UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the
Registrant x Filed by a
Party other than the Registrant ¨
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material under §240.14a-12 |
AEP Industries 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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LETTER TO OUR STOCKHOLDERS
February 25, 2015
To our Stockholders:
We cordially invite you to attend our 2015 annual meeting of stockholders, which will be held on Tuesday, April 14, 2015, at 10:00 a.m., Eastern Time, at the
Courtyard by Marriott, 100 Chestnut Ridge Road, Montvale, New Jersey. The business to be conducted at the annual meeting is set forth in the attached Notice of 2015 Annual Meeting of Stockholders and Proxy Statement.
Fiscal 2014 was a challenging year as we worked to navigate difficult market conditions marked by a continuation of unprecedented resin price increases. While there
remain headwinds affecting AEP and our industry, we have been working diligently to position the Company for future growth. During fiscal 2014, we invested approximately $26.5 million in capital expenditures, and added 40 million pounds of
capacity to our product lines across custom films, stretch films, and canliners. We believe these capital expenditures build on the capital projects completed in 2012 and 2013. At the same time, we have implemented cost-cutting initiatives and
worked to drive efficiencies within our plant operations. We believe AEP is well positioned to capitalize on anticipated reductions in resin prices and increases in domestic film manufacturing activities.
Throughout our history, we have been committed to continuous improvement in our business processes and film extrusion technology, and today we have a diverse and
comprehensive portfolio that is an essential part of the value chain across a wide range of industries. We are confident that by continuing to emphasize the fundamentals of quality, efficiency and service, and by continuing to focus on operating
efficiently and spending wisely, AEP will continue as the flexible plastic packaging supplier of choice to many of North Americas most important and best known brands. We believe AEP has entered fiscal 2015 poised for long-term growth and
creating shareholder value.
Thank you for your continued support of AEP.
Sincerely,
J. Brendan Barba
Chairman of the Board
President and Chief Executive Officer
Corporate Headquarters
95 Chestnut Ridge Road
Montvale, NJ 07645
(201) 641-6600
AEP INDUSTRIES INC.
NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS
Our 2015 annual
meeting of stockholders will be held on Tuesday, April 14, 2015 at 10:00 a.m., Eastern Time, at the Courtyard by Marriott, 100 Chestnut Ridge Road, Montvale, New Jersey to conduct the following items of business:
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To elect three Class B directors named in the accompanying Proxy Statement, each to serve for a three-year term or until his successor has been duly elected and qualified. |
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To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015. |
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To approve (on an advisory basis) the compensation of our named executive officers. |
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To transact any other business that may properly come before the meeting or any postponement or adjournment of the meeting. |
Only holders of our common stock at the close of business on February 17, 2015, the record date, are entitled to receive this notice and to attend and vote at the
annual meeting. For ten days prior to the annual meeting, a complete list of stockholders will be available during regular business hours at our principal executive office, 95 Chestnut Ridge Road, Montvale, NJ 07645. A stockholder may examine the
list for any legally valid purpose related to the annual meeting.
Your vote is important. Whether or not you plan to attend the meeting, we urge you to vote
promptly and save us the expense of additional solicitation. If you attend the annual meeting, you may revoke your proxy in accordance with the procedures set forth in the Proxy Statement and vote in person.
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By Order of the Board of Directors |
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Sandra C. Major |
Vice President and Secretary |
Montvale, New Jersey
February 25, 2015
PROXY SUMMARY
This proxy summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider
and therefore you should read the entire proxy statement before voting. For more complete information regarding the Companys 2014 performance, review the Companys annual report on Form 10-K for the year ended October 31, 2014.
Please Vote Today
Your vote is important. Whether or not you plan to attend the annual meeting, we urge you to vote promptly to save us the expense of additional solicitation. Please
carefully review the proxy materials for the 2015 annual meeting and follow the instructions below to cast your vote on all of the proposals.
Proposals, Board Recommendations and Required Vote
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Proposal |
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Board
Recommendation |
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Required Vote |
No. 1 - |
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Election of Directors (page 5) |
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FOR each nominee |
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Plurality |
No. 2 - |
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Ratification of Independent Registered Public Accounting Firm (page 51) |
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FOR |
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Majority of shares entitled to vote and present at the meeting (in person or by proxy) |
No. 3 - |
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Advisory Vote to Approve Named Executive Officer Compensation (page 52) |
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FOR |
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Majority of shares entitled to vote and present at the meeting (in person or by proxy) |
Voting Methods in Advance of Annual Meeting
Even if you plan to attend the 2015 annual meeting in person, please vote right away using one of the following voting methods (see page 2 for additional details).
Make sure to have your proxy card or voting instruction card in hand and follow the instructions.
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By Mail. Complete, sign and return your proxy card or voting instruction card in the enclosed envelope. |
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Participants in the 401(k) Savings Plan. Complete, sign and return your proxy card in the enclosed envelope; your proxy card must be received by April 9, 2015. |
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Other. If you are a beneficial owner or you receive your annual meeting materials by e-mail, you may have the option to vote your shares via the internet or telephone. |
Attend and Vote at Annual Meeting
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Date: |
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Tuesday, April 14, 2015 |
Time: |
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10:00 a.m., Eastern Time |
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Courtyard by Marriott, 100 Chestnut Ridge Road, Montvale, New Jersey |
Stockholders of record and beneficial owners (if in possession of a proxy from your broker, bank or other nominee) as of
February 17, 2015 may attend and vote at the annual meeting.
Director
Nominees
The Board currently consists of eight
directors serving three-year staggered terms. Three Class B directors are to be elected at the annual meeting to hold office until the 2018 annual meeting of stockholders. The Board has re-nominated current Class B directors, Robert T. Bell, Paul M.
Feeney and Frank P. Gallagher, for new three-year terms. The following table provides summary information about such director nominees.
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Name |
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Director Since |
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Independent |
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Primary Occupation |
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Committee Memberships |
Robert T. Bell |
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71 |
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2006 |
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Yes |
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Member/Manager of Foundation Consultants; Executive Director of Charles B. Wang International Foundation |
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Audit (Chair), Compensation |
Paul M. Feeney |
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72 |
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1988 |
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No |
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Executive Vice President, Finance, and Chief Financial Officer of the Company |
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None |
Frank P. Gallagher |
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71 |
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2005 |
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Yes |
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Chairman and CEO of Aadyn Technology |
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Compensation, Nominating and Corporate Governance (Chair) |
Executive Compensation Highlights
See Compensation Discussion and AnalysisExecutive Summary beginning on page 19 for a brief summary of key compensation matters for fiscal 2014.
Fiscal 2014 Target Annual Compensation Determinations. The Compensation Committee generally determined target annual compensation for fiscal 2014 in October 2013.
For fiscal 2014, the Committee increased target annual compensation by 3%, which corresponded to the average salary change for all of the Companys salaried and non-bargaining employees. Base salaries increased by 3%, the target bonus (in
dollars) increased by 3% and the target dollar value of performance units increased by approximately 3%. See Compensation Discussion and AnalysisProcess for Making Compensation DeterminationsTarget Annual Compensation for a
description of how the components of target annual compensation are determined. The Committee also reviewed subjective factors for each named executive officer, although subjective factors did not result in material changes to the target annual
compensation.
Components of Target Annual Compensation. The following table sets forth the various components of target annual compensation approved for each
of the named executive officers in fiscal 2014.
Base salary includes a car allowance. The performance units vest in five equal installments on the first through fifth
anniversaries of the grant date. Ms. Guerrera receives performance unit awards approximately once every three years at the discretion of the Committee. She was granted performance units in fiscal 2012 and was not granted any performance units
in fiscal 2013 or 2014; however, the table reflects an annualized grant.
Target Versus Earned Annual Compensation. The following table compares target versus
earned annual compensation in fiscal 2014 for each of the named executive officers. No performance-based compensation was earned in fiscal 2014, so the earned compensation columns in the table below reflect base salaries (including car allowances)
for the named executive officers in the following amounts: Mr. Barba, $971,700; Mr. Feeney, $474,800; Mr. Powers, $360,300; Mr. Vegliante, $328,300; and Ms. Guerrera, $237,500.
True At-Risk Pay. Historical payouts for the MIP and performance units have proven that such compensation is truly at-risk.
For example, in three of the last seven fiscal years through fiscal 2014, no bonuses were paid under the MIP to named executive officers and the performance unit grants were forfeited in full under the performance unit program.
Say-on-Pay Proposal. The Companys say-on-pay proposal was approved by over 98% of the shares entitled to vote and present at the 2014 annual meeting. At the
2015 annual meeting, stockholders are being asked to provide advisory approval of the Companys named executive officer compensation for fiscal 2014.
Governance Highlights
The Company is committed to good corporate governance
appropriate to the Company and its stockholders. Highlights include:
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5 out of 8 independent directors and fully independent Board committees |
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Annual Board and committee performance evaluations |
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Robust stock ownership guidelines and ownership among executive officers and directors |
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Hedging and pledging policies |
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Robust governance policies |
Ratification
of Independent Registered Public Accounting Firm
At
the 2015 annual meeting, stockholders are being asked to ratify the appointment of KPMG as the Companys independent registered public accounting firm for fiscal 2015.
The following table sets forth the fees the Company was billed for audit and other services provided by KPMG in fiscal 2014 and 2013. All of such services were approved
in conformity with the pre-approval policies and procedures described under Audit Committee MattersPre-Approval Policies and Procedures on page 50. The Audit Committee, based on its reviews and discussions with management and KPMG,
determined that the provision of these services was compatible with maintaining KPMGs independence.
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Fiscal 2014 ($) |
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Fiscal 2013 ($) |
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Audit Fees |
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1,264,755 |
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1,302,207 |
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Audit-Related Fees |
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52,656 |
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40,250 |
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Tax Fees |
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22,750 |
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6,000 |
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Total Fees |
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1,340,161 |
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1,348,457 |
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TABLE OF CONTENTS
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL
14, 2015
ABOUT THE ANNUAL MEETING
Throughout this proxy statement, fiscal refers to the fiscal year ended October 31.
Who is soliciting my vote?
The Board of Directors (the Board) of AEP Industries Inc. (the Company) is soliciting your proxy, as a holder of our common stock, for use at
our 2015 annual meeting of stockholders and any adjournment or postponement of such meeting. The 2015 annual meeting will be held on Tuesday, April 14, 2015, at 10:00 a.m., Eastern Time, at the Courtyard by Marriott, 100 Chestnut Ridge Road,
Montvale, New Jersey.
The notice of annual meeting, proxy statement and form of proxy was first mailed to stockholders of record of our common stock on or about
February 26, 2015.
What is the purpose of the annual meeting?
At the annual meeting, you will be voting on:
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The election of three Class B directors named in this proxy statement, each to serve for a three-year term or until his successor has been duly elected and qualified. |
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The ratification of the appointment of KPMG LLP (KPMG) as our independent registered public accounting firm for fiscal 2015. |
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The approval (on an advisory basis) of the compensation of our named executive officers. |
The Board recommends a vote
FOR each of the director nominees listed in this proxy statement, FOR the ratification of KPMGs appointment, and FOR the approval of the compensation of our named executive officers. We are not aware of any other matters
that will be brought before the stockholders for a vote at the annual meeting. If any other matter is properly brought before the meeting, your signed proxy card gives authority to your proxies to vote on such matter in their best judgment; proxy
holders named in the proxy card will vote as the Board recommends or, if the Board gives no recommendation, in their own discretion.
During or immediately following
the annual meeting, management will report on our performance and will respond to appropriate questions from stockholders. Representatives of KPMG will be present at the annual meeting, will make a statement, if they desire to do so, and will answer
appropriate questions from our stockholders.
Who is entitled to vote?
You may vote if you owned shares of our common stock at the
close of business on February 17, 2015, the record date, provided such shares are held directly in your name as the stockholder of record or are held for
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you as the beneficial owner through a broker, bank or other nominee. Each share of common stock is entitled to one vote on each matter properly brought before the meeting. As of February 17,
2015, we had 5,083,095 shares of common stock outstanding and entitled to vote.
What is the difference between holding shares as a stockholder of record
and a beneficial owner?
Stockholders of
Record. If your common shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those
shares, and these proxy materials are being sent directly to you by us. As the stockholder of record, you have the right to grant your voting proxy directly to us through the enclosed proxy card or to vote in person at the annual meeting.
Beneficial Owners. Many of our stockholders hold their common shares through a broker, bank or other nominee rather than directly in their
own names. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner with respect to those shares, and these proxy materials (including a voting instruction card) are being forwarded
to you by your broker, bank or nominee 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 nominee on how to vote and are also invited to attend the
annual meeting. However, since you are not the stockholder of record, you may not attend the annual meeting or vote these shares in person at the annual meeting unless you request and obtain a proxy from your broker, bank or nominee. Your broker,
bank or nominee has enclosed a voting instruction card for you to use in directing the broker, bank or nominee on how to vote your shares.
May I vote my shares
in person at the annual meeting?
