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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant ☒ |
Filed by a Party other than the Registrant ☐ |
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| ☐ | Preliminary Proxy Statement |
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| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under §240.14a-12 |
| | | | | | | | |
GMS INC. |
(Name of Registrant as Specified In Its Charter) |
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Dear Fellow Shareholders,
At GMS, Inc., we have a clear vision – to be the premier distributor of building products in all of the markets we serve. By closing out another strong fiscal year of growth in sales and profits, we again demonstrated our commitment to our customers and to our values which guide our actions every day in the market.
We achieved record levels of net sales, net income, Adjusted EBITDA*, and cash flow generation for fiscal 2023. Net sales were $5.3 billion, an increase of 15% compared to the prior year, net income increased 22% to $333.0 million, net income as a percent of sales increased 30 basis points to 6.2%, Adjusted EBITDA* grew 17% to $665.7 million, and Adjusted EBITDA margin* improved 30 basis points to 12.5%. Net debt leverage improved from 1.8 times at the end of fiscal 2022 to 1.4 times at April 30, 2023. And, finally, during fiscal 2023, with an expanded authorization from our Board of Directors, we repurchased 2.3 million shares of common stock for $110.6 million, compared with 715,709 shares repurchased during fiscal 2022 for $35.5 million.
By staying focused on the execution of our four strategic priorities we have, again this year, grown the business and added significant value for our shareholders. Throughout our fiscal 2023, we made progress across these key priorities:
•Expand share in core products: We strengthened existing relationships and broadened our customer base across end markets in wallboard, steel framing and ceilings. As such, we believe that we continue to maintain or grow share in each of our core product categories.
•Grow complementary products: We furthered the growth of our complementary products. We expanded the AMES footprint. We entered the New York City market through the acquisition of Tanner Bolt & Nut, Inc., a leading distributor of tools, fasteners and other related construction products, and we purchased Blair Building Materials, Inc., a highly respected provider of complementary products in Ontario, Canada.
•Platform expansion: We completed four acquisitions and opened six new greenfield yards and 11 AMES stores. Expanding our footprint, scale, and product offerings remains a key priority, and we have a healthy list of opportunities in our pipeline of core and complementary focused businesses.
•Drive improved productivity and profitability: Through technology initiatives, we have generated improvements in efficiencies and profitability, such as consolidating certain back-of-house functions, furthering the roll-out of fleet optimization tools and using a more data-driven approach across the business in understanding and making decisions.
We are continually evaluating opportunities to ensure that our capital structure and allocation priorities align with our four-pillar strategy, balancing investing in our organic growth initiatives, pursuing accretive M&A transactions, paying down debt, and opportunistically leveraging favorable market conditions to repurchase shares.
As part of our commitment to sustainability and transparency, we are publishing our inaugural Corporate Social Responsibility Report, which is available on our website at https://www.gms.com/corporate-social-responsibility. The report utilizes the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-Related Financial Disclosures (TCFD) frameworks. The report highlights our focus on providing a safe work environment for our employees and customers. We are proud to have reduced our total recordable incident rate by 11% over the last two years. Our Corporate Social Responsibility Report also features disclosure of our Scope 1 and Scope 2 greenhouse gas emissions baseline and in terms of corporate governance, all directors are now elected annually following our previously announced board declassification.
___________________________________
*Adjusted EBITDA and Adjusted EBITDA margin are Non-GAAP financial measures. For a reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to the most directly comparable GAAP measures, see Appendix.
The credit for our performance goes to the more than 7,000 colleagues who work every day to provide exceptional customer service while our customers experience the familiarity of a local business. Looking ahead, we are entering fiscal 2024 aligned around the same commitment to deliver best-in-class service to our customers. While slower single-family housing conditions are expected to impact our results year over year in the near-term, over the longer-term, we believe that leveraging our scale, our extensive portfolio of products, and our expertise and ability to serve both commercial and residential customers should drive growth and bring value to all our stakeholders.
Thank you for your confidence and support of our company. We hope you will participate in our Annual Meeting in October. Your participation is important, so please exercise your right to vote.
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| Sincerely, | | |
| | |
| /s/ John J. Gavin | | /s/ John C. Turner, Jr. |
| John J. Gavin | | John C. Turner, Jr. |
| Chair of the Board of Directors | | President and Chief Executive Officer |
GMS INC.
100 Crescent Centre Parkway, Suite 800
Tucker, Georgia 30084
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 18, 2023
NOTICE IS HEREBY GIVEN that the 2023 Annual Meeting of Stockholders (the “Annual Meeting) of GMS Inc., will be held virtually on Wednesday, October 18, 2023, at 8:00 a.m. (Eastern Time), for the purposes of considering and acting on the four proposals below and any other business as may properly come before the Annual Meeting or any adjournments or postponements thereof:
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| Proposal | | Board
Recommendation |
1 | To elect the nine director nominees identified in this Proxy Statement | | FOR each nominee |
2 | To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending April 30, 2024 | | FOR |
3 | To approve, on an advisory basis, the compensation of our named executive officers | | FOR |
4 | To approve, by a non-binding advisory vote, the frequency of future advisory votes on the compensation of the Company’s named executive officers | | 1 YEAR |
This year’s Annual Meeting will be held in a virtual format only. We believe this format enhances stockholder access to the Annual Meeting by enabling stockholder attendance and participation from anywhere, without cost. Stockholders of record at the close of business on September 1, 2023 are entitled to receive notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.
It is important that your shares be represented and voted whether or not you plan to attend the Annual Meeting. You may vote on the Internet, by telephone or by completing and mailing a proxy card. Voting over the Internet, by telephone or by written proxy will ensure your shares are represented at the Annual Meeting.
Securities and Exchange Commission rules allow companies to furnish proxy materials to their stockholders on the Internet. We are pleased to take advantage of these rules and believe that they enable us to provide you with the information you need, while making delivery more efficient and more environmentally friendly. In accordance with these rules, a Notice of Internet Availability of Proxy Materials containing instructions on how to access this Proxy Statement and our fiscal 2023 Annual Report is first being mailed on or about September 8, 2023 to all stockholders entitled to vote at the Annual Meeting. The Notice of Internet Availability of Proxy Materials also provides instructions on how to vote online, by telephone or by completing and mailing a proxy card and includes instructions on how to request a printed set of the proxy materials.
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| By Order of the Board of Directors, |
| |
| /s/ Craig D. Apolinsky |
| Craig D. Apolinsky |
| Senior Vice President, General Counsel and Corporate Secretary |
Tucker, Georgia
September 8, 2023
IMPORTANT INFORMATION REGARDING THE AVAILABILITY OF PROXY MATERIALS
This Notice of Meeting, Proxy Statement, Proxy Card and our fiscal 2023 Annual Report, which includes our Annual Report on Form 10-K for the fiscal year ended April 30, 2023, are available at investor.gms.com.
YOUR VOTE IS VERY IMPORTANT. PLEASE CAREFULLY READ THE ATTACHED PROXY STATEMENT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE URGE YOU TO VOTE AND SUBMIT YOUR PROXY OVER THE INTERNET, BY TELEPHONE OR MAIL.
GMS INC.
TABLE OF CONTENTS
GMS INC.
100 Crescent Centre Parkway, Suite 800
Tucker, GA 30084
PROXY HIGHLIGHTS
We are providing these materials in connection with the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of GMS Inc. This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. Please read the entire Proxy Statement carefully before voting as it contains important information about matters upon which you are being asked to vote.
2023 Annual Meeting of Stockholders
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| Date and Time | | Record Date | | Location |
October 18, 2023 at 8:00 a.m. (local time) | | September 1, 2023 | | This year’s meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/GMS2023 |
Proposals and Voting Recommendations
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| Proposal | | Board
Recommendation |
1 | To elect the nine director nominees identified in this Proxy Statement | | FOR each nominee |
2 | To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending April 30, 2024 | | FOR |
3 | To approve, on an advisory basis, the compensation of our named executive officers | | FOR |
4 | To approve, by a non-binding advisory vote, the frequency of future advisory votes on the compensation of the Company’s named executive officers | | 1 YEAR |
About GMS
GMS Inc. (together with its consolidated subsidiaries, “we,” “our,” “us,” “GMS” or the “Company”), through its wholly owned operating subsidiaries, operates a network of more than 300 distribution centers with extensive product offerings of wallboard, ceilings, steel framing and complementary construction products. We also operate more than 100 tool sales, rental and service centers. Through these operations, we provide a comprehensive selection of building products and solutions for our residential and commercial contractor customer base across the United States and Canada. Our unique operating model combines the benefits of a national platform and strategy with a local go-to-market focus, enabling us to generate significant economies of scale while maintaining high levels of customer service.
Since our founding in 1971, we have grown our business from a single location to more than 300 distribution centers across 47 U.S. states and six Canadian provinces through a combination of strategic acquisitions, opening new distribution centers, and organic growth. Underpinning that growth is our entrepreneurial culture, which both enables us to drive organic growth by delivering outstanding customer service and makes us an attractive acquirer for smaller distributors.
Fiscal 2023 Business Highlights
Driving Growth in Product Lines, Diversifying Offerings & Expanding Service Territories
In fiscal 2023, we remained focused on building on our competitive advantage – significant scale, outstanding service and strong supplier relationships. The investments we have made over the past several years position us well for near-term supply and demand dynamics as well as long-term success.
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7,000+ | 60+ | 300+ | 100+ |
Dedicated GMS Team Members | Leading Brands | Distribution centers across the U.S. and Canada | Tool sales, rentals and service centers |
Key Financial Highlights
In 2023, GMS achieved record-setting financial results with significant year-over-year growth, and continued to deliver value to you, our shareholders. Despite the challenges GMS and the broader economy faced, GMS reported record performance while maintaining a relentless focus on delivering best-in-class service for our customers, suppliers, and communities.
Corporate Social Responsibility Highlights
GMS is committed to fostering good corporate social responsibility practices that support the success of our customers, employees, communities, shareholders and other stakeholders.
•Promoting Corporate Social Responsibility Transparency
◦Published our inaugural Corporate Social Responsibility report, available at www.gms.com/corporate-social-responsibility
◦Disclosed performance using the SASB and TCFD frameworks
•Offering Customers Cleaner, More Efficient Building Materials and Products
◦To support our work of offering more environmentally-friendly products, we partnered with a third party to identify the products we stock that have sustainability attributes
•Taking Action to Reduce Emissions
◦Established and disclosed our Scope 1 and Scope 2 greenhouse gas emissions baseline
◦Adopted first-of-their-kind battery powered hydraulic cranes to our fleet
◦Implementing operational energy efficiency measures including increased LED lighting
•Supporting Our Team Member Success
◦Improved our safety performance with an 11% decrease in our total recordable incident rate over the last two years
◦Continued formalized training programs aimed to retain traditionally underrepresented groups as part of our inclusion and diversity (“I&D”) program
Governance Highlights
The Board of Directors (the “Board”) of GMS is committed to strong corporate governance practices that reflect high standards of ethics and integrity and promote long-term stockholder value. Our Board continually analyzes our corporate governance practices in light of evolving practices as well as the Company’s changing business and shareholder base. As a result of this continued evaluation, over the past several years we have taken the following actions, among others, to strengthen our corporate governance practices:
•Added two female directors;
•Added two African American directors;
•Declassified the Board;
•Eliminated supermajority voting requirements in our Certificate of Incorporation (the "Charter") and Bylaws (the "Bylaws");
•Formally incorporated Corporate Social Responsibility oversight into our Nominating and Corporate Governance Committee Charter;
•Included human capital management oversight and risk monitoring in the Human Capital Management and Compensation Committee Charter; and
•Formally assigned oversight of cybersecurity and information technology risks to the Audit Committee.
Compensation Highlights
The Human Capital Management and Compensation Committee of the Board continues its past practice of implementing performance incentives, pursuant to which the Company’s executives may earn annual cash incentives and long-term incentive compensation in the form of Company stock options and restricted stock unit awards.
The annual cash incentives for our named executive officers are based 80% on achievement of Adjusted EBITDA targets and 20% on achievement of working capital as a percentage of sales targets.
Every year, we provide for a stockholder advisory vote on executive compensation, which gives stockholders the opportunity to endorse or not endorse our named executive compensation program. At our 2022 Annual Meeting of Stockholders, our stockholders approved the Company’s named executive compensation program with 99% of the votes cast being voted in favor.
PROPOSAL 1—ELECTION OF DIRECTORS
Our Board has nominated nine people for election as directors at the Annual Meeting. Each of the nominees currently is a director of the Company. If our stockholders elect these directors, then the directors will hold office until the annual meeting of stockholders in 2024, or until their successors have been duly elected and qualified, subject to the director’s earlier death or resignation or removal. The Board is now fully declassified and all Board members are standing for annual election.
Each of the Board’s nominees has consented to be named in this Proxy Statement and has agreed to serve if elected. If for some reason any of the Board’s nominees is unable to serve or for good cause will not serve if elected, the persons named as proxies may vote for a substitute nominee recommended by the Board and, unless you indicate otherwise on the proxy card, your shares will be voted in favor of the Board’s remaining nominees.
We believe each of the Board’s nominees meets the qualifications established by the Board for service on our Board and has professional experience in areas that are extremely relevant to our strategy and operations. We also believe that the skills, experience, backgrounds and attributes of the Board’s nominees make them the best candidates to serve on our Board.
The following table highlights specific experience, skills, qualifications and attributes of our directors that are important to us and how the composition of our nominees for the Board meets these needs. A director may possess additional experience, skills, qualifications and attributes, even if not specifically indicated below.
