not a
Named Executive Officer prior to Fiscal 2018.
|
Eligible participants
in the DCP include certain employees and non-employee directors of NCI who are selected by the Compensation Committee to participate.
The DCP is a nonqualified retirement plan created to provide specified benefits to our highly compensated employees and directors.
The DCP allows employees, including the Named Executive Officers, to defer up to 80% of their annual salaries and up to 90% of
their annual cash bonuses, and allows NCI’s non-employee directors to defer up to 100% of their annual fees and meeting attendance
fees, until a specified date in the future, including at or after retirement. Elections to defer under the DCP must be made prior
to the end of the year preceding the year the compensation will be earned. Elections to defer incentive payments based on services
to be performed over at least a twelve-month period must be made no later than six months prior to the end of the designated performance
period. Mr. Moore chose not to participate in the DCP in Fiscal 2016.
The DCP also allows discretionary
matching contributions to provide a supplemental retirement benefit to executives. For Fiscal 2018, we determined to make discretionary
matching contributions provided that NCI achieved ROA for Fiscal 2018 of 15%. If target ROA was achieved, we would match the percentage
of an executive officer’s salary and bonus that he has voluntarily deferred under the DCP, up to a maximum of 15%. Because
our ROA exceeded 15%, this discretionary contribution was made for Fiscal 2018. In addition, NCI made discretionary matching contributions
to make up for certain limits applicable to the 401(k) Plan (the “Restoration Match”). Executives generally become
vested in the Restoration Match in a manner consistent with NCI’s match in the NCI 401(k) plan, which generally vests ratably
over a six-year period. Discretionary matching contributions vest ratably over a three-year period. However, effective upon the
consummation of the Equity Investment on October 20, 2009, all matching contributions then allocated to a participant’s account
under the DCP became 100% vested. Matching contributions allocated to a participant’s account following October 20, 2009,
will also become fully vested upon any subsequent change in control or upon the participant’s retirement, death or disability.
Amounts deferred are deemed
invested in one or more phantom investment funds and additional amounts are credited to participants’ accounts based on the
hypothetical earnings of such investments. No above-market or preferential earnings are paid under the DCP and, therefore, none
of the aggregate earnings reported in the table above are included in the Summary Compensation Table. With the exception of amounts
deferred into Common Stock, participants may change their investment options at any time, subject to the administrative procedures
adopted by the plan administrator. The table below shows the funds available in the DCP and the annual return of each for Fiscal
2018:
Investment Funds
|
|
Rate of Return
|
|
Wells Fargo Government Money Market Fund
|
|
|
1.5
|
%
|
American Funds EuroPacific Growth Fund
|
|
|
-10.6
|
%
|
American Beacon Stephens Small Cap Growth Fund
|
|
|
18.6
|
%
|
Fidelity® 500 Index Fund
|
|
|
7.3
|
%
|
Baird Aggregate Bond Fund
|
|
|
-2.2
|
%
|
NCI Stock Fund
|
|
|
-23.2
|
%
|
Withdrawal elections under
the DCP will be made in conjunction with the deferral election, and the scheduled distribution date elected will be the first day
of a plan year at least three years after the end of the plan year to which the amounts subject to the election relate. A participant
may elect to receive a scheduled in-service distribution in a lump sum or in installments. Changes to withdrawal elections must
be made at least 12 months prior to the initial elected payment date and must defer the new initial payment date at least five
years. In-service withdrawals are permitted to satisfy an unforeseeable emergency plus the amounts anticipated to pay taxes on
the withdrawal amount. If a participant withdraws amounts from the DCP upon an unforeseeable emergency, the participant’s
participation in the DCP may be suspended. Upon a change in control or the participant’s death, disability or other termination
(other than due to retirement), a participant will receive his vested plan account in a lump sum. Upon a change in control, a participant’s
deferral elections immediately terminate with respect to any prospective compensation payable following the change in control.
NEOs may defer receipt
of the shares of Common Stock that they earn with respect to the FY 2018 Awards and the FY 2019 Awards. If a deferral election
is made, these deferrals will be credited as phantom shares of Common Stock. These deferrals must remain in the form of phantom
shares during the entire deferral period and may not be exchanged into any of the other investment options under the DCP.
The phantom shares will be settled in actual shares of Common Stock on settlement dates elected by the participant at the time
of deferral.
We have established a
rabbi trust to provide for NCI’s obligations under the DCP and have formed an administrative committee to manage the DCP
and its assets. Pursuant to the investment agreement, effective on October 20, 2009 (the “Investment Agreement”), the
DCP was amended to eliminate the right to appoint a third-party administrator of the DCP after October 20, 2009. Similarly, the
rabbi trust that is the source of funding for obligations under the DCP was amended so that certain administrative protections
that would have gone into effect following a change in control did not apply as a result of the Equity Investment. In addition,
as a result of the amendment, the requirement to fully fund the rabbi trust upon a change in control did not apply as a result
of the Equity Investment. Prior to the Merger, the rabbi trust was amended on November 12, 2018 to provide that neither the Merger
nor any transaction contemplated thereunder constituted a change in control for purposes of the DCP.
Potential Payments
upon Termination or Change in Control
We describe below certain
payments and benefits that would be received by our Named Executive Officers upon specified terminations of their employment, and
up on a change in control of us, under the employment agreements to which we and our Named Executive Officers are parties, as well
as under our Incentive Plan and the outstanding equity awards as of the end FY 2018. It should be highlighted that, notwithstanding
that an actual change in control of us occurred on November 16, 2018, the following information relates to our fiscal year ended
October 28, 2018. Thus, the information that follows does not take into account (1) the changes to outstanding equity awards that
occurred at the closing of the Merger (described above in the section entitled “Compensation Discussion & Analysis —
Other Compensation — Termination and Change in Control Agreements.” or (2) the grant of the Founders Awards at the
closing of the Merger.
Employment Agreements
Each Named Executive Officer
has an employment agreement with the Company that provides for severance payments and termination benefits upon a termination of
a Named Executive Officer’s employment by the Company without “cause” or by the Named Executive Officer for “good
reason,” both prior to and following a change in control of the Company. For a description of the severance benefits to which
Named Executive Officers are entitled under the employment agreements, see “Compensation Discussion & Analysis —
Other Compensation — Termination and Change in Control Agreements.”
Equity Incentive Awards
FY
2016 Awards
The unvested RSUs granted
to the Named Executive Officers as part of the FY 2016 Awards, FY 2017 Awards and FY 2018 Awards become fully vested prior to the
completion of the stated vesting period (1) upon the Named Executive Officer’s death or disability, or (2) upon the occurrence
of a change in control.
The unvested performance
share units granted to the Named Executive Officers as part of the FY 2016 Awards become vested prior to the completion of the
performance period as follows: (1) on a pro rata basis (a) in the event the Named Executive Officer’s employment is terminated
by NCI without cause, (b) in the event the Named Executive Officer terminates his or her employment for good reason or (c) upon
the Named Executive Officer’s death or disability, such pro rata vesting to be determined based on the elapsed portion of
the performance period (except that, if the performance period is less than one-half completed, the performance share units will
be forfeited upon any such termination other than for death or disability) and measured against the actual satisfaction of the
performance criteria; and (2) as to the maximum number of performance share units under the award upon a change in control.
For a discussion of the
actual treatment of these awards in the Merger, see “Compensation Discussion & Analysis — Other Compensation —
Termination and Change in Control Agreements.”
FY
2017 Awards and FY 2018 Awards
Upon
a change in control (as defined above), the FY 2017 Awards and FY 2018 Awards provide that they will be assumed or replaced by
economically equivalent alternative awards, and, further, that these awards are intended to fully vest only to the extent that
they are not assumed or replaced with alternative awards. The terms of any alternative award must be at least as favorable as the
terms of the award being replaced (including an equal or better vesting schedule and, in the case of stock options, an identical
or better method of exercise) and must provide for full acceleration in the event that the grantee is terminated by the successor
without cause or by the award holder with good reason within two years following the change in control with respect to which the
alternative award was granted.
