Executive Compensation
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2022 Peer Group
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AAR
Corp. |
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GMS Inc. |
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Rush Enterprises, Inc. |
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APi Group
Corporation |
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MRC Global Inc. |
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ScanSource, Inc. |
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Avient
Corporation |
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MSC Industrial Direct Co., Inc. |
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SiteOne Landscape Supply, Inc. |
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Beacon Roofing
Supply, Inc. |
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NOW Inc. |
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UniFirst Corporation |
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BlueLinx
Holdings Inc. |
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Owens & Minor, Inc. |
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Univar Solutions Inc. |
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Boise Cascade Company |
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Patterson Companies, Inc. |
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Watsco, Inc. |
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Fastenal
Company |
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Pool Corporation |
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The following companies were in the peer group in previous years but were removed for 2022 after being acquired or for reasons of size
or business change: Anixter International Inc., BMC Stock Holdings, Inc., HD Supply Holdings, Inc., Kaman Corporation, LKQ Corporation, WESCO International, Inc., and Wesco Aircraft Holdings, Inc.
Pay Governance then prepared a compensation review and assessment, analyzing the competitiveness of target compensation for Applieds CEO and CFO positions
relative to comparable Peer Group data. Pay Governance did not analyze Peer Group data for other officer positions for 2022, but reported on broader compensation trends to assist the Committee in evaluating target pay levels.
The study identified Peer Group pay for each position at the 25th, 50th, and 75th percentile levels. The 50th percentile is referred to here as the
market median and represents Applieds target pay objective.
Beyond the Peer Group data, Pay Governance presented other pay data from several
broad industrial company surveys, as well as from the previous peer group. The Committee requested this supplemental data to help confirm the Peer Group datas reliability.
Pay Governance analyzed base salary, annual incentive target compensation as a percentage of base salary, total cash target compensation (base salary plus annual
incentive target compensation), long-term incentive target compensation, and total direct target compensation (total cash target compensation plus long-term incentive target compensation).
The study also compared Applieds performance in each of the past five years with the Peer Group companies performance, considering metrics such as sales
growth, EBITDA growth, cash flow growth, EBITDA margin, cash flow margin, net income margin, ROA, and total shareholder return. The comparisons assist the Committee in examining how Applieds executive pay aligns with company performance
relative to peers.
Using Pay Governances study, the Committee evaluated each primary compensation component. In most years, including 2022, the Committee
seeks to compensate executives near the market median if Applieds performance targets are achieved. Sustained performance below target levels should result in realized total compensation below market medians, and performance that exceeds
target levels should result in realized total compensation above market medians.
However, market medians and ranges only represent beginning reference points; the
Committee also uses its subjective judgment to adjust targeted compensation to reflect factors such as individual performance and skills, long-term potential, tenure in the position, internal equity, retention considerations, and the positions
importance in Applieds organization.
Detailed Review of Compensation Components
Base Salary. The Committee observes a general policy that base salaries for executive officers who have held their positions for at least three years and are meeting performance expectations should approximate the market
median for comparable positions. As with all pay components, however, the Committee, using its subjective judgment, sets salaries higher or lower to reward individual performance and skills and other considerations such as those mentioned above.
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Applied Industrial Technologies 2022 Proxy Statement |