Nominees for Election of Directors
The Board has nominated the following directors for election as directors for one-year terms expiring at the annual meeting of stockholders in 2024:
| | | | | | | | | | | |
| Experience |
| • | Big Lots, Inc., Executive Vice President, Chief Merchandising and Operating Officer (2015 – 2020), Executive Vice President, Chief Operating Officer (2012 – 2015), Senior Vice President, Supply Chain Management and Chief Information Officer (2010 – 2012),
Senior Vice President Merchandise Planning and Allocation and Chief Information Officer (2005 – 2010), Senior Vice President Merchandise Planning, Allocation and Presentation (2002 – 2005), a leading discount retailer operating over 1,400 stores in 47 states |
| • | Ames Department Stores, Inc., Senior Vice President Planning and Allocation (1997 – 2002), formerly the fourth-largest discount retailer in the country |
| Lisa M. Bachmann | • | Casual Corner Group, Inc., Vice President of Planning and Allocation, formerly an American retail clothing chain operating under the names Casual Corner, Petite Sophisticate and August Max Woman brands, among others, with more than 1,200 stores at its peak |
| | | |
Age: 62 | Qualifications |
| | • | Public Company Leadership |
Independent Director Since: 2020 | • | Public Company Board Experience |
| | • | High Level of Financial Literacy |
| Committees | • | Distribution |
| • | Audit | • | Strategy Development |
| • | Nominating and Corporate | • | Mergers & Acquisitions |
| Governance | • | Diversity |
| | | |
| | Education |
| | • | BS, Accounting, Western New England University |
| | • | MBA, Western New England University |
| | | |
| | Other Boards |
| | • | Currently serves on the board of directors of Dorman Products, Inc., a publicly traded company |
| | | | | | | | | | | |
| Experience |
| • | Peter Browning Partners, LLC, Managing Director (2009 – present), a board advisory firm |
| • | Nucor Corporation, Lead Director, Non-Executive Chair (2006 – 2012); Non-Executive Chair (2000 – 2006), a publicly traded producer of steel and related products |
| • | McColl Graduate School of Business at Queens University of Charlotte, North Carolina, Dean (2002 – 2005) |
| • | Sonoco Products Company, President and Chief Executive Officer, President and Chief Operating Officer, and Executive Vice President (1993 – 2000), a manufacturer of industrial and consumer packaging products |
| Peter C. Browning | • | National Gypsum Company, Chair, President, and Chief Executive Officer (1989 – 1993), a privately held manufacturer and supplier of building and construction products |
| | | |
Age: 82 | Qualifications |
| | • | Public Company Leadership |
Independent Director Since: 2014 | • | Public Company Board Experience |
| | • | High Level of Financial Literacy |
| Committees | • | Building Products or Construction Industry |
| • | Human Capital Management | • | Distribution |
| and Compensation | • | Strategy Development |
| • | Nominating and Corporate | • | Mergers & Acquisitions |
| Governance | • | Corporate Governance |
| | | |
| | Education |
| | • | MBA, University of Chicago – Booth School of Business |
| | • | BA, History, Colgate University |
| | | |
| | Other Boards |
| | • | Currently serves on the board of directors of ScanSource, Inc., a publicly traded company. |
| | • | Previously served on the board of directors of the following publicly traded companies: Acuity Brands, Inc., EnPro Industries, Inc., Lowe’s Companies, Inc., Nucor Corporation, The Phoenix Companies, Inc., Wachovia Corporation, Sykes Enterprises, and Loctite Corp. |
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| Experience |
| • | Goldman Sachs Value Accelerator, Operating Advisor (2021 – present), a centralized platform that partners with Goldman Sachs portfolio companies to build enduring businesses and create incremental value by leveraging the Goldman Sachs network |
| • | LLR Partners, Inc., Senior Operating Advisor (2010 – 2017), a growth-oriented private equity firm |
| • | Drake, Beam, Morin, Inc., Vice Chairman, Chief Executive Officer and President (2006 – 2009), an international career management and transitions management firm |
| • | Right Management Consultants, Inc., President and Chief Operating Officer (1996 – 2004), a global provider of integrated consulting solutions across the employment lifecycle |
| John J. Gavin | • | Andersen Worldwide, Partner (1990 – 1996), a global firm providing a wide range of tax, valuation, financial advisory and related consulting services to individual and commercial clients |
| | | |
Age: 67 | Qualifications |
| | • | Public Company Leadership |
Independent Director Since: 2014 | • | Public Company Board Experience |
| | • | High Level of Financial Literacy |
Chair of the Board Since: 2019 | • | Building Products or Construction Industry |
| • | Strategy Development |
| Committees | • | Mergers & Acquisitions |
| • | Audit (Chair) | • | Corporate Governance |
| | | |
| • | Nominating and Corporate | Education |
| Governance | • | Graduate of Temple University |
| | |
| | Other Boards |
| | • | Currently serves on the board of directors of Dorman Products, Inc., a publicly traded company and on the Advisory Board on the Center for Corporate Governance for Drexel University, Philadelphia |
| | • | Previously served on the board of directors of the following publicly traded companies: CSS Industries, Inc., DFC Global Corp, and Interline Brands, Inc. |
| | • | Currently serves on the board of directors of various privately held companies |
| | | | | | | | | | | |
| Experience |
| • | NES Fircroft, Chief Executive Officer (2014 – present), a global solutions company specializing in recruiting and deploying engineering talent to meet client needs in more than 65 countries |
| • | AEA Investors LP, Managing Director and Operating Partner (2013 – 2014), a leading global private investment firm |
| • | Adecco Group North America, CEO (2007 – 2012), a multi-brand specialty staffing and workforce solutions company |
| • | Spent 20 years with PricewaterhouseCoopers LLP and then IBM Business Consulting Services when it acquired PricewaterhouseCoopers Consulting; led the global supply chain management consulting services business, as well as the Americas consumer, wholesale distribution and software industry practices at IBM |
| | | |
| Theron I. Gilliam | Qualifications |
| • | Public Company Board Experience |
Age: 58 | • | High Level of Financial Literacy |
| | • | Building Products or Construction Industry |
Independent Director Since: 2014 | • | Strategy Development |
| | • | Mergers & Acquisitions |
| | | |
| Committees | Education |
| • | Human Capital Management | • | MBA, Systems Engineering, Columbia University |
| and Compensation | • | BS, Systems Engineering, University of Virginia |
| | |
| • | Nominating and Corporate | Other Boards |
| Governance | • | Currently serves on the board of directors of Lennar Corporation, a publicly traded company |
| | • | Previously served on the board of directors of Work Market, Inc., a privately held company |
| | | | | | | | | | | |
| Experience |
| • | BlueLinx Holdings, Inc., Advisor to Chief Executive Officer (2022), President and Chief Executive Officer (2014 – 2021), a leading distributor of building and industrial products in the United States |
| • | Euramax Holdings, Inc., now known as OmniMax International, Inc., President and Chief Executive Officer (2008 – 2013), Chief Operating Officer (2005 – 2008), Executive Vice President (2002 – 2005), Group Vice President (1997 – 2002), and President (1992 – 1997), a leading North American building products manufacturer. |
| • | Alumax, Inc., Corporate Counsel, a fabricator of aluminum products for the transportation, distribution, building and construction, packaging, and consumer durables markets |
| Mitchell B. Lewis | • | Alston & Bird LLP, Attorney, Mergers and Acquisitions |
| | | |
Age: 61 | Qualifications |
| | • | Public Company Leadership |
Independent Director Since: 2019 | • | Public Company Board Experience |
| | • | High Level of Financial Literacy |
| Committees | • | Building Products or Construction Industry |
| • | Audit | • | Distribution |
| • | Nominating and Corporate | • | Strategy Development |
| Governance | • | Mergers & Acquisitions |
| | • | Corporate Governance |
| | | |
| | Education |
| | • | BA, Economics, Emory University |
| | • | JD, University of Michigan Law School |
| | |
| | Other Boards |
| | • | Currently serves on the board of directors of BlueLinx Holdings, Inc., a publicly traded company, on the board of directors of Meteor Education, a privately held company, and on the board of directors of BCDI Meteor Holdings, LP, a Bain Capital Double Impact portfolio company |
| | • | Previously served on the board of directors of Euramax Holdings, Inc., a privately held company |
| | | | | | | | | | | |
| Experience |
| • | United Parcel Service, Senior Vice President, Executive Management Committee (2005 – 2019), an American multinational shipping & receiving and supply chain management company |
| • | Prior roles with United Parcel Service include General Counsel and Corporate Secretary, Chief Human Resources Officer, and Senior Vice President of Compliance, Public Affairs, Communications, and Labor and Employment Counsel with subsequent roles in the legal department, compliance and operations before being promoted to the senior leadership team |
| • | Troutman Sanders law firm now Troutman Pepper, Attorney, Civil Litigation and Labor & Employment |
| |
| Qualifications |
| Teri P. McClure | • | Public Company Leadership |
| | • | Public Company Board Experience |
Age: 59 | • | High Level of Financial Literacy |
| | • | Building Products or Construction Industry |
Independent Director Since: 2019 | • | Distribution |
| | • | Strategy Development |
| Committees | • | Mergers & Acquisitions |
| • | Human Capital Management | • | Corporate Governance |
| and Compensation | • | Diversity |
| | | |
| • | Nominating and Corporate | Education |
| Governance (Chair) | • | BSBA, Economics and Marketing, Washington University in St. Louis |
| | • | JD, Emory University School of Law |
| | |
| | Other Boards |
| | • | Currently serves on the board of directors of Fluor Inc., Lennar Corporation and JetBlue, each a publicly traded company |
| | • | Serves as the Compensation Committee Chair of Lennar Corporation and JetBlue |
| | | | | | | | | | | |
| Experience |
| • | PepsiCo Frito-Lay North America, Senior Vice President and General Manager (1993 – 2017), one of the leading global companies in the snack chip industry
Served in numerous positions of increasing responsibility covering operations, sales and marketing, customer engagement and strategy |
| • | Procter & Gamble, Vice President, Sales and Marketing (1981 – 1993), an American multinational consumer goods corporation |
| • | Maytag Corporation, Senior Vice President (1999 – 2001), an American home and commercial appliance company owned by Whirlpool Corporation |
| |
| Qualifications |
| Randolph W. Melville | • | Public Company Leadership |
| | • | Public Company Board Experience |
Age: 64 | • | Distribution |
| | • | Strategy Development |
Independent Director Since: 2020 | • | Diversity |
| | | |
| | Education |
| Committees | • | BS, Sociology, Princeton University |
| | |
| • | Audit | Other Boards |
| • | Nominating and Corporate | • | Currently serves on the board of directors of Saia, Inc., a publicly traded company |
| Governance | • | Serves as the Chair of the Compensation Committee of Saia, Inc. |
| | • | Serves on the Board of Trustees for Northwestern Mutual |
| | • | Previously served on the board of directors of Interline Brands, Inc. and as a member of the Compensation Committee of Interline Brands, Inc. |
| | | | | | | | | | | |
| Experience |
| • | Euramax International, Inc., Chair, Chief Executive Officer and President (1996 – 2008), a privately owned global producer of residential, commercial, and architectural building products |
| • | Nortek, Inc., Chair (2010 – 2015) and Interim CEO (2011), a publicly owned producer of residential, commercial, and architectural building products |
| |
| Qualifications |
| • | Public Company Leadership |
| • | Public Company Board Experience |
| | • | High Level of Financial Literacy |
| J. David Smith | • | Building Products or Construction Industry |
| | • | Distribution |
Age: 74 | • | Strategy Development |
| | • | Mergers & Acquisitions |
Independent Director Since: 2014 | • | Corporate Governance |
| | | |
| | Education |
| Committees | • | BA, Political Science, Gettysburg College |
| | |
| • | Audit | Other Boards |
| • | Human Capital Management and Compensation (Chair) | • | Currently serves on the board of directors of BlueLinx Holdings, Inc., a publicly traded company |
| • | Nominating and Corporate Governance | • | Previously served on the board of directors and committees of the following privately held companies: Air Distribution Technologies, Henry Company, Houghton International, Inc., DiversiTech, Inc., Chair of Siamons International, Inc., and Chair of Euramax International, Inc. |
| | • | Previously served on the board of directors and committees of publicly held companies: Chair, Select Interior Concepts, Inc., Chair of Nortek, Inc., and Commercial Metals Company |
| | | | | | | | | | | |
| Experience |
| • | Gypsum Management and Supply, Inc., President and Chief Executive Officer (2019 – Present), a leading distributor of construction products for commercial and residential building supply needs for local contractors in North America |
| • | Dal-Tile, a division of Mohawk Industries, Inc., President (2012), Senior Vice President of Sales (2005), Senior Vice President of Operations (2008 – 2011), and Chief Operating Officer (2011 – 2012), the world’s leading global flooring manufacturer |
| |
| Qualifications |
| John C. Turner, Jr. | • | Public Company Leadership |
| | • | Public Company Board Experience |
Age: 55 | • | High Level of Financial Literacy |
| | • | Building Products or Construction Industry |
Director Since: 2019 | • | Distribution |
| | • | Strategy Development |
| Committees | • | Mergers & Acquisitions |
| | | |
| • | None | Education |
| | • | BS BUAD, Marketing/Marketing Management, General, University of Southern California |
| | |
| | Other Boards |
| | • | Currently serves on the board of directors of TLB MM Corp., a privately held company |
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES LISTED ON THE PROXY CARD.
BOARD SELECTION AND ELECTION
Director Selection Process
The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director nominees and recommending to the Board those candidates to be nominated for election to the Board. The Nominating and Corporate Governance Committee does not apply any specific minimum qualifications when considering director nominees. Instead, the Nominating and Corporate Governance Committee considers all factors it deems appropriate, which may include, among others (a) ensuring that the Board, as a whole, is appropriately diverse and the extent to which a candidate would fill a present need on the Board, (b) the Board’s size and composition, (c) our corporate governance policies and any applicable laws, (d) individual director performance, expertise, relevant business and financial experience, integrity and willingness to serve actively, (e) the number of other public and private company boards on which a director candidate serves, and (f) consideration of director nominees properly proposed by third parties with the legal right to nominate directors or by stockholders in accordance with our Bylaws. The Board monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. As a matter of practice, the Board considers diversity in the context of the Board as a whole and takes into account considerations relating to race, ethnicity, gender and the range of perspectives that the directors bring to their work. Stockholders may also nominate directors for election at the Company’s annual stockholders meeting by following the provisions set forth in the Company’s Amended and Restated Bylaws, whose qualifications the Nominating and Corporate Governance Committee will consider.
Board Diversity
The Board considers qualified candidates for membership on the Board without regard to race, color, religion, sex, ancestry, sexual orientation, national origin or disability. Our objective is to have wide diversity in terms of business experiences, functional skills, gender, race, ethnicity and cultural backgrounds. We believe that enhancing our Board’s diversity is for the Company’s and stockholders’ long-term benefit. Two of our Board members are women (Teri P. McClure and Lisa M. Bachmann) and two are of a race other than white (Teri P. McClure and Randolph W. Melville).
Board Declassification
Our Board was previously divided into three classes, with members of each class serving staggered three-year terms. At the 2020 annual meeting of stockholders, our stockholders approved amendments to our Charter to declassify our Board and to provide for the annual election of directors, beginning at the 2021 Annual Meeting of Stockholders. The amendments provided for the phased elimination of the classified structure of the Board over a three-year period. As of the 2023 annual meeting of stockholders, our Board is fully declassified (and all Board members are standing for annual elections).
Board of Directors' Independence
New York Stock Exchange (“NYSE”) listing standards require us to have a majority of independent directors on our Board. Under our Corporate Governance Guidelines and NYSE listing standards, a director is not independent unless our Board affirmatively determines that he or she does not have a material relationship with us or any of our subsidiaries. Our Corporate Governance Guidelines define independence in accordance with the independence definition in the current NYSE corporate governance rules for listed companies. Our Corporate Governance Guidelines require our Board to review the independence of all directors at least annually. In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the objective tests set forth in the NYSE independence definition, our Board will determine, considering all relevant facts and circumstances, whether such relationship is material.
Our Board is comprised of one management director and eight non-management directors. Our Board has affirmatively determined that each of our eight non-management directors, Lisa M. Bachmann, Peter C. Browning, John J. Gavin, Theron I. Gilliam, Mitchell B. Lewis, Teri P. McClure, Randolph W. Melville and J. David Smith, are independent directors under the rules of the NYSE and independent directors as such term is defined in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. John C. Turner, Jr., our President and Chief Executive Officer, our only management director, is not independent because of his position as an executive officer.
BOARD GOVERNANCE
Corporate Governance Guidelines
We have adopted the GMS Inc. Corporate Governance Guidelines (our “Corporate Governance Guidelines”), which provide a framework for the governance of the Company as a whole and describe the principles and practices that the Board follows in carrying out its responsibilities. Our Corporate Governance Guidelines address, among other things:
• the composition, structure and policies of the Board and its committees;
• director qualification standards;
• expectations and responsibilities of directors;
• management succession planning;
• the evaluation of Board performance;
• principles of Board compensation; and
• communications with stockholders and non-management directors.
Our Corporate Governance Guidelines further provide that the Board, acting through the Nominating and Corporate Governance Committee (as described below), conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively. In addition, our Corporate Governance Guidelines provide that each committee conduct a self-evaluation and compare its performance to the requirements of its charter.
Our Corporate Governance Guidelines are posted on our website at investor.gms.com/govdocs. Our Corporate Governance Guidelines are reviewed by the Nominating and Corporate Governance Committee from time to time to ensure that they effectively promote the best interests of both the Company and the Company’s stockholders and that they comply with all applicable laws, regulations and NYSE requirements.
Code of Business Conduct and Ethics
We have adopted a code of ethics applicable to all of our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website at investor.gms.com/govdocs. In the event that we amend or waive certain provisions of the Code of Business Conduct and Ethics applicable to our principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable Securities and Exchange Commission (“SEC”) rules, we will disclose the same on our website.
Board Oversight of Risk Management
Our Board administers its risk oversight function primarily through the Audit Committee and the Nominating and Corporate Governance Committee. To that end, our Audit Committee meets at least quarterly with our Chief Financial Officer and our independent auditors where it receives regular updates regarding our management’s assessment of risk exposures including liquidity, credit and operational risks, cybersecurity risks and the process in place to monitor such risks and review results of operations, financial reporting, and assessments of internal controls over financial reporting. Our Nominating and Corporate Governance Committee meets at least quarterly with our Chief Executive Officer and other executive leadership where it receives regular updates regarding our management’s assessment of risk exposures in addition to the risks considered by the Audit Committee.
Furthermore, the Chief Executive Officer’s membership on, and collaboration with, the Board allows our Chief Executive Officer to gauge whether management is providing adequate information for the Board to understand the interrelationships of our various business and financial risks. Our Chief Executive Officer is available to the Board to address any questions from other directors regarding executive management’s ability to identify and mitigate risks and weigh them against potential rewards.
Board Oversight of Cybersecurity and Information Security Risk
Our Board appreciates the importance of maintaining the confidence and trust of our customers, suppliers, and employees. As part of the Board’s role as independent oversight of the key risks facing our Company, the Board, through the Audit Committee, devotes regular and thorough attention to our data, information technology (“IT”) systems and their development (including the Company’s e-commerce strategy and its implementation) and protection of our data and IT systems, including business resilience, compliance, cybersecurity, and information security risk.
On an ongoing basis, the Company analyzes and assesses information security risks associated with our business. The assessment is primarily the responsibility of the Company’s information technology department. The Company seeks to adhere to the NIST Cyber-Security Framework, which provides best practice guidance on how to prevent, detect, and respond to cyberattacks. As part of the Company’s information security risk management program, the Company routinely tests our controls and information systems to help ensure we remain compliant with our security policies and procedures and industry standards and requires that IT infrastructure associated with sensitive customer credit card information be audited and certified by a quality security party. We also provide information security training for our employees and business partners. In addition, the Company maintains information security risk insurance.
Management updates the Board on the Company’s information security policies and procedures, including, training, risk assessment, internal controls, security software, evaluation and testing, insurance, incident response plans, and forward-looking information security strategies. Additionally, our policies require our Board to be notified of breaches to our information systems based on pre-defined severity thresholds.
Board Oversight of Corporate Social Responsibility
Our Board, via the Nominating and Corporate Governance Committee, oversees our corporate social responsibility program and performance. The Nominating and Corporate Governance Committee receives quarterly updates on our opportunities and risk management efforts of sustainability and corporate social responsibility matters. Our Executive Leadership Team, including our Chief Executive Officer, reviews our corporate social responsibility strategy and is responsible for addressing such initiatives as part of our business and planning.
BOARD ORGANIZATION
Board Leadership Structure
We separate the roles of Chief Executive Officer and Chair of the Board. These positions are currently held by John C. Turner, Jr., as our Chief Executive Officer, and John J. Gavin, as the Chair of the Board. We believe this leadership structure is appropriate for our Company due to the differences between the two roles. The Chief Executive Officer is responsible for setting our strategic direction, providing day-to-day leadership, and managing our business, while the Chair of the Board provides guidance to the Chief Executive Officer, chairs board meetings and executive sessions of our independent directors, and takes a leading role in setting the agendas for meetings of our Board. In addition, separating the roles of Chief Executive Officer and Chair of the Board allows the Chair to provide oversight of our management.
Meetings of the Board and Committees
During the fiscal year ended April 30, 2023, the Board held six meetings. All of the directors who served during the fiscal year ended April 30, 2023 attended at least 75% of the total meetings of the Board and each of the Board committees on which such director served during their respective tenure. Directors are expected to make best efforts to attend all Board meetings, all meetings of the committee or committees of the Board of which they are a member and the annual meeting of stockholders. Attendance by telephone or videoconference is deemed attendance at a meeting.
Pursuant to our Corporate Governance Guidelines, our Board currently plans to hold at least four meetings each year, with additional meetings to occur (or action to be taken by unanimous consent, either in writing or by electronic transmission) at the discretion of the Board.
Executive Sessions of Non-Management Directors
Pursuant to our Corporate Governance Guidelines, to ensure free and open discussion and communication among the non-management directors of the Board, the non-management directors meet in executive session at most Board meetings with no members of management present. The Chair of the Board presides at the executive sessions.
Committees of the Board
The Board has an Audit Committee, a Human Capital Management and Compensation Committee and a Nominating and Corporate Governance Committee, as described below. Currently, our Audit Committee, Human Capital Management and Compensation Committee and Nominating and Corporate Governance Committee consist entirely of independent directors. Each of the Audit Committee, Human Capital Management and Compensation Committee and Nominating and Corporate Governance Committee operates under a written charter approved by the Board, copies of which are available on our website at investor.gms.com/govdocs.
The following table shows the current membership of each committee of our Board and the number of meetings held by each committee during the fiscal year ended April 30, 2023:
| | | | | | | | | | | | | | | | | | | | |
| Director | | Audit
Committee | | Human Capital Management and Compensation
Committee | | Nominating and
Corporate
Governance
Committee |
| Lisa M. Bachmann | | P | | | | P |
| Peter C. Browning | | | | P | | P |
| John J. Gavin | | Chair | | | | P |
| Theron I. Gilliam | | | | P | | P |
| Mitchell B. Lewis | | P | | | | P |
| Teri P. McClure | | | | P | | Chair |
| Randolph W. Melville | | P | | | | P |
| J. David Smith | | P | | Chair | | P |
| Number of Fiscal Year 2023 Meetings | | 8 | | 5 | | 4 |
Audit Committee
Currently, the members of the Audit Committee are Mr. John J. Gavin, as Chair, Ms. Lisa M. Bachmann, Mr. Mitchell B. Lewis, Mr. Randolph W. Melville, and Mr. J. David Smith. Each of Mr. Gavin, Mr. Lewis and Mr. Smith qualify as an “audit committee financial expert” within the meaning of regulations adopted by the SEC. The Audit Committee recommends the annual appointment of our independent registered accounting firm, oversees our cyber security and data privacy programs, and reviews the independence of auditors and reviews the scope of audit and non-audit assignments and related fees, the results of the annual audit, accounting principles used in financial reporting, internal auditing procedures, the adequacy of our internal control procedures, related party transactions, and investigations into matters related to audit functions. The Audit Committee is also partially responsible for overseeing risk management on behalf of our Board. See “—Board Oversight of Risk Management.” Our Audit Committee consists entirely of independent directors.
The charter of the Audit Committee permits the committee to, in its discretion, delegate its duties and responsibilities to one or more subcommittees as it deems appropriate.