For a discussion of the
actual treatment of these awards in the Merger, see “Compensation Discussion & Analysis — Other Compensation —
Termination and Change in Control Agreements.”
Quantification
of Payments
Termination
Payments (unrelated to a Change in Control)
The
following table estimates the value of the payments and benefits that each of our
Named Executive Officer
s
would receive if his or her employment terminated on October 26, 2018 (the last business day of Fiscal 2018) under the circumstances
shown and making the following assumptions, except for Mr. Johnson and Mr. Chambers, each of whom departed during FY 2018, and
for whom the table instead reflects the actual payments and benefits received in connection with their departure. The table excludes
(i) amounts accrued through Fiscal 2018 year-end that would be paid in the normal course of continued employment, such as accrued
but unpaid salary, (ii) benefits generally available to all of our salaried employees, and (iii) stock options with a strike price
below the closing stock price on October 26, 2018. The amounts reflected for the acceleration of the FY 2016 Awards, FY 2017 Awards
and FY 2018 Awards assume that these awards would be settled at target levels. The amounts disclosed assume that the price of our
Common Stock was $12.45, which was the closing price of our stock on October 26, 2018. Therefore, such amounts and disclosures
should be considered “forward looking statements.”
Name
|
|
Benefit
|
|
Termination
for Cause
($)
|
|
|
Termination
Without
Cause or by
Executive
for Good
Reason ($)
|
|
|
Termination
by Executive
Without Good
Reason ($)
|
|
|
Disability ($)
|
|
|
Retirement
($)
|
|
|
Death ($)
|
|
Mr. Riley
|
|
Non-CIC Severance
|
|
|
—
|
|
|
|
2,103,570
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Bonus FY 2018
|
|
|
—
|
|
|
|
789,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated RSU Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,088,391
|
|
|
|
—
|
|
|
|
1,088,391
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,637
|
|
|
|
—
|
|
|
|
68,637
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
466,253
|
|
|
|
—
|
|
|
|
466,253
|
|
|
|
—
|
|
|
|
466,253
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
389,336
|
|
|
|
—
|
|
|
|
389,336
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
926,143
|
|
|
|
—
|
|
|
|
926,143
|
|
|
|
Life Insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
Mr. Johnson
|
|
Non-CIC Severance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Bonus FY 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated RSU Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Life Insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Name
|
|
Benefit
|
|
Termination
for Cause
($)
|
|
|
Termination
Without
Cause or by
Executive
for Good
Reason ($)
|
|
|
Termination
by Executive
Without Good
Reason ($)
|
|
|
Disability ($)
|
|
|
Retirement
($)
|
|
|
Death ($)
|
|
Mr. Little
|
|
Non-CIC Severance
|
|
|
—
|
|
|
|
277,378
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Bonus FY 2018
|
|
|
—
|
|
|
|
268,260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated RSU Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
212,634
|
|
|
|
—
|
|
|
|
212,634
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
166,519
|
|
|
|
—
|
|
|
|
166,519
|
|
|
|
—
|
|
|
|
166,519
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
128,970
|
|
|
|
—
|
|
|
|
128,970
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
92,616
|
|
|
|
—
|
|
|
|
92,616
|
|
|
|
Life Insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
Mr. Kuzdal
|
|
Non-CIC Severance
|
|
|
—
|
|
|
|
428,378
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
Bonus FY 2018
|
|
|
—
|
|
|
|
328,224
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated RSU Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
341,541
|
|
|
|
—
|
|
|
|
341,541
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
366,341
|
|
|
|
—
|
|
|
|
366,341
|
|
|
|
—
|
|
|
|
366,341
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
267,675
|
|
|
|
—
|
|
|
|
267,675
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
208,388
|
|
|
|
—
|
|
|
|
208,388
|
|
|
|
Life Insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
Mr. Moore
|
|
Non-CIC Severance
|
|
|
—
|
|
|
|
389,378
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Bonus FY 2018
|
|
|
—
|
|
|
|
297,453
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated RSU Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
313,914
|
|
|
|
—
|
|
|
|
313,914
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
316,392
|
|
|
|
—
|
|
|
|
316,392
|
|
|
|
—
|
|
|
|
316,392
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
231,172
|
|
|
|
—
|
|
|
|
231,172
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
208,388
|
|
|
|
—
|
|
|
|
208,388
|
|
|
|
Life Insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
Ms. Theroux
|
|
Non-CIC Severance
|
|
|
—
|
|
|
|
408,572
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Bonus FY 2018
|
|
|
—
|
|
|
|
315,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated RSU Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
336,001
|
|
|
|
—
|
|
|
|
336,001
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,655
|
|
|
|
—
|
|
|
|
23,655
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
266,430
|
|
|
|
—
|
|
|
|
266,430
|
|
|
|
—
|
|
|
|
266,430
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194,668
|
|
|
|
—
|
|
|
|
194,668
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
208,388
|
|
|
|
—
|
|
|
|
208,388
|
|
|
|
Life Insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
Name
|
|
Benefit
|
|
Termination
for Cause
($)
|
|
|
Termination
Without
Cause or by
Executive
for Good
Reason ($)
|
|
|
Termination
by Executive
Without Good
Reason ($)
|
|
|
Disability ($)
|
|
|
Retirement
($)
|
|
|
Death ($)
|
|
Mr. Chambers
|
|
Non-CIC Severance
|
|
|
—
|
|
|
|
825,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Bonus FY 2018
|
|
|
—
|
|
|
|
144,650
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated RSU Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
1,665,163
|
|
|
|
—
|
|
|
|
1,665,163
|
|
|
|
—
|
|
|
|
1,665,163
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
1,216,664
|
|
|
|
—
|
|
|
|
1,216,664
|
|
|
|
—
|
|
|
|
1,216,664
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Life Insurance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Change-in-Control
Payments
The following table estimates
the value of the payments and benefits that each of our Named Executive Officers would receive if a change in control occurred
on October 26, 2018 (the last business day of Fiscal 2018), other than Mr. Johnson and Mr. Chambers, each of whom departed during
FY 2018. The table is intended to provide additional information about the effects of a change in control on the compensation of
the Named Executive Officers, and should not be understood to supplement or replace the information provided in the table above,
which represents payments to the Named Executive Officers upon a termination unrelated to a change in control. Column (A) represents
the value of the payments to which each Named Executive Officer would be entitled upon the occurrence of the change in control,
without regard to whether the Named Executive Officer continued to be employed by the Company following a change in control. Column
(B) represents the value of the payments to which each Named Executive Officer would be entitled if the Named Executive Officer’s
employment was terminated in connection with the change in control either by the Company without cause or by the Named Executive
Officer for good reason. The payments shown in Column B include the payments in Column A (i.e., the payments in Column (B) are
the sum of the “single-trigger” payments shown in Column (A), plus any additional termination benefits to which the
Named Executive Officer would be entitled if he or she were terminated following a change in control). The same exclusions and
assumptions applicable to the table in “Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table
— Quantification of Payments — Termination Payments” were applied to the following table. Accordingly, such amounts
and disclosures should be considered “forward looking statements.”