Even if you plan
to be present at the meeting, we encourage you to vote your shares prior to the meeting.
Stockholders of Record. If you are a
stockholder of record and attend the annual meeting, you may deliver your completed proxy card or vote by ballot.
Beneficial
Owners. If you hold your common shares through a bank, broker or other nominee and want to vote such shares in person at the annual meeting, you must obtain a proxy from your broker, bank or other nominee giving you the
power to vote such shares. However, participants in the 401(k) Savings Plan are not able to vote the shares allocated to their accounts in person at the annual meeting.
Can I vote my shares without attending the annual meeting?
By Mail. You may vote by
completing, signing and returning the enclosed proxy card or voting instruction card. If you are a stockholder of record and the postage-paid envelope is missing, please mail your completed proxy card to AEP Industries Inc., c/o Sandra C. Major,
Vice President and Secretary, 95 Chestnut Ridge Road, Montvale, NJ 07645.
Participants in the 401(k) Savings Plan. Your proxy card
will serve to instruct the trustee of the 401(k) Savings Plan on how to vote your shares. If you do not provide instructions on how to vote your shares, those shares will not be voted. To allow sufficient time for the trustee to vote your shares,
your proxy card must be received by April 9, 2015.
Other. If you are a beneficial owner or you receive your annual meeting
materials by e-mail, you may have the option to vote your shares via the internet or telephone.
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Can I change my vote?
Stockholders of Record. You
may change your vote at any time before the proxy is exercised by voting in person at the annual meeting or by filing with our Secretary either a notice revoking the proxy or a properly signed proxy, in each case bearing a later date. Your
attendance at the annual meeting in person will not cause your previously granted proxy to be revoked unless you file the proper documentation for it to be so revoked.
Beneficial Owners. If you hold your shares through a bank, broker or other nominee, you should contact such person prior to the time such
voting instructions are exercised. For participants in the 401(k) Savings Plan, if you would like to revoke or change your voting instructions, you must do so by April 9, 2015.
What does it mean if I receive more than one proxy card or voting instruction card?
If you receive more than one proxy card or voting
instruction card, it means that you have multiple accounts with banks, brokers, other nominees and/or our transfer agent. Please sign and deliver, or otherwise vote, each proxy card and voting instruction card that you receive. We recommend that you
contact your nominee and/or our transfer agent, as appropriate, to consolidate as many accounts as possible under the same name and address. Our transfer agent is American Stock Transfer & Trust Company, 59 Maiden Lane, New York, NY 10038;
Telephone: 800-937-5449.
What if I do not vote for some of the items listed on my proxy card or voting instruction card?
Stockholders of Record. If you
indicate a choice with respect to any matter to be acted upon on your proxy card, the shares will be voted in accordance with your instructions. Proxy cards that are signed and returned, but do not contain voting instructions with respect to certain
matters, will be voted in accordance with the recommendations of the Board on such matters.
Beneficial Owners. If you indicate a
choice with respect to any matter to be acted upon on your voting instruction card, the shares will be voted in accordance with your instructions. If you do not indicate a choice or return the voting instruction card, the bank, broker or other
nominee will determine if it has the discretionary authority to vote on each matter. Under applicable law, a bank, broker or nominee has the discretion to vote on routine matters, including the ratification of the appointment of an independent
registered public accounting firm. For all other matters at the 2015 annual meeting, brokers and certain banks and nominees will be unable to vote on your behalf if you do not instruct them how to vote your shares in the manner set forth on your
voting instruction card. Therefore, it is very important for you to vote your shares for each proposal.
How many shares must be present to hold the meeting?
In order for us to conduct the annual meeting,
one-third of our outstanding shares entitled to vote as of February 17, 2015 must be present in person or by proxy at the meeting. This is known as a quorum. Abstentions and broker non-votes will be considered present for purposes of
determining a quorum.
What vote is required to approve each item of business?
Proposal No. 1Election of
Directors. The three nominees receiving the highest number of for votes at the meeting will be elected as Class B directors. This number is called a plurality. Withheld votes and broker non-votes will have
no effect on the outcome of the vote.
Proposal No. 2Ratification of Appointment of KPMG. The affirmative vote of holders of
a majority of shares entitled to vote and present at the meeting, in person or by proxy, is required for ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2015. Abstentions will have the same
effect as votes against the matter.
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Proposal No. 3Advisory Approval of the Compensation of Our Named Executive
Officers. The affirmative vote of holders of a majority of shares entitled to vote and present at the meeting, in person or by proxy, is required for the approval of the compensation of our named executive officers.
Abstentions will have the same effect as votes against the matter. Broker non-votes will have no effect on the outcome of the vote.
Although the advisory votes in
Proposal Nos. 2 and 3 are not binding on the Company, the Board and/or respective committee will take your vote into consideration in determining future activities.
Other Matters. If any other matter is properly submitted to the stockholders at the annual meeting, its adoption generally will require the
affirmative vote of holders of a majority of shares entitled to vote and present at the meeting, in person or by proxy. The Board does not propose to conduct any business at the annual meeting other than as stated above.
Who will count the votes and where can I find the voting results?
American Stock Transfer & Trust Company will
tabulate the voting results. We intend to announce the preliminary voting results at the annual meeting and, in accordance with rules of the Securities and Exchange Commission (the SEC), we intend to publish the final results in a
current report on Form 8-K within four business days of the annual meeting.
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PROPOSAL NO. 1ELECTION OF DIRECTORS
The Board currently consists of eight directors serving three-year staggered terms. The Board has re-nominated current Class B directors, Robert T. Bell, Paul M.
Feeney and Frank P. Gallagher, for new three-year terms. As discussed below, the Board has affirmatively concluded that Messrs. Bell and Gallagher are independent under the applicable rules of the NASDAQ Global Select Market (Nasdaq).
The three directors to be elected at the annual meeting will hold office until the 2018 annual meeting of stockholders (Class B directors). Each director will serve
until a successor is duly elected and qualified or until such directors earlier resignation, retirement or death. The remaining directors are Class C directors (terms expire in 2016) or Class A directors (terms expire in 2017).
Each nominee has consented to be listed in this proxy statement and agreed to serve as a director if elected by the stockholders. If any nominee becomes unable or
unwilling to serve between the date of this proxy statement and the annual meeting, the Board may designate a new nominee and the persons named as proxies in the attached proxy card will vote for that substitute nominee. Alternatively, the Board may
reduce the size of the Board.
The Board recommends that you vote FOR the election of each of the Class B director
nominees.
Board of Directors
The directors and director nominees of the Company are as follows:
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Name(1) |
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Age |
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Title |
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ClassTerm Ending |
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J. Brendan Barba |
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74 |
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Chairman, President and Chief Executive Officer |
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Class C2016 |
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Robert T. Bell |
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71 |
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Director |
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Class B2015 |
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Ira M. Belsky |
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62 |
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Director |
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Class A2017 |
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Richard E. Davis |
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72 |
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Director |
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Class C2016 |
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Paul M. Feeney |
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72 |
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Executive Vice President, Finance, Chief Financial Officer and Director |
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Class B2015 |
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Frank P. Gallagher |
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71 |
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Director |
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Class B2015 |
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John J. Powers |
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50 |
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Executive Vice President, Sales and Marketing, and Director |
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Class A2017 |
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Lee C. Stewart |
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66 |
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Director |
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Class C2016 |
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Effective as of the annual meeting held April 8, 2014, Kenneth Avias term as a Class A director expired and the Board reduced the Boards size from nine to eight directors. |
Specific Qualifications, Attributes, Skills and Experience to be Represented on the Board
The Nominating and Corporate Governance Committee is
responsible for reviewing and assessing with the Board the appropriate skills, experience and background sought of Board members in the context of our business and the then-current membership on the Board. The Committee and the Board review and
assess the continued relevance of and emphasis on these factors as part of the Boards annual self-assessment process and in connection with candidate searches to determine if they are effective in helping to satisfy the Boards goal of
creating and sustaining a Board that can appropriately support and oversee the Companys activities.
We believe our directors have an appropriate balance of
knowledge, experience, attributes, skills and expertise as a group to ensure that the Board appropriately fulfills its oversight responsibilities and acts in the best interests of stockholders. Although specific qualifications for Board membership
may vary from time to time, desired qualities include (A) the highest ethical character, integrity and shared values with the Company, (B) loyalty to the Company and concern for its success and welfare, (C) sound business judgment,
and (D) sufficient commitment and availability to effectively carry out a directors duties. Listed below are additional
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key skills and experience that we consider important for our directors to have in light of our current business and structure. Thereafter, the biographies of the directors and nominees set forth
their business experience during at least the past five years, as well as the specific experience, qualifications, attributes and skills that led to the Nominating and Corporate Governance Committees conclusion that each director and nominee
should continue to serve on the Board.
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Senior Leadership Experience. Directors who have served in senior leadership positions can provide experience and perspective in analyzing, shaping, and overseeing the execution of
important operational, organizational and policy issues at a senior level. |
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Public Company Board Experience. Directors who have served on other public company boards can offer advice and insights with regard to the dynamics and operation of a board of directors,
the relations of a board to the CEO and other management personnel, the importance of particular agenda and oversight matters, and oversight of a changing mix of strategic, operational, governance and compliance-related matters. |
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Business Development and Mergers and Acquisitions Experience. Directors who have a background in business development and in mergers and acquisitions transactions can provide insight into
developing and implementing strategies for growing our business, which may include mergers and acquisitions. Useful experience in mergers and acquisitions includes an understanding of the importance of fit with the Companys culture
and strategy, the valuation of transactions, and managements plans for integration with existing operations. |
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Financial and Accounting Expertise. Knowledge of the financial markets, corporate finance, accounting regulations, and accounting and financial reporting processes can assist our directors
in understanding, advising, and overseeing our capital structure, financing and investing activities, financial reporting, and internal control of such activities. The Company also strives to have a number of directors who qualify as financial
experts under SEC rules. |
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Industry and Technical Expertise. We are a manufacturing company of plastic packaging films. Education or experience in manufacturing is useful in understanding our research and development
efforts, competing technologies, the various products and processes that we develop, our manufacturing operations, and the market segments in which we compete. |
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Brand Marketing Expertise. We serve the packaging, transportation, beverage, food, automotive, pharmaceutical, chemical, electronics, construction, agriculture and textile industries.
Directors who have brand marketing experience and/or knowledge of the foregoing industries can provide expertise and guidance as we seek to maintain and expand brand and product awareness and a positive reputation in these industries.
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Global Expertise. Our customer base is global and therefore directors with global expertise can provide a useful business and cultural perspective regarding aspects of our business.
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Director Background and Qualifications
J. Brendan Barba has served as President, Chief Executive Officer and a director of the Company since he co-founded the Company
in 1970 and has been Chairman of the Board since 1985.
Mr. Barba has led the Company as its principal executive officer and a director for over 44 years
and as Chairman for over 29 years. Mr. Barba has a unique perspective and understanding of the Companys business, culture and history, having led the Company through many economic cycles, global expansion and curtailment, acquisitions and
dispositions, and other key operational initiatives. His day-to-day leadership of the Company gives him critical insights into the Companys operations, strategy and competition, and he facilitates the Boards ability to perform its
oversight function. Throughout his career at the Company, he has demonstrated strong technical, marketing, strategic, and operational expertise and he possesses in-depth knowledge of the plastic packaging films industry on a global basis.
6
Robert T. Bell has served as a director of the Company since 2006. Mr. Bell has been the Member/Manager of Foundation Consultants LLC since 2002, the Executive Director of the Charles B. Wang International Foundation
since 1999, and the Executive Director of the Charles B. Wang Foundation since 1988 (merged into International in 2012). From 1965 to 1998, he worked as a Certified Public Accountant for Mendelsohn, Kary, Bell & Natoli, LLP, including as a
Partner (1973 1998) and as Managing Partner (1986 1996). Mr. Bell has been a member of the Board of Directors of a number of public charities and private entities throughout his career, including currently with The Smile Train
Inc. (public charity; serves as Chair on the Audit Committee), the Memorial Day Nursery of Paterson, Inc. (private entity; serves as Chair on the Finance Committee and a member of the Compensation Committee), the Plainview Chinese Cultural Center,
Inc. (public charity; serves as Chair on the Finance Committee), the Charles B. Wang International Foundation (private entity), the New York Islanders Childrens Foundation (public charity) and the Charles B. Wang Community Health Center
(public charity; serves on Finance Committee and Audit Committee).
Mr. Bells long tenure as a certified public accountant, as well as his civic
leadership roles, has provided him with significant experience and expertise on accounting and financial reporting matters, including for public companies. Based on the foregoing, the Board has determined that Mr. Bell is a financial expert in
accordance with SEC rules. As the executive director of significant foundations, he also has broad-based senior leadership, global and finance expertise.
Ira M. Belsky has served as a director of the Company since 2011. Mr. Belsky is a seasoned executive, attorney and investor.