Human Capital Management and Compensation Committee
Currently, the members of the Human Capital Management and Compensation Committee are Mr. J. David Smith, as Chair, Mr. Peter C. Browning, Mr. Theron I. Gilliam, and Ms. Teri P. McClure. The principal responsibilities of the Human Capital Management and Compensation Committee are to review and approve matters involving executive and director compensation, recommend changes in employee benefit programs, authorize equity and other incentive arrangements, oversee our inclusion and diversity efforts, and authorize our Company to enter into employment and other related agreements with our executive officers. Our Human Capital Management and Compensation Committee consists entirely of independent directors.
The charter of the Human Capital Management and Compensation Committee permits the committee to, in its discretion, delegate its duties and responsibilities to a subcommittee of the Human Capital Management and Compensation Committee as it deems appropriate and to the extent permitted by applicable law.
In making executive compensation decisions during fiscal 2023, the Human Capital Management and Compensation Committee received advice from an independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”). Meridian's services during fiscal year 2023 are discussed in the Compensation Discussion and Analysis (“CD&A”) included below. Meridian did not provide any additional services to the Company other than those discussed in the CD&A.
Meridian conducted an annual review of its performance and prepared an annual independence document for the Human Capital Management and Compensation Committee that provided assurances and confirmation of the consultant’s independent status under the SEC’s and NYSE’s standards. The Human Capital Management and Compensation Committee then evaluated Meridian’s independence annually pursuant to the SEC’s rules and the NYSE’s rules. In making its determination, the Human Capital Management and Compensation Committee took into account, among other things, that no member of the Meridian team that works for the Human Capital Management and Compensation Committee has either a business or personal relationship with either any member of executive management or member of the Human Capital Management and Compensation Committee as defined by the NYSE’s rules.
Based on all considerations, the Human Capital Management and Compensation Committee concluded no conflict of interest existed in connection with the executive compensation services and considered Meridian to be independent.
Although Meridian is retained directly by the Human Capital Management and Compensation Committee, Meridian personnel interact with our executive officers as needed, specifically the Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer and General Counsel and their staffs to provide the Human Capital Management and Compensation Committee with relevant compensation and performance data for our executives and the Company.
Nominating and Corporate Governance Committee
Currently, the members of the Nominating and Corporate Governance Committee are Ms. Teri P. McClure, as Chair, Ms. Lisa M. Bachmann, Mr. Peter C. Browning, Mr. John J. Gavin, Mr. Theron I. Gilliam, Mr. Mitchell B. Lewis, Mr. Randolph W. Melville, and Mr. J. David Smith. The Nominating and Corporate Governance Committee assists our Board in identifying individuals qualified to become board members, makes recommendations for nominees for committees and develops, recommends to the Board and reviews our corporate governance principles. Our Nominating and Corporate Governance Committee consists entirely of independent directors.
The charter of the Nominating and Corporate Governance Committee permits the committee to, in its sole discretion, delegate its duties and responsibilities to one or more subcommittees as it deems appropriate.
Succession Planning
The Board is responsible for the succession planning process for the directors, Chair of the Board, the Chief Executive Officer, and other executive officer positions. Succession planning for directors and key Company positions is a principal focus of the Nominating and Corporate Governance Committee as well as the full Board.
The Company has worked, using both internal and external resources, to integrate succession planning with leadership development in an effort to help ensure high-potential employees obtain the experience, skills and development opportunities necessary to assume, and succeed in, future leadership roles within the organization.
Human Capital Management and Compensation Committee Interlocks and Insider Participation
Mr. Smith, Mr. Browning, Mr. Gilliam, and Ms. McClure were members of the Human Capital Management and Compensation Committee during fiscal 2023, none of whom was an officer or employee of the Company at any time. None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board or Human Capital Management and Compensation Committee. None of our executive officers served as a member of the compensation committee of an entity that has an executive officer serving as a director on the Board. No interlocking relationship exists between any member of our Human Capital Management and Compensation Committee (or other committee performing equivalent functions) and any executive, member of the board of directors or member of the compensation committee (or other committee performing equivalent functions) of any other company.
Hedging and Pledging Policy
The Company’s Securities Trading Policy prohibits all directors and executive officers of the Company from effecting short sales, put options, call options or other derivative securities, holding securities in a margin account or otherwise pledging securities as collateral for a loan or hedging or similar monetization transactions with respect to the Company’s common stock.
COMMUNICATIONS WITH THE BOARD
Any interested parties wishing to communicate with, or otherwise make his or her concerns known directly to the Board or chairperson of any of the Audit, Human Capital Management and Compensation and Nominating and Corporate Governance Committees, or to the non-management or independent directors as a group, may do so by addressing such communications or concerns to the General Counsel and Corporate Secretary of the Company, 100 Crescent Centre Parkway, Suite 800, Tucker, Georgia 30084. The General Counsel and Corporate Secretary will forward such communications to the appropriate party as soon as practicable. Such communications may be done confidentially or anonymously.
DIRECTOR COMPENSATION
Director Compensation Program
The Human Capital Management and Compensation Committee is responsible for oversight of the compensation program for non-employee directors. The Committee annually reviews the program relative to peer and broader market practices with the assistance of Meridian, its independent compensation consultant. Non-employee directors receive a combination of cash and stock-based compensation designed to attract and retain qualified candidates to serve on the board and further align their interest with our stockholders. Our Chief Executive Officer does not receive any additional compensation for his service on the Board of Directors.
The following table presents the elements of compensation for non-employee directors under the Company’s director compensation program in fiscal 2023:
| | | | | | | | |
| Element of Compensation | | Amount |
Non-executive chair cash retainer | | $ | 100,000 | |
Director cash retainer | | 100,000 | |
| Chair of Audit Committee cash retainer | | 25,000 | |
Chair of Human Capital Management and Compensation Committee cash retainer | | 25,000 | |
Chair of the Nominating and Corporate Governance Committee cash retainer | | 15,000 | |
Member of the Audit Committee cash retainer | | 12,500 | |
Member of the Human Capital Management and Compensation Committee cash retainer | | 10,000 | |
Member of the Nominating and Corporate Governance Committee cash retainer | | 7,500 | |
Director grant of restricted stock units | | 125,000 | |
The annual cash retainers are paid in quarterly installments. The restricted stock units are valued on the date of grant. The restricted stock units vest on the one year anniversary of grant, subject to the director’s continued service on the Board on such vesting date, and upon vesting the director will receive shares of common stock, unless deferred as described below.
Deferred Compensation Plan for Non-Employee Directors
The Company has a deferred compensation plan for non-employee directors. Under the plan, non-employee directors may defer receipt of all or a portion of certain compensation. Compensation eligible for deferral includes annual retainer fees and committee fees, payable in cash and restricted stock units.
Fiscal 2023 Director Compensation Table
Shown below is information regarding the director compensation for each member of the Board for fiscal 2023, other than for Mr. Turner who does not participate in our director compensation program as an employee director.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees
Earned or
Paid in
Cash
($) | | Stock
Awards(1)
($) | | Option
Awards(2)
($) | | Total
($) |
| Lisa M. Bachmann | | $ | 112,500 | | $ | 125,000 | | $— | | $ | 237,500 |
| Peter C. Browning | | 113,750 | | 125,000 | | — | | 238,750 |
| John J. Gavin | | 225,000 | | 125,000 | | — | | 350,000 |
| Theron I. Gilliam | | 110,000 | | 125,000 | | — | | 235,000 |
| Mitchell B. Lewis | | 112,500 | | 125,000 | | — | | 237,500 |
| Teri P. McClure | | 113,750 | | 125,000 | | — | | 238,750 |
| Randolph W. Melville | | 112,500 | | 125,000 | | — | | 237,500 |
| J. David Smith | | 137,500 | | 125,000 | | — | | 262,500 |
___________________________________
(1)Represents the aggregate grant date fair value of the stock award, computed based on the number of awards granted and the fair value of the award on the date of grant. Assumptions used in the calculation of the grant date fair value of these award amounts are included in Note 12 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended April 30, 2023.
Pursuant to our director compensation program, on August 1, 2022, we granted restricted stock units valued at $125,000 to each independent director serving on our Board on that date. Each of the directors received 2,322 restricted stock units. The number of restricted stock units granted to each director was based on the closing price of GMS common stock on the grant date. The restricted stock units vest and become exercisable one year from the grant date.
(2)None of our directors were granted option awards in fiscal 2023. As of April 30, 2023, Mr. Gavin and Mr. Smith each had 30,474 options outstanding to purchase shares of Company common stock at an exercise price of $12.31 per share and Mr. Gilliam had 30,474 options outstanding to purchase shares of Company common stock at an exercise price of $14.77 per share. Such options were issued at the time the directors joined the Company’s Board. As of April 30, 2023, all outstanding options were vested.
PROPOSAL 2—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee is directly responsible for the appointment, compensation, retention, evaluation, and oversight of the Company’s independent registered public accounting firm. As part of this responsibility, the Audit Committee routinely reviews the performance and retention of our independent registered public accounting firm.
The Audit Committee has appointed Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ended April 30, 2024. We have engaged Ernst & Young LLP as our independent registered public accounting firm since August 2017. A representative of Ernst & Young LLP will be present at the Annual Meeting to answer questions of stockholders and will have the opportunity, if desired, to make a statement.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED ACCOUNTING FIRM FOR THE YEAR ENDING APRIL 30, 2024.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES AND SERVICES
The following table presents the fees billed by Ernst & Young LLP, our independent auditors for the fiscal years ended April 30, 2023 and 2022:
| | | | | | | | | | | | | | |
| Type of Fees | | Fiscal Year Ended April 30, 2023 | | Fiscal Year Ended April 30, 2022 |
Audit Fees(1) | | $ | 3,278,533 | | $ | 3,270,652 |
Audit-Related Fees(2) | | 85,000 | | 475,000 |
Tax Fees(3) | | — | | — |
All Other Fees(4) | | — | | — |
| Total | | $ | 3,363,533 | | $ | 3,745,652 |
___________________________________
(1)Audit fees consist of fees for professional services rendered for the audit of our financial statements, review of interim financial statements, assistance with registration statements filed with the SEC and services that are normally provided in connection with statutory and regulatory filings or engagements.
(2)Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under audit fees. Audit-related fees for fiscal 2023 include due diligence services provided in connection with business combinations.
(3)Tax fees are fees for a variety of permissible services relating to tax compliance, tax planning and tax advisory services.
(4)All other fees relate to professional services not included in the categories above.
The Audit Committee’s outside auditor independence policy provides for pre-approval of audit, audit-related and tax services specifically described by the Audit Committee on an annual basis and, in addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. The policy authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT RELATED
SERVICES OF INDEPENDENT AUDITORS
The Audit Committee is responsible for the appointment, compensation, retention, oversight, and termination of the Company’s independent registered public accounting firm. The Audit Committee has adopted a policy requiring substantially all audit, audit-related and non-audit services provided by the independent auditor be pre-approved by the Audit Committee. Pre-approval is not necessary for certain minor non-audit services that (i) do not constitute more than 5% of the total amount paid by the Company to its independent registered public accounting firm during the fiscal year the non-audit services were provided; (ii) were not recognized by the Company to be non-audit services at the time of the engagement for such services; and (iii) are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Audit Committee. The Audit Committee may delegate authority to one or more independent members of the Audit Committee to grant pre-approvals of audit and permitted non-audit services, provided any such pre-approvals are presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee has adopted a policy that prohibits our independent auditors from providing the following services:
• bookkeeping or other services related to the accounting records or financial statements of the Company;
• financial information systems design and implementation;
• appraisal or valuation services, providing fairness opinions or preparing contribution-in-kind reports;
• actuarial services;
• internal audit outsourcing services;
• management functions or human resources;
• broker or dealer, investment adviser or investment banking services;
• legal services and expert services unrelated to the audit; and
• any other service the Public Company Accounting Oversight Board prohibits through regulation.
The Audit Committee’s pre-approval policy is included in the Audit Committee Charter, which is available on our website at investor.gms.com/govdocs.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD
The Audit Committee is currently comprised of Mr. John J. Gavin, as Chair, Ms. Lisa M. Bachmann, Mr. Mitchell B. Lewis, Mr. Randolph W. Melville, and Mr. J. David Smith. The Audit Committee oversees GMS Inc.’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including maintaining an effective system of internal controls over financial reporting. The Audit Committee meets separately with management, the internal auditors and the independent registered public accounting firm. The Audit Committee operates under a written charter approved by the Board, a copy of which is available on our website at investor.gms.com/govdocs. The charter, among other things, provides the Audit Committee has full authority to appoint, compensate, retain, oversee, and terminate when appropriate, the independent registered public accounting firm.
In addition to fulfilling its oversight responsibilities as set forth in its charter and further described above in the section of this Proxy Statement entitled “Corporate Governance and Board Matters—Committees of the Board—Audit Committee,” the Audit Committee has done the following things:
•reviewed and discussed the audited financial statements in GMS Inc.’s annual report on Form 10-K for the fiscal year ended April 30, 2023 with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements;
•reviewed with Ernst & Young LLP, GMS Inc.’s independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgments as to the quality and acceptability of GMS Inc.’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards;
•received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence;
•discussed with Ernst & Young LLP its independence from management and GMS Inc. and considered whether Ernst & Young LLP could also provide non-audit services without compromising the firm’s independence;
•discussed with Ernst & Young LLP the matters required to be discussed under Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 1301, Communications with Audit Committees (AS 1301); and
•discussed with the Company’s internal auditors and Ernst & Young LLP the overall scope and plans for their respective audits, and then met with the internal auditors and Ernst & Young LLP, with and without management present, to discuss the results of their examinations, their evaluations of GMS Inc.’s internal controls and the overall quality of GMS Inc.’s financial reporting.
Based on the foregoing reviews and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the annual report on Form 10-K for the fiscal year ended April 30, 2023, for filing with the SEC.
This report has been furnished by the members of the Audit Committee of the Board:
| | | | | |
| Audit Committee |
| |
| John J. Gavin, Chair Lisa M. Bachmann
Mitchell B. Lewis
Randolph W. Melville J. David Smith |
MANAGEMENT
The following table sets forth, the name and age of each current executive officer of the Company, indicating all positions and offices with us currently held by such executive officer:
| | | | | | | | | | | | | | |
| Name | | Age | | Position |
| John C. Turner, Jr. | | 55 | | President, Chief Executive Officer and Director |
| Scott M. Deakin | | 57 | | Senior Vice President and Chief Financial Officer |
| Craig D. Apolinsky | | 56 | | Senior Vice President, General Counsel and Corporate Secretary |
| Leigh R. Dobbs | | 46 | | Senior Vice President, Chief Human Resources Officer |
| George T. Hendren | | 48 | | Senior Vice President, Chief Operating Officer |
Set forth below are descriptions of the backgrounds of each current executive officer of the Company who are not directors. The background for John C. Turner, Jr., who is also a director, is provided in the section entitled “Proposal 1—Election of Directors” of this Proxy Statement.
Scott M. Deakin, our Senior Vice President and Chief Financial Officer, joined us in 2019. Prior to joining us, Mr. Deakin served as the President of the Thermal Acoustical Solutions segment of Lydall, Inc., a publicly-traded global manufacturer of specialty engineered products from 2017 to 2019. Prior to that, he served as Executive Vice President and CFO of Lydall, Inc. where he oversaw its finance and accounting organization from 2015 to 2018. Mr. Deakin previously served as Executive Vice President, Chief Financial Officer of Ensign-Bickford Industries, Inc. from 2009 to 2015. Earlier in his career he also held the role of Senior Vice President, Corporate Development at Barnes Group, Inc. from 2007 to 2009 and various operating and finance roles during his 12 years at Eaton Corporation. He began his career at Deloitte and PricewaterhouseCoopers, LLP. Mr. Deakin holds an MBA from Carnegie Mellon University and a Bachelor of Science in Business Administration from Bowling Green State University.
Craig D. Apolinsky, our Senior Vice President, General Counsel and Corporate Secretary, joined us in July 2015. Prior to joining us, Mr. Apolinsky was a corporate and mergers and acquisitions attorney with the law firm of Taylor English Duma LLP from December 2014 until July 2015. From September 2008 until May 2014, Mr. Apolinsky served as Executive Vice President, General Counsel and Corporate Secretary for Alere Health, LLC, a healthcare services company. Previously he served as Senior Vice President, General Counsel and Corporate Secretary for Merge Healthcare Incorporated from April 2007 until August 2008. From 2005 until 2007 he worked for Gold Kist Inc., including as its Deputy General Counsel and Assistant Secretary. Prior to joining Gold Kist in 2007, Mr. Apolinsky was a partner at Alston & Bird LLP, where he practiced in the areas of corporate, securities and mergers and acquisitions for eleven years. Mr. Apolinsky received his law degree from the University of Texas at Austin School of Law and his undergraduate degree from the University of Virginia.
Leigh R. Dobbs, our Senior Vice President, Chief Human Resources Officer, joined us in September 2022. Prior to joining GMS, Ms. Dobbs served as Executive Vice President and Chief Human Resources Officer for Zenith American Solutions, Inc. Also, from 2013 to 2020, Ms. Dobbs worked in progressive leadership positions within Human Resources for Randstad North America, and from 2009 to 2013, she served as Director, Compensation and Benefits for building products distributor, BlueLinx Corporation. Ms. Dobbs earned a Bachelor of Science in Industrial Engineering from Georgia Tech and a Master of Business Administration from Emory University’s Goizueta Business School.
George T. Hendren, our Senior Vice President, Chief Operating Officer, joined us in 2014 and was appointed as the Company's Chief Operating Officer effective August 1, 2022. Mr. Hendren served as President, GMS Canada from 2019 to August 2022. From 2014 to 2019, Mr. Hendren served as Vice President of Corporate Development for the Company. Prior to joining us, Mr. Hendren spent seventeen years in the financial services industry in various roles. From 2008 to 2014, Mr. Hendren was a Managing Director with Algon Group, where he worked as a financial consultant to the building materials and homebuilding industries. Previously, Mr. Hendren worked for Wachovia Securities and predecessors as an investment banker, most recently as a Director, focused on building materials manufacturers and distributors. Mr. Hendren received a Bachelor of Science of Business Administration degree with distinction from the University of North Carolina.
PROPOSAL 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board is providing the Company’s stockholders with the opportunity to cast an advisory vote on our executive compensation program, in accordance with Section 14A of the Exchange Act. This proposal is commonly known as a “say on pay” proposal.
The section of this Proxy Statement entitled “Compensation Discussion and Analysis” describes the Company’s executive compensation program that is designed to provide opportunities for our named executive officers to earn incentive compensation based on the achievement of company performance goals balanced with compensation elements intended to retain our management talent over the long-term. We believe we utilize an appropriate mix of fixed and variable compensation elements, including salary, short-term cash bonus opportunities and long-term incentives in the form of equity-based compensation, to retain and motivate our named executive officers. We encourage you to review the section of this Proxy Statement entitled “Compensation Discussion and Analysis” for additional details.
Under our Bylaws, the below resolution will be approved if the votes cast “FOR” its approval exceed the votes cast “AGAINST” its approval. Abstentions and non-votes by brokers, banks and other nominee holders of record will not be counted as votes for or against the below resolution.
The Board recommends that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers as follows:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including in the Compensation Discussion and Analysis, the compensation tables and narrative discussion, is hereby approved.