|
|
|
|
(A)
|
|
|
(B)
|
|
Name
|
|
Benefit
|
|
Change
in Control ($)
|
|
|
Change in Control
Followed by a Termination
Without Cause or by
Executive for Good Reason
($)
|
|
Mr. Riley
|
|
CIC Severance
|
|
|
—
|
|
|
|
4,551,378
|
|
|
|
Accelerated RSU Vesting
|
|
|
106,537
|
|
|
|
799,840
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
69,188
|
|
|
|
69,188
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
668,237
|
|
|
|
668,237
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
311,474
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
740,912
|
|
|
|
|
|
(A)
|
|
|
(B)
|
|
Name
|
|
Benefit
|
|
Change in Control ($)
|
|
|
Change in Control
Followed by a Termination
Without Cause or by
Executive for Good Reason
($)
|
|
Mr. Little
|
|
CIC Severance
|
|
|
—
|
|
|
|
800,638
|
|
|
|
Accelerated RSU Vesting
|
|
|
94,012
|
|
|
|
164,641
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
238,651
|
|
|
|
238,651
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
103,173
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
74,102
|
|
Mr. Kuzdal
|
|
CIC Severance
|
|
|
—
|
|
|
|
1,068,602
|
|
|
|
Accelerated RSU Vesting
|
|
|
83,709
|
|
|
|
237,479
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
525,029
|
|
|
|
525,029
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
214,140
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
166,705
|
|
Mr. Moore
|
|
CIC Severance
|
|
|
—
|
|
|
|
969,581
|
|
|
|
Accelerated RSU Vesting
|
|
|
72,301
|
|
|
|
212,792
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
—
|
|
|
|
—
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
453,444
|
|
|
|
453,444
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
184,945
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
166,706
|
|
Ms. Theroux
|
|
CIC Severance
|
|
|
—
|
|
|
|
1,024,172
|
|
|
|
Accelerated RSU Vesting
|
|
|
60,880
|
|
|
|
247,817
|
|
|
|
Accelerated Restricted Stock Vesting
|
|
|
23,845
|
|
|
|
23,845
|
|
|
|
Accelerated FY 2016 Awards Vesting (PSU)
|
|
|
381,846
|
|
|
|
381,846
|
|
|
|
Accelerated FY 2017 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
155,737
|
|
|
|
Accelerated FY 2018 Awards Vesting (PSU)
|
|
|
—
|
|
|
|
166,706
|
|
OTHER COMPENSATION INFORMATION
Pay Ratio Disclosure
Pursuant to Item 402(u)
of Regulation S-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of the annual total compensation of our
CEO in Fiscal 2018, Mr. Riley, to the annual total compensation of our median employee (excluding Mr. Riley).
The ratio presented below
is a reasonable estimate calculated in a manner consistent with Item 402(u). The SEC’s rules for identifying the median employee
and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies,
to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation
practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other
companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates,
and assumptions in calculating their own pay ratios.
We identified our median
employee from all full-time and part-time workers who were included as employees on our payroll records as of a determination date
of August 1, 2018. The median was identified using base pay, overtime, and bonuses paid over the twelve-month period preceding
the determination date. International employees’ pay was converted to US dollar equivalents using exchange rates as of the
determination date and pay was annualized for any employees hired during the period.
The 2018 annual total
compensation as determined under Item 402 of Regulation S-K for Mr. Riley was $4,018,866, as reported in the Summary Compensation
Table of this Form 10-K. The 2018 annual total compensation as determined under Item 402 of Regulation S-K for our median employee
was $56,317. The ratio of Mr. Riley’s annual total compensation to our median employee’s annual total compensation
for fiscal year 2018 is 71 to 1.
DIRECTOR COMPENSATION
Directors of NCI who are
also employees of NCI do not receive compensation for their service as directors. For Fiscal 2018, in addition to reimbursing our
non-employee directors for the expenses incurred to attend and/or participate in meetings, we paid non-employee directors the following
amounts:
Annual Retainer Fee
|
|
$
|
65,000
|
|
Audit Committee Chair Annual Retainer Fee
|
|
$
|
18,500
|
|
Compensation Committee Chair Annual Retainer Fee
|
|
$
|
13,500
|
|
Audit Committee Member Annual Retainer Fee
|
|
$
|
10,000
|
|
Compensation Committee Member Annual Retainer Fee
|
|
$
|
7,500
|
|
Nominating and Corporate Governance Committee Member Annual Retainer Fee
|
|
$
|
5,000
|
|
Chair of Nominating and Corporate Governance Committee
|
|
$
|
10,000
|
|
Affiliated Transactions Committee Member Annual Retainer Fee
|
|
$
|
3,000
|
|
Executive Committee Member Annual Retainer Fee
|
|
$
|
3,000
|
|
In addition, in Fiscal
2018, Mr. Metcalf received a cash retainer of $135,000 for his service as Chair of the Board. As disclosed in our 2017 proxy statement,
as of Fiscal 2018, we no longer pay our non-employee directors a fee for their attendance at meetings (except for payments of $750
per meeting to those non-employee directors who participate in meetings of ad hoc committees). Our non-employee directors instead
receive annual retainer fees in the amounts disclosed above.
In addition, through Fiscal
2018, each non-employee director received a grant of RSUs and/or stock options under the Incentive Plan having an aggregate fair
market value of $90,000 on December 15 of each year. These RSUs generally vest over a one-year period of service, subject to the
same acceleration provisions as applied to the restricted stock units granted to our NEOs (see “Executive Compensation —
Potential Payments upon Termination or Change in Control — Equity Incentive Awards”).
Messrs. Berges, Sleeper,
and Zrebiec have assigned all of the compensation each would receive for his services as a director, including any shares of RSUs,
to CD&R, LLC. In the same manner as our other directors, Mr. Berges received reimbursement for travel and other out-of-pocket
expenses incurred in connection with his functions and duties as a director, except that Mr. Berges was also entitled to reimbursement
of up to $150,000 in the aggregate per calendar year for actual air travel expenses for NCI-related purposes on our corporate aircraft
in lieu of reimbursement based on the cost of commercial air travel.
In Fiscal 2019, the Compensation
Committee, with assistance from FW Cook, undertook a review of its compensation policy for non-employee directors. Our non-employee
directors will instead receive annual retainer fees in the following amounts:
Annual Retainer Fee
|
|
$
|
75,000
|
|
Audit Committee Chair Annual Retainer Fee
|
|
$
|
22,500
|
|
Compensation Committee Chair Annual Retainer Fee
|
|
$
|
15,500
|
|
Audit Committee Member Annual Retainer Fee
|
|
$
|
10,000
|
|
Compensation Committee Member Annual Retainer Fee
|
|
$
|
7,500
|
|
Nominating and Corporate Governance Committee Member Annual Retainer Fee
|
|
$
|
6,500
|
|
Chair of Nominating and Corporate Governance Committee
|
|
$
|
13,500
|
|
Affiliated Transactions Committee Member Annual Retainer Fee
|
|
$
|
3,000
|
|
Executive Committee Member Annual Retainer Fee
|
|
$
|
3,000
|
|
In addition, beginning
in Fiscal 2019 each non-employee director will receive a grant of RSUs under the Incentive Plan having an aggregate fair market
value of $110,000 on December 15 of each year.
Fiscal Year 2018 Director
Compensation Table
The following table provides
information concerning the compensation of our non-employee directors for Fiscal 2018.