From 1999 through June 2002, he was Executive Vice President, Business Development and Legal Affairs, and a member of the Executive Committee of FreeRide.com L.L.C., an internet-based media business. Prior to that, he served as special counsel to
Time Warner Inc. From 1996 through April 1998, Mr. Belsky served as Senior Vice President, General Counsel and Secretary of Six Flags Entertainment Corporation, a leading national theme park company. Mr. Belsky practiced law with the
international law firm OMelveny & Myers in Los Angeles and New York, where his practice was focused on securities, mergers and acquisitions, and general corporate affairs. Mr. Belsky is a graduate of Stanford Law School and the
University of Pennsylvania.
Mr. Belsky has a broad background in legal, governance, financial reporting and general corporate and finance matters, and
he possesses extensive senior leadership skills from his service as in-house and outside general counsel to numerous companies as well as in various executive management positions. In addition, as a securities attorney, he was involved with numerous
public offerings and mergers and acquisitions, and the representation of public reporting companies.
Richard E. Davis has served as a director
of the Company since 2004. Mr. Davis has been the Vice PresidentFinance and Chief Financial Officer of Glatt Air Techniques, Inc., a supplier of solids processing technology to pharmaceutical and manufacturing organizations, since 1988.
Since 1988, Mr. Davis also has served as the Vice President of Nortec Development Associates Inc. (an affiliate of Glatt Air Techniques, Inc.), providing contract research services. From 1985 to 1988, he was Vice President, Finance and Chief
Financial Officer of The GMI Group, a conglomerate with computer graphics, advertising, audio/visual presentations, music and book publishing operations.
Mr. Davis has a broad background in accounting and financial reporting, and he possesses extensive senior leadership and global expertise, based on his service as
the principal financial officer at multinational companies, as an auditor for three years and as a teacher of accounting courses at the college and graduate school level. Based on the foregoing, the Board has determined that Mr. Davis is a
financial expert in accordance with SEC rules. Mr. Davis has extensive knowledge of the manufacturing and pharmaceutical industries, two key industries served by the Company, based on his employment with Glatt Air Techniques. He also has
significant knowledge of the Company based on his years of service as a director of the Company.
Paul M. Feeney has served as Executive Vice
President, Finance, Chief Financial Officer and a director of the Company since 1988. From 1980 to 1988, he served as Vice President and Treasurer of Witco Corporation, a chemical products corporation.
7
Mr. Feeney has led the Company as its principal financial officer and a director for over 26 years. Mr. Feeney
has a unique perspective and understanding of the Companys business, culture and history, having led the Company through many economic cycles, global expansion and curtailment, acquisitions and dispositions, and other key operational
initiatives. His day-to-day leadership of the Company gives him critical insights into the Companys financial performance, operations and strategy, and he facilitates the Boards ability to perform its oversight function. Throughout his
career at the Company, he has demonstrated strong financial reporting, finance, accounting, strategic, and operational expertise and he possesses in-depth knowledge of the plastic packaging films industry on a global basis.
Frank P. Gallagher has served as a director
of the Company since 2005. Since 2010, Mr. Gallagher has served as the Chairman and CEO of Aadyn Technology LLC, a privately held company that manufactures LED lights for the entertainment industry. From 1996 to 2003, Mr. Gallagher was a
director of Coach USA, a transportation company, and also served as its Chairman of the Board (19992003), its CEO (20002001), and its Executive Vice President and Chief Operating Officer (19981999). Mr. Gallagher served as a
director of Stagecoach Holding PLC, a transportation company from Perth, Scotland, from 2000 to 2001. From 1985 to 1998, he was the President of Community Coach, a transportation company. Mr. Gallagher is currently a director of ABC Company, a
private entity.
Mr. Gallagher has a broad background in strategic and operational planning, and he possesses extensive senior leadership and board
leadership expertise, based on his prior employment and board positions. Mr. Gallagher also has extensive knowledge of the transportation industry, a key industry served by the Company and a critical component of the Companys operations.
John J. Powers has served as a
director of the Company since November 1, 2013. Mr. Powers has been the Companys Executive Vice President, Sales and Marketing since 1996. Previously, he served the Company as Vice President, Custom Film Division from 1993 to 1996
and various sales positions from 1989 to 1993.
Mr. Powers has been part of the Companys executive leadership team for over 19 years and has been
with the Company for over 26 years. Therefore, Mr. Powers has a unique perspective and understanding of the Companys business, culture and history. Throughout his career at the Company, he has demonstrated strong expertise regarding
sales, marketing and operations generally, and he possesses in-depth knowledge of the plastic packaging films industry on a global basis.
Lee C. Stewart has served as a director of the Company since 1996. Mr. Stewart has been an independent financial consultant
since March 2001. He served as Executive Vice President and Chief Financial Officer of Foamex International, Inc., a manufacturer of polyurethane products, from March to May 2001. From 1996 to 2001, he was Vice President of Union Carbide
Corporation, a manufacturer of petrochemicals, where he was responsible for various Treasury and Finance functions. Prior to such time, Mr. Stewart was an investment banker for over 25 years, most recently with Bear Stearns & Co., Inc.
for over ten years. Mr. Stewart has a significant number of years of experience as a director of public companies, including currently serving two other companies besides AEP. Since 2002, he has been a director of P.H. Glatfelter Company, a
NYSE-listed company that is a global manufacturer of specialty papers and engineering products. He currently serves as Chair of the Compensation Committee and is a member of the Finance Committee. Since 2005, he has been a director of ITC Holdings
Corp., a NYSE-listed company that is an electrical transmission company. He currently is the Lead Director of the Board for ITC, and serves on the Audit and Finance Committee and the Operations Committee. From May 2013 to October 2014,
Mr. Stewart was a director of Momentive Performance Materials Inc., a specialty chemical company in silicones and advanced materials that filed a voluntary bankruptcy petition in April 2014. From 2000 to 2011, Mr. Stewart was a director of
Marsulex, Inc., a Toronto Stock Exchange-listed company, which provided outsourced environmental compliance services.
Mr. Stewart has extensive
knowledge of finance, capital raising and mergers and acquisitions based on his experience as a treasury officer, an investment banker and a financial consultant. Mr. Stewart also has significant public company board experience, from which he
has expertise in finance, financial reporting, accounting, corporate governance, compensation, risk management, manufacturing and global matters. Based on the foregoing, the Board has determined that Mr. Stewart is a financial expert in
accordance with SEC rules.
8
In addition, Mr. Stewart has extensive knowledge of the key industries served by the Company based on his employment and board experience. He also has significant knowledge of the Company
based on his years of service as a director of the Company.
Director Independence
The Board believes that there should be at least a majority of independent directors on the Board. The Board recently undertook its annual review of director
independence in accordance with the applicable rules of Nasdaq. The independence rules include a series of objective tests, including that the director is not employed by us and has not engaged in various types of business dealings with us. In
addition, the Board is required to make a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. Pursuant to such authority, the Board has adopted additional categorical standards regarding relationships that the Board does not consider material for purposes of determining a directors independence, as set
forth in the Companys Corporate Governance Guidelines, which are available on the Investor Relations section of our website at www.aepinc.com. In making these determinations, the Board reviewed and discussed information provided
by the directors and us with regard to each directors business and personal activities as they may relate to us and our management.
The Board has
affirmatively determined, after considering all of the relevant facts and circumstances, that Messrs. Bell, Belsky, Davis, Gallagher and Stewart are independent directors under the applicable rules of Nasdaq. Messrs. Barba, Feeney and Powers are
employed by us and therefore are not independent directors. Mr. Avia, whose term expired at the 2014 annual meeting, was independent under the applicable rules of Nasdaq.
Each member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is independent under Nasdaq rules. In addition, the Board
has affirmatively determined that the members of the Audit Committee and Compensation Committee qualify as independent in accordance with the additional independence rules established by the SEC and Nasdaq.
9
BOARD MATTERS
The Board of Directors
General
The Board has general oversight responsibility for our affairs and,
in exercising its fiduciary duties, the Board represents and acts on behalf of the stockholders. Although the Board does not have responsibility for our day-to-day management, it stays regularly informed about our business and provides oversight and
guidance to our management through periodic meetings and other communications. The Board provides critical oversight in, among other things, our strategic planning process, leadership development and succession planning, risk management, as well as
other functions carried out through the Board committees as described below.
Board Leadership
Our Board is led by J. Brendan Barba, the Companys Chairman, President and Chief Executive Officer. The Board believes this structure permits a unified strategic
vision for the Company that ensures alignment between the Board and management, provides clear leadership for the Company and helps ensure accountability for the Companys performance. The Board does not utilize a lead independent director.
Although the Board recognizes that an increasing number of public companies utilize a non-executive chair and/or lead independent director, the Board believes its
current leadership structure is most appropriate for the Company and best serves the stockholders of the Company at the current time, as it has since Mr. Barba became Chairman in 1985. There is no one size fits all approach to
ensuring independent leadership. The Board believes that its independent directors are deeply engaged and provide significant independent leadership and direction given their executive and board experience noted above. See Proposal
No. 1-Election of DirectorsDirector Background and Qualifications. The independent directors are the sole members of the Board committees, which oversee critical matters of the Company such as the integrity of the Companys
financial statements, the compensation of executive management, the nomination, selection and evaluation of directors, and the development and implementation of the Companys corporate governance policies. The independent directors also meet
regularly in executive session at Board and committee meetings and have access to independent advisors as they deem appropriate. Management supports this oversight role through its tone-at-the-top and open communication.
Board Oversight of Risk Management
The Board oversees the Companys
risk management primarily through the following:
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the Boards review and approval of managements annual business plan and review of managements long-term strategic and liquidity plans; |
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at least quarterly review by the Board of business developments, strategic plans and implementation, liquidity and financial results; |
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the Boards review of specific material risks and risk mitigants on an annual basis, and an in-depth review of one or more material risks on a regular basis; |
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the Boards oversight of succession planning; |
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the Boards oversight of capital spending and financings, as well as mergers, acquisitions and divestitures; |
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the Audit Committees oversight of the Companys significant financial risk exposures (including credit, liquidity and legal, regulatory and other contingencies), accounting and financial reporting, internal
control processes (including internal control over financial reporting), and the Code of Conduct and related person transactions; |
10
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the Nominating and Corporate Governance Committees oversight of Board structure and size, the Companys governance policies and the self-evaluation assessments conducted by the Board and committees;
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the Compensation Committees review and approvals regarding executive officer compensation and its alignment with the Companys business and strategic plans, and the review of compensation plans generally and
the related incentives, risks and risk mitigants; and |
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Board and committee executive sessions on a regular basis, consisting of the independent directors, solely among themselves, as well as with management, the internal and outside auditor, compensation consultant and
other third parties as appropriate. |
Meetings
The Board
and its committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time as appropriate. The independent directors hold regularly scheduled executive sessions to meet without
management present, with rotating directors leading such sessions. These executive sessions generally occur around regularly scheduled meetings of the Board.
All
directors are expected to attend all meetings of the Board and of the Board committees on which they serve, as well as the annual meeting of stockholders. The Board met six times during fiscal 2014. In fiscal 2014, each director attended more than
75% of the aggregate of all meetings of the Board and the committees of which he was a member. Further, all directors attended the 2014 annual meeting of stockholders except Mr. Gallagher.
Committees of the Board
The Board has delegated various responsibilities and authority to Board committees. Each committee has regularly scheduled meetings and reports on its activities to the
full Board. Each committee operates under a written charter approved by the Board, which is reviewed annually by the respective committee and the Board. Each committees charter is posted on the Investor Relations section of our website at
www.aepinc.com. The table below sets forth the current membership for the three Board committees and the number of meetings held for each in fiscal 2014.
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Director |
|
Audit |
|
Compensation |
|
Nominating and Corporate Governance |
J. Brendan Barba |
|
|
|
|
|
|
Robert T. Bell (1) |
|
Chair |
|
X |
|
|
Ira M. Belsky (1) |
|
X |
|
|
|
X |
Richard E. Davis |
|
X |
|
|
|
X |
Paul M. Feeney |
|
|
|
|
|
|
Frank P. Gallagher |
|
|
|
X |
|
Chair |
John J. Powers |
|
|
|
|
|
|
Lee C. Stewart |
|
X |
|
Chair |
|
|
Meetings |
|
5 |
|
4 |
|
2 |
(1) |
In connection with the expiration of Mr. Avias term as a Class A director, effective as of April 8, 2014, Mr. Bell replaced Mr. Avia on the Compensation Committee, and Mr. Belsky replaced
Mr. Bell on the Nominating and Corporate Governance Committee. |
Audit Committee
The Audit Committees responsibilities include:
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providing general oversight of our financial reporting and internal control functions; |
11
|
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reviewing our reports filed with or furnished to the SEC that include financial statements or results; |
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monitoring compliance with significant legal and regulatory requirements and other risks related to financial reporting and internal control; and |
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the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm, currently KPMG, and our third-party consultant that handles certain internal audit functions.
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The Audit Committee may form and delegate authority to subcommittees as appropriate. The responsibilities and activities of the Committee are
described in greater detail in Audit Committee Report and Audit Committee Matters, as well as in its charter.