As an advisory vote, this proposal is not binding on the Company. However, the Human Capital Management and Compensation Committee and the Board value the opinions expressed by the Company’s stockholders on this issue and will consider the outcome of this vote when making future compensation decisions for the named executive officers.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 3 TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED PURSUANT TO THE SEC’S COMPENSATION DISCLOSURE RULES.
PROPOSAL 4—ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the Exchange Act, we are required to ask our stockholders to vote on whether future advisory "say on pay" votes on the compensation of our named executive officers, such as Proposal 3 of this Proxy Statement, should occur every 1 Year, 2 Years or 3 Years. This Proposal 4 asks stockholders to submit their "say on pay" frequency preference (meaning every one, two or three years), or stockholders may abstain from voting on the proposal. The Company requests that the stockholders vote, on an advisory basis, to hold a stockholder advisory vote on executive compensation (a "say on pay" vote) every 1 Year.
The Board believes that holding an advisory "say on pay" vote every year will allow stockholders to provide direct input on the effectiveness of our overall compensation philosophy, policies and practices in the context of our long-term business results. An advisory "say on pay" vote every one year will provide the most effective timeframe for the Company to respond to vote results and stockholder feedback.
As an advisory vote, this proposal is not binding upon the Company. However, our Board values the opinions expressed by stockholders in their vote on this proposal and will carefully consider the outcome of the vote.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO HOLD AN ADVISORY VOTE ON EXECUTIVE COMPENSATION EVERY YEAR, BY THE SELECTION OF "1 YEAR" FOR PROPOSAL 4.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The discussion that follows describes the executive compensation program for our named executive officers (“NEOs”). This Compensation Discussion and Analysis (“CD&A”) is intended to be read in conjunction with the tables immediately following this section, which provide further historical compensation information.
The following executive officers constituted our NEOs for fiscal year 2023:
| | | | | |
| Name | Title |
John C. Turner, Jr. | President and Chief Executive Officer |
Scott M. Deakin | Senior Vice President and Chief Financial Officer |
| Craig D. Apolinsky | Senior Vice President, General Counsel and Corporate Secretary |
| Leigh R. Dobbs | Senior Vice President, Chief Human Resources Officer |
George T. Hendren | Senior Vice President, Chief Operating Officer |
I. Overview
Our compensation program is designed to reward executives for achievement of the Company’s short- and long-term performance goals. Our Company’s performance is highly dependent on the talents, skills and engagement of our people. As such, our executive compensation program is designed to: (1) attract highly qualified individuals; (2) retain those individuals in a competitive marketplace for executive talent; and (3) motivate performance in a manner that supports achievement of our mission to increase stockholder value while ensuring these programs do not encourage excessive risk-taking.
We believe our executive compensation program as developed and implemented, and as presented in this CD&A, achieves these objectives and is appropriate for a company in our industry and at our stage of growth.
2023 Performance
In fiscal 2023, GMS continued to execute our growth strategy. During fiscal 2023, we increased net sales to $5.3 billion, primarily due to inflationary pricing along with strength in multi-family residential construction activity and an improving commercial landscape, each of which helped drive volume growth in wallboard and complementary products. We also benefited from acquisitions completed over the past year. We believe this growth has well-positioned the Company to continue delivering strong results to our stockholders in future years.
Highlights of our fiscal 2023 performance include the following:
• Generated net sales of $5,329.3 million, a 15.0% increase from the prior fiscal year. Organic net sales increased 12.7% from the prior fiscal year.
• Generated net income of $333.0 million, or $7.82 per diluted share, compared to $273.4 million, or $6.23 per diluted share, in the prior fiscal year. Net income as a percentage of sales was 6.2% and 5.9% during fiscal 2023 and 2022, respectively.
• Generated Adjusted EBITDA(1) of $665.7 million, or 12.5% of net sales, compared to Adjusted EBITDA of $566.9 million, or 12.2% of net sales, in the prior fiscal year.
• Completed four acquisitions, including Construction Supply of Southwest Florida, Inc., a distributor of various stucco, building and waterproofing supplies serving markets in the southwest Florida area; Tanner Bolt and Nut, Inc., a distributor of various tools, fasteners, sealants, and related construction products to the broader New York City market; Blair Building Materials, Inc., a distributor of exterior, insulation, and waterproofing products to customers in the Greater Toronto Area; and Engler, Meier and Justus, Inc., a leading distributor of drywall, acoustical ceilings and related interior construction products to the greater Chicago market and exterior insulation finishing systems (“EIFS”) related products in the Southeastern United States.
• Opened six new branch locations and eleven new Ames tool sales, rental and service centers.
• Generated cash provided by operating activities of $441.7 million.
___________________________________
(1) Adjusted EBITDA is a non-GAAP measure management uses to evaluate the performance of the Company. Adjusted EBITDA, as we define it, is an amount equal to net income (loss) plus interest expense and related items, income taxes, stock compensation, depreciation and amortization, further adjusted to exclude other non-cash items and certain other adjustments. See Appendix A for a reconciliation of Adjusted EBITDA to the most comparable measure reported in accordance with GAAP.
Pay Program Overview
We believe the design and structure of our pay program, and in particular our incentive plans, support our business strategy and organizational objectives while successfully aligning executive focus and interest with our stockholders. Our compensation programs are designed to attract, motivate, and retain qualified and talented executives, and to incent our executives to achieve our business goals and reward them for superior short- and long-term performance. All pay elements, and the safeguards and governance features of the program, have been carefully chosen and implemented to align with our pay philosophy and objectives.
In doing so, we have selected the following framework to achieve these objectives:
| | | | | |
| Base Salary | Fixed cash component of pay based on individual scope of experience and responsibilities, performance against goals, and peer and industry practices. |
| |
| Annual Incentives | Variable cash component of pay intended to motivate and reward our executives for the achievement of select strategic goals of the Company. |
| In fiscal year 2023, our annual incentives continued to be based on two corporate performance metrics: (1) Adjusted EBITDA (weighted 80%) and (2) Working Capital Turns (weighted 20%). |
| |
Long-Term
Equity Incentives | Variable stock-based component of pay designed to motivate executives to deliver long-term stockholder value, while also providing a retention vehicle for our executive talent. In fiscal year 2023, equity awards were granted with a three-year annual vesting term as: |
| • Stock Options (50%) |
| • Restricted Stock Units (“RSUs”) (50%) |
2023 Target Pay Mix
Consistent with our philosophy of aligning executive pay with the short- and long-term performance of the Company, and to align the interests of management with those of our stockholders, the Company’s compensation programs are designed to provide a significant portion of executive compensation in the form of variable, at-risk, incentive pay as shown in the graphics below:
Compensation Governance Highlights
The Human Capital Management and Compensation Committee (“HCMC Committee”) regularly reviews best practices in executive compensation and uses the guidelines below to design our compensation programs.
Consideration of Last Year’s Say-on-Pay Vote
At the 2022 Annual Meeting of Stockholders, our say-on-pay proposal received strong support, garnering support from 99% of shares cast. The Company is pleased with these results and believes that stockholders have a positive view of our executive compensation philosophy, policies and programs. The HCMC Committee took these results into account by continuing to emphasize our pay-for-performance philosophy which utilizes performance measures that provide incentives to deliver value to our stockholders.
II. Executive Compensation Philosophy and Objectives
For fiscal 2023, the objectives of the executive compensation program included the following:
• balancing an entrepreneurial focus with the need to set and achieve pre-determined goals;
• aligning with best practices and standards as determined by peer practices and institutional stockholders;
• basing annual reward opportunities on performance measures linked to stockholders value creation;
• providing substantial, but capped upside on cash incentives that is linked to superior performance; and
• requiring a threshold level of performance in order for any cash award to be earned.
III. Pay Components
Base Salary
We believe that the provision of base salary plays an important role in attracting and retaining top executive talent by providing executives with a predictable level of income. Base salaries represent a fixed portion of our NEOs’ compensation and vary by job responsibility. The HCMC Committee reviews our NEOs’ base salaries annually, though it may make periodic base salary adjustments in connection with an NEO’s promotion, change in job responsibility, or when otherwise necessary for equitable reasons.
In connection with its review and determination of base salaries, the HCMC Committee will consider market data, the level of the executive’s compensation (individually and relative to the other executives), the level of the executive’s performance and, for the base salaries for executives other than the Chief Executive Officer, the recommendations of the Chief Executive Officer.
The following table sets forth our NEOs’ base salaries for fiscal 2023:
| | | | | | | | | | | |
| Executive | Fiscal 2022
Base Salary | Fiscal 2023
Base Salary | % Change |
John C. Turner, Jr. | $ | 772,500 | | $ | 834,300 | | 8.0% |
Scott M. Deakin | 515,000 | | 535,600 | | 4.0% |
| Craig D. Apolinsky | 417,768 | | 434,479 | | 4.0% |
Leigh R. Dobbs(1) | N/A | 350,000 | | N/A |
George T. Hendren(2) | N/A | 500,000 | | N/A |
___________________________________
(1)Ms. Dobbs joined the Company on September 6, 2022.
(2)Mr. Hendren was appointed as Chief Operating Officer of the Company on August 1, 2022.
Annual Incentives
The Company maintains the Annual Incentive Plan (the “AIP”) in order to drive the Company’s annual performance by linking variable compensation payments to achievement of Company performance. Cash incentives under the AIP are designed to support our strategic business, promote the maximization of Company profitability and encourage teamwork. In fiscal 2023, each of our NEOs was eligible to earn an annual cash incentive under the AIP, subject to the conditions described below.
Under the AIP, the HCMC Committee takes into consideration the Company’s performance as measured against pre-established business and/or financial goals at different levels of the Company’s operating structure. The table below outlines the structure of our fiscal 2023 annual cash incentives:
| | | | | | | | | | | |
| Metric | Weighting | Rationale |
| Adjusted EBITDA | 80% | • | Adjusted EBITDA serves as a key measure of our profitability |
| Working Capital Turns | 20% | • | Working Capital Turns measures our operating efficiency and inventory management |
Both are key performance metrics assessed by shareholders as driving the creation of shareholder value and are used by management to assess the Company’s performance.
For fiscal 2023, the HCMC Committee approved each NEO’s target cash incentive opportunity (expressed as a percentage of base salary), as set forth in the table below. Based on company performance against the pre-established performance goals, NEOs may earn between 0% and 200% of their target cash incentive opportunities. If threshold performance goals are not achieved, NEOs would not be entitled to any payout under the AIP. The annual incentives under the AIP are subject to adjustment by the HCMC Committee, at its discretion, based on the executive’s individual performance and contribution to the Company during the year.
The following table sets forth the annual cash incentive target, expressed as a percentage of base salary, for our NEOs for fiscal 2023 (which were the same as fiscal 2022 for our existing NEOs):
| | | | | |
| Executive | Target |
| John C. Turner, Jr. | 100% |
| Scott M. Deakin | 60% |
| Craig D. Apolinsky | 60% |
| Leigh R. Dobbs | 60% |
George T. Hendren | 60% |
The following table summarizes fiscal year 2023 AIP performance targets, actual performance and incentive payout expressed as a percentage of target:
| | | | | | | | | | | | | | | | | | | | |
| | | | | Actual Performance |
| Measures | Weighting | Threshold
(25%) | Target
(100%) | Maximum
(200%) | Results | % Payout |
Adjusted EBITDA(1)
(in millions) | 80% | $494.4 | $618.0 | $741.6 | $665.7 | 138.6% |
Working Capital Turns(2)
(as a % of annual net sales) | 20% | 21.80% | 19.80% | 18.30% | 19.50% | 120.0% |
| Total Weighted Payout | | | | | | 134.9% |
___________________________________
(1)Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the Company. Adjusted EBITDA, as we define it, is an amount equal to net income (loss) plus interest expense and related
items, income taxes, stock compensation, depreciation and amortization, further adjusted to exclude other non-cash items and certain other adjustments. Adjusted EBITDA is not determined in accordance with GAAP, and is not intended to present a superior measure of the financial condition from those determined under GAAP.
(2)Working Capital Turns equals the four quarter trailing average of trade accounts and notes receivable plus inventories less accounts payable, divided by annual net sales.
Based on the Company’s actual performance in fiscal 2023 and interpolation being applied for performance above threshold levels, Adjusted EBITDA was paid out at 138.6% of target and Working Capital Turns was paid out at 120.0% of target, for a total weighted annual cash incentive performance payout of 134.9% of target. The HCMC Committee did not exercise its discretion to adjust annual cash incentive amounts based on the executive’s individual performance and contribution to the Company during the year. The following table sets forth the annual cash incentives earned in fiscal 2023 under AIP for our NEOs:
| | | | | |
| Executive | 2023 Earned Bonus |
John C. Turner, Jr. | $ | 1,125,232 | |
Scott M. Deakin | 433,423 | |
| Craig D. Apolinsky | 351,593 | |
Leigh R. Dobbs(1) | 183,906 | |
George T. Hendren(2) | 302,629 | |
___________________________________
(1)Ms. Dobbs joined the Company on September 6, 2022 and earned a prorated bonus based on the portion of fiscal year 2023 that she was employed with the Company. Ms. Dobbs also received a sign-on bonus of $100,000 in fiscal 2023.
(2)Mr. Hendren was appointed as Chief Operating Officer of the Company on August 1, 2022 and earned a prorated bonus based on the portion of fiscal 2023 that he was acting in such role. Mr. Hendren also earned a bonus of $114,924 for the portion of fiscal 2023 he was the President of GMS Canada (May 1, 2022 through August 1, 2022).
Long-Term Incentive Plan
The Company maintains a long-term incentive plan under which we may make grants of equity awards. The main objectives of the long-term incentive plan are to (1) directly link the executives to increasing stockholder value, (2) incentivize our executives to work towards the achievement of our long-term performance goals, (3) provide the Company a competitive means through which we may better attract able individuals to become executives, and (4) retain executives for a multiple year period by providing these individuals with stock ownership opportunities. For the foregoing reasons, we believe providing our NEOs long-term equity compensation further advances and aligns the interests of our NEOs with those of our stockholders.
As described below in the Compensation Determination Process section, each year the HCMC Committee reviews the results of a benchmarking study to determine the appropriate mix of equity awards and total grant date value of equity awards that will be granted to each NEO. In determining the number of shares subject to each type of equity award, we use the grant date closing stock price for full value awards and the grant date Black-Scholes value for stock options.
In fiscal 2023, we granted a mix of the following equity awards:
| | | | | | | | | | | | | | |
| Equity Award | Weighting | Vesting Schedule | Rationale |
| RSUs | 50% of grant value | Time-based over three years, with equal installments vesting on each annual anniversary subject to continued employment (with certain exceptions) | • | Long-term incentives granted in equity to align NEOs with shareholder outcomes |
| Stock Options | 50% of grant value | • | Stock options motivate executives to build long-term shareholder value by only providing value if share price increases |
| | • | RSUs encourage executive retention with the value varying based on shareholder outcomes |
In July 2022, the HCMC Committee approved our annual equity award grants to our NEOs under the Company’s Equity Incentive Plan. These annual equity grants were made on August 1, 2022, except for Ms. Dobbs whose grant was made on September 6, 2022 when she joined the Company. The following table presents the fiscal 2023 annual equity grants:
| | | | | | | | | | | | | | |
Executive | Number of RSUs | Grant Date Value of RSUs(1) | Number of Stock Options | Grant Date Value of Stock Options(1) |
| John C. Turner, Jr. | 28,799 | $1,550,000 | 61,192 | $1,550,000 |
| Scott M. Deakin | 9,290 | 500,000 | 19,739 | 500,000 |
| Craig D. Apolinsky | 5,574 | 300,000 | 11,843 | 300,000 |
| Leigh R. Dobbs | 2,490 | 113,750 | 4,984 | 113,750 |
George T. Hendren | 5,574 | 300,000 | 11,843 | 300,000 |
___________________________________
(1)Grant date values vary slightly from the values in the Summary Compensation Table due to the issuance of whole shares.
IV. Compensation Determination Process
Role of Human Capital Management and Compensation Committee
Our HCMC Committee is responsible for overseeing our executive compensation philosophy and our executive compensation program, determining and approving the compensation for our executive officers, negotiating executive employment contracts, and helping to establish appropriate compensation for directors and other key employees. Our HCMC Committee regularly reports to our Board on its deliberations but is ultimately responsible for executive compensation decisions.
Our HCMC Committee reviews, on at least an annual basis, our executive compensation program, including our incentive compensation plans, to determine whether they are appropriate, properly coordinated, and achieve their intended purposes. It also reviews the compensation of our executive officers and makes decisions about the various components that comprise their compensation packages.
The appropriate mix and amount of compensation for each executive officer varies based on the level of the executive’s responsibilities. The HCMC Committee does not maintain any formal policy or formula for allocating the appropriate mix of compensation as it believes it is more important to remain flexible to respond to shifts in the marketplace in which the Company must compete to recruit and retain executive talent. Therefore, the HCMC Committee retains the authority to review our executive officers’ compensation periodically and to use its discretion to adjust the mix of compensation and the amount of any element of compensation as it deems appropriate.
Role of Management
The Company’s Chief Executive Officer, in consultation with our Chief Human Resources Officer and other Company representatives, provides input and recommendations to the HCMC Committee on the design of our executive compensation program and compensation decisions for executive officers other than himself. The Chief Executive Officer makes recommendations based on his assessment of the Company and each executive’s performance, as well as market data provided by the Committee’s executive compensation consultant. The HCMC Committee reviews and considers the Chief Executive Officer’s recommendations when considering any compensation changes affecting our executive officers, but retains approval authority. The HCMC Committee meets regularly in executive session without management present.
Role of Compensation Consultant
For fiscal year 2023, the HCMC Committee retained the services of Meridian as independent executive compensation consultant, to advise the HCMC Committee on compensation matters related to the Company’s executive officers and non-employee directors. During fiscal year 2023, Meridian assisted the HCMC Committee with, among other things:
•assessing market data on executive and director compensation pay levels and program structures;
•reviewing and making changes to the compensation peer group;
•developing and refining our executive and director compensation programs;
•staying apprised of market trends and regulatory developments related to executive and director compensation; and
•assisting with drafting our fiscal year 2023 Proxy Statement disclosures, including the Compensation, Discussion and Analysis section.
Use of Peer Group Data
To assess the appropriateness of our executive compensation program and compensation levels, our HCMC Committee, with the assistance of Meridian, examines the competitive compensation data for senior executives of our peer companies. The HCMC Committee uses the peer group to reference recent market data and understand the marketplace, but does not establish compensation based on a specific percentile of the market data. The HCMC Committee also recognizes the importance of flexibility and considers other factors as well when setting executive compensation, such as individual performance, experience, history and scope of responsibility, current market conditions and the specific needs of the business at critical points in time.
During fiscal year 2023, Meridian presented a compensation benchmarking study to the HCMC Committee at its request, which included market data derived from public filings of the peer group companies listed below. The HCMC Committee used the benchmarking study as a comparative tool in its evaluation of the Company’s executive compensation program in relation to companies believed to represent the appropriate comparable labor market for executive talent and to provide context for executive compensation.