Name
|
|
Fees Earned or
Paid in Cash
($)(a)(b)
|
|
|
Stock Awards
($)(c)
|
|
|
Option
Awards
($)(c)
|
|
|
All Other
Compensation
($)
|
|
|
Total ($)
|
|
Kathleen J. Affeldt
|
|
|
78,500
|
|
|
|
109,647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
188,147
|
|
George L. Ball
|
|
|
104,000
|
|
|
|
109,647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
213,647
|
|
James G. Berges
(d)
|
|
|
78,000
|
|
|
|
109,634
|
|
|
|
—
|
|
|
|
—
|
|
|
|
187,634
|
|
Gary L. Forbes
|
|
|
104,500
|
|
|
|
109,647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
214,147
|
|
John J. Holland
|
|
|
99,375
|
|
|
|
109,647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
209,022
|
|
Lawrence J. Kremer
|
|
|
70,000
|
|
|
|
109,647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
179,647
|
|
George Martinez
|
|
|
95,500
|
|
|
|
109,647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
205,147
|
|
James S. Metcalf
|
|
|
215,500
|
|
|
|
219,274
|
|
|
|
—
|
|
|
|
—
|
|
|
|
434,774
|
|
Nathan K. Sleeper
|
|
|
75,500
|
|
|
|
109,634
|
|
|
|
—
|
|
|
|
—
|
|
|
|
185,134
|
|
William R. VanArsdale
(d)
|
|
|
80,000
|
|
|
|
109,647
|
|
|
|
—
|
|
|
|
—
|
|
|
|
189,647
|
|
Jonathan L. Zrebiec
|
|
|
65,750
|
|
|
|
109,634
|
|
|
|
—
|
|
|
|
—
|
|
|
|
175,384
|
|
|
(a)
|
Includes annual retainer fees, supplemental retainer fees for Committee Chairmen, Board meeting fees
and Committee meeting fees for each non-employee director as more fully explained in the preceding paragraphs.
|
|
(b)
|
The amounts reported in the “Fees Earned or Paid in Cash” column for each of Messrs. Berges,
Sleeper, and Zrebiec represents amounts paid to CD&R, LLC, as assignee of compensation payable to those directors, each of
whom is an employee or partner of CD&R, LLC.
|
|
(c)
|
The amounts reported in the “Stock Awards” and “Option Awards” columns reflect
the aggregate grant date fair value of the awards granted under our Incentive Plan in Fiscal 2018, computed in accordance with
FASB ASC Topic 718. See Note 7 of the consolidated financial statements in NCI’s Annual Report on Form 10-K for the fiscal
year ended October 28, 2018 for additional detail regarding assumptions underlying the valuation of equity awards. As of October
28, 2018, the non-employee directors held the following outstanding restricted stock awards and stock options: (i) Ms. Affeldt
(6,459 restricted shares), (ii) Mr. Forbes (5,580 restricted shares and 7,029 stock options), (iii) Mr. Holland (9,534 restricted
shares and 3,514 stock options), (iv) Mr. Kremer (6,459 restricted shares), (v) Mr. Martinez (6,459 restricted shares), (vi) Mr.
Ball (6,459 restricted shares), and Mr. Metcalf (11,159 restricted shares). Amounts reported for each of Messrs. Berges, Sleeper,
and Zrebiec represent grants of restricted Common Stock issued to CD&R, LLC, as assignee of compensation payable to those directors,
each of whom is an employee or partner of CD&R, LLC. These figures do not include RSUs or options granted to the non-employee
directors on December 15, 2018. Stock options figures include total exercisable and non-exercisable options.
|
|
(d)
|
Messrs. Berges and VanArsdale resigned from the Board
effective November 16, 2018.
|
Item 12. Security Ownership
of Certain Beneficial Owners & Management and Related Stockholder Matters
Equity Compensation
Plan Information
The
following table summarizes our
equity plan information
as
of
October 28, 2018
.
Plan Category
|
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
|
|
|
Weighted-
average exercise price
of outstanding
options, warrants and
rights
(b)
|
|
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
1,696,641
|
(1)
|
|
|
10.94
|
(2)
|
|
|
—
|
|
Equity compensation plans not approved by security holders
(3)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
460,566
|
|
|
|
10.94
|
|
|
|
—
|
|
|
(1)
|
Includes 214,971 shares subject to outstanding stock options, 460,566 shares subject to outstanding
RSUs and 1,021,104 shares subject to outstanding PSUs based on assumed target performance, unless performance is otherwise know.
|
|
(2)
|
The weighted average remaining contractual life of outstanding options is 2.9 years.
|
|
(3)
|
All shares of Common Stock underlying outstanding awards and remaining available for issuance as of
October 28, 2018 were under the Incentive Plan.
|
Security Ownership
of Certain Beneficial Owners and Management
Unless otherwise noted,
the following tables set forth, as of
February 5, 2019
(the “Ownership Date”),
the number of shares of our equity securities beneficially owned by (1) each person or group known by us to own beneficially more
than 5% of the outstanding shares of any class of our equity securities, (2) each director and nominee for director, (3) each of
our executive officers identified under the caption “Executive Compensation,” and (4) all current directors and executive
officers as a group. Except as otherwise indicated, each of the persons or groups named below has sole voting power and investment
power with respect to the Common Stock. Unless otherwise noted, the mailing address of each person or entity named below is 5020
Weston Parkway, Suite 400, Cary, North Carolina 27513.
|
|
Beneficial
Ownership
(1)
|
|
|
|
|
Name of Beneficial Owner or Group
|
|
Number of Shares
of Common Stock
|
|
|
Percent
|
|
CD&R Pisces Holdings, L.P.
(2)
|
|
|
39,128,929
|
|
|
|
31.18
|
|
Clayton Dubilier & Rice Fund VIII, L.P.
(3)
|
|
|
22,744,823
|
|
|
|
18.13
|
|
CD&R Friends & Family Fund VIII, L.P.
(3)
|
|
|
56,940
|
|
|
|
*
|
|
GG Shareholders
(4)
|
|
|
16,739,403
|
|
|
|
13.34
|
|
Kathleen J. Affeldt
(5)
|
|
|
39,195
|
|
|
|
*
|
|
George Ball
|
|
|
151,670
|
|
|
|
*
|
|
Norman C. Chambers
(5)
|
|
|
329,584
|
|
|
|
*
|
|
Gary L. Forbes
(5)
|
|
|
87,266
|
|
|
|
*
|
|
John J. Holland
(5)
|
|
|
66,779
|
|
|
|
*
|
|
|
|
Beneficial
Ownership
(1)
|
|
|
|
|
Name of Beneficial Owner or Group
|
|
Number of Shares
of Common Stock
|
|
|
Percent
|
|
Mark E. Johnson
(5)
|
|
|
90,858
|
|
|
|
*
|
|
Lawrence J. Kremer
(5)
|
|
|
45,707
|
|
|
|
*
|
|
John Krenicki
(2)(3)(6)
|
|
|
—
|
|
|
|
*
|
|
John L. Kuzdal
(5)
|
|
|
242,137
|
|
|
|
*
|
|
Bradley S. Little
(5)
|
|
|
11,584
|
|
|
|
*
|
|
George Martinez
(5)
|
|
|
57,804
|
|
|
|
*
|
|
James Metcalf
(5)
|
|
|
137,772
|
|
|
|
*
|
|
Todd R. Moore
(5)(6)
|
|
|
70,515
|
|
|
|
*
|
|
Timothy O’Brien
(5)
|
|
|
—
|
|
|
|
*
|
|
Donald R. Riley
(5)
|
|
|
128,904
|
|
|
|
*
|
|
Nathan K. Sleeper
(2)(3)(7)
|
|
|
—
|
|
|
|
*
|
|
Katy K. Theroux
(5)
|
|
|
48,146
|
|
|
|
*
|
|
Jonathan L. Zrebiec
(2)(3)(7)
|
|
|
—
|
|
|
|
*
|
|
All directors and executive officers as a group (21 persons)
(7)(8)
|
|
|
1,507,921
|
|
|
|
1.20
|
|
* Less
than 1%.
|
(1)
|
Includes shares beneficially owned by the listed persons, including unvested restricted stock granted
in December 2018 and prior years, shares owned under our 401(k) Profit Sharing Plan and phantom units owned under our Deferred
Compensation Plan, but does not include any of the restricted stock units or the performance share units granted to the listed
persons in December 2015, December 2016, December 2017 or November 2018 (see “Compensation Discussion & Analysis —
Long-Term Incentive Compensation”). If a person has the right to acquire beneficial ownership of any shares by exercise of
options or by reason of the vesting of restricted stock units previously granted within 60 days after the Ownership Date, those
shares are deemed beneficially owned by that person as of the Ownership Date and are deemed to be outstanding solely for the purpose
of determining the percentage of the Common Stock that he or she owns. Those shares are not included in the computations for any
other person. Please see the tables accompanying footnotes 5 and 7 below for additional information regarding equity compensation
awards held by the listed persons.
|
|
(2)
|
CD&R Investment Associates X, Ltd. (“CD&R Pisces GP”) is the general partner of
CD&R Pisces.
|
CD&R Pisces
GP, as the general partner of CD&R Pisces, may be deemed to beneficially own the shares of Common Stock shown as beneficially
owned by CD&R Pisces. CD&R Pisces GP expressly disclaims beneficial ownership of the Common Stock of which CD&R Pisces
has beneficial ownership.