The Board has determined that
each Audit Committee member has sufficient knowledge in reading and understanding financial statements to serve on the Committee. The Board has further determined that three Audit Committee members, Messrs. Bell, Davis and Stewart, qualify as
audit committee financial experts in accordance with SEC rules. The designation of an audit committee financial expert does not impose upon such persons any duties, obligations or liabilities that are greater than those which
are generally imposed on each of them as a member of the Committee and the Board, and such designation does not affect the duties, obligations or liabilities of any other member of the Committee or the Board.
Compensation Committee
The Compensation Committees responsibilities
include:
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administering the compensation programs for the Companys executive officers and non-employee directors, including monitoring compensation trends, establishing the goals and policies of the compensation programs,
and approving the compensation structure and amounts that may be earned thereunder; |
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recommending or approving equity grants and otherwise administering share-based plans, as well as other benefit plans and policies, to the extent delegated by the Board; |
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reviewing the Companys compensation policies and practices for all employees, at least annually, regarding risk-taking incentives and risk management policies and practices; and |
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reviewing certain compensation disclosures and proposals in the Companys proxy statement and other reports filed with or furnished to the SEC. |
The Compensation Committee may form and delegate its authority to subcommittees as appropriate. The responsibilities and activities of the Committee are described
further in Compensation Discussion and Analysis, as well as in its charter.
The Board has determined that the current members of the Compensation
Committee qualify as non-employee directors as defined in Rule 16b-3 of the Securities Exchange Act of 1934, as amended (Exchange Act), and outside directors under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the Code).
Role of Management. Similar to prior years, in fiscal 2014 the Compensation Committee
received significant input from Messrs. Barba and Feeney with respect to the design and implementation of the Companys compensation program for its executive officers. See Compensation Discussion and Analysis for further
information.
Role of Compensation Consultant. The Compensation Committee did not engage a compensation consultant to perform a
comprehensive review of the Companys executive compensation program for fiscal 2014. The Committee most recently engaged Mercer Human Resource Consulting (Mercer) in fiscal 2012 to perform a comprehensive review of the
Companys executive compensation program for fiscal 2013. As discussed below in Compensation Discussion and AnalysisProcess for Making Compensation Determinations, in establishing
12
the target annual compensation for each named executive officer in fiscal 2014, the Committee continued to rely on the survey data from Mercers fiscal 2013 executive compensation review.
The Compensation Committee also did not engage Mercer to perform a comprehensive review of the Companys non-employee director compensation program for fiscal
2014, having determined that it would continue the current program in fiscal 2014.The Committee most recently engaged Mercer in fiscal 2012 to perform a comprehensive review of the Companys non-employee director compensation program for fiscal
2013. As part of such review, Mercer assessed the non-employee director compensation program against a specified peer group and made significant changes to the program. See Director Compensation.
The Compensation Committee intends to retain a compensation consultant to perform a comprehensive review of the Companys executive compensation program and
non-employee director compensation program approximately every three years or as otherwise appropriate.
Independence of Compensation
Consultant. The Compensation Committee has the sole authority to engage outside advisors and establish the terms of such engagement, including compensatory fees. In connection with any such engagement, the Committee
reviews the independence of such outside advisor, based on the factors specified by Nasdaq as well as any other factors it deems appropriate, and any conflicts of interest raised by the work of such outside advisor.
In prior years, the Compensation Committee has engaged Mercer, a wholly owned subsidiary of Marsh & McLennan Companies, Inc. (MMC), as its
compensation consultant for both its executive officer and non-employee director compensation programs. The Committees determination to engage Mercer and approve the terms of such engagement has been made independently from the Companys
management. When engaged, the Committee works with management to determine Mercers responsibilities and direct its work product, although the Committee is responsible for the formal approval of the work plan. Mercer was not paid any fees for
executive and non-employee director compensation consulting to the Committee in fiscal 2014.
During fiscal 2014, based on the determination of management, the
Company retained Mercer and certain MMC affiliates to provide other services unrelated to executive and non-employee director compensation, which generally consisted of human resource consulting, including providing advice regarding the
Companys benefits programs in the area of plan design, compliance, administration and funding (aggregate fees of $311,125), and insurance brokerage services (aggregate commissions and fees of $494,850). While neither the Compensation Committee
nor the Board approved such other services, the Committee believes that the advice it has received from the individual compensation consultants in prior years has been objective and not influenced by Mercers or its affiliates other
relationships with the Company because of the policies and procedures Mercer and the Committee have in place. These policies and procedures include:
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the Committees consultants receive no incentive or other compensation based on the fees charged to the Company for other services provided by Mercer or any of its affiliates; |
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the Committees consultants are not responsible for selling other Mercer or affiliate services to the Company; |
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Mercers professional standards prohibit the Committees consultants from considering any other relationships Mercer or any of its affiliates may have with the Company in rendering their advice and
recommendations; |
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the Committee has the sole authority to retain and terminate its compensation consultants; |
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the Committees consultants have direct access to the Committee without management intervention and may participate in executive sessions with the Committee; and |
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the Committee evaluates the quality and objectivity of the services provided by the consultants each year and determines whether to continue to retain the consultants. |
Except as set forth above, the Committee noted there were no potential conflicts of interest raised by the work of its historical compensation consultant.
13
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committees responsibilities include:
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identifying individuals qualified to become Board members and recommending director nominees to the Board; |
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reviewing the composition, organization, function and performance of the Board and its committees; |
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exercising general oversight over corporate governance policy matters of the Company, including developing, recommending proposed changes to, and monitoring compliance with, the Corporate Governance Guidelines; and
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reviewing certain governance disclosures and proposals in the Companys proxy statement and other reports filed with or furnished to the SEC. |
The Nominating and Corporate Governance Committee may form and delegate its authority to subcommittees as appropriate. The responsibilities and activities of the
Committee are described in greater detail in its charter.
The Nominating and Corporate Governance Committee reviews and makes recommendations to the Board, from
time to time, regarding the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board, the operations of the Company and the long-term interests of stockholders. See Proposal
No. 1-Election of DirectorsSpecific Qualifications, Attributes, Skills and Experience to be Represented on the Board and Proposal No. 1Election of DirectorsDirector Background and Qualifications. The
Committee does not have a specific diversity policy underlying its nomination process, although it seeks to ensure the Board includes directors with diverse backgrounds, qualifications, skills and experience relevant to the Companys business.
Generally, the Nominating and Corporate Governance Committee will re-nominate incumbent directors who continue to satisfy the Committees criteria for
membership on the Board, continue to make important contributions to the Board and consent to continue their service on the Board. If a vacancy on the Board occurs or the Board increases in size, the Committee will actively seek individuals that
satisfy the Committees criteria for membership on the Board and the Committee may rely on multiple sources for identifying and evaluating potential nominees, including referrals from our current directors and management. In fiscal 2014, the
Committee did not employ a search firm or pay fees to other third parties in connection with identifying or evaluating Board nominee candidates.
The Nominating and
Corporate Governance Committee will consider recommendations of director nominees by stockholders so long as such recommendations are sent on a timely basis and are otherwise in accordance with our Seventh Amended and Restated By-Laws (as amended
from time to time, the By-Laws) and applicable law. See Additional InformationRequirements for Submission of Stockholder Proposals and Nominations for 2016 Annual Meeting for additional information. The Committee will
evaluate nominees recommended by stockholders against the same criteria that it uses to evaluate other nominees. We did not receive any nominations of directors by stockholders for the 2015 annual meeting.
Corporate Governance
The Board, as well as management, is committed to responsible corporate governance to ensure that we are managed for the benefit of our stockholders. To that end, the
Board and management periodically review and update, as appropriate, our corporate governance policies and practices, and, when required, make changes to such policies and practices as are mandated by the Sarbanes-Oxley Act, the Dodd-Frank Act,
other SEC rules and regulations and the listing standards of Nasdaq.
A copy of the Boards committee charters, the Code of Conduct and the Corporate Governance
Guidelines will be sent to any stockholder, without charge, upon written request to Corporate Secretary, AEP Industries Inc., 95 Chestnut Ridge Road, Montvale, NJ 07645.
14
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines, which are available on the Investor Relations section of our website at www.aepinc.com. These
guidelines address, among other things, director responsibilities, qualifications (including independence), compensation, CEO succession and related matters.
Annual Performance Evaluations. The Corporate Governance Guidelines require that the Board and its committees conduct self-evaluations at
least annually to determine whether the Board and its committees are functioning effectively. These reviews focus on the Board and its committees as a whole, and not individual directors, unless circumstances otherwise warrant. The Board also
reviews the Nominating and Corporate Governance Committees periodic recommendations concerning the performance and effectiveness of the Board and its committees. The Nominating and Corporate Governance Committee oversees the annual performance
evaluation process.
Code of Conduct
The Board has adopted a Code of
Conduct, which sets out the basic principles to guide the actions and decisions of our employees, directors and officers, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Conduct
addresses, among other things, ethical principles, insider trading, conflicts of interest, compliance with laws and confidentiality. The Code of Conduct can be found on the Investor Relations section of our website at www.aepinc.com.
Any amendments to the Code of Conduct, or any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq, will be posted on our website in the Investor Relations section.
Committee Charters
See Committees of the Board for a
description of the Boards delegation of authority and responsibilities to the three standing committees.
Succession Planning
The succession planning process for executive officers is designed to assist the Board in understanding our readiness and the related transition risks for a crisis as
well as a planned transition, and to oversee the development of strong leadership quality and executive bench strength. On at least an annual basis, the Board meets with the Chief Executive Officer and Chief Financial Officer and in executive
session to discuss succession planning and strategies to strengthen and supplement the skills and qualifications of internal succession candidates. The Chief Executive Officer and Chief Financial Officer periodically provide the Board with an
assessment of key executives for potential succession and discuss potential sources of external candidates. Further, key executives have ongoing exposure to the Board to assist in the Boards oversight.
Director Compensation
Non-employee directors of the Board receive a mix of cash and share-based compensation. The compensation mix is intended to encourage non-employee directors to continue
Board service, further align the interests of the Board and stockholders, and attract new non-employee directors with outstanding qualifications. Directors who are employees or officers of the Company do not receive any additional compensation for
Board service.
15
Fiscal 2014 Compensation Program
The Compensation Committee engaged Mercer in fiscal 2012 to conduct a review of the competitiveness of the Companys non-employee director compensation program.
Mercer assessed the compensation program against a peer group consisting of 15 companies. For fiscal 2013, the Committee determined generally to target the median of the peer group for total compensation. In addition, the Committee targeted a pay
mix between cash and equity that approximated the peer group median, which required a greater portion of total compensation to be paid in equity. The changes for fiscal 2013 primarily reflected the trend of increasing annual retainers and reducing
meeting attendance fees, increasing differentiation based on committee service, and increasing reliance on full value shares in lieu of options.
For fiscal 2014,
the Compensation Committee determined not to engage Mercer to perform a comprehensive review with respect to the Companys non-employee director compensation program. The Committee believed that the overall non-employee director compensation
program was sufficiently meeting its objectives, and decided to continue such program in fiscal 2014.
The following table sets forth the compensation program for
non-employee directors in fiscal 2014.
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2014 |
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Annual retainer: |
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Board |
|
$ |
50,000 |
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Additional retainer: |
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Audit Committee-Chair |
|
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15,000 |
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Audit Committee-Member |
|
|
8,000 |
|
Compensation Committee-Chair |
|
|
10,000 |
|
Nominating and Corporate Governance Committee-Chair |
|
|
7,500 |
|
Board attendance fees per meeting (in person) |
|
|
|
|
Committee attendance fees per meeting (in person) |
|
|
1,500 |
|
Annual grant of restricted stock ($ value) |
|
|
55,000 |
|
As of the 2014 annual meeting, each non-employee director was granted an annual restricted stock award with a grant date fair value of
approximately $55,000, or 1,515 shares. Future annual grants of restricted stock to non-employee directors will be made as of annual meeting date.
The restricted
stock vests in full on the first anniversary of the grant date, subject to the directors continued service to the Company through such date. The restricted stock may be forfeited in the event of termination of service as a non-employee
director of the Company prior to the first anniversary of the grant date, subject to the Compensation Committees right to accelerate the vesting of all or a portion of the restricted stock at any time. During the restricted period, the
restricted stock entitles the participant to all of the rights of a stockholder, including the right to vote the shares and the right to receive any dividends thereon. Prior to the end of the restricted period, restricted stock generally may not be
sold, assigned, pledged, or otherwise disposed of or hypothecated by participants.
The Company does not provide any perquisites to directors.
16
Fiscal 2014 Compensation Table
The table below sets forth the compensation of each non-employee director in fiscal 2014.