The peer group was evaluated by Meridian using criteria including the following:
•Industry and Business Mix: companies with comparable lines of business (generally distribution and building products)
•Size and Scope: companies with revenues generally within 1/3rd to 2x GMS with comparable margins and market capitalization
•Company Type: publicly-traded companies operating primarily in the U.S.
Based on Meridian's evaluation, the HCMC Committee approved the following peer group of 19 companies for fiscal 2023(1):
| | | | | | | | |
A.O. Smith Corporation | Core & Main, Inc. | MSC Industrial Direct Co. Inc. |
Applied Industrial Technologies, Inc. | Fastenal Company | Pool Corporation |
Armstrong World Industries, Inc. | JELD-WEN Holding, Inc. | Simpson Manufacturing Co., Inc. |
Atkore International Group Inc. | Lennox International Inc. | SiteOne Landscape Supply, Inc. |
Beacon Roofing Supply, Inc. | Masonite International Corporation | TopBuild Corp. |
BlueLinx Holdings, Inc. | MRC Global Inc. | Watsco, Inc. |
| Boise Cascade Company | | |
___________________________________
(1)Cornerstone Building Brands, Inc., Global Industrial Company and MRC Global Inc. were removed from the peer group that was used in fiscal 2022. Core & Main, Inc. and JEL-WEN Holding, Inc. were added to the peer group in fiscal 2023. There were no other changes from the peer group used in fiscal 2022.
Risk Analysis of Compensation Program
The HCMC Committee reviewed our compensation program to determine if the elements encourage excessive or unnecessary risk taking that is reasonably likely to have a material adverse effect on the Company. The Human Capital Management and Compensation Committee believes that the Company’s compensation program offers an appropriate mix of fixed compensation and short- and long-term variable compensation so as to mitigate the motivation to take high levels of business risk. As a result, the HCMC Committee believes our compensation program does not encourage unreasonable risk taking that is reasonably likely to have a material adverse effect on the Company.
V. Additional Compensation Practices and Policies
Stock Ownership Guidelines
The Company has stock ownership guidelines for our senior leaders and independent members of the Board to further align the interests of our senior leaders and independent members of the Board with our stockholders. Pursuant to these guidelines, each senior leader or independent member of the Board is required to own specified levels of our common stock. Individuals are required to hold 50% of net shares received from vesting of restricted shares or the exercise of stock options until they have met the required ownership level. All NEOs have met or are on track to meet share ownership guidelines.
| | | | | |
| Position | Requirement |
| Chief Executive Officer | 5x base salary |
| Other Named Executive Officers | 1.5x base salary |
| Non-executive directors | 5x annual cash retainer |
Incentive Compensation Clawback Policy
All equity and cash awards are subject to the Company’s Incentive Compensation Clawback Policy. The Company reserves the right to “clawback” certain cash and equity incentive-based compensation upon the occurrence of certain events. Upon the occurrence of a triggering event, such as when the employee engaged in willful action or willful inaction that materially contributes to or results in a restatement, the Board may, in its sole discretion, after evaluating the associated costs and benefits, recover all or any portion of the recoverable incentive paid to the employee during the applicable period. In addition, the Board may, in its sole discretion and in the reasonable exercise of its business judgment, determine whether and to what extent additional action is appropriate to address the circumstances surrounding such triggering event so as to minimize the likelihood of any recurrence and to impose such other discipline as it deems appropriate. In July, 2023, the HCMC Committee adopted a new clawback policy that complies with the NYSE’s listing standards. Consistent with the listing standards, the new policy requires the Company to recoup erroneously awarded incentive-based compensation
received by covered executives on or after October 1, 2023, and also permits the HCMC Committee to apply the policy to certain employees other than covered executives in its discretion.
Retirement Benefits
The Company provides retirement benefits to the NEOs, including matching contributions, under the terms of its tax-qualified defined contribution plan (the “401(k) Plan”). The NEOs participate in the 401(k) Plan on the same terms as our other participating employees. We believe the retirement benefits provided under the 401(k) Plan are analogous to those provided by comparable companies. The Company does not maintain any defined benefit or supplemental retirement plans for any of its executive officers.
Severance and Change in Control Payments
We believe employment agreements assist us in attracting and retaining executive talent and that change in control provisions are appropriate to help ensure continuity of management during a potential change in control. We have employment agreements, as amended, with each of our NEOs and each agreement contains termination and change in control provision.
The GMS Inc. Equity Incentive Plan provides that in connection with a change in control, the HCMC Committee will determine whether outstanding awards will either: (a) be assumed or substituted for, with appropriate adjustments to the number, kind of shares, and exercise prices of the awards; or (b) terminate. Beginning with equity awards granted in August 2019, we implemented a new change in control feature in our equity award agreements, which provides that (i) upon the occurrence of a change of control of the Company in which awards are not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control in a manner approved by the HCMC Committee or the Board, all outstanding options will become fully vested and exercisable and all RSUs will become fully-vested; and (ii) upon the occurrence of a change of control of the Company in which awards are assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control, if within two years after the effective date of the change of control, a participant’s employment is terminated without “cause” or the participant resigns for “good reason,” then all outstanding options will become fully vested and exercisable and all RSUs will become fully-vested. This change in control feature is included in the GMS Inc. 2020 Equity Incentive Plan approved by our shareholders at the 2020 Annual Meeting of Stockholders.
More information about the NEOs’ employment agreements is provided in the section “Employment Agreements” on page 44 and more information about their potential payments is provided in the section “—Payments upon Certain Events of Termination or Change in Control” beginning on page 44.
Employee Stock Purchase Plan
The Company provides NEOs the opportunity to purchase the Company’s common stock at a discount from the market price under the GMS Inc. Employee Stock Purchase Plan (the “ESPP”). The NEOs participate in the ESPP on the same terms as our other participating employees. We believe that the benefits provided under the ESPP are analogous to those provided by comparable companies. All of our NEOs participated in the ESPP during fiscal 2023.
Perquisites and Other Personal Benefits
The Company provides the NEOs with perquisites and other personal benefits that it believes are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. We believe that these benefits enable our executives to focus on our business and enhance their commitment to us. In fiscal 2023, our NEOs each received $800 per month in a car allowance and premium credit cards, which were the sole perquisites received by the NEOs. The HCMC Committee periodically reviews the levels of perquisites and other personal benefits provided to our NEOs to confirm such levels are reasonable and continue to serve their intended retentive purposes.
Human Capital Management and Compensation Committee Report
The HCMC Committee has reviewed and discussed the above Compensation Discussion and Analysis. Based on its review and discussion with management, the HCMC Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
J. David Smith, Chair
Peter C. Browning
Theron I. Gilliam
Teri P. McClure
COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation paid to our NEOs for the fiscal years ended April 30, 2023, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary
($) | | Bonus
($) | | Stock
Awards
($)(1) | | Option
Awards
($)(1) | | Non-Equity
Incentive
Plan
Compensation
($) | | All Other
Compensation
($) | | Total
($) |
John C. Turner, Jr., | | 2023 | | $ | 834,300 | | $— | | $ | 1,549,962 | | $ | 1,549,993 | | $ | 1,125,232 | | $ | 18,145 | | $ | 5,077,632 |
| President and Chief | | 2022 | | 772,500 | | — | | 1,499,988 | | 1,499,986 | | 1,291,157 | | 15,407 | | 5,079,038 |
Executive Officer(2) | | 2021 | | 757,500 | | — | | 1,149,991 | | 1,149,997 | | 1,060,952 | | 16,174 | | 4,134,614 |
| | | | | | | | | | | | | | | | |
Scott M. Deakin, | | 2023 | | 535,600 | | — | | 499,988 | | 499,989 | | 433,423 | | 19,149 | | 1,988,149 |
| Senior Vice President | | 2022 | | 515,000 | | 365,000 | | 374,960 | | 374,986 | | 516,463 | | 14,642 | | 2,161,051 |
and Chief Financial Officer(2) | | 2021 | | 505,000 | | — | | 299,998 | | 299,995 | | 424,381 | | 15,014 | | 1,544,388 |
Craig D. Apolinsky, | | 2023 | | 434,479 | | — | | 299,993 | | 299,983 | | 351,593 | | 18,281 | | 1,404,329 |
| Senior Vice President, | | 2022 | | 417,768 | | — | | 274,981 | | 274,981 | | 418,954 | | 15,741 | | 1,402,425 |
| General Counsel and | | 2021 | | 409,656 | | — | | 262,486 | | 262,499 | | 344,258 | | 56,091 | | 1,334,990 |
Corporate Secretary(2) | | | | | | | | | | | | | | | | |
Leigh R. Dobbs, | | 2023 | | 227,260 | | 100,000 | | 113,718 | | 113,735 | | 183,906 | | 13,645 | | 752,264 |
| Senior Vice President, | | | | | | | | | | | | | | | | |
| Chief Human Resources | | | | | | | | | | | | | | | | |
Officer(3) | | | | | | | | | | | | | | | | |
George T. Hendren, | | 2023 | | 471,050 | | — | | 299,993 | | 299,983 | | 417,553 | | 40,357 | | 1,528,936 |
| Senior Vice President, | | | | | | | | | | | | | | | | |
Chief Operating Officer(4) | | | | | | | | | | | | | | | | |
___________________________________(1)The amount set forth represents the aggregate grant date fair value of the option and stock awards granted in each respective year, computed based on the number of awards granted and the fair value of the award on the date of grant. Assumptions used in the calculation of these amounts are included in Note 12 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended April 30, 2023.
(2)The amount set forth under “All Other Compensation” for fiscal 2023 includes (i) a car allowance ($9,600) and (ii) certain other non-perquisite items (the value of each being less than $10,000).
(3)Ms. Dobbs joined the Company on September 6, 2022. For fiscal 2023, Ms. Dobbs earned prorated amounts of salary and non-equity incentive plan compensation based on the portion of fiscal year 2023 that she was employed with the Company. The amount set forth under “All Other Compensation” for fiscal 2023 includes (i) a car allowance ($5,600) and (ii) certain other non-perquisite items (the value of each being less than $10,000).
(4)Mr. Hendren was not a Named Executive Officer in fiscal 2022 or 2021. The amount set forth under “All Other Compensation” for fiscal 2023 includes (i) a car allowance ($7,200), (ii) moving expenses ($24,401) and (ii) certain other non-perquisite items (the value of each being less than $10,000). Mr. Hendren's Non-Equity Incentive Plan Compensation includes $302,629 earned under our AIP and $114,924 earned for the portion of fiscal 2023 Mr. Hendren was the President of GMS Canada.
FISCAL 2023 GRANTS OF PLAN-BASED AWARDS
The table below sets forth information regarding all grants of awards made to the named executive officers during the fiscal year ended April 30, 2023. Options and RSUs reflected in this table were granted under the GMS Inc. 2020 Equity Incentive Plan. For further information regarding the terms of certain of these grants, see “Compensation Discussion and Analysis” above.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards(1) | | All Other
Stock
Awards:
Number of
Shares of
Stock or | | All Other
Option
Awards:
Number of
Securities
Underlying | | Exercise or
Base
Price of
Option | | Grant Date
Fair Value
of Stock
and
Option |
| Name | | Grant
Date | | Threshold
($) | | Target
($) | | Maximum
($) | | Units
(#) | | Options
(#) | | Awards
($/Sh) | | Awards
($)(2) |
| John C. Turner, Jr. | | — | | $ | 208,575 | | $ | 834,300 | | $ | 1,668,600 | | — | | — | | $— | | $— |
| | 8/1/2022 | | — | | — | | — | | 28,799 | | — | | — | | 1,549,962 |
| | 8/1/2022 | | — | | — | | — | | — | | 61,192 | | 53.82 | | 1,549,993 |
| Scott M. Deakin | | — | | 80,340 | | 321,360 | | 642,720 | | — | | — | | — | | — |
| | 8/1/2022 | | — | | — | | — | | 9,290 | | — | | — | | 499,988 |
| | 8/1/2022 | | — | | — | | — | | — | | 19,739 | | 53.82 | | 499,989 |
| Craig D. Apolinsky | | — | | 65,172 | | 260,687 | | 521,375 | | — | | — | | — | | — |
| | 8/1/2022 | | — | | — | | — | | 5,574 | | — | | — | | 299,993 |
| | 8/1/2022 | | — | | — | | — | | — | | 11,843 | | 53.82 | | 299,983 |
| Leigh R. Dobbs | | — | | 52,500 | | 210,000 | | 420,000 | | — | | — | | — | | — |
| | 9/6/2022 | | — | | — | | — | | 2,490 | | — | | — | | 113,718 |
| | 9/6/2022 | | — | | — | | — | | — | | 4,984 | | 45.67 | | 113,735 |
| George T. Hendren | | — | | 75,000 | | 300,000 | | 600,000 | | — | | — | | — | | — |
| | 8/1/2022 | | — | | — | | — | | 5,574 | | — | | — | | 299,993 |
| | 8/1/2022 | | — | | — | | — | | — | | 11,843 | | 53.82 | | 299,983 |
___________________________________
(1)These columns, where applicable, show the range of possible payouts for fiscal 2023 performance under the AIP as described above under “—Annual Incentives”. Ms. Dobbs’ and Mr. Hendren’s AIP payouts were prorated for the period of time they served in their respective roles during fiscal 2023.
(2)The grant date fair value for RSU awards and option awards was computed based on the number of awards granted and the fair value of the award on the date of grant. Assumptions used in the calculation of these award amounts are included in Note 12 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended April 30, 2023.
OUTSTANDING EQUITY AWARDS AT FISCAL 2023 YEAR END
The following table sets forth certain information with respect to outstanding options and RSUs held by each of our NEOs as of April 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | Number of | | Number of | | | | | | |
| Name | | Securities
Underlying
Unexercised
Options
Exercisable (#) | | Securities
Underlying
Unexercised
Options
Un-exercisable (#) | | Option
Exercise
Price
($) | | Option
Expiration
Date | | Number of
Units
That
Have Not
Vested (#) | | Market
Value of
Units That
Have Not
Vested ($)(1) |
| John C. Turner, Jr. | | 47,480 | | — | | $21.90 | | 08/01/29 | | 65,513(2) | | $3,803,685 |
| | 68,945 | | 34,472(3) | | 23.43 | | 08/01/30 | | | | |
| | 24,704 | | 49,406(4) | | 49.13 | | 08/01/31 | | | | |
| | — | | 61,192(5) | | 53.82 | | 08/01/32 | | | | |
| | | | | | | | | | | | |
| Scott M. Deakin | | 7,429 | | — | | 30.10 | | 10/21/29 | | 18,646(6) | | 1,082,587 |
| | 17,986 | | 8,992(3) | | 23.43 | | 08/01/30 | | | | |
| | 6,176 | | 12,351(4) | | 49.13 | | 08/01/31 | | | | |
| | — | | 19,739(5) | | 53.82 | | 08/01/32 | | | | |
| | | | | | | | | | | | |
| Craig D. Apolinsky | | 53,898 | | — | | 23.11 | | 06/02/26 | | 13,039(7) | | 757,044 |
| | 3,512 | | — | | 37.49 | | 12/01/27 | | | | |
| | 25,693 | | — | | 25.60 | | 08/01/28 | | | | |
| | 15,738 | | 7,868(3) | | 23.43 | | 08/01/30 | | | | |
| | 4,529 | | 9,057(4) | | 49.13 | | 08/01/31 | | | | |
| | — | | 11,843(5) | | 53.82 | | 08/01/32 | | | | |
| | | | | | | | | | | | |
| Leigh R. Dobbs | | — | | 4,984(8) | | 45.67 | | 09/06/32 | | 2,490(8) | | 144,569 |
| | | | | | | | | | | | |
| George T. Hendren | | 20,554 | | — | | 25.60 | | 08/01/28 | | 10,437(9) | | 605,972 |
| | 9,822 | | — | | 21.90 | | 08/01/29 | | | | |
| | 10,492 | | 5,245(3) | | 23.43 | | 08/01/30 | | | | |
| | 2,882 | | 5,764(4) | | 49.13 | | 08/01/31 | | | | |
| | — | | 11,843(5) | | 53.82 | | 08/01/32 | | | | |
___________________________________
(1)Based on the closing price on the NYSE for our common stock on April 30, 2023, the last trading day of the fiscal year, of $58.06.
(2)These restricted stock units vest as follows: (i) 36,137 vested on August 1, 2023; (ii) 19,777 will vest on August 1, 2024; and (iii) 9,599 will vest on August 1, 2025.
(3)These stock options vested on August 1, 2023.
(4)One half of these stock options vested on August 1, 2023 and one half will vest on August 1, 2024.
(5)One third of these stock options vested on August 1, 2023 and one third will vest on each of August 1, 2024 and August 1, 2025.
(6)These restricted stock units vest as follows: (i) 9,909 vested on August 1, 2023; (ii) 5,641 will vest on August 1, 2024; and (iii) 3,096 will vest on August 1, 2025.
(7)These restricted stock units vest as follows: (i) 7,458 vested on August 1, 2023; (ii) 3,723 will vest on August 1, 2024; and (iii) 1,858 will vest on August 1, 2025.
(8)One third of these awards will vest on each of September 6, 2023, September 6, 2024 and September 6, 2025.
(9)These restricted stock units vest as follows: (i) 5,534 vested on August 1, 2023; (ii) 3,045 will vest on August 1, 2024; and (iii) 1,858 will vest on August 1, 2025.
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2023
The following table sets forth information concerning the exercise of stock options and the vesting of restricted stock units for our NEOs during the fiscal year ended April 30, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| Name | | Number of
Shares
Acquired on
Exercise (#) | | Value
Realized on
Exercise ($) | | Number of
Shares
Acquired on
Vesting (#) | | Value
Realized on
Vesting ($)(1) |
| John C. Turner, Jr. | | 49,988 | | $ | 1,992,143 | | 51,811 | | $ | 2,707,122 |
| Scott M. Deakin | | — | | — | | 10,134 | | 511,494 |
| Craig D. Apolinsky | | 25,138 | | 962,341 | | 9,747 | | 524,584 |
| Leigh R. Dobbs | | — | | — | | — | | — |
| George T. Hendren | | 6,321 | | 241,209 | | 6,340 | | 341,219 |
___________________________________
(1)The value realized on vesting for stock awards represents the number of shares acquired on vesting multiplied by the closing price of our common stock on the vesting date.
EMPLOYMENT AGREEMENTS
The Company is party to an employment agreement with each of Messrs. Turner, Deakin and Hendren and Ms. Dobbs, each of which had an initial one-year term commencing on May 1, 2019, October 21, 2019, August 1, 2022 and September 6, 2023, respectively, and Mr. Apolinsky, which had an initial one-year term commencing on July 20, 2015, in each case with automatic one-year renewals unless and until either the Company or the executive provides at least 90 days’ written notice to the other of intent not to renew the term. The employment agreements provide that each executive is entitled to base salary, target annual bonus and eligibility for participation in the Company’s benefit plans, as well as a car allowance. The employment agreements also provide for severance upon certain terminations of employment, as described below under “— Payments upon Certain Events of Termination or Change in Control.”