Investment and
voting decisions with respect to the shares of Common Stock held by CD&R Pisces or CD&R Pisces GP are made by an investment
committee comprised of more than ten individuals (the “CD&R Pisces Investment Committee”). All members of the CD&R
Pisces Investment Committee disclaim beneficial ownership of the shares of Common Stock shown as beneficially owned by CD&R
Pisces.
CD&R Pisces
GP expressly disclaims beneficial ownership of the shares held by CD&R Pisces and the restricted shares held by CD&R, LLC
as assignees of director compensation payable to Messrs. Krenicki, Sleeper and Zrebiec. Each of CD&R Pisces and CD&R Pisces
GP expressly disclaim beneficial ownership of the restricted shares held by CD&R, LLC as assignees of director compensation
payable to Messrs. Krenicki, Sleeper and Zrebiec. CD&R, LLC expressly disclaims beneficial ownership of the shares held by
CD&R Pisces.
The address for
CD&R Pisces and CD&R Pisces GP is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street,
George Town, Grand Cayman, KY1-1104, Cayman Islands. The address for CD&R, LLC is 375 Park Avenue, 18th Floor, New York, NY
10152.
|
(3)
|
Does not include 120,626 restricted shares of Common Stock and 20,424 restricted stock units
issued to CD&R, LLC, as assignee of director compensation payable to Messrs. James G. Berges, John Krenicki, Nathan K.
Sleeper and Jonathan L. Zrebiec.
|
The general partner
of each of the CD&R Fund VIII Investors is CD&R Associates VIII, Ltd., whose sole stockholder is CD&R Associates VIII,
L.P. The general partner of CD&R Associates VIII, L.P. is CD&R Investment Associates VIII, Ltd.
CD&R Investment
Associates VIII, Ltd. is managed by a two-person board of directors. Donald J. Gogel and Kevin J. Conway, as the directors of CD&R
Investment Associates VIII, Ltd., may be deemed to share beneficial ownership of the shares of Common Stock shown as beneficially
owned by the CD&R Fund VIII Investors. Such persons expressly disclaim such beneficial ownership.
Investment and
voting decisions with respect to the shares of the Company’s Common Stock held by each of the CD&R Fund VIII Investors
are made by an investment committee of limited partners of CD&R Associates VIII, L.P., currently consisting of more than ten
individuals (the “CD&R Fund VIII Investment Committee”). All members of the CD&R Fund VIII Investment Committee
disclaim beneficial ownership of the shares of Common Stock shown as beneficially owned by the CD&R Fund VIII Investors.
Each of CD&R
Associates VIII, L.P., CD&R Associates VIII, Ltd. and CD&R Investment Associates VIII, Ltd. expressly disclaims beneficial
ownership of the shares held by the CD&R Fund VIII Investors and the restricted shares held by CD&R, LLC as assignees of
director compensation payable to Messrs. Berges, Krenicki, Sleeper and Zrebiec. The CD&R Fund VIII Investors expressly disclaim
beneficial ownership of the restricted shares held by CD&R, LLC as assignees of director compensation payable to Messrs. Berges,
Krenicki, Sleeper and Zrebiec. CD&R, LLC expressly disclaims beneficial ownership of the shares held by the CD&R Fund VIII
Investors.
The address for
the CD&R Fund VIII Investors, CD&R Associates VIII, L.P., CD&R Associates VIII, Ltd. and CD&R Investment Associates
VIII, Ltd. is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman,
KY1-1104, Cayman Islands. The address for CD&R, LLC is 375 Park Avenue, 18th Floor, New York, NY 10152.
|
(4)
|
Unless otherwise indicated, Atrium Intermediate Holdings, LLC (“Atrium Intermediate”)
and GGC BP Holdings, LLC (“GGC BP”) are referred to collectively as the “GG Shareholders”
|
Golden Gate Capital
Opportunity Fund, L.P. (“GGCOF”), Golden Gate Capital Opportunity Fund-A, L.P. (“GGCOF-A”), GGCOF Co-Invest,
L.P. (“GGCOF Co-Invest”), GGCOF Executive Co-Invest, L.P. (“Executive Co-Invest”) and GGCOF IRA Co-Invest,
L.P. (“IRA Co-Invest”, together with GGCOF, GGCOF-A, GGCOF Co-Invest and Executive Co-Invest, the “Funds”)
hold all of the equity interests in GGC BP.
Atrium Window
Holdings, LLC (“Atrium Holdings”) and Atrium Window Parent, LLC (“Atrium Parent”) are the members of Atrium
Intermediate. Atrium Parent is the controlling unitholder of Atrium Holdings. GGC Atrium Window Holdings, LLC (“GGC Atrium”)
is the controlling unitholder of Atrium Parent. GGC BP is the controlling unitholder of GGC Atrium.
GGC Opportunity
Fund Management, L.P. (“Fund GP”) is the general partner of each of GGCOF and GGCOF-A. GGC Opportunity Fund Management
GP, Ltd. (“Ultimate GP”) is the general partner of Fund GP. GGCOF Co-Invest Management, L.P. (“Co-Invest GP”)
is the general partner of GGCOF Co-Invest, IRA Co-Invest and Executive Co-Invest. Fund GP is the general partner of Co-Invest GP.
Ultimate GP is
governed by its board of directors and has ultimate voting and dispositive authority over the ownership interests of the following
entities in the Company: GGC BP, Atrium Holdings, Atrium Intermediate, Atrium Parent and GGC Atrium (collectively, the “Atrium
Entities”). Each of the Atrium Entities, the Funds, Fund GP and Co-Invest GP has shared dispositive power with each other
with respect to the Common Stock.
The address for
the GG Shareholders, Atrium Holdings, Atrium Parent, GGC Atrium, the Funds, Fund GP, Ultimate GP and Co-Invest GP is c/o
Golden Gate Private Equity, Inc., One Embarcadero Center, 39th Floor, San Francisco, California 94111.
All information
set forth in this footnote (4) was derived from a general statement of acquisition of beneficial ownership on Schedule 13D filed
on November 23, 2018 with respect to the Golden Gate Investors, Atrium Holdings, Atrium Parent, GGC Atrium, the Funds, Fund GP,
Ultimate GP and Co-Invest GP.
|
(5)
|
The number of shares of Common Stock beneficially owned by each person reflected in the table above
includes options exercisable on the Ownership Date or that would become exercisable within 60 days after the Ownership Date, but
excludes (i) options not exercisable within 60 days after the Ownership Date and (ii) unvested restricted stock units and performance
share units. The number of options, unvested shares of restricted stock units, and unvested performance shares units beneficially
owned by each person shown in the table above is shown in the table below. For more information about outstanding options, restricted
stock units, and performance share units, see “Compensation Discussion & Analysis — Long-Term Incentive Compensation.”
|
|
(6)
|
50,095 shares of Common Stock are pledged by Mr. Moore to secure a line of credit as to which he
has sole voting and investment power.