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Name |
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Fees Earned or Paid in Cash ($)(1) |
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Restricted Stock ($)(2) |
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Other Compensation ($) |
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Total ($) |
|
Kenneth Avia |
|
|
26,500 |
|
|
|
|
|
|
|
56,955 |
(3) |
|
|
83,455 |
|
Robert T. Bell |
|
|
75,500 |
|
|
|
54,979 |
|
|
|
|
|
|
|
130,479 |
|
Ira M. Belsky |
|
|
67,000 |
(4) |
|
|
54,979 |
|
|
|
|
|
|
|
121,979 |
|
Richard E. Davis |
|
|
65,500 |
|
|
|
54,979 |
|
|
|
|
|
|
|
120,479 |
|
Frank P. Gallagher |
|
|
63,500 |
|
|
|
54,979 |
|
|
|
|
|
|
|
118,479 |
|
Lee C. Stewart |
|
|
77,000 |
|
|
|
54,979 |
|
|
|
|
|
|
|
131,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
375,000 |
|
|
|
274,895 |
|
|
|
56,955 |
|
|
|
706,850 |
|
(1) |
Reflects cash retainers and meeting fees. Mr. Avia, whose term as a Class A director expired at the 2014 annual meeting of stockholders, received a pro-rata portion of such amount. |
(2) |
Reflects restricted stock awards granted under the 2013 Omnibus Incentive Plan. The amounts reported represent the grant date fair value of the restricted stock award, which is the closing trading price of a share of
common stock on the grant date multiplied by the number of shares subject to the award. The closing trading price of a share of common stock on April 8, 2014 was $36.29. The Company does not pay in cash the value of fractional shares.
|
(3) |
Reflects the value of acceleration of the unvested portions of all share-based awards held by Mr. Avia as of April 8, 2014, which is (A) for each unvested share subject to stock option awards, $36.29 less
the exercise price, and (B) for each share of restricted stock, $36.29. $36.29 represents the closing price of the Companys common stock on Nasdaq on April 8, 2014. In connection with the expiration of Mr. Avias term as a
Class A director, the Board determined (i) to accelerate the vesting of all unvested shares subject to stock option and restricted stock awards held by Mr. Avia, effective as of April 8, 2014, and (ii) to permit exercise of
such stock option awards for one year thereafter. |
(4) |
Includes a one-time fee of $3,000 paid for service as Chairman of a special committee of the Board. |
As of
October 31, 2014, each non-employee director had the following number of shares underlying outstanding option awards: Robert T. Bell, 12,000; Ira M. Belsky, 2,000; Richard E. Davis, 14,000; Frank P. Gallagher, 15,000; and Lee C. Stewart,
15,000. In addition, each non-employee director had 1,515 shares underlying outstanding stock awards that were outstanding on October 31, 2014.
Director
Stock Ownership Guidelines
The Board has adopted stock ownership guidelines for the directors of the Company to further the alignment of stockholders and
directors. The current guidelines are available on the Investor Relations section of the Companys website at www.aepinc.com. The guidelines set forth a minimum number of shares or dollar value of common stock required to be owned
by a director, which must be owned by an initial compliance date. Following initial compliance, the directors must comply with the guidelines for all periods thereafter as long as such director remains subject to the guidelines.
The stock ownership guidelines in effect for fiscal 2014 required all non-employee directors to own stock having a value of at least $150,000, with the ownership level
to be initially achieved by the later of May 1, 2018 or five years after the director is first appointed or elected. The guidelines set forth how to value the stock held for purposes of compliance testing. The guidelines also set forth how
indirect and/or derivative securities, as well as securities held by specified family members, are taken into account in determining the satisfaction of the guidelines, and the ramifications of noncompliance. The Nominating and Corporate Governance
Committee will
17
evaluate whether exceptions should be made for any director on whom this requirement would impose a financial hardship or prevent such director from complying with a court order, such as a
divorce settlement, although no such exceptions are in effect. As of the date hereof, all non-employee directors have achieved the stock ownership requirements set forth in the guidelines. No director has pledged any shares of the Companys
common stock.
Stockholder Communication with the Board
Any stockholder wishing to communicate with a particular director, with all or certain of the independent directors or with the entire Board should direct the
communication to Corporate Secretary, AEP Industries Inc., 95 Chestnut Ridge Road, Montvale, NJ 07645. If a stockholder does not wish to have our corporate secretary screen the communication, the stockholder should indicate that the material sent by
the stockholder be delivered unopened to the person or persons to whom it is addressed.
To submit concerns regarding accounting, internal accounting controls or
auditing matters, stockholders and other interested persons may also call the Companys toll free, confidential hotline (1-800-750-4972). Employees may submit such concerns on a confidential and anonymous basis.
18
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee, composed entirely of independent directors, administers the executive compensation program of the Company, including reviewing annually all
compensation decisions relating to the Companys executive officers. This section of the proxy statement explains how the Companys compensation programs are designed and operate in practice with respect to the Chief Executive Officer, the
Chief Financial Officer and the other executive officers named in the Summary Compensation Table for Fiscal 2014 (the named executive officers).
Target annual compensation referred to below consists of base salary, a target bonus, target performance unit grants and a company car allowance.
Executive Summary
Fiscal 2014 Company Performance
Our sales volume has decreased 1% and 1.5%
in fiscal 2014 and 2013, respectively, primarily as a result of the challenging economic conditions in recent years and the unprecedented six price increases totaling $0.23 per pound in polyethylene resin since November 1, 2012. However, we
believe in the long-term prospects for our business and anticipate stabilization or lower pricing in the resin markets in the next few years. As newfound supplies of low-priced natural gas feedstock have become available in North America, several
North American resin suppliers are undertaking substantial capital projects which are designed to significantly increase domestic polyethylene resin supplies over the next several years. We believe these projects along with oil price declines will
result over the next few years in significant reductions in domestic resin prices and increases in domestic film manufacturing activities. We believe our capital expenditures over the past three years have well positioned the Company to fully
participate in this opportunity, and in combination with our cost-cutting initiatives, should enable us to accommodate expected growing demand and navigate through a volatile market.
The Companys fiscal 2014 financial results are discussed in detail in the Companys annual report on
Form 10-K. Key takeways include:
|
|
|
Net sales. Net sales of $1.19 billion, a 4.3% increase and 3.5% increase from fiscal 2013 and 2012, respectively. |
|
|
|
Gross profit. Gross profit of $121.9 million, a (21.1)% decrease and (33.3)% decrease from fiscal 2013 and 2012, respectively. |
|
|
|
Resin prices. Unprecedented resin price increases resulting in an aggregate increase of $0.23 per pound from November 1, 2012 to October 31, 2014. During fiscal 2014, there were two
polyethylene resin (PE) price increases totaling $0.07 per pound, and average PE resin costs were 13% or $0.09 per pound higher than the average PE resin costs during fiscal 2013. |
|
|
|
Capital expenditures. $26.5 million in capital expenditures. Capital expenditures were $46.7 million and $42.0 million in fiscal 2013 and 2012, respectively. |
|
|
|
Net (loss) income. Net loss of $(5.5) million, or $(1.03) per diluted share, as compared to net income of $10.7 million, or $1.92 per diluted share, for fiscal 2013, and net income of $23.2 million, or
$4.16 per diluted share, for fiscal 2012. |
|
|
|
Adjusted EBITDA. Fiscal 2014 Adjusted EBITDA for the Company was $46.1 million, compared to $75.9 million and $84.2 million for fiscal 2013 and 2012, respectively. As discussed below in
Compensation Philosophy, Program Objectives, and Key FeaturesAdjusted EBITDA (Performance Plans) Definition, the calculation of Adjusted EBITDA for financial reporting purposes in the Companys Form 10-K differs from the
calculation of Adjusted EBITDA (Performance Plans) for purposes of the MIP and the performance unit program. |
19
|
|
|
Total Stockholder Return. One-year, three-year and five-year total stockholder return of (22.6)%, 70.1% and 31.9%, respectively. The Company does not pay dividends on its common stock.
|
|
|
|
Liquidity. The Company continues to maintain a strong balance sheet and sufficient liquidity. Availability under its credit facility and credit line was an aggregate of $111.8 million at
October 31, 2014. |
Fiscal 2014 Compensation Framework
In making annual compensation determinations for the named executive officers, the Committee primarily focuses on target annual compensation, which consists of base
salary, a target bonus (short-term incentive in accordance with the Management Incentive Plan, or MIP), target performance unit grants (long-term incentive) and a company car allowance.
Target Annual Compensation (Fiscal 2006-2012). From fiscal 2006 to fiscal 2012, the Committee utilized the median target annual compensation of executive officers
in the peer group from Mercers 2006 study, with approximately a 3% increase each year for target annual compensation, except that there was no increase in fiscal 2011 (the Peer Group Median). During such time, the Peer Group Median
was the primary factor in determining the target annual compensation of the named executive officers. The annual increases in target annual compensation corresponded to the average salary change for all of the Companys salaried and
non-bargaining employees.
Target Annual Compensation (Fiscal 2013-2014). As discussed below in Process for Making Compensation
DeterminationsBenchmarking DataSurvey Target, the Committee benchmarked fiscal 2013 compensation against the survey data from Mercers 2013 study to establish the target annual compensation for each named executive officer in
fiscal 2013. The Committee primarily relied upon the 50th percentile target annual compensation from the survey data (the Survey Target, and as adjusted in subsequent years to take into account annual increases in target annual
compensation, the Adjusted Survey Target). The Committee believed that the overall executive compensation program was sufficiently meeting its objectives and therefore determined not to engage Mercer to perform a comprehensive executive
compensation review with respect to the fiscal 2014 executive compensation program.
Summary of Fiscal 2014 Target and Earned Annual Compensation
Components of Target Annual Compensation. The following table sets forth the various components of target annual compensation approved for each of the named
executive officers in fiscal 2014.
20
Base salary includes a car allowance. The performance units vest in five equal installments on the first through fifth
anniversaries of the grant date. Ms. Guerrera receives performance unit awards approximately once every three years at the discretion of the Committee. She was granted performance units in fiscal 2012 and was not granted any performance units
in fiscal 2013 or 2014; however, the table reflects an annualized grant.
Target Versus Earned Annual Compensation.The following table compares target versus
earned annual compensation in fiscal 2014 for each of the named executive officers. No performance-based compensation was earned in fiscal 2014, so the earned compensation columns in the table below reflect base salaries (including car allowances)
for the named executive officers in the following amounts: Mr. Barba, $971,700; Mr. Feeney, $474,800; Mr. Powers, $360,300; Mr. Vegliante, $328,300; and Ms. Guerrera, $237,500.
Fiscal 2014 Target Annual Compensation Determinations
The Committee generally determined target annual compensation for fiscal 2014 in October 2013. For fiscal 2014, the Committee increased target annual compensation by
3%, which corresponded to the average salary change for all of the Companys salaried and non-bargaining employees. Base salaries increased by 3%, the target bonus (in dollars) increased by 3% and the target dollar value of performance units
increased by approximately 3%. See Process for Making Compensation DeterminationsTarget Annual Compensation for a description of how the components of target annual compensation are determined. The Committee also reviewed
subjective factors for each named executive officer, although subjective factors did not result in material changes to the target annual compensation.
Fiscal
2014 Pay-For-Performance
The establishment of performance metrics generally is focused on the Company and its management team as a collective unit, to foster
teamwork and maximize the Companys performance. Management runs the Company to maximize Adjusted EBITDA, and the Company emphasizes this through its performance-based plans. Substantially the same definition of Adjusted EBITDA (Adjusted
EBITDA (Performance Plans)) is used to
21
determine actual Company performance in the MIP and performance unit programs and both programs utilize one-year performance targets. See page 25 for the definition of Adjusted EBITDA
(Performance Plans) and further discussion of why the Committee uses one performance measure for its incentive programs.
Target Performance. Fiscal 2014
target performance goals corresponded to the Committees reasonable judgment of what would be a good outcome for the Company for fiscal 2014 based on information known at the time of such determination. Despite very difficult market conditions,
the Committee and management believed it was important to incentivize employees by setting target performance goals at levels significantly above the prior fiscal years performance.
|
|
|
The fiscal 2014 MIP Earnings Target of the Company was $94.0 million, an 18.1% increase from the fiscal 2013 Adjusted EBITDA (Performance Plans) of $79.6 million and a 1.7% increase from the fiscal 2013 MIP Earnings
Target of $92.4 million. |
|
|
|
The fiscal 2014 Performance Unit Earnings Target was $84.3 million, a 5.9% increase from the fiscal 2013 Adjusted EBITDA (Performance Plans) of $79.6 million and a 1.1% decrease from the fiscal 2013 Performance Unit
Earnings Target of $85.2 million. |
Actual Performance. Fiscal 2014 Adjusted EBITDA (Performance Plans) for the Company was $52.7 million for
purposes of the MIP, and $50.6 million for purposes of the performance unit program. Since the Company did not satisfy the threshold requirements under the MIP or the performance unit program in fiscal 2014, no bonuses were paid to the named
executive officers and all of the performance units were forfeited.
True At-Risk Pay. Historical payouts for the MIP and performance units have proven that
such compensation is truly at-risk. For example, in three of the last seven fiscal years through fiscal 2014, no bonuses were paid under the MIP to named executive officers and the performance unit grants were forfeited in full under the performance
unit program.