PAYMENTS UPON CERTAIN EVENTS OF TERMINATION OR CHANGE IN CONTROL
Employment Agreements
Termination Payments. Pursuant to the terms of the respective Employment Agreement, as applicable, our NEOs are entitled to receive certain payments in connection with certain termination events. In the event Mr. Turner’s employment is terminated by the Company other than for cause, death or disability (each, as defined in his Employment Agreement) or by Mr. Turner for good reason (as defined in his Employment Agreement), in each case other than in connection with a change in control, Mr. Turner shall be entitled to (i) base salary continuation for 18 months; (ii) the payment of an amount equal to one times Mr. Turner’s target bonus opportunity; (iii) a pro-rata annual actual bonus for the year in which termination occurs and (iv) medical benefits continuation for 18 months. In the event our other NEOs besides Mr. Turner employment is terminated by the Company other than for cause, death or disability (each, as defined in the respective Employment Agreement) or by the NEO for good reason (as defined in the respective Employment Agreement), in each case other than in connection with a change in control, the NEO shall be entitled to (i) base salary continuation for 12 months; (ii) a pro-rata annual bonus for the year in which termination occurs and (iii) medical benefits continuation for 12 months.
With respect to our NEOs, in the event the NEO’s employment is terminated by the Company for cause or on account of the NEOs death, disability or voluntary termination without good reason, the Company is obligated to pay the NEO any accrued benefits through the date of termination, which accrued benefits are quantified in each of the tables below in the “Accrued Benefits” column. Each NEO is entitled to payment for accrued but unused vacation. The amounts in the “Accrued Benefits” column represent four weeks’ vacation pay assuming no vacation has been taken for the relevant time period.
The following table describes the estimated value of payments that would have been due to our current NEOs in the event their employment was terminated by the Company due to a termination other than for cause, death or disability of the NEO or by the NEO for good reason, in each case other than in connection with a change in control, on April 30, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Accrued
Benefits ($) | | Base
Salary ($) | | Pro Rata
Bonus ($) | | Medical
Coverage ($) | | Total ($) |
| John C. Turner, Jr. | | $ | 104,288 | | $ | 1,251,450 | | $ | 2,250,464 | | $ | 25,545 | | $ | 3,631,747 |
| Scott M. Deakin | | 44,633 | | 535,600 | | 433,423 | | 26,939 | | 1,040,595 |
| Craig D. Apolinsky | | 36,207 | | 434,479 | | 351,593 | | 26,939 | | 849,218 |
| Leigh R. Dobbs | | 29,167 | | 350,000 | | 183,906 | | 26,939 | | 590,012 |
| George T. Hendren | | 41,667 | | 500,000 | | 417,553 | | 26,939 | | 986,159 |
Change-In-Control Payments. Pursuant to the terms of the respective Employment Agreement, as applicable, our NEOs are entitled to receive certain payments in connection with a qualifying termination of employment within twenty-four (24) months following a change in control. In the event Mr. Turner has a qualifying termination of employment within twenty-four (24) months following a change in control, Mr. Turner shall be entitled to (i) a lump sum payment equal to thirty months of his then-current base salary plus an amount equal to twenty-four (24) months of his then-current corporate target bonus opportunity and (ii) medical benefits continuation for 18 months. In the event our other NEOs besides Mr. Turner have a qualifying termination of employment within twenty-four (24) months following a change in control, our other NEOs shall be entitled to (i) a lump sum severance payment equal to two (2) times the sum of their then-current base salary plus then-current target annual bonus, (ii) a pro-rata annual actual bonus for the year in which termination occurs, and (iii) medical benefits continuation for 18 months.
The following table describes the estimated value of payments that would have been due to our current NEOs in the event there was a qualifying termination of employment within twenty-four (24) months following a change in control on April 30, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Accrued
Benefits ($) | | Base
Salary ($) | | Pro Rata
Bonus ($) | | Medical
Coverage ($) | | Total ($) |
| John C. Turner, Jr. | | $ | 104,288 | | $ | 2,085,750 | | $ | 2,250,464 | | $ | 25,545 | | $ | 4,466,047 |
| Scott M. Deakin | | 44,633 | | 1,071,200 | | 866,846 | | 40,409 | | 2,023,088 |
| Craig D. Apolinsky | | 36,207 | | 868,958 | | 703,186 | | 40,409 | | 1,648,760 |
| Leigh R. Dobbs | | 29,167 | | 700,000 | | 367,812 | | 40,409 | | 1,137,388 |
| George T. Hendren | | 41,667 | | 1,000,000 | | 835,106 | | 40,409 | | 1,917,182 |
Equity Awards. Equity awards granted in August 2020 under the GMS Inc. Equity Incentive Plan and awards granted under the GMS Inc. 2020 Equity Incentive Plan provide that (i) upon the occurrence of a change of control of the Company in which awards are not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control in a manner approved by the HCMC Committee or the Board, all outstanding options will become fully vested and exercisable and all RSUs will become fully-vested; and (ii) upon the occurrence of a change of control of the Company in which awards are assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control, if within two years after the effective date of the change of control, a participant’s employment is terminated without “cause” or the participant resigns for “good reason,” then all outstanding options will become fully vested and exercisable and all RSUs will become fully-vested.
The following table describes the estimated value of payments for unvested stock options and RSUs that would have become vested upon a change in control, assuming such change in control occurred on April 30, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Number of
Stock
Options (#)(1)(2) | | Value of
Stock
Options ($)(3) | | Number of
Stock
Awards (#)(1)(4) | | Value of
Stock
Awards ($)(5) | | Total ($) |
| John C. Turner, Jr. | | 145,070 | | $ | 1,894,415 | | 65,513 | | $ | 3,803,685 | | $ | 5,698,100 |
| Scott M. Deakin | | 41,082 | | 505,381 | | 18,646 | | 1,082,587 | | 1,587,968 |
| Craig D. Apolinsky | | 28,768 | | 403,562 | | 13,039 | | 757,044 | | 1,160,606 |
| Leigh R. Dobbs | | 4,984 | | 61,752 | | 2,490 | | 144,569 | | 206,321 |
| George T. Hendren | | 22,852 | | 283,321 | | 10,437 | | 605,972 | | 889,293 |
___________________________________
(1)Assumes the options and RSUs granted in fiscal 2021, 2022 and 2023 were not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control and, therefore, became fully vested in connection with the change in control.
(2)Represents unvested options as of April 30, 2023 granted in August 2020 under the GMS Inc. Equity Incentive Plan and options granted under the GMS Inc. 2020 Equity Incentive Plan.
(3)Calculations with regard to stock options are based upon the closing price of our Common Stock on April 30, 2023, or $58.06, less the exercise price.
(4)Represents unvested RSUs as of April 30, 2023 granted under the GMS Inc. 2020 Equity Incentive Plan.
(5)The amount of benefit for RSUs represents the number of outstanding RSUs multiplied by the closing price of our Common Stock on April 30, 2023, or $58.06.
CEO PAY RATIO
For fiscal 2023, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees of our company other than our CEO was approximately 75 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions summarized below. Given the different methodologies various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported below should not be used as a basis for comparison between companies.
We determined our median employee as of April 30, 2023. We identified our median employee by using a consistently applied compensation definition and chose total gross wages for all employees, excluding the CEO. We selected the median employee from our employee population (full-time, part-time, temporary and seasonal) of 7,007 individuals employed as of April 30, 2023.
| | | | | |
| Compensation Measure Used to Identify Median Employee | Total gross wages as derived from the Company’s payroll records(1) |
| Median Employee Fiscal 2023 Annual Compensation | $67,958, calculated in the same manner as we calculated total compensation of the CEO in the Summary Compensation Table |
| CEO Fiscal 2023 Annual Compensation | $5,077,632, as reported in the Summary Compensation Table |
| Pay Ratio | 75:1 |
___________________________________
(1)After identifying the median employee based on total gross wages, we calculated the annual total compensation for such employee using the same methodology we use for our NEOs as set forth in the Summary Compensation Table included in this Proxy Statement.
PAY VERSUS PERFORMANCE
Pay Versus Performance Table
The following table sets forth information regarding the Company’s performance and the "compensation actually paid" to our principal executive officer ("PEO") and our non-PEO NEOs, as calculated in accordance with SEC disclosure rules:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | |
Year(1) | | Summary Compensation Table Total Compensation for PEO(2) | | Compensation Actually Paid to PEO(3) | | Average Summary Compensation Table Total for Non-PEO NEOs(2) | | Average Compensation Actually Paid to Non-PEO NEOs(3) | | Company Total Shareholder Return(4) | | Peer Group Total Shareholder Return(4) | | Net Income (in thousands)(5) | | Adjusted EBITDA (in thousands)(6) |
| 2023 | | $ | 5,077,632 | | $ | 6,721,104 | | $ | 1,418,419 | | $ | 1,664,253 | | $ | 315.89 | | $ | 155.76 | | $ | 332,991 | | $ | 665,696 |
| 2022 | | 5,079,038 | | 6,202,174 | | 1,781,738 | | 2,050,302 | | 272.13 | | 121.96 | | 273,442 | | 566,921 |
| 2021 | | 4,134,614 | | 10,187,373 | | 1,439,689 | | 2,720,299 | | 140.28 | | 141.14 | | 105,560 | | 319,371 |
___________________________________(1)Mr. Turner was the PEO for all years presented. Mr. Deakin and Mr. Apolinsky were the non-PEO NEOs for fiscal years 2021 and 2022. Mr. Deakin, Mr. Apolinsky, Ms. Dobbs and Mr. Hendren were the non-PEO NEOs for fiscal year 2023.
(2)Amounts reported in these columns represent the total compensation reported in the Summary Compensation Table for the applicable fiscal year in the case of our PEO and the average of the total compensation reported in the Summary Compensation Table for the applicable fiscal year for our non-PEO NEOs.
(3)Amounts shown for compensation actually paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized or received by our PEO or other non-PEO NEOs during the applicable fiscal year. These amounts reflect total compensation as set forth in the Summary Compensation Table with equity award value adjustments for the applicable year. A reconciliation of the adjustments for our PEO and for the average of our non-PEO NEOs is set forth following the footnotes to this table.
(4)Amounts reported in these columns represent the cumulative total shareholder return of GMS Inc. common stock and the cumulative total return of our peer group, the S&P 500 Select Sector SPDR (XLI), for purposes of this table, the same index used for our performance graph disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023. The total shareholder return for each investment assumes that $100 was invested in GMS Inc. common stock and the respective index at the beginning of the three-year period, including reinvestment of any dividends. Historical stock performance is not necessarily indicative of future stock performance.
(5)Amounts represent consolidated net income as reported in our Annual Report on Form 10-K for the applicable fiscal year.
(6)We determined Adjusted EBITDA to be the most important financial performance measure used to link Company performance to compensation actually paid to our PEO and non-PEO NEOs in 2023. Adjusted EBITDA, as we define it, is an amount equal to net income (loss) plus interest expense and related items, income taxes, stock compensation, depreciation and amortization, further adjusted to exclude other non-cash items and certain other adjustments. See Appendix A for a reconciliation of Adjusted EBITDA to the most comparable measure reported in accordance with GAAP.
The following table presents a reconciliation of the amounts reported in the Summary Compensation Table to the compensation actually paid to our PEO and other non-PEO NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PEO | | Average Non-PEO NEOs |
| Reconciliation | | 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 |
| Summary Compensation Table Total | | $ | 5,077,632 | | $ | 5,079,038 | | $ | 4,134,614 | | $ | 1,418,419 | | $ | 1,781,738 | | $ | 1,439,689 |
| Less: Grant date fair value of stock awards granted in fiscal year(a) | | (1,549,962) | | (1,499,988) | | (1,149,991) | | (303,423) | | (324,971) | | (281,242) |
| Less: Grant date fair value of option awards granted in fiscal year(a) | | (1,549,993) | | (1,499,986) | | (1,149,997) | | (303,423) | | (324,984) | | (281,247) |
| Plus: Year-end fair value of outstanding and unvested stock awards granted in fiscal year(b) | | 1,672,070 | | 1,463,961 | | 2,145,374 | | 332,800 | | 317,165 | | 524,673 |
| Plus: Change in fair value of prior year stock awards that are unvested and outstanding(b) | | 371,179 | | 245,895 | | 1,280,330 | | 54,806 | | 49,763 | | 230,414 |
| Plus: Change in fair value of prior year stock awards that vested in the fiscal year(b) | | 222,784 | | 150,546 | | 50,306 | | 30,000 | | 46,481 | | 32,595 |
| Plus: Year-end fair value of outstanding and unvested option awards granted in fiscal year(b) | | 1,583,862 | | 1,539,204 | | 2,687,414 | | 317,508 | | 333,481 | | 657,243 |
| Plus: Change in fair value of prior year options that are unvested and outstanding(b) | | 548,300 | | 519,665 | | 2,017,873 | | 82,058 | | 103,907 | | 354,442 |
| Plus: Change in fair value of prior year options that vested in the fiscal year(b) | | 345,232 | | 203,839 | | 171,450 | | 35,508 | | 67,722 | | 43,732 |
| Compensation Actually Paid | | $ | 6,721,104 | | $ | 6,202,174 | | $ | 10,187,373 | | $ | 1,664,253 | | $ | 2,050,302 | | $ | 2,720,299 |
___________________________________
(a)The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year.
(b)Fair values of unvested and outstanding equity awards were remeasured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. Fair values as of each measurement date were determined using valuation assumptions and methodologies that are generally consistent with those used to estimate fair value at grant under U.S. GAAP. Fair value of stock awards was determined using the closing stock price of our common stock on the applicable measurement dates. Fair value of stock options was determined using the Black-Scholes methodology on the applicable measurement dates.
Description of Certain Relationships
We believe the “compensation actually paid” in each of the years reported above and over the three-year cumulative period are reflective of the Human Capital Management and Compensation Committee’s emphasis on “pay for performance” as the “compensation actually paid” fluctuated year-over-year, primarily due to the result of our stock performance and our varying levels of achievement against pre-established performance goals under our AIP and long-term incentive plan. The following graphs show the relationship between the compensation actually paid to our PEO and non-PEO NEOs and (i) our total shareholder return and (ii) our net income and Adjusted EBITDA for the past three fiscal years. In addition, the first graph below compares our cumulative total shareholder return and our peer group’s cumulative total shareholder return.
Most Important Financial Performance Measures
The following table presents the financial performance measures we believe are the most important financial performance measures used to link the compensation actually paid to our PEO and non-PEO NEOs to Company performance for fiscal 2023. Please see the “Executive Compensation — Compensation Discussion and Analysis” for a further discussion of the metrics used in the Company’s executive compensation program.
| | |
| Most Important Performance Measures |
Adjusted EBITDA |
Working Capital Turns |
| Total Shareholder Return |
STOCK OWNERSHIP
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of our common stock as of July 31, 2023:
• each person or entity who is known by us to beneficially own more than 5% of our common stock;
• each of our directors and named executive officers; and
• all of our directors and executive officers as a group.
Information with respect to beneficial ownership has been furnished to us by each director, executive officer or stockholder listed in the table below, as the case may be. The amounts and percentages of our common stock beneficially owned are reported on the basis of rules of the SEC governing the determination of beneficial ownership of securities. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days after July 31, 2023, including any shares of our common stock subject to an option that has vested or will vest within 60 days after July 31, 2023 and any shares of our common stock subject to RSUs that will vest within 60 days after July 31, 2023. More than one person may be deemed to be a beneficial owner of the same securities.
The percentage of beneficial ownership is based on 40,606,444 shares of common stock outstanding as of July 31, 2023.
Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, the address for each person or entity listed below is c/o GMS Inc., 100 Crescent Centre Parkway, Suite 800, Tucker, Georgia 30084.
| | | | | | | | | | | | | | |
| Name of Beneficial Owner | | Number of
Shares
Beneficially
Owned | | Percentage
of Class |
| 5% Stockholders | | | | |
BlackRock, Inc.(1) | | 7,226,488 | | 17.8% |
The Vanguard Group(2) | | 5,589,544 | | 13.8% |
Coliseum Capital Management, LLC(3) | | 3,417,651 | | 8.4% |
Dimensional Funds LP(4) | | 2,511,682 | | 6.2% |
| Directors and Named Executive Officers | | | | |
John C. Turner, Jr.(5) | | 288,846 | | * |
Scott M. Deakin(6) | | 77,847 | | * |
Craig D. Apolinsky(7) | | 120,093 | | * |
Leigh R. Dobbs(8) | | 2,492 | | * |
George T. Hendren(9) | | 73,474 | | * |
Lisa M. Bachmann(10) | | 9,881 | | * |
Peter C. Browning(11) | | 13,734 | | * |
John J. Gavin(12) | | 48,309 | | * |
Theron I. Gilliam(13) | | 42,309 | | * |
Mitchell B. Lewis(14) | | 13,734 | | * |
Teri P. McClure(15) | | 14,812 | | * |
Randolph W. Melville(16) | | 6,183 | | * |
J. David Smith(17) | | 61,309 | | * |
All executive officers and directors as a group (13 persons)(18) | | 773,023 | | 1.9% |
___________________________________
* Represents beneficial ownership of less than 1% of our outstanding common stock.
(1)Represents beneficial ownership as of December 31, 2022, according to the Schedule 13G filed by BlackRock, Inc. on January 31, 2023. BlackRock, Inc. has sole voting power over 7,158,431 of these shares and sole dispositive power over 7,226,488 of these shares. The address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
(2)Represents beneficial ownership as of December 30, 2022, according to the Schedule 13G filed by The Vanguard Group on February 9, 2023. The Vanguard Group has shared voting power over 80,167 of these shares, sole dispositive power over 5,475,727 of these shares and shared dispositive power over 113,817 of these shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
(3)Represents beneficial ownership as of June 28, 2023, according to the Schedule 13G filed by Coliseum Capital Management, LLC on June 30, 2023. Coliseum Capital Management, LLC has shared voting power over 3,417,651 of these shares and shared dispositive power over 3,417,651 of these shares. The address for Coliseum Capital Management, LLC is 105 Rowayton Avenue, Rowayton, Connecticut, 06853.
(4)Represents beneficial ownership as of December 30, 2022, according to the Schedule 13G filed by Dimensional Funds LP on February 10, 2023. Dimensional Funds LP has sole voting power over 2,477,429 of these shares and sole dispositive power over 2,511,682 of these shares. The address for Dimensional Funds LP is Building One, 6300 Bee Cave Road, Austin, Texas, 78746.
(5)Includes 220,702 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 36,137 restricted stock units that will vest within 60 days after July 31, 2023.
(6)Includes 53,339 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 9,909 restricted stock units that will vest within 60 days after July 31, 2023.
(7)Includes 102,765 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 7,458 restricted stock units that will vest within 60 days after July 31, 2023.
(8)Includes 1,662 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 830 restricted stock units that will vest within 60 days after July 31, 2023.
(9)Includes 46,003 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 5,534 restricted stock units that will vest within 60 days after July 31, 2023.
(10)Includes 2,322 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023. Ms. Bachmann is a member of our Board.
(11)Includes 2,322 restricted stock units that will vest within 60 days after July 31, 2023. Mr. Browning is a member of our Board.