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
Exercisable
Within 60 Days
(included in the
table above)
|
|
|
Not
Exercisable
Within 60 Days
(not included
in the table
above)
|
|
|
Unvested
Restricted
Stock Units
(not included
in the table
above)
|
|
|
Unvested
Performance
Share Units
(not
included in
the table
above)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen J. Affeldt
|
|
|
—
|
|
|
|
—
|
|
|
|
6,808
|
|
|
|
—
|
|
George Ball
|
|
|
—
|
|
|
|
—
|
|
|
|
6,808
|
|
|
|
—
|
|
Norman C. Chambers
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gary L. Forbes
|
|
|
14,163
|
|
|
|
—
|
|
|
|
6,808
|
|
|
|
—
|
|
John J. Holland
|
|
|
37,259
|
|
|
|
—
|
|
|
|
6,808
|
|
|
|
—
|
|
Mark E. Johnson
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Lawrence J. Kremer
|
|
|
9,234
|
|
|
|
—
|
|
|
|
6,808
|
|
|
|
—
|
|
John Krenicki
(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
John L. Kuzdal
|
|
|
150,148
|
|
|
|
96,539
|
|
|
|
78,962
|
|
|
|
30,590
|
|
Bradley S. Little
|
|
|
—
|
|
|
|
28,604
|
|
|
|
25,409
|
|
|
|
14,239
|
|
George Martinez
|
|
|
—
|
|
|
|
—
|
|
|
|
6,808
|
|
|
|
—
|
|
James Metcalf
|
|
|
—
|
|
|
|
307,481
|
|
|
|
153,470
|
|
|
|
76,870
|
|
Todd R. Moore
|
|
|
—
|
|
|
|
100,210
|
|
|
|
61,790
|
|
|
|
53,297
|
|
Timothy O’Brien
|
|
|
—
|
|
|
|
—
|
|
|
|
6,808
|
|
|
|
—
|
|
Shawn K. Poe
|
|
|
—
|
|
|
|
156,049
|
|
|
|
78,024
|
|
|
|
39,012
|
|
Donald R. Riley
|
|
|
—
|
|
|
|
204,988
|
|
|
|
158,180
|
|
|
|
135,775
|
|
Nathan K. Sleeper
(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Katy K. Theroux
|
|
|
—
|
|
|
|
122,393
|
|
|
|
76,211
|
|
|
|
56,497
|
|
Jonathan L. Zrebiec
(7)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(7)
|
Does not include 61,930,692 shares of Common Stock held by investment funds associated with or
designated by CD&R, LLC, 120,626 restricted shares of Common Stock issued to CD&R, LLC, or 20,424 restricted stock
units issued to CD&R, LLC, as assignee of compensation payable to Messrs. Krenicki, Sleeper and Zrebiec. Messrs.
Krenicki, Sleeper and Zrebiec are members of our Board and executives of CD&R, LLC. Messrs. Krenicki, Sleeper and Zrebiec
disclaim beneficial ownership of the shares held by CD&R, LLC and by investment funds associated with or designated by
CD&R, LLC.
|
|
(8)
|
The number of shares of Common Stock beneficially owned by the directors and executive officers as
a group reflected in the table above includes beneficial ownership of the additional officers listed in the table below. As with
the officers and directors listed individually in Note 5, the number of shares of Common Stock beneficially owned by the directors
and executive officers as a group and reflected in the table above includes options exercisable on the Ownership Date or that would
become exercisable within 60 days after the Ownership Date, but excludes (i) options not exercisable within 60 days after the Ownership
Date and (ii) unvested restricted stock units and performance share units. The number of options, unvested shares of restricted
stock units, and unvested performance shares units beneficially owned by these additional officers is shown in the table below.
For more information about outstanding options, restricted stock units and performance share units, see “Compensation Discussion
& Analysis — Long-Term Incentive Compensation.”
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
Exercisable
Within 60 Days
(included in the
table above)
|
|
|
Not
Exercisable
Within 60 Days
(not included
in the table
above)
|
|
|
Unvested
Restricted
Stock Units
(not included
in the table
above)
|
|
|
Unvested
Performance
Share Units
(not
included in
the table
above)
|
|
Brian P. Boyle
|
|
|
—
|
|
|
|
60,817
|
|
|
|
30,408
|
|
|
|
15,204
|
|
John L. Buckley
|
|
|
—
|
|
|
|
190,099
|
|
|
|
95,049
|
|
|
|
47,524
|
|
Arthur W. Steinhafel
|
|
|
—
|
|
|
|
190,099
|
|
|
|
95,049
|
|
|
|
47,524
|
|
Item 13. Certain Relationships
and Related Transactions, and Director Independence
Director Independence
On July 25, 2016, the
CD&R Fund VIII Investors decreased their beneficial ownership in the Company from approximately 58.6% to 42.0%. As a result,
the Company ceased being deemed a “controlled company,” within the meaning in the NYSE Listed Company Manual. Following
a one year phase-in, both the Nominating & Corporate Governance Committee and the Compensation Committee are now entirely comprised
of independent directors. As of the date of this Amendment, the Company’s board is comprised of a majority of independent
directors, as required by the NYSE. For a description of the transaction resulting in our no longer being deemed a controlled company,
please see “Transactions with Related Persons — CD&R Transactions.”
Our Board determined,
after considering all of the relevant facts and circumstances, that Ms. Affeldt, Mr. Ball, Mr. Forbes, Mr. Holland, Mr. Kremer,
Mr. Krenicki, Mr. Martinez, Mr. O’Brien and Mr. Sleeper are independent from our management, as “independence”
is defined by the listing standards of the NYSE. For a description of transactions between us and certain members of our Board,
please see “Transactions with Related Persons — CD&R Transactions.”
Transactions With Related
Persons
Policies and Procedures
The Nominating and Corporate
Governance Committee has approved and adopted a written statement of policy and procedures with respect to related party transactions.
This policy covers the review, approval or ratification of transactions between us and “related parties” (generally,
directors, executive officers and employees required to file reports under Section 16 of the Exchange Act and their immediate family
members, beneficial owners of 5% or more of any class of our securities, and any entity in which any such persons are employed,
are principals, partners or hold a similar position or in which they have a beneficial interest of 5% or more). The policy covers
transactions in which NCI and any related party are participants in which a related party has a material interest, other than (1)
transactions between us and affiliates of CD&R, LLC, which are evaluated by the Affiliate Transactions Committee pursuant to
the guidelines in the New Stockholders Agreement, (2) transactions involving less than $25,000 when aggregated with all similar
transactions, and (3) certain exceptions for the employment of executive officers, director compensation, employees of the related
party and transactions in which all stockholders receive proportional benefits. The policy generally requires that any related
party transaction be approved by the Nominating and Corporate Governance Committee or its Chairman in advance of the consummation
or material amendment of the transaction. Under the policy, prior to entering into a related party transaction, a related party
must make full written disclosure of all of the facts and circumstances relating to the transaction to our Chief Financial Officer
or General Counsel, who must assess this information and decide whether it is a related party transaction. If either of the Chief
Financial Officer or General Counsel makes this determination, they must submit the transaction to the Nominating and Corporate
Governance Committee or to its Chairman. The Nominating and Corporate Governance Committee or its Chairman will approve such transaction
only if, in its good faith determination, it is in, or is not inconsistent with, the best interests of NCI and its stockholders.