22
Executive Compensation and Governance Practices
23
Say-On-Pay Stockholder Vote for 2014 Annual Meeting of Stockholders
The Companys say-on-pay proposal was approved by over 98% of the shares entitled to vote and present at the 2014 annual meeting. The Committee and the Board had a
detailed discussion of the results of such stockholder vote. Given the high level of stockholder support, the Committee did not materially revise the Companys compensation policies and decisions relating to the named executive officers as a
result of such vote. The Committee will continue to consider the outcome of stockholder votes and other stockholder feedback in making future compensation decisions for the named executive officers.
Compensation Philosophy, Program Objectives, and Key Features
The compensation program for named executive officers is
designed to:
|
|
|
provide competitive pay commensurate with job scope and responsibilities in order to attract, retain and motivate key executives critical to the Companys operations; |
|
|
|
reward superior Company performance, including the achievement of financial and strategic goals, and to a lesser extent individual performance; |
|
|
|
foster individual growth within the Company and long-term commitment to the Company; and |
|
|
|
align the long-term interests of executives with those of stockholders through performance-based and long-term compensation awards and stock ownership guidelines. |
The following table sets forth how each component of compensation is intended to satisfy one or more of the Committees compensation objectives.
|
|
|
|
|
|
|
|
|
Component |
|
Primary Purpose(s) |
|
Key Features |
Base Salary |
|
|
|
Retains and attracts employees in a competitive market |
|
|
|
Determinations are based on employment agreement and the Adjusted Survey Target, and to a lesser extent an evaluation of the individuals experience and current performance. Also impacted by changes generally for
salaried and non-bargaining employees. |
|
|
|
|
Preserves an employees commitment during downturns in the plastic films industry and/or equity markets
|
|
|
|
|
|
|
|
Reflects experience, responsibilities, anticipated individual growth and other subjective factors |
|
|
|
Annual Incentive Cash Bonus |
|
|
|
Motivates and rewards achievement of annual performance-based measure(s) |
|
|
|
The bonus target for each employee is set forth as a percentage of base salary.
|
|
|
|
|
Retains and attracts employees for short term |
|
|
|
Earned bonus is 0% to 200% of such target. |
|
|
|
|
|
|
|
|
Performance measure is Adjusted EBITDA (Performance Plans) compared to MIP Earnings Target. The MIP Earnings Target is set at a level that is higher (often times, materially higher) than the forecast for the period or the
Performance Unit Earnings Target. |
24
|
|
|
|
|
|
|
|
|
Component |
|
Primary Purpose(s) |
|
Key Features |
Performance Units |
|
Motivate and reward
achievement of annual performance-based measure(s)
For earned awards:
Provide incentive in up market, with some down market protection
Retain and attract employees
for long term due to vesting requirements
Direct alignment with stockholders with focus on medium- and long-term fundamentals, with value of
award at-risk based on trading price of common stock at vesting dates |
|
Target dollar value for
performance unit grants is equal to the difference between the Adjusted Survey Target and the target annual compensation otherwise allocated to each named executive officer for the applicable fiscal year.
Earned performance units is
80% to 100% of the target if minimum performance is satisfied.
Performance measure is Adjusted EBITDA (Performance Plans) compared to Performance Unit Earnings
Target. The Performance Unit Earnings Target corresponds to budgeted Adjusted EBITDA (Performance Plans).
If earned, performance units vest pro rata on the first through fifth anniversaries of the grant
date. Holders have no rights as stockholders until vesting. On each vesting date, holders can elect common stock or equivalent cash.
Stock ownership guidelines reinforce long-term alignment, even if holders elect cash
option. |
Company Car Allowance |
|
Attracts employees in a competitive market |
|
Historical perquisite. |
Post-Termination Benefits |
|
Retain and attract employees in
a competitive market
Ensure compensation and benefits expectations in appropriate circumstances
Ensure continued dedication
of employees in case of personal uncertainties or risk of job loss |
|
Each named executive officer
has an employment agreement.
Cash severance is only paid upon termination by the Company without cause, termination by the
executive for good reason or termination within 30 days of a change in control.
Double trigger required generally and no tax gross-ups. |
Adjusted EBITDA (Performance Plans) Definition
Since 1997, the Committee has utilized the achievement of Adjusted EBITDA (Performance Plans) compared to the MIP Earnings Target as the applicable performance measure
under the MIP. Since fiscal 2008, performance units are earned based on the achievement of Adjusted EBITDA (Performance Plans) compared to the Performance Unit Earnings Target. Beginning in fiscal 2010, substantially the same definition of Adjusted
EBITDA
25
(Performance Plans) has been used to calculate Company performance for both the MIP and performance unit programs. The adjustments in Adjusted EBITDA (Performance Plans) may be different than the
adjustments disclosed for financial reporting purposes in the Companys Form 10-K and otherwise.
Use of One Performance Measure for Incentive
Programs. The Committee utilizes Adjusted EBITDA (Performance Plans) because it believes Adjusted EBITDA (Performance Plans) is an important measure of operating performance. Specifically, this measure focuses on the Companys
core operating results by removing the impact of the Companys capital structure (interest expense from its outstanding debt), asset base (depreciation and amortization), foreign currency effects, tax consequences, specified non-core operating
items, specified non-operating items, specified non-cash items and specified extraordinary items.
The Committee believes the single measure of Adjusted EBITDA is
appropriate to utilize in its incentive programs at this time, although the Committee considers additional or alternative performance measures from time to time. First, the Company is managed for Adjusted EBITDA and employees understand the
performance measure and its components based on the long history of its utilization. In addition, there are key differences in the programs that provide materially different incentives to the participants. The Performance Unit Earnings Target
corresponds to budgeted Adjusted EBITDA (Performance Plans), whereas the MIP Earnings Target represents budgeted Adjusted EBTIDA plus an additional dollar amount (recommended by management based on subjective factors, often materially higher than
budget) intended to further motivate participants for the achievement of specific strategic or financial goals. Also, earned bonuses under the MIP are paid to participants in January subsequent to fiscal year end, whereas performance unit awards are
subject to significant market risk due to the five-year pro-rata vesting from the grant date for earned performance units.
Defined. Adjusted
EBITDA (Performance Plans) is defined as net income before interest expense, income taxes, depreciation and amortization, discontinued operations, non-core business operating income, annual change in LIFO reserve, gain or loss on disposal of
property, plant and equipment, non-operating income (expense) and share-based compensation expense, all as adjusted to remove foreign exchange effect. Further, the Committee has approved certain procedures in calculating Adjusted EBITDA (Performance
Plans):
|
|
|
extraordinary items outside the ordinary course of business, such as a gain (provision) for the sale or acquisition of assets or a business, will be excluded from Adjusted EBITDA (Performance Plans) to the extent not
included in the MIP Earnings Target or Performance Unit Earnings Target (the Earnings Targets); provided, however, extraordinary items will be included in Adjusted EBITDA (Performance Plans) to the extent of cash received;
|
|
|
|
accounting policy changes required by the SEC or the U.S. Financial Accounting Standards Board that are approved by such parties following the approval of the Earnings Targets will not be utilized to calculate Adjusted
EBITDA (Performance Plans); |
|
|
|
inter-unit management fees in effect on the date the Earnings Targets are approved by the Committee will be included in Adjusted EBTIDA (Performance Plans); |
|
|
|
inter-unit royalty fees in effect on the date the Earnings Targets are approved by the Committee will be excluded from Adjusted EBTIDA (Performance Plans); and |
|
|
|
vendor pricing credits will be included in Adjusted EBITDA (Performance Plans) in the fiscal year in which credits are earned, provided that the Company provides the Committee with sufficient and quantifiable support
relating to such credit amounts if such credits are not included in the fiscal year-end financial statements, and provided further that any vendor pricing credits included in Adjusted EBITDA (Performance Plans) for a fiscal year will be excluded
from Adjusted EBITDA (Performance Plans) in the following fiscal year. |
26
Process for
Making Compensation Determinations
Target Annual
Compensation
In making annual compensation determinations for the named executive officers, the Committee primarily focuses on target annual compensation,
which consists of base salary, a target bonus (short -term incentive), target performance unit grants (long-term incentive) and a company car allowance. In establishing the amounts allocated to each component of target annual compensation, the
Committee initially finalizes all compensation other than the target dollar value of the performance units. Base salaries and target bonuses (set forth as percentages of base salaries) are based on the Adjusted Survey Target and, to a lesser extent,
subjective factors. The car allowance generally remains a constant dollar amount each fiscal year. Upon finalizing the foregoing components of target annual compensation, the Committee calculates a target dollar value for performance unit grants
equal to the difference between the Adjusted Survey Target and the target annual compensation otherwise allocated to each named executive officer for the applicable fiscal year. The number of performance units actually granted is equal to the target
dollar value divided by the closing price of the Companys common stock on Nasdaq on the grant date, which occurs in the beginning of the next calendar year at the first regularly scheduled Committee meeting.
The named executive officers will earn their target annual compensation only to the extent target performance measures are achieved. To the extent target performance
measures are not achieved or are exceeded, the named executive officers will earn compensation below or above the Adjusted Survey Target, respectively. The Committee generally does not utilize its discretion to provide additional compensation.
Compensation Differences Among Named Executive Officers
The Company does
not have a fixed internal pay equity scale but rather determines the compensation for each role based on scope of responsibility and market rates of compensation. For fiscal 2014, target annual compensation increased 3% from the Survey Target.
Benchmarking in establishing the Survey Target generally reflected the job responsibilities and positions of the named executive officers of the Company. The job responsibilities and positions of the named executive officers were, as of the date of
Mercers 2013 study, and continued to be through fiscal 2014, as follows.
|
|
|
Mr. Barba, Chairman, President and Chief Executive Officer, leads the management of the Company across all departments and is primarily responsible for the operational division of the Company, as well as serving as
the leader of the Board. |
|
|
|
Mr. Feeney, Executive Vice President, Finance and Chief Financial Officer, is primarily responsible for the financial division of the Company; he shares significant responsibilities, leadership and decision-making
authority with Mr. Barba, and serves as a director on the Board. |
|
|
|
Mr. Powers is the Executive Vice President, Sales and Marketing, which is viewed as the key operating unit in the highly competitive plastic films industry; he reports directly to Mr. Barba. Mr. Powers
began serving as a director of the Board in fiscal 2014. |
|
|
|
Mr. Vegliante, Executive Vice President, Operations, is responsible for a key operating division of the Company and reports to Mr. Barba. |
|
|
|
Ms. Guerrera, Vice President-Controller, is responsible for financial reporting and accounting functions and reports to Mr. Feeney. |
Advisors Utilized in Determination of Executive Compensation
Management. In determining the compensation of executive officers, the Committee receives significant input from Messrs. Barba and Feeney, who have a
combined 70 years experience in their executive officer roles
27
with the Company and have the most involvement in, and knowledge of, the Companys business goals, strategies and performance, the overall effectiveness of the management team and each
persons individual contribution to the Companys performance. For each named executive officer, the Committee is provided a compensation recommendation as well as information regarding the individuals experience, current
performance, potential for advancement and other subjective factors. Messrs. Barba and Feeney also provide recommendations for the performance metrics to be utilized in the performance-based compensation programs, the appropriate performance targets
and analyses of whether such performance targets have been achieved (including recommended adjustments). The Committee retains the discretion to modify the recommendations of Messrs. Barba and Feeney and reviews such recommendations for their
reasonableness based on individual and Company performance as well as market information. Messrs. Barba and Feeney do not provide input with respect to their own respective compensation.
The Committee works with management to set the agenda for Committee meetings, and Mr. Feeney is invited regularly to attend such meetings. The Committee also meets
regularly in executive session to discuss compensation issues generally outside the presence of management, as well as to review the performance and determine the compensation of Messrs. Barba and Feeney.
Third-Party Consultants. The Committee did not engage Mercer to perform a comprehensive executive compensation review with respect to the fiscal 2014
executive compensation program. The Committee previously engaged Mercer to conduct such review with respect to the fiscal 2013 executive compensation program. As discussed below in Benchmarking DataSurvey Target, the
Committee continues to benchmark target annual compensation with the survey data from Mercers 2013 study.
Benchmarking Data Survey Target
In connection with the fiscal 2013 executive compensation review, Mercer initially provided analyses using a peer group and survey data. The Committee determined to
benchmark fiscal 2013 compensation against the survey data because the survey data included a significantly larger sample size of companies that aligned with the Companys industry and business, and the survey data had better job position
matches given the unique responsibilities of the Companys executives. The survey analyses for base salaries and bonus targets were based on the average data from two surveys, (x) Mercers 2011 US report for companies with revenues of
0.5x to 2x of the Companys revenues and (y) Towers Watsons 2011 US report for companies with revenues of 0.5x to 2.5x of the Companys revenues, in each case only including non-durable manufacturing companies (or all
manufacturing companies if non-durable manufacturing data was not available). The survey analysis for target long-term equity incentives was derived from Mercers proprietary interpolation tool using companies in the public, non-durable
manufacturing industry. Survey data participants were not available to the Committee and therefore the Company cannot disclose the names of such participants.