(12)Includes 30,474 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 2,322 restricted stock units that will vest within 60 days after July 31, 2023. Mr. Gavin is a member of our Board.
(13)Includes 24,474 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 2,322 restricted stock units that will vest within 60 days after July 31, 2023. Mr. Gilliam is a member of our Board.
(14)Includes 2,322 restricted stock units that will vest within 60 days after July 31, 2023. Mr. Lewis is a member of our Board.
(15)Includes 2,322 restricted stock units that will vest within 60 days after July 31, 2023. Ms. McClure is a member of our Board.
(16)Includes 2,322 restricted stock units that will vest within 60 days after July 31, 2023. Mr. Melville is a member of our Board.
(17)Includes 30,474 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 2,322 restricted stock units that will vest within 60 days after July 31, 2023. Mr. Smith is a member of our Board.
(18)Includes 509,893 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after July 31, 2023 and 78,444 restricted stock units that will vest within 60 days after July 31, 2023.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires our directors, executive officers and persons who own beneficially more than 10% of our Common Stock to file reports of ownership and changes in ownership of such stock with the SEC. These persons are also required by SEC regulations to furnish us with copies of all such forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis during the fiscal year ended April 30, 2023, except that one Form 4 related to one sales transaction was filed late for Mr. Hendren.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions during the fiscal year ended April 30, 2023 to which we were a party in which the amount involved exceeded or will exceed $120,000, and in which any of our executive officers, directors or holders of more than 5% of any class of our voting securities, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest. We believe the terms obtained or the consideration that we paid or received, as applicable, in connection with the transactions described below are comparable to terms available or amounts that would be paid or received, as applicable, in arms’-length transactions with parties unrelated to us.
Relationships and Transactions
During the fiscal year ended April 30, 2023, we purchased inventories from BlueLinx Holdings, Inc. ("BlueLinx") an entity with which Mr. Lewis and Mr. Smith were directors during fiscal 2023 We purchased inventory from BlueLinx for distribution in the amount of approximately $1.4 million during the fiscal year ended April 30, 2023.
Policies and Procedures for Related Persons Transactions
Our Board has adopted a written policy providing that the Audit Committee will review and approve or ratify transactions in excess of $120,000 of value in which we participate and in which a director, executive officer or beneficial holder of more than 5% of any class of our voting securities has or will have a direct or indirect material interest. Under this policy, the Board is to obtain all information it believes to be relevant to a review and approval or ratification of these transactions. After consideration of the relevant information, the Audit Committee is to approve only those related party transactions that the Audit Committee believes are on their terms, taken as a whole, no less favorable to us than could be obtained in an arms’-length transaction with an unrelated third party and that the Audit Committee determines are not inconsistent with the best interests of the Company. In particular, our policy with respect to related person transactions will require our Audit Committee to consider the benefits to the Company, the impact on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director has a position or relationship, the availability of other sources for comparable products or services, the terms of the transaction and the terms available to unrelated third parties or to employees generally. A “related person” is any person who is or was one of our executive officers, directors or director nominees or is a holder of more than 5% of our common stock, or their immediate family members or any entity owned or controlled by any of the foregoing persons. All of the transactions described above were entered into prior to the adoption of this policy.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 18, 2023
GENERAL
We are furnishing this Proxy Statement to you as part of a solicitation by the Board of GMS Inc., a Delaware corporation, of proxies to be voted at our Annual Meeting and at any reconvened meeting after an adjournment or postponement of the meeting. We will hold the Annual Meeting virtually on Wednesday, October 18, 2023 at 8:00 a.m. (Eastern Time).
Our mailing address and principal executive office is 100 Crescent Centre Parkway, Suite 800, Tucker, Georgia 30084. Our website is located at investor.gms.com. The information contained on, or that can be accessed through, our website is not a part of this Proxy Statement.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS
SEC rules allow companies to furnish proxy materials to their stockholders on the Internet. We are pleased to take advantage of these rules and believe that they enable us to provide you with the information you need, while making delivery more efficient and more environmentally friendly. We have saved significant mailing and printing costs by providing proxy materials to you over the Internet in accordance with SEC rules. In accordance with these rules, on or about September 8, 2023, we expect to mail to our stockholders a notice providing instructions on how to access our proxy materials and fiscal 2023 Annual Report on the Internet (the “Notice of Internet Availability of Proxy Materials”). The Notice of Internet Availability of Proxy Materials, which cannot itself be used to vote your shares, also provides instructions on how to vote online, by telephone or by completing and mailing a proxy card and includes instructions on how to request a paper copy of the proxy materials, if you so desire. The Notice of Internet Availability of Proxy Materials includes a control number that must be entered at the website provided on the notice in order to view the proxy materials. Whether you received the Notice of Internet Availability of Proxy Materials or paper copies of our proxy materials, the Proxy Statement and fiscal 2023 Annual Report are available to you at investor.gms.com.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the Annual Meeting, you will consider and act upon the four proposals below and any other business as may properly come before the Annual Meeting or any adjournments or postponements thereof:
• Proposal 1: The election of the nine director nominees identified in this Proxy Statement;
• Proposal 2: The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2024;
• Proposal 3: The approval, on an advisory basis, of the compensation of our named executive officers; and
• Proposal 4: The approval, on an advisory basis, the frequency of future advisory votes on the compensation of the Company’s named executive officers.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
The information provided in the “question and answer” format below is for your convenience only and is merely a summary of the information contained in this Proxy Statement. You should read this entire Proxy Statement carefully. Information contained on, or that can be accessed through, our website is not a part of this Proxy Statement.
What is a proxy?
The Board is asking for your proxy. This means you authorize persons selected by the Company to vote your shares at the Annual Meeting in the way that you instruct. All shares represented by valid proxies received and not revoked before the Annual Meeting will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.
Why am I receiving these materials?
You are receiving these materials because at the close of business on September 1, 2023 (the “Record Date”), you owned shares of the Company’s common stock, $0.01 par value per share. All stockholders of record on the Record Date are entitled to attend and vote at the Annual Meeting. Each share of our common stock is entitled to one vote on each matter presented for a vote at the Annual Meeting. As of July 31, 2023, we had 40,606,444 shares of common stock outstanding.
What shares are included on my proxy card?
You will receive one proxy card for all the shares of the Company’s common stock that you hold as a stockholder of record. If you hold your shares in street name, you will receive voting instructions for each account you have with a broker, bank or other nominee.
What matters am I voting on, how may I vote on each matter and how does the Board recommend that I vote on each matter?
The following table sets forth each of the proposals you are being asked to vote on, how you may vote on each proposal and how the Board recommends that you vote on each proposal:
| | | | | | | | | | | | | | | | | |
| Proposal | | How may I vote? | | How does the Board recommend that I vote? |
| 1. | The election of the nine director nominees identified in this Proxy Statement, each for a one-year term or until his or her successor is duly elected and qualified. | | FOR the election of all director nominees named herein; WITHHOLD authority to vote for all such director nominees; or FOR the election of all such director nominees other than any nominees with respect to whom the vote is specifically WITHHELD by indicating in the space provided on the proxy. | | FOR each director |
| 2. | The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2024. | | FOR or AGAINST, or you may ABSTAIN from voting on the matter. | | FOR |
| 3. | The approval, on an advisory basis, of the compensation of our named executive officers. | | FOR or AGAINST, or you may ABSTAIN from voting on the matter. | | FOR |
| 4. | The determination, on an advisory basis, of the frequency with which stockholders will participate in any advisory vote on executive compensation. | | 1 YEAR, 2 YEARS, or 3 YEARS, or you may ABSTAIN from voting on the matter. | | 1 YEAR |
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares are registered directly in your name with the Company’s transfer agent, Broadridge Financial Solutions, Inc., you are considered the “stockholder of record” with respect to those shares. The Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement, the fiscal 2023 Annual Report and proxy card with postage-paid envelope), as applicable, will be sent to stockholders beginning on or about September 8, 2023, and the proxy materials will be posted on the investor relations portion of the Company’s website, investor.gms.com, and on the website referenced in the Notice of Internet Availability of Proxy Materials on the same day.
If your shares are held with a broker or in an account at a bank, you are considered the “beneficial owner” with respect to those shares. These shares are sometimes referred to as being held “in street name.” The Notice of Internet Availability of Proxy Materials or full set of proxy materials, as applicable, would have been forwarded to you by your
broker, bank, or other holder of record who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by using the voting instruction card included in proxy materials or by following the instructions on the enclosed proxy card for voting online or by telephone. You will not be able to vote these shares directly unless you obtain a signed legal proxy from your broker, bank, or other nominee giving you the right to vote the shares.
How do I vote if I am a stockholder of record?
As a stockholder of record, you may vote your shares in any one of the following ways:
• Call the toll-free number shown on the proxy card;
• Vote on the Internet on the website shown on the proxy card;
• Mark, sign, date and return the proxy card in the postage-paid envelope; or
• Vote at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, we urge you to vote. Returning the proxy card or voting by telephone or online will not affect your right to attend the Annual Meeting and vote.
How do I vote if I am a beneficial owner?
As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares by following the instructions that your broker, bank or other nominee sent to you. You will receive, or be provided access to, proxy materials and voting instructions for each account that you have with a broker, bank, or other nominee. As a beneficial owner, if you wish to change the directions that you have provided your broker, bank, or other nominee, you should follow the instructions that your broker, bank or other nominee sent to you.
As a beneficial owner, you are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares at the meeting unless you obtain a signed legal proxy from your broker, bank, or other nominee giving you the right to vote the shares.
How can I attend the Annual Meeting?
You are entitled to attend the Annual Meeting if you were a stockholder of record or beneficial owner as of the Record Date. We have decided to hold this year’s Annual Meeting in a virtual meeting format only. We believe this format enhances stockholder access to the Annual Meeting by enabling stockholder attendance and participation from anywhere, without cost. To attend the Annual Meeting, visit www.virtualshareholdermeeting.com/GMS2023 and enter the 16-digit control number included in your proxy card. Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. You may contact our General Counsel and Corporate Secretary at (800) 392-4619 if you have any questions regarding the above instructions.
What can I do if I change my mind after I vote?
If you are a stockholder of record, you can revoke your proxy before it is exercised by:
• written notice of revocation delivered before the Annual Meeting to our General Counsel and Corporate Secretary at 100 Crescent Centre Parkway, Suite 800, Tucker, Georgia 30084;
• a valid, later-dated proxy delivered to us before the Annual Meeting;
• a later-dated online vote or vote by telephone, in each case prior to 11:59 p.m. (Eastern Time) on October 17, 2023; or
• attending the Annual Meeting and voting by ballot.
If you are a beneficial owner of shares but not the stockholder of record, you may submit new voting instructions by contacting your broker, bank, or other nominee. You may also vote at the Annual Meeting if you obtain a legal proxy as described in the answer to the question “How do I vote if I am a beneficial owner?” above. All shares represented by valid
proxies received and not revoked will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.
What if I return my proxy card or vote by Internet or phone but do not specify how I want to vote?
If you are a stockholder of record and sign and return your proxy card or complete the online or telephone voting procedures, but do not specify how you want to vote your shares, we will vote them, in accordance with our Board’s recommendation. as follows:
• FOR the election of each of the director nominees identified in this Proxy Statement;
• FOR the ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2024;
• FOR the approval, on an advisory basis, of the compensation of our named executive officers; and
• 1 YEAR for the frequency of future advisory votes on the compensation of the Company’s named executive officers.
What votes need to be present to hold the Annual Meeting?
Under our Bylaws, a quorum will exist at the Annual Meeting if stockholders holding a majority of the shares entitled to vote at the Annual Meeting are present or by proxy. Stockholders of record who return a proxy or attend the Annual Meeting will be considered part of the quorum. Abstentions are counted as “present” for determining a quorum.
What is the voting requirement to approve each of the proposals?
The following table sets forth the voting requirements with respect to each of the proposals:
| | | | | | | | | | | |
| Proposal | | Voting Requirement |
| 1. | The election of the nine director nominees identified in this Proxy Statement each for a one-year term or until his or her successor is duly elected and qualified. | | Each director must be elected by a plurality of the votes cast. A plurality means that the nominees with the largest number of votes are elected as directors up to the maximum number of directors to be elected at the Annual Meeting. |
| 2. | The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2024. | | To be approved, this vote must be approved by a majority of the votes present or by proxy and entitled to vote on the proposal, meaning that the votes cast by the stockholders “FOR” the approval of the proposal must exceed the number of votes cast “AGAINST” the approval of the proposal and the number of abstentions. |
| 3. | The approval, on an advisory basis, of the compensation of our named executive officers. | | To be approved, this non-binding vote must be approved by a majority of the votes present or by proxy and entitled to vote on this proposal, meaning that the votes cast by the stockholders “FOR” the approval of the proposal must exceed the number of votes cast “AGAINST” the approval of the proposal and the number of abstentions. |
| 4. | The determination, on an advisory basis, of the frequency with which stockholders will participate in any advisory vote on executive compensation. | | For this non-binding proposal, the frequency of "1 YEAR," "2 YEARS," or "3 YEARS" receiving the most votes cast by the stockholders present or by proxy, will be deemed to be the frequency preferred by the stockholders. |
Other matters that may properly come before the Annual Meeting may require more than a majority vote under our Bylaws, Charter, the laws of Delaware or other applicable laws.
How are votes counted?
In the election of the directors, your vote may be cast “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. If you withhold your vote with respect to any nominee, your shares will not be considered to have been voted for or against the nominee. For all other proposals, your vote may be cast “FOR” or “AGAINST” or you may “ABSTAIN.” If you “ABSTAIN,” it has the same effect as a vote “AGAINST.” If you sign your proxy card with no further instructions and you are a stockholder of record, then your shares will be voted in accordance with the recommendations of our Board. If you sign your proxy card with no further instructions and you are a beneficial owner, then please see the response to the question immediately below for a description of how your shares will be voted.
What is the effect of broker non-votes?
Under the rules of the NYSE, if you are a beneficial owner, your broker, bank, or other nominee only has discretion to vote on certain “routine” matters without your voting instructions. These rules also provide, however, that when a proposal is not a “routine” matter and your broker, bank, or other nominee has not received your voting instructions with respect to such proposal, your broker, bank, or other nominee cannot vote your shares on that proposal. When a broker, bank, or other nominee does not cast a vote for a non-routine matter, it is called a “broker non-vote.” Your broker, bank or other nominee may not vote your shares with respect to any of the proposals other than the ratification of the appointment of Ernst & Young LLP in the absence of your specific instructions as to how to vote with respect to these matters, because under such rules these matters are not considered “routine” matters. Broker non-votes will have no effect on the election of directors or the advisory vote on the compensation of our named executive officers.
The ratification of the appointment of Ernst & Young LLP is considered a routine matter and as a result there will be no broker non-votes with respect to this proposal.
Who will count the votes?
Broadridge Financial Solutions, Inc. will act as the inspector of elections and count the votes.
Where can I find the voting results?
We will announce the preliminary voting results at the Annual Meeting. We will also publish voting results in a Current Report on Form 8-K that we will file with the SEC within four business days following the Annual Meeting. If on the date of this Form 8-K filing the inspector of elections for the Annual Meeting has not certified the voting results as final, we will note in the filing that the results are preliminary and publish the final results in a subsequent Form 8-K filing within four business days after the final voting results are known.
Who will pay the costs of soliciting these proxies?
We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of the Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement, the fiscal 2023 Annual Report and proxy card with postage-paid envelope), as applicable, and any additional information furnished to stockholders. Broadridge will assist us in distribution of the proxy materials and will provide voting and tabulation services for the Annual Meeting. We may reimburse banks, brokers, custodians, and nominees for their reasonable costs of forwarding proxy materials to beneficial owners. Original solicitation of proxies may be supplemented by electronic means, mail, facsimile, telephone or personal solicitation by our directors, officers or other employees. No additional compensation will be paid to our directors, officers, or other employees for such services.
Are you “householding” for stockholders sharing the same address?
The SEC’s rules permit us to deliver a single copy of the Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement, the fiscal 2023 Annual Report and proxy card with postage-paid envelope), as applicable, to an address that two or more stockholders share. This method of delivery is referred to as “householding” and can significantly reduce our printing and mailing costs. It also reduces the volume of mail that you receive. We will deliver only one Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement, the fiscal 2023 Annual Report and proxy card with postage-paid envelope), as applicable, to
multiple registered stockholders sharing an address, unless we receive instructions to the contrary from one or more of the stockholders. If printed copies of proxy materials are requested, we will still send each stockholder an individual proxy card.
If you did not receive an individual copy of the Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement, the fiscal 2023 Annual Report and proxy card with postage-paid envelope), as applicable, we will send copies to you if you contact us at 100 Crescent Centre Parkway, Suite 800, Tucker, Georgia 30084, Attention: General Counsel and Corporate Secretary or by telephone at (800) 392-4619. If you and other residents at your address have been receiving multiple copies of the Notice of Internet Availability of Proxy Materials, or a full set of the proxy materials (including the Proxy Statement, the fiscal 2023 Annual Report and proxy card with postage-paid envelope), as applicable, and desire to receive only a single copy of these materials, you may contact your broker, bank, or other nominee or contact us at the above address or telephone number.
What is the deadline for stockholders to propose actions for consideration at the 2024 annual meeting of stockholders?
Stockholders who wish to nominate persons for election to our Board or propose other matters to be considered at our 2024 annual meeting of stockholders must provide us advance notice of the director nomination or stockholder proposal, as well as the information specified in our Bylaws, no earlier than June 20, 2024 and no later than July 20, 2024. Stockholders are advised to review our Bylaws, which contain the requirements for advance notice of director nominations and stockholder proposals. Notice of director nominations and stockholder proposals must be mailed to our General Counsel and Corporate Secretary at 100 Crescent Centre Parkway, Suite 800, Tucker, Georgia 30084. The requirements for advance notice of stockholders proposals under our Bylaws do not apply to proposals properly submitted under Rule 14a-8 under the Exchange Act, as those stockholder proposals are governed by Rule 14a-8. We reserve the right to reject, rule out of order or take other appropriate action with respect to any director nomination or stockholder proposal that does not comply with our Amended and Restated Bylaws and other applicable requirements.
May 11, 2024 is the deadline for stockholders to submit proposals to be included in our proxy statement under Rule 14a-8 under the Exchange Act for our 2024 annual meeting of stockholders. However, if the date of the 2024 annual meeting of stockholders is changed by more than 30 days from the date of the previous year’s meeting, then the deadline is a reasonable time before we begin to print and send our proxy statement for the 2024 annual meeting of stockholders. Proposals by stockholders must comply with all requirements of applicable rules of the SEC, including Rule 14a-8, and be mailed to our General Counsel and Corporate Secretary at 100 Crescent Center Parkway, Suite 800, Tucker, Georgia 30084. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with Rule 14a-8 and other applicable requirements.
Whom should I call if I have any questions?
If you have any questions about the Annual Meeting or your ownership of Company voting stock, please contact our transfer agent at:
Broadridge Corporate Issuer Solutions, Inc.