In the event a transaction is not identified as a related party transaction in advance, it will be submitted promptly to the Nominating
and Corporate Governance Committee or the Chairman thereof, and such committee or Chair, as the case may be will evaluate the transaction
and evaluate all options, including but not limited to ratification, amendment or termination of the transaction. In addition,
certain transactions with related stockholders may be subject to the provisions of Section 203 of the Delaware General Corporation
Law (the “DGCL”). Section 203 of the DGCL prohibits certain publicly held Delaware corporations from engaging in a
business combination with an interested stockholder for a period of three years following the time such person became an interested
stockholder unless the business combination is approved in a specified manner. Generally, an interested stockholder is a person
who, together with its affiliates and associates, owns 15% or more of the corporation’s voting stock, or is affiliated with
the corporation and owns or owned 15% of the corporation’s voting stock within three years before the business combination.
The Affiliate Transactions
Committee, which is further described in “Board of Directors — Board Committees — Affiliate Transactions Committee,”
is responsible for reviewing, considering and approving certain transactions between NCI and its controlled affiliates, on the
one hand, and the CD&R Investors and their affiliates, on the other hand. This committee is made up of (x) the Unaffiliated
Shareholder Directors then in office and (y) one CD&R Investor Independent Director, if a CD&R Investor Independent Director
is then serving on the Board, and otherwise, the Chief Executive Officer of the Company serving as a director on the Board.
CD&R Transactions
On October 20, 2009, we
completed a financial restructuring that resulted in a change in control of NCI. Pursuant to an investment agreement (as amended,
the “Investment Agreement”), we issued and sold to the CD&R Fund VIII Investors, for an aggregate purchase price
of $250 million, an aggregate of 250,000 shares of Series B Cumulative Convertible Participating Preferred Stock, or “Preferred
Stock,” convertible into 39,221,839 shares of Common Stock (adjusted to reflect the 1:5 reverse stock split that occurred
on March 5, 2010) based on the initial conversion price (or approximately 68.4% of our then voting power) (such purchase and sale,
the “Equity Investment”).
In connection with the
Equity Investment, NCI and the CD&R Fund VIII Investors entered into a stockholders agreement, dated October 20, 2009 (the
“Old Stockholders Agreement”). Among other provisions, the Old Stockholders Agreement entitled the CD&R Fund VIII
Investors to certain nomination or designation rights with respect to our Board; subscription rights with respect to future issuances
of common stock by us; corporate governance rights; and consent rights with respect to certain types of transactions we may enter
into in the future. In connection with the Equity Investment, we made a determination that the acquisition of our equity interests
by the CD&R Fund VIII Investors would not be subject to the provisions of Section 203 of the DGCL. At the time of the Equity
Investment, we also entered into a registration rights agreement (the “Old Registration Rights Agreement”) with the
CD&R Fund VIII Investors, which provided for customary demand and piggyback registration rights with respect to the shares
of our common stock held by the CD&R Fund VIII Investors. The Old Registration Rights Agreement also provided that we would
indemnify the CD&R Fund VIII Investors and their affiliates in connection with the registration of our securities thereunder.
On May 8, 2012, we entered
into an Amendment Agreement with the CD&R Fund VIII Investors (the “Amendment Agreement”) to terminate our dividend
obligation on the Preferred Stock, which accrued at an annual rate of 12% unless paid in cash at 8% (the “Dividend Knock-out”).
As consideration for the Dividend Knock-out, the CD&R Fund VIII Investors received a total of 37,834 additional shares of Preferred
Stock.
On May 14, 2013, the
CD&R Fund VIII Investors delivered a formal notice requesting the conversion of all of their Preferred Stock into shares of
our Common Stock (the “Conversion”). In connection with the Conversion request, we issued to the CD&R Fund VIII
Investors 54,136,817 shares of our Common Stock (representing the shares of Common Stock issuable in connection with the conversion
of (1) the shares of Preferred Stock purchased by the CD&R Fund VIII Investors pursuant to the Investment Agreement, (2) the
shares of Preferred Stock issued in satisfaction of our dividend obligations prior to the Dividend Knock-out and (3) the additional
shares of Preferred Stock issued in consideration for the Dividend Knock-out). The Conversion eliminated all the outstanding Preferred
Stock.
On January 15, 2014,
the CD&R Fund VIII Investors completed a registered underwritten offering of 9,775,000 shares of our Common Stock pursuant
to our shelf registration statement previously filed and declared effective by the SEC on March 27, 2013 (the “2014 Secondary
Offering”). The CD&R Fund VIII Investors received all proceeds from the 2014 Secondary Offering, which was effected pursuant
to the Old Registration Rights Agreement. In addition, on January 6, 2014, we entered into a separate agreement with the CD&R
Fund VIII Investors to repurchase 1,150,000 shares of our Common Stock, contingent on the closing of the 2014 Secondary Offering
and subject to other conditions, at a price per share equal to the price per share to be paid by the underwriters to the CD&R
Fund VIII Investors in the 2014 Secondary Offering (the “2014 Stock Repurchase”). The 2014 Stock Repurchase was a private,
non-underwritten transaction that was approved and recommended by the Affiliate Transactions Committee of our Board, and closed
simultaneously with the 2014 Secondary Offering. We have cancelled all shares repurchased in the 2014 Stock Repurchase.
On July 25, 2016, the
CD&R Fund VIII Investors completed a registered underwritten offering, in which the CD&R Fund VIII Investors offered
9 million shares of our Common Stock at a price to the public of $16.15 per share (the “2016 Secondary Offering”),
pursuant to our shelf registration statement previously filed and declared effective by the SEC on April 8, 2016. The underwriters
also exercised their option to purchase 1.35 million additional shares of our Common Stock from the CD&R Fund VIII Investors.
The aggregate offering price for the 10.35 million shares sold in the 2016 Secondary Offering was approximately $160.1 million,
net of underwriting discounts and commissions. The CD&R Fund VIII Investors received all of the proceeds from the 2016 Secondary
Offering and no shares in the 2016 Secondary Offering were sold by the Company or any of its officers or directors (although certain
of our directors are affiliated with the CD&R Fund VIII Investors). In addition, concurrent with the 2016 Secondary Offering,
the Company repurchased approximately 2.9 million shares from the CD&R Fund VIII Investors, at a price per share equal to the
price per share to be paid by the underwriters to the CD&R Fund VIII Investors in the 2016 Secondary Offering (the “2016
Stock Repurchase”). The 2016 Stock Repurchase was a private, non-underwritten transaction that was approved and recommended
by our Affiliate Transactions Committee of our Board, and closed simultaneously with the 2016 Secondary Offering. We have cancelled
all shares repurchased in the 2016 Stock Repurchase.
Upon closing of the 2016
Secondary Offering and 2016 Stock Repurchase, the CD&R Fund VIII Investors’ beneficial ownership in the Company decreased
from approximately 58.6% to 42.0%. As a result, the CD&R Fund VIII Investors no longer controlled a majority of the voting
power of the Company’s common stock resulting in the Company no longer being deemed a “controlled company” within
the meaning of the corporate governance rules of the NYSE.
Pursuant to an Underwriting
Agreement, dated December 11, 2017 (the “Underwriting Agreement”), among the Company, the CD&R Fund VIII Investors,
and Goldman Sachs & Co. LLC (“Goldman”) and RBC Capital Markets, LLC (“RBC” and, together with
Goldman, the “Underwriters”), on December 13, 2017 CD&R Fund VIII sold 7,132,145 and F&F Fund VIII sold
17,855 shares of Common Stock, in each case, to the Underwriters at a price of $19.36 per share, in a registered offering (the
“2017 Secondary Offering”). Pursuant to the Underwriting Agreement, at the CD&R Fund VIII Investors’ request,
the Company purchased 1,150,000 shares of the Common Stock from the Underwriters in the 2017 Secondary Offering at a price per
share equal to the price at which the Underwriters purchased the shares from the CD&R Fund VIII Investors. Upon closing of
the 2017 Secondary Offering, the CD&R Fund VIII Investors’ beneficial ownership in the Company decreased from approximately
44.8% to 34.7%.