Timing of Fiscal 2014 Compensation Determinations
Set forth below is the
general timing of the fiscal 2014 compensation determinations for named executive officers.
|
|
|
|
|
Component of
Compensation |
|
Meeting Date |
|
Review and Approval Steps |
Base salary |
|
October 2013 |
|
Committee approves base salary |
|
|
|
Annual Incentive Cash Bonus |
|
October 2013 |
|
Committee approves target bonus (as percentage of base salary)
Committee approves fiscal 2014
MIP |
|
|
|
|
|
January 2014 |
|
Committee approves fiscal 2014 performance goal |
|
|
|
|
|
January 2015 |
|
Committee reviews achievement of fiscal 2014 performance goal and finalizes bonus payout, if
any |
28
|
|
|
|
|
Component of
Compensation |
|
Meeting Date |
|
Review and Approval Steps |
Performance Units |
|
October 2013 |
|
Committee approves target dollar value of performance units
Committee approves fiscal 2014 performance unit
program |
|
|
|
|
|
January 2014 |
|
Committee grants performance units based on target dollar value
Committee approves fiscal 2014 performance
goal |
|
|
|
|
|
January 2015 |
|
Committee reviews achievement of fiscal 2014 performance goal and determines if performance units are earned |
In addition, the Committee and/or the Board makes determinations with respect to post-termination benefits, perquisites and other
compensation matters as it deems appropriate.
Fiscal 2014 Compensation Determinations
Base Salary
Each named executive officer receives a base salary paid in
cash. The employment agreements for each named executive officer established a base salary as of November 2004, with annual increases guaranteed to be at least equal to the percentage increase in the Consumer Price Index for all Urban Consumers for
the New York-Northeastern New Jersey metropolitan area as published by the Bureau of Labor & Statistics for the twelve months ended on the September 30th immediately prior to the
applicable fiscal year. The Committee may increase base salaries further at its discretion.
The following table sets forth the base salaries approved for the named
executive officers in fiscal 2014 and 2013, effective November 1 of each such fiscal year. Fiscal 2014 base salaries increased 3% for all named executive officers.
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|
|
Name |
|
Fiscal 2014
($) |
|
|
Fiscal 2013 ($) |
|
J. Brendan Barba |
|
|
958,700 |
|
|
|
930,800 |
|
Paul M. Feeney |
|
|
463,800 |
|
|
|
450,300 |
|
John J. Powers |
|
|
349,300 |
|
|
|
339,100 |
|
Paul C. Vegliante |
|
|
317,300 |
|
|
|
308,100 |
|
Linda N. Guerrera |
|
|
229,500 |
|
|
|
222,800 |
|
For the twelve months ended September 30, 2013, the Consumer Price Index for all Urban Consumers for the New York-Northeastern New
Jersey metropolitan area increased by 1.6%.
Annual Incentive Cash Bonus (MIP)
Performance Target. Each named executive officer participates in the MIP, pursuant to which eligible employees earn a cash bonus upon the
satisfaction of one or more annual performance targets established by the Committee. Since 1997, the Committee has utilized the achievement of Adjusted EBITDA (Performance Plans) compared to the MIP Earnings Target as the applicable performance
measure under the MIP. The performance goal for each participant is dependent upon job classification, with the intent to capture that portion of the Companys business the performance of which a participant can reasonably influence. Since
fiscal 2009, the performance goal for all of the named executive officers has been based on the performance of the Company as a whole.
29
Bonus Target. The bonus target for each employee is set forth as a percentage of base salary
and the earned bonus is 0% to 200% of such target based on Adjusted EBITDA (Performance Plans) compared to the MIP Earnings Target, as set forth in the table below.
|
|
|
|
|
Adjusted EBITDA (Performance Plans) |
|
Degree of Performance Achieved |
|
Percent of MIP Target Bonus Earned |
Less than 80% of MIP Earnings Target |
|
Below Threshold |
|
0% |
80% of MIP Earnings Target |
|
Threshold |
|
50% |
100% of MIP Earnings Target |
|
Target |
|
100% |
120% or more of MIP Earnings Target |
|
Maximum |
|
200% |
There is a linear increase in the target bonus between such threshold, target and maximum amounts. Reductions (but not increases) of
such bonuses are at the sole discretion of the Committee and certain management. The Committee confirmed the reasonableness of the bonus target, as a percentage of base salary, for each named executive officer in connection with Mercers 2013
study. Although the Committee did not change the bonus target, as a percentage of base salary, for any named executive officer in fiscal 2014, the value of such target cash bonus increased 3% based on the corresponding increase in base salary.
Fiscal 2014-Earned. The following table sets forth summary information regarding the fiscal 2014 MIP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MIP Target Bonus |
|
|
MIP Bonus Earned $ |
|
Name |
|
% of Base Salary |
|
|
$ |
|
|
J. Brendan Barba |
|
|
80 |
|
|
|
766,960 |
|
|
|
|
|
Paul M. Feeney |
|
|
65 |
|
|
|
301,470 |
|
|
|
|
|
John J. Powers |
|
|
50 |
|
|
|
174,650 |
|
|
|
|
|
Paul C. Vegliante |
|
|
50 |
|
|
|
158,650 |
|
|
|
|
|
Linda N. Guerrera |
|
|
25 |
|
|
|
57,375 |
|
|
|
|
|
Long-Term, Share-Based Incentive Compensation
Performance Target. The Committee has granted long-term incentive compensation to a limited number of employees, including the named executive officers, in the
form of performance units since fiscal 2006. The Committee currently grants equity awards to Company employees under the 2013 Omnibus Incentive Plan. Prior to such time and including all grants made to the named executive officers in fiscal 2013,
the Committee granted such awards under the 2005 Stock Option Plan.
Since fiscal 2008, performance units are earned based on the achievement of Adjusted EBITDA
(Performance Plans) compared to the Performance Unit Earnings Target, as set forth in the table below.
|
|
|
|
|
Adjusted EBITDA (Performance Plans) |
|
Degree of Performance Achieved |
|
Percent of Performance Units Earned |
Less than 80% of Performance Unit Earnings Target |
|
Below Threshold |
|
0% |
80% of Performance Unit Earnings Target |
|
Threshold |
|
80% |
100% or more of Performance Unit Earnings Target |
|
Target/Maximum |
|
100% |
If the Companys Adjusted EBITDA (Performance Plans) is between 80% and less than 100% of the Performance Unit Earnings Target, such
employee forfeits such number of performance units equal to (A) the performance units granted multiplied by (B) the percentage Adjusted EBITDA (Performance Plans) is less than the Performance Unit Earnings Target.
Earned performance units vest pro rata on the first through fifth anniversaries of the grant date and therefore are subject to significant market risk over the vesting
period.
30
Performance Unit Target. See Process for Making Compensation DeterminationsTarget
Annual Compensation for information as to how the Committee determines the number of performance units granted.
Fiscal 2014-Earned. The
table below sets forth for each named executive officer the number of performance units granted and earned in fiscal 2014 under the 2013 Omnibus Incentive Plan.
|
|
|
|
|
|
|
|
|
Name |
|
Performance Units Granted |
|
|
Performance Units Earned |
|
J. Brendan Barba |
|
|
41,691 |
|
|
|
|
|
Paul M. Feeney |
|
|
4,835 |
|
|
|
|
|
John J. Powers |
|
|
4,412 |
|
|
|
|
|
Paul C. Vegliante |
|
|
882 |
|
|
|
|
|
Linda N. Guerrera |
|
|
|
|
|
|
|
|
Ms. Guerrera and other Vice Presidents that participate in the performance unit program historically have received such awards
approximately once every three years. Ms. Guerrera was granted performance units in fiscal 2012, and was not awarded performance units in fiscal 2013 or 2014.
Post-Employment Benefits
Each named executive officer has an employment
agreement with the Company, which includes specified severance benefits. In general, cash severance is only paid upon termination by the Company without cause, or upon termination by the executive for good reason or upon termination within 30 days
following a change in control. The change in control provision is a double trigger, which means that two events must occur for payments to be made (a change in control and, within 30 days subsequent thereto, the termination of
employment); this is consistent with the purpose of the employment agreements, to provide employees or their heirs with a guaranteed level of financial protection upon employment loss. The change in control protection also ensures that executives
can advise the Board regarding a potential transaction without being unduly influenced by personal considerations, such as fear of the economic consequences of losing a job as a result of such change in control. Further, it is imperative to provide
competitive benefits relative to peer companies and to diminish the inevitable distraction by virtue of personal uncertainties and risks created by a pending or threatened change in control or termination without cause. Finally, the Committee
believes that these agreements are beneficial to the Company because, in consideration for these severance arrangements, the executives agree to non-competition and non-solicitation covenants for a period of time following such termination of
employment.
Additionally, certain of the Companys equity compensation plans and arrangements, including the 2005 Stock Option Plan and the 2013 Omnibus
Incentive Plan, permit (but do not require) the Committee to accelerate the vesting of securities granted thereunder upon specified terminations of employment. See Named Executive Officer Compensation TablesPotential Payments Upon
Termination or Change in Control for further information on post-employment benefits.
Other Equity-Related Policies
Executive Stock Ownership Guidelines
The Company has had stock ownership guidelines for executive officers for many years. The Nominating and Corporate Governance Committee most recently revised the
guidelines in conjunction with revisions to the executive compensation program in fiscal 2013 and as a result of the significant increase in the Companys common stock price since the prior guidelines were first implemented in 2010. The current
guidelines are available on the Investor Relations section of our website at www.aepinc.com.
31
The executive stock ownership guidelines in effect currently and throughout fiscal 2014 require executive officers to own a
minimum number of shares of the Companys common stock equal to a multiple of such persons base salary in effect on November 1, 2012 (or such later date he or she becomes an executive under the guidelines) divided by the share price
of the Companys common stock. The applicable multiples of base salaries are set forth in the table below. The share price is computed as the average of the closing price of the Companys common stock within 30 consecutive days ending
October 31, 2012 (or a later 30-day period reasonably close to the date such person becomes an executive under the guidelines). The minimum number of shares does not change as a result of subsequent changes in base salaries.
|
|
|
Position |
|
Value of Common Stock to be Owned |
Chief Executive Officer and President |
|
4x base salary |
Chief Financial Officer and Executive Vice Presidents |
|
2x base salary |
Other Executive Officers |
|
1x base salary |
The guidelines set forth how to value the stock held for purposes of compliance testing. The guidelines also set forth how indirect
and/or derivative securities, as well as securities held by specified family members, are taken into account in determining the satisfaction of the guidelines, and the ramifications of noncompliance.
All of our named executive officers are in compliance with the current guidelines as of the date hereof, well in advance of the initial compliance date of
October 31, 2017. Further, no executive officer has pledged any shares of the Companys common stock. As of February 17, 2015, our named executive officers had aggregate beneficial ownership of 25.4% of our common stock,
exhibiting significant alignment of management with other long-term stockholders.
Timing and Pricing of Share-Based Grants
The Committee and the Board do not coordinate the timing of share-based grants with the release of material non-public information. Performance units are granted to the
named executive officers on an annual basis at the first regular meeting of the Committee during the calendar year, and remain subject to both the satisfaction of a one-year Adjusted EBITDA performance measure and five-year pro-rata vesting from the
grant date. The Committee generally establishes dates for regularly scheduled meetings at least a year in advance.
In accordance with the 2013 Omnibus Incentive
Plan, the exercise price of each stock option is the closing price for the Companys common stock on the date approved by the Committee to be the grant date (which date is not earlier than the date the Committee approved such grant).
Policy on Pledging and Hedging Company Securities
In addition to the
restrictions set forth in SEC regulations, the Companys insider trading policy prohibits the hedging of Company securities and significantly limits any pledging of Company securities. In particular, the policy prohibits directors, executive
officers and other employees, with respect to the Companys securities, from trading on a short-term basis (open market purchases and sales within six months), short sales, trading in puts, calls, options or other derivative securities, or
trading otherwise for short-term gain or speculative purposes. In addition, the policy prohibits pledging of Company securities or holding Company securities in a margin account, except in situations and on conditions pre-approved by the Chief
Financial Officer. At a minimum, such person must have the financial capacity to repay the applicable loan without resort to the margin or pledged securities. No Company securities beneficially owned by a director or executive officer have been
pledged or subject to a margin account at any time in the last four fiscal years.
32
Tax and
Accounting Implications
Deductibility of
Executive Compensation
The Committee has reviewed the Companys compensation programs and policies in light of Section 162(m) of the Code, which
provides that annual compensation in excess of $1 million paid to a companys chief executive officer and the three other highest compensated executive officers (excluding the chief financial officer) is not deductible by the company for
federal income tax purposes, subject to specified exemptions (the most significant of which is certain performance-based compensation). Amounts payable under the MIP, which was last approved by our stockholders at the 2013 annual meeting, are
intended to qualify as performance-based compensation in accordance with Section 162(m) of the Code.