P.O. Box 1342
Brentwood, NY 11717
Internet: www.shareholder.broadridge.com
Telephone: (877) 830-4936
Email: shareholder@broadridge.com
OTHER MATTERS
Incorporation by Reference
The Audit Committee Report shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. In addition, the information contained on, or that can be accessed through, our website is not part of this Proxy Statement and references to our website addresses in this Proxy Statement are inactive textual references only.
Access to Reports and Other Information
We file or furnish our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy Statements and other documents electronically with the SEC under the Exchange Act. You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain such reports from the SEC’s website at www.sec.gov.
Our website is www.gms.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy Statements and other documents filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Corporate Governance Guidelines, Code of Business Conduct and Ethics and Board committee charters are also available on our website. We will provide, free of charge, a copy of any of our corporate documents listed above upon written request to our General Counsel and Corporate Secretary at 100 Crescent Center Parkway, Suite 800, Tucker, Georgia 30084.
List of Company Stockholders
A list of our stockholders as of September 1, 2023, the record date for the Annual Meeting, will be available for inspection at our corporate headquarters during ordinary business hours throughout the 10-day period prior to the Annual Meeting. The list of stockholders will also be available for such examination at the Annual Meeting.
Other Matters That May Come Before the Annual Meeting
We do not know of any other matters that will be considered at the Annual Meeting. However, if any other proper business should come before the meeting, the persons named in the proxy card will have discretionary authority to vote according to their best judgment to the extent permitted by applicable law.
* * * * *
| | | | | |
| By Order of the Board of Directors, |
| |
| /s/ Craig D. Apolinsky |
| Craig D. Apolinsky
Senior Vice President, General Counsel and Corporate Secretary |
Tucker, Georgia
August 25, 2023
APPENDIX A
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, Adjusted EBITDA margin and free cash flow are non-GAAP measures. We report our financial results in accordance with GAAP. However, we present Adjusted EBITDA, Adjusted EBITDA margin and free cash flow, which are not recognized financial measures under GAAP, because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA, Adjusted EBITDA margin and free cash flow are helpful in highlighting trends in our operating results, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and allocation, the tax jurisdictions in which companies operate and capital investments and acquisitions. In addition, we utilize Adjusted EBITDA in certain calculations under our debt agreements.
We believe that Adjusted EBITDA, Adjusted EBITDA margin and free cash flow are frequently used by analysts, investors and other interested parties in their evaluation of companies, many of which present these measures when reporting their results. Our presentation of Adjusted EBITDA, Adjusted EBITDA margin and free cash flow should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA, Adjusted EBITDA margin and free cash flow may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
Adjusted EBITDA, Adjusted EBITDA margin and free cash flow have their limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
Reconciliation of Net Income to Adjusted EBITDA
The following is a reconciliation of our net income to Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended April 30, |
| | 2019 | | 2020 | | 2021 | | 2022 | | 2023 |
| | (in thousands) |
| Net income | | $ | 56,002 | | $ | 23,381 | | $ | 105,560 | | $ | 273,442 | | $ | 332,991 |
| Interest expense | | 73,677 | | 67,718 | | 53,786 | | 58,097 | | 65,843 |
| Write off-of debt discount and deferred financing fees | | — | | 1,331 | | 4,606 | | — | | — |
| Interest income | | (66) | | (88) | | (86) | | (163) | | (1,287) |
| Provision for income taxes | | 14,039 | | 22,944 | | 31,534 | | 91,377 | | 114,512 |
| Depreciation expense | | 46,456 | | 51,332 | | 50,480 | | 55,437 | | 61,177 |
| Amortization expense | | 71,003 | | 65,201 | | 57,645 | | 63,795 | | 65,730 |
| Impairment of goodwill | | — | | 63,074 | | — | | — | | — |
| Stock appreciation expense(a) | | 2,730 | | 1,572 | | 3,173 | | 4,403 | | 7,703 |
| Redeemable noncontrolling interests(b) | | 1,188 | | 520 | | 1,288 | | 1,983 | | 1,178 |
| Equity-based compensation(c) | | 3,906 | | 7,060 | | 8,442 | | 10,968 | | 13,217 |
| Severance and other permitted costs(d) | | 8,152 | | 5,733 | | 2,948 | | 1,132 | | 2,788 |
| Transaction costs (acquisitions and other)(e) | | 7,858 | | 2,414 | | 1,068 | | 3,545 | | 1,961 |
| (Gain) loss on disposal of assets(f) | | (525) | | 658 | | (1,011) | | (913) | | (1,413) |
| Effects of fair value adjustments to inventory(g) | | 4,176 | | 575 | | 788 | | 3,818 | | 1,123 |
| Gain on legal settlement | | — | | (14,029) | | (1,382) | | — | | — |
| Change in fair value of financial instruments(h) | | 6,395 | | — | | — | | — | | — |
| Secondary public offering costs(i) | | — | | 363 | | — | | — | | — |
| Debt transaction costs(j) | | 678 | | — | | 532 | | — | | 173 |
| Adjusted EBITDA | | $ | 295,669 | | $ | 299,759 | | $ | 319,371 | | $ | 566,921 | | $ | 665,696 |
| | | | | | | | | | |
| Net sales | | $ | 3,116,032 | | | $ | 3,241,307 | | | $ | 3,298,823 | | | $ | 4,634,875 | | | $ | 5,329,252 | |
| Adjusted EBITDA Margin | | 9.5 | % | | 9.2 | % | | 9.7 | % | | 12.2 | % | | 12.5 | % |
___________________________________
(a)Represents changes in the fair value of stock appreciation rights.
(b)Represents changes in the fair values of noncontrolling interests.
(c)Represents non-cash equity-based compensation expense related to the issuance of share-based awards.
(d)Represents severance expenses and other costs permitted in the calculation of Adjusted EBITDA under the ABL Facility and the Term Loan Facility, including certain unusual, nonrecurring costs and credits due to COVID-19.
(e)Represents costs related to acquisitions paid to third parties.
(f)Includes gains and losses from the sale and disposal of assets.
(g)Represents the non-cash cost of sales impact of acquisition accounting adjustments to increase inventory to its estimated fair value.
(h)Represents the mark‑to‑market adjustments for derivative financial instruments.
(i)Represents costs paid to third-party advisors related to the secondary offerings of our common stock.
(j)Represents costs paid to third-party advisors related to debt refinancing activities.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
The following is a reconciliation of cash provided by operating activities to free cash flow:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended April 30, |
| | 2019 | | 2020 | | 2021 | | 2022 | | 2023 |
| | (in thousands) |
| Cash provided by operating activities | | $ | 193,615 | | | $ | 303,079 | | | $ | 153,304 | | | $ | 179,611 | | | $ | 441,737 | |
| Purchases of property and equipment | | (18,770) | | | (25,193) | | | (29,873) | | | (41,082) | | | (52,672) | |
| Free cash flow (a) | | $ | 174,845 | | | $ | 277,886 | | | $ | 123,431 | | | $ | 138,529 | | | $ | 389,065 | |
___________________________________(a)Free cash flow is a non-GAAP financial measure that we define as net cash provided by operations less capital expenditures.
v3.23.2
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v3.23.2
Pay vs Performance Disclosure - USD ($)
|
12 Months Ended |
Apr. 30, 2023 |
Apr. 30, 2022 |
Apr. 30, 2021 |
| Pay vs Performance Disclosure |
|
|
|
| Pay vs Performance Disclosure, Table |
The following table sets forth information regarding the Company’s performance and the "compensation actually paid" to our principal executive officer ("PEO") and our non-PEO NEOs, as calculated in accordance with SEC disclosure rules: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year(1) | | Summary Compensation Table Total Compensation for PEO(2) | | Compensation Actually Paid to PEO(3) | | Average Summary Compensation Table Total for Non-PEO NEOs(2) | | Average Compensation Actually Paid to Non-PEO NEOs(3) | | Company Total Shareholder Return(4) | | Peer Group Total Shareholder Return(4) | | Net Income (in thousands)(5) | | Adjusted EBITDA (in thousands)(6) | | 2023 | | $ | 5,077,632 | | $ | 6,721,104 | | $ | 1,418,419 | | $ | 1,664,253 | | $ | 315.89 | | $ | 155.76 | | $ | 332,991 | | $ | 665,696 | | 2022 | | 5,079,038 | | 6,202,174 | | 1,781,738 | | 2,050,302 | | 272.13 | | 121.96 | | 273,442 | | 566,921 | | 2021 | | 4,134,614 | | 10,187,373 | | 1,439,689 | | 2,720,299 | | 140.28 | | 141.14 | | 105,560 | | 319,371 |
|
|
|
| Company Selected Measure Name |
Adjusted EBITDA
|
|
|
| Named Executive Officers, Footnote |
Mr. Turner was the PEO for all years presented. Mr. Deakin and Mr. Apolinsky were the non-PEO NEOs for fiscal years 2021 and 2022. Mr. Deakin, Mr. Apolinsky, Ms. Dobbs and Mr. Hendren were the non-PEO NEOs for fiscal year 2023.
|
|
|
| Peer Group Issuers, Footnote |
Amounts reported in these columns represent the cumulative total shareholder return of GMS Inc. common stock and the cumulative total return of our peer group, the S&P 500 Select Sector SPDR (XLI), for purposes of this table, the same index used for our performance graph disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023. The total shareholder return for each investment assumes that $100 was invested in GMS Inc. common stock and the respective index at the beginning of the three-year period, including reinvestment of any dividends. Historical stock performance is not necessarily indicative of future stock performance.
|
|
|
| PEO Total Compensation Amount |
$ 5,077,632
|
$ 5,079,038
|
$ 4,134,614
|
| PEO Actually Paid Compensation Amount |
$ 6,721,104
|
6,202,174
|
10,187,373
|
| Adjustment To PEO Compensation, Footnote |
The following table presents a reconciliation of the amounts reported in the Summary Compensation Table to the compensation actually paid to our PEO and other non-PEO NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PEO | | Average Non-PEO NEOs | | Reconciliation | | 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 | | Summary Compensation Table Total | | $ | 5,077,632 | | $ | 5,079,038 | | $ | 4,134,614 | | $ | 1,418,419 | | $ | 1,781,738 | | $ | 1,439,689 | | Less: Grant date fair value of stock awards granted in fiscal year(a) | | (1,549,962) | | (1,499,988) | | (1,149,991) | | (303,423) | | (324,971) | | (281,242) | | Less: Grant date fair value of option awards granted in fiscal year(a) | | (1,549,993) | | (1,499,986) | | (1,149,997) | | (303,423) | | (324,984) | | (281,247) | | Plus: Year-end fair value of outstanding and unvested stock awards granted in fiscal year(b) | | 1,672,070 | | 1,463,961 | | 2,145,374 | | 332,800 | | 317,165 | | 524,673 | | Plus: Change in fair value of prior year stock awards that are unvested and outstanding(b) | | 371,179 | | 245,895 | | 1,280,330 | | 54,806 | | 49,763 | | 230,414 | | Plus: Change in fair value of prior year stock awards that vested in the fiscal year(b) | | 222,784 | | 150,546 | | 50,306 | | 30,000 | | 46,481 | | 32,595 | | Plus: Year-end fair value of outstanding and unvested option awards granted in fiscal year(b) | | 1,583,862 | | 1,539,204 | | 2,687,414 | | 317,508 | | 333,481 | | 657,243 | | Plus: Change in fair value of prior year options that are unvested and outstanding(b) | | 548,300 | | 519,665 | | 2,017,873 | | 82,058 | | 103,907 | | 354,442 | | Plus: Change in fair value of prior year options that vested in the fiscal year(b) | | 345,232 | | 203,839 | | 171,450 | | 35,508 | | 67,722 | | 43,732 | | Compensation Actually Paid | | $ | 6,721,104 | | $ | 6,202,174 | | $ | 10,187,373 | | $ | 1,664,253 | | $ | 2,050,302 | | $ | 2,720,299 |
___________________________________ (a)The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year. (b)Fair values of unvested and outstanding equity awards were remeasured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. Fair values as of each measurement date were determined using valuation assumptions and methodologies that are generally consistent with those used to estimate fair value at grant under U.S. GAAP. Fair value of stock awards was determined using the closing stock price of our common stock on the applicable measurement dates. Fair value of stock options was determined using the Black-Scholes methodology on the applicable measurement dates.
|
|
|
| Non-PEO NEO Average Total Compensation Amount |
$ 1,418,419
|
1,781,738
|
1,439,689
|
| Non-PEO NEO Average Compensation Actually Paid Amount |
$ 1,664,253
|
2,050,302
|
2,720,299
|
| Adjustment to Non-PEO NEO Compensation Footnote |
The following table presents a reconciliation of the amounts reported in the Summary Compensation Table to the compensation actually paid to our PEO and other non-PEO NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PEO | | Average Non-PEO NEOs | | Reconciliation | | 2023 | | 2022 | | 2021 | | 2023 | | 2022 | | 2021 | | Summary Compensation Table Total | | $ | 5,077,632 | | $ | 5,079,038 | | $ | 4,134,614 | | $ | 1,418,419 | | $ | 1,781,738 | | $ | 1,439,689 | | Less: Grant date fair value of stock awards granted in fiscal year(a) | | (1,549,962) | | (1,499,988) | | (1,149,991) | | (303,423) | | (324,971) | | (281,242) | | Less: Grant date fair value of option awards granted in fiscal year(a) | | (1,549,993) | | (1,499,986) | | (1,149,997) | | (303,423) | | (324,984) | | (281,247) | | Plus: Year-end fair value of outstanding and unvested stock awards granted in fiscal year(b) | | 1,672,070 | | 1,463,961 | | 2,145,374 | | 332,800 | | 317,165 | | 524,673 | | Plus: Change in fair value of prior year stock awards that are unvested and outstanding(b) | | 371,179 | | 245,895 | | 1,280,330 | | 54,806 | | 49,763 | | 230,414 | | Plus: Change in fair value of prior year stock awards that vested in the fiscal year(b) | | 222,784 | | 150,546 | | 50,306 | | 30,000 | | 46,481 | | 32,595 | | Plus: Year-end fair value of outstanding and unvested option awards granted in fiscal year(b) | | 1,583,862 | | 1,539,204 | | 2,687,414 | | 317,508 | | 333,481 | | 657,243 | | Plus: Change in fair value of prior year options that are unvested and outstanding(b) | | 548,300 | | 519,665 | | 2,017,873 | | 82,058 | | 103,907 | | 354,442 | | Plus: Change in fair value of prior year options that vested in the fiscal year(b) | | 345,232 | | 203,839 | | 171,450 | | 35,508 | | 67,722 | | 43,732 | | Compensation Actually Paid | | $ | 6,721,104 | | $ | 6,202,174 | | $ | 10,187,373 | | $ | 1,664,253 | | $ | 2,050,302 | | $ | 2,720,299 |
___________________________________ (a)The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year. (b)Fair values of unvested and outstanding equity awards were remeasured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. Fair values as of each measurement date were determined using valuation assumptions and methodologies that are generally consistent with those used to estimate fair value at grant under U.S. GAAP. Fair value of stock awards was determined using the closing stock price of our common stock on the applicable measurement dates. Fair value of stock options was determined using the Black-Scholes methodology on the applicable measurement dates.
|
|
|
| Compensation Actually Paid vs. Total Shareholder Return |
|
|
|
| Compensation Actually Paid vs. Net Income |
|
|
|
| Compensation Actually Paid vs. Company Selected Measure |
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| Total Shareholder Return Vs Peer Group |
|
|
|
| Tabular List, Table |
| | | | Most Important Performance Measures | Adjusted EBITDA | Working Capital Turns | | Total Shareholder Return |
|
|
|
| Total Shareholder Return Amount |
$ 315.89
|
272.13
|
140.28
|
| Peer Group Total Shareholder Return Amount |
155.76
|
121.96
|
141.14
|
| Net Income (Loss) |
$ 332,991,000
|
$ 273,442,000
|
$ 105,560,000
|
| Company Selected Measure Amount |
665,696,000
|
566,921,000
|
319,371,000
|
| PEO Name |
Mr. Turner
|
|
|
| Additional 402(v) Disclosure |
Amounts reported in these columns represent the total compensation reported in the Summary Compensation Table for the applicable fiscal year in the case of our PEO and the average of the total compensation reported in the Summary Compensation Table for the applicable fiscal year for our non-PEO NEOs.Amounts shown for compensation actually paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized or received by our PEO or other non-PEO NEOs during the applicable fiscal year. These amounts reflect total compensation as set forth in the Summary Compensation Table with equity award value adjustments for the applicable year. A reconciliation of the adjustments for our PEO and for the average of our non-PEO NEOs is set forth following the footnotes to this table.Amounts represent consolidated net income as reported in our Annual Report on Form 10-K for the applicable fiscal year.
|
|
|
| Measure:: 1 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Adjusted EBITDA
|
|
|
| Non-GAAP Measure Description |
We determined Adjusted EBITDA to be the most important financial performance measure used to link Company performance to compensation actually paid to our PEO and non-PEO NEOs in 2023. Adjusted EBITDA, as we define it, is an amount equal to net income (loss) plus interest expense and related items, income taxes, stock compensation, depreciation and amortization, further adjusted to exclude other non-cash items and certain other adjustments. See Appendix A for a reconciliation of Adjusted EBITDA to the most comparable measure reported in accordance with GAAP.
|
|
|
| Measure:: 2 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Working Capital Turns
|
|
|
| Measure:: 3 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Total Shareholder Return
|
|
|
| PEO | Equity Awards Reported Value [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ (1,549,962)
|
$ (1,499,988)
|
$ (1,149,991)
|
| PEO | Options Reported Value [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(1,549,993)
|
(1,499,986)
|
(1,149,997)
|
| PEO | Equity Awards Granted During Year, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
1,672,070
|
1,463,961
|
2,145,374
|
| PEO | Equity Awards Granted In Prior Years, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
371,179
|
245,895
|
1,280,330
|
| PEO | Equity Awards Granted In Prior Years, Vested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
222,784
|
150,546
|
50,306
|
| PEO | Options Granted During Year, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
1,583,862
|
1,539,204
|
2,687,414
|
| PEO | Options Granted In Prior Years, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
548,300
|
519,665
|
2,017,873
|
| PEO | Options Granted In Prior Years, Vested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
345,232
|
203,839
|
171,450
|
| Non-PEO NEO | Equity Awards Reported Value [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(303,423)
|
(324,971)
|
(281,242)
|
| Non-PEO NEO | Options Reported Value [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
(303,423)
|
(324,984)
|
(281,247)
|
| Non-PEO NEO | Equity Awards Granted During Year, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
332,800
|
317,165
|
524,673
|
| Non-PEO NEO | Equity Awards Granted In Prior Years, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
54,806
|
49,763
|
230,414
|
| Non-PEO NEO | Equity Awards Granted In Prior Years, Vested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
30,000
|
46,481
|
32,595
|
| Non-PEO NEO | Options Granted During Year, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
317,508
|
333,481
|
657,243
|
| Non-PEO NEO | Options Granted In Prior Years, Unvested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
82,058
|
103,907
|
354,442
|
| Non-PEO NEO | Options Granted In Prior Years, Vested [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ 35,508
|
$ 67,722
|
$ 43,732
|
| X |
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