On July 17, 2018, the
Company entered into the Merger Agreement and at the Special Shareholder Meeting on November 15, 2018, NCI’s shareholders
approved, among other matters, the Merger Agreement and the Stock Issuance. The Company consummated the Stock Issuance on November
16, 2018, pursuant to which CD&R Pisces and the GG Shareholders each received 39,128,929 and 16,739,403 shares of Common
Stock, respectively.
Pursuant to the terms
of the Merger Agreement, on November 16, 2018, the Company entered into the New Stockholders Agreement with each of the CD&R
Investors and the Golden Gate Investors.
Pursuant to the New Stockholders
Agreement, among other matters, the CD&R Investors are entitled to nominate for election, fill vacancies and appoint five out
of twelve initial members of NCI’s board of directors (the “Board”) and, thereafter, so long as the CD&R
Investors beneficially owns at least 7.5% of the outstanding shares of Common Stock, to nominate for election, fill vacancies and
appoint replacements for a number of Board members in proportion to the CD&R Investors’ percentage beneficial ownership
of outstanding Common Stock, but never to exceed one less than the number of independent, non-CD&R-affiliated directors serving
on the Board. The New Stockholders Agreement contains voting agreements between the Company and each of the Investors, including
the requirement that each Investor shall vote all of the shares of Common Stock that it beneficially owns (a) in favor of all director
nominees, other than CD&R Investor Nominees or director nominees proposed by a Golden Gate Investor, nominated by the Board
for election by the stockholders of the Company in accordance with the terms of the New Stockholders Agreement and the By-Laws,
(b) as recommended by the Board, on any and all (i) proposals relating to or concerning compensation or equity incentives for directors,
officers or employees of the Company adopted in the ordinary course of business consistent with past practice, (ii) proposals by
stockholders of the Company, other than a proposal by a CD&R Investor or a Golden Gate Investor, and (iii) proposals the subject
matter of which is a CD&R Investor Consent Action (as defined in the New Stockholders Agreement), provided that, in respect
of clauses (i) and (iii) only, that the Board’s recommendation is consistent with the CD&R Investors’ exercise
of their consent rights provided in the New Stockholders Agreement, and (c) not in favor of any transaction constituting, or that
would result in, a Change of Control (as defined in the New Stockholders Agreement) that has not been approved by a majority of
the Independent Non-CD&R Investor Directors, if the per share consideration to be received by any CD&R Investor or Golden
Gate Investor in connection with such transaction is not equal to, and in the same form as, the per-share consideration to be received
by the shareholders not affiliated with the Investors.
Each CD&R Investor
and Golden Gate Investor will also have preemptive rights to subscribe for any equity securities the Company proposes to issue
in accordance with each Investor’s percentage beneficial ownership of Common Stock, subject to customary exceptions. The
CD&R Investors and the Golden Gate Investor Group have each agreed, among other things, that until such time that its percentage
beneficial ownership of the outstanding Common Stock falls below 10% and stays below such threshold for a period of six months,
to be subject to standstill, voting and transfer restrictions and limitations, including a prohibition on transferring Common Stock
to any third party or group that beneficially owns, or would, after giving effect to such transfer, beneficially own 10% or more
of Common Stock outstanding. The Company and the CD&R Fund VIII Investors terminated the Old Stockholders Agreement pursuant
to the terms of the New Stockholders Agreement.
Pursuant to the terms
of the Merger Agreement, the Company entered into a registration rights agreement (the “New Registration Rights Agreement”),
dated November 16, 2018, with the CD&R Investors and the Golden Gate Investors, pursuant to which the Company granted the CD&R
Investors and the Golden Gate Investors customary demand and piggyback registration rights, including rights to demand registrations
and underwritten shelf registration statement offerings with respect to the shares of Common Stock that are held by the CD&R
Investors and the Golden Gate Investors following the consummation of the Merger. The Company and the CD&R Fund VIII Investors
terminated the Old Registration Rights Agreement pursuant to the terms of the New Registration Rights Agreement.
As holders of approximately
49.4 % of our outstanding Common Stock as of the Ownership Date, the CD&R Investors will be able to significantly influence
matters submitted to stockholders for vote.
As a result of their
respective positions with CD&R, LLC and its affiliates, Mr. Krenicki, Mr. Sleeper and Mr. Zrebiec may be deemed to have an
indirect material interest in certain agreements executed in connection with the Equity Investment and the Merger, including:
|
•
|
an Indemnification Agreement indemnifying CD&R and its affiliates against certain liabilities
arising out of the transactions with CD&R and certain other liabilities and claims;
|
|
•
|
the New Stockholders Agreement; and
|
|
•
|
the New Registration Rights Agreement.
|
For additional information
regarding the transactions with CD&R, LLC and the CD&R Investors’ relationship with CD&R, LLC and the above referenced
agreements, see “Item 1. Business” and “Item 1A. Risk Factors” of the Original Filing, as well as Notes
12, 13 and 23 to our audited financial statements included in the Original Filing.
Item 14. Principal
Accounting Fees and Services
Our Independent Auditors
and Fees
Grant Thornton LLP has served as our principal independent registered public accounting firm since October 29, 2018, and Ernst & Young LLP served as our principal independent registered public accounting firm until October 28, 2018.
Audit Fees
. We
incurred fees of $2,289,285 during Fiscal 2018 and $2,473,345 during Fiscal 2017 for Ernst & Young LLP’s independent
audit of our annual financial statements, review of the financial statements contained in our quarterly reports on Form 10-Q and
assistance regarding other SEC filings. All of the audit services provided to us by Ernst & Young LLP during Fiscal 2018 and
Fiscal 2017 were pre-approved by the Audit Committee.
Audit-Related Fees
.
We did not incur any audit-related fees during Fiscal 2018 or 2017.
Tax Fees
. We did
not incur any tax fees during Fiscal 2018 or 2017.
All Other Fees
.
We incurred fees of $2,160 during Fiscal 2018 and $2,143 during Fiscal 2017 for research tool subscriptions rendered by Ernst &
Young LLP. All of the research tool subscriptions provided to us by Ernst & Young LLP during Fiscal 2018 and Fiscal 2017 were
pre-approved by the Audit Committee.
Pre-Approval Policies
and Procedures for Audit and Non-Audit Services
The Audit Committee has
developed policies and procedures concerning its pre-approval of the performance of audit and non-audit services for us by Grant
Thornton LLP. These policies and procedures provide that the Audit Committee must pre-approve all audit and permitted non-audit
services (including the fees and terms thereof) to be performed for us by Grant Thornton LLP, subject to the de minimis exception
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the Audit Committee before the
completion of the audit. In pre-approving all audit services and permitted non-audit services, the Audit Committee or a delegated
member must consider whether the provision of the permitted non-audit services is compatible with maintaining the independence
of Grant Thornton LLP and its status as our independent auditors.
The Audit Committee has
delegated to its members the authority to consider and approve management proposals for the engagement of Grant Thornton LLP to
perform certain permitted non-audit services for fees of up to an aggregate of $25,000 between quarterly meetings of the Audit
Committee; provided that those pre-approvals are presented to the entire Audit Committee at its next regularly scheduled meeting.
Management proposals arising between quarterly Audit Committee meetings are presented for pre-approval to the Chair of the Audit
Committee, Mr. Forbes, and in the event of his unavailability, to another member of the Audit Committee.
All of the services performed
by Ernst & Young LLP in Fiscal 2018 were approved in advance by the Audit Committee pursuant to the foregoing pre-approval
policy and procedures. Additionally, during Fiscal 2018, Ernst & Young LLP did not provide any services prohibited by the Sarbanes-Oxley
Act of 2002.