Incentive stock options, non-qualified stock options and
stock appreciation rights granted under our 2005 Stock Option Plan and 2013 Omnibus Incentive Plan qualify for the performance-based compensation exemption from the $1 million deduction limitation of Section 162(m) of the Code. Performance
shares and performance units granted under our 2005 Stock Option Plan and 2013 Omnibus Incentive Plan may also qualify for the performance-based compensation exemption if, among other things, the Company obtains stockholder approval of the material
terms of the performance goals applicable to performance shares and performance units every five years. Such stockholder approval was last received with respect to the 2005 Stock Option Plan at the 2012 annual meeting. The stockholders approved the
2013 Omnibus Incentive Plan, including for purposes of Section 162(m) of the Code, at the 2013 annual meeting.
The Committee intends to continue to review the
application of Section 162(m) of the Code with respect to any future compensation arrangements considered by the Company. To maintain flexibility in compensating the Companys executive officers to meet a variety of objectives, the
Committee does not have a policy that all executive compensation must be tax-deductible.
Nonqualified Deferred Compensation
Section 409A of the Code provides that amounts deferred under nonqualified deferred compensation arrangements will be included in an employees income when
vested, as well as be subject to penalties and interest, unless certain requirements are complied with. The Companys applicable employment and severance arrangements and benefit plans, as well as the 2013 Omnibus Incentive Plan, are intended
to comply with or be exempt from the requirements of Section 409A.
Change in Control Payments
Section 280G of the Code disallows a companys tax deduction for excess parachute payments. For this purpose, parachute payments generally are
defined as payments to specified persons that are contingent upon a change in control in an amount equal to or greater than three times the persons base amount (the five-year average Form W-2 compensation). The excess parachute payments, which
are nondeductible, equal the amount of the parachute payments less the base amount. Additionally, Code Section 4999 imposes a 20% excise tax on any person who receives excess parachute payments. The Company does not pay tax gross-ups with
respect to such excise tax.
All of the named executive officers currently have employment agreements which entitle them to payments upon termination of their
employment following a change in control of the Company that may qualify as excess parachute payments. The Companys 2005 Stock Option Plan and 2013 Omnibus Incentive Plan also entitle participants to payments in connection with a
change in control that may result in excess parachute payments.
33
Fiscal 2015
Preliminary Executive Compensation Program
The
Committee did not engage a compensation consultant to perform a comprehensive executive compensation review with respect to the fiscal 2015 executive compensation program. Although the average salary change for all of the Companys salaried and
non-bargaining employees was 3%, the Committee departed from historical practice and determined not to increase the base salaries of Messrs. Barba, Feeney, Powers and Vegliante for fiscal 2015. In lieu of a base salary increase and a resulting
increase in the dollar value of the MIP target bonus for the named executive officers, the Committee determined to increase the target dollar value of their performance units by slightly more than historical practice, thereby increasing the already
significant pay-for-performance focus of the compensation program. As a result, fiscal 2015 target annual compensation increased by a range of approximately 4-5%, as compared to fiscal 2014 target annual compensation, for Messrs. Barba, Feeney,
Powers and Vegliante.
By contrast, the Committee increased Ms. Guerreras base salary by 3%, which also resulted in a 3% increase in the dollar value of
her MIP target bonus. Further, the Committee granted Ms. Guerrera 3,500 performance units for fiscal 2015, consistent with the Committees historical practice of granting certain Vice Presidents performance units approximately once every
three years; Ms. Guerrera was not awarded performance units in fiscal 2014 and 2013.
34
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis (CD&A) in this proxy statement with management,
including Messrs. Barba and Feeney. Based on such review and discussion, the Committee recommended to the Board that the CD&A be included in the Companys annual report on Form 10-K for the fiscal year ended October 31, 2014 and the
proxy statement for the 2015 annual meeting.
|
The Compensation Committee |
|
Lee C. Stewart, Chairman |
Robert T. Bell |
Frank P. Gallagher |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2014, the Compensation Committee consisted of Lee C. Stewart, Frank P. Gallagher, Kenneth Avia (from November 1, 2013 to April 8, 2014) and
Robert T. Bell (from and after April 8, 2014). All members of the Committee during fiscal 2014 were independent directors and none of them is or has been an employee or officer of ours. During fiscal 2014, none of our executive officers served
on the compensation committee (or equivalent) or the board of directors of another entity whose executive officer(s) served on the Committee or the Board.
35
NAMED EXECUTIVE OFFICER COMPENSATION TABLES
Summary Compensation Table for Fiscal 2014
The table below summarizes the total compensation paid or
earned by the named executive officers in fiscal 2014, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position |
|
Year (1) |
|
|
Salary ($) |
|
|
Bonus ($) |
|
|
Stock Awards ($) (2) |
|
|
Non-Equity Incentive Plan Compensation ($) |
|
|
All Other Compensation ($) (3) |
|
|
Total ($) |
|
J. Brendan Barba |
|
|
2014 |
|
|
|
958,700 |
|
|
|
|
|
|
|
2,195,865 |
|
|
|
|
|
|
|
27,476 |
|
|
|
3,182,041 |
|
Chairman, President and Chief |
|
|
2013 |
|
|
|
930,800 |
|
|
|
|
|
|
|
2,131,600 |
|
|
|
487,018 |
|
|
|
26,176 |
|
|
|
3,575,594 |
|
Executive Officer |
|
|
2012 |
|
|
|
903,728 |
|
|
|
|
|
|
|
1,016,244 |
|
|
|
1,295,468 |
|
|
|
25,498 |
|
|
|
3,240,938 |
|
|
|
|
|
|
|
|
|
Paul M. Feeney |
|
|
2014 |
|
|
|
463,800 |
|
|
|
|
|
|
|
254,659 |
|
|
|
|
|
|
|
24,585 |
|
|
|
743,044 |
|
Executive Vice President, Finance |
|
|
2013 |
|
|
|
450,300 |
|
|
|
|
|
|
|
247,000 |
|
|
|
191,432 |
|
|
|
24,312 |
|
|
|
913,044 |
|
and Chief Financial Officer |
|
|
2012 |
|
|
|
437,207 |
|
|
|
|
|
|
|
192,643 |
|
|
|
509,213 |
|
|
|
23,854 |
|
|
|
1,162,917 |
|
|
|
|
|
|
|
|
|
John J. Powers |
|
|
2014 |
|
|
|
349,300 |
|
|
|
|
|
|
|
232,380 |
|
|
|
|
|
|
|
24,380 |
|
|
|
606,060 |
|
Executive Vice President, Sales |
|
|
2013 |
|
|
|
339,100 |
|
|
|
|
|
|
|
225,300 |
|
|
|
110,891 |
|
|
|
24,111 |
|
|
|
699,402 |
|
and Marketing |
|
|
2012 |
|
|
|
329,199 |
|
|
|
|
|
|
|
160,841 |
|
|
|
294,936 |
|
|
|
23,705 |
|
|
|
808,681 |
|
|
|
|
|
|
|
|
|
Paul C. Vegliante |
|
|
2014 |
|
|
|
317,300 |
|
|
|
|
|
|
|
46,455 |
|
|
|
|
|
|
|
24,322 |
|
|
|
388,077 |
|
Executive Vice President, |
|
|
2013 |
|
|
|
308,100 |
|
|
|
|
|
|
|
44,900 |
|
|
|
100,754 |
|
|
|
23,875 |
|
|
|
477,629 |
|
Operations |
|
|
2012 |
|
|
|
299,117 |
|
|
|
|
|
|
|
26,730 |
|
|
|
267,985 |
|
|
|
23,664 |
|
|
|
617,496 |
|
|
|
|
|
|
|
|
|
Linda N. Guerrera |
|
|
2014 |
|
|
|
229,500 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
21,180 |
|
|
|
255,680 |
|
Vice President-Controller |
|
|
2013 |
|
|
|
222,800 |
|
|
|
|
|
|
|
|
|
|
|
36,430 |
|
|
|
20,901 |
|
|
|
280,131 |
|
|
|
|
2012 |
|
|
|
216,319 |
|
|
|
|
|
|
|
100,275 |
|
|
|
96,903 |
|
|
|
20,550 |
|
|
|
434,047 |
|
(1) |
Fiscal year: November 1October 31. |
(2) |
The amounts reported reflect the grant date fair value (excluding the effect of estimated forfeitures). All awards in the Stock Awards column for 2014 relate to performance units granted in January 2014 under the 2013
Omnibus Incentive Plan. The grant date fair value of each performance unit assumes all units are earned in full and is calculated as the closing price of a share of common stock as of the grant date. Due to the cash settlement feature, the
performance units are liability classified on the Companys balance sheets and the (income) expense is remeasured at each balance sheet date based on the market value of the Companys common stock, although no remeasurements are reflected
herein. |
(3) |
Represents a car allowance ($13,000 for Mr. Barba, $11,000 each for Messrs. Feeney, Powers, and Vegliante, and $8,000 for Ms. Guerrera), $12,750 contributed by the Company to such persons account in the
401(k) Savings Plan, life insurance premiums and accidental death and dismemberment insurance premiums. |
Narrative Discussion of Summary
Compensation Table for Fiscal 2014
Employment Agreements. See Potential Payments Upon Termination or Change in Control for
a description of the material terms of the employment agreements of all named executive officers.
36
Stock Awards. The Compensation Committee provides long-term incentive compensation to the named executive
officers in the form of performance units. Each performance unit represents the right to receive, upon vesting and the satisfaction of any required withholding obligation, either one share of the Companys common stock or the corresponding cash
value of such stock or a combination of shares and cash value (at the employees option at the time of vesting). The Company did not achieve at least 80% of the Performance Unit Earnings Target in fiscal 2014, and therefore all of the
performance units were forfeited in fiscal 2014. The Company achieved 93.48% of the Performance Unit Earnings Target in fiscal 2013, and therefore 93.48% of the performance units were earned and 6.52% of the performance units were forfeited in
fiscal 2013. The Company achieved more than 100% of the Performance Unit Earnings Target in fiscal 2012, and therefore no performance units were forfeited in fiscal 2012.
Non-Equity Incentive Plan Compensation. The Company did not achieve at least 80% of the MIP Earnings Target in fiscal 2014, and therefore no bonuses
were earned by the named executive officers in fiscal 2014. The Company achieved 86.16% of the MIP Earnings Target in fiscal 2013, which corresponded to a payment of 65.4% of the target bonus of each named executive officer. The Company achieved
115.8% of the MIP Earnings Target in fiscal 2012, which corresponded to a payment of 179.2% of the target bonus of each named executive officer.
Grants of Plan-Based Awards in
Fiscal 2014
The following table provides
information about equity and non-equity awards granted to the named executive officers in fiscal 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) |
|
|
Estimated Possible Payouts Under Equity Incentive Plan Awards (2) |
|
|
Grant Date Fair Value of Stock and Option Awards ($)(3) |
|
Name |
|
Grant Date |
|
|
Threshold ($) |
|
|
Target ($) |
|
|
Maximum ($) |
|
|
Threshold (#) |
|
|
Target (#) |
|
|
Maximum (#) |
|
|
J. Brendan Barba |
|
|
N/A |
|
|
|
383,480 |
|
|
|
766,960 |
|
|
|
1,533,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/07/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,352 |
|
|
|
41,691 |
|
|
|
41,691 |
|
|
|
2,195,865 |
|
Paul M. Feeney |
|
|
N/A |
|
|
|
150,735 |
|
|
|
301,470 |
|
|
|
602,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/07/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,868 |
|
|
|
4,835 |
|
|
|
4,835 |
|
|
|
254,659 |
|
John J. Powers |
|
|
N/A |
|
|
|
87,325 |
|
|
|
174,650 |
|
|
|
349,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/07/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,529 |
|
|
|
4,412 |
|
|
|
4,412 |
|
|
|
232,380 |
|
Paul C. Vegliante |
|
|
N/A |
|
|
|
79,325 |
|
|
|
158,650 |
|
|
|
317,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/07/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
705 |
|
|
|
882 |
|
|
|
882 |
|
|
|
46,455 |
|
Linda N. Guerrera |
|
|
N/A |
|
|
|
28,688 |
|
|
|
57,375 |
|
|
|
114,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Relates to the possible cash bonus payouts under the fiscal 2014 MIP. |
(2) |
Relates to the performance units granted, subject to forfeiture, under the 2013 Omnibus Incentive Plan. |
(3) |
The Company assumed that the target/maximum amount of performance units would be earned in determining the grant date fair value. Each performance unit had a grant date fair value of $52.67, which was the closing price
of a share of common stock on the grant date. See Note 2 to the Summary Compensation Table. |
Narrative Discussion of Grants of Plan-Based Awards in
Fiscal 2014 Table
MIP. The bonuses of the named executive officers were subject to the satisfaction of Adjusted EBITDA (Performance Plans) of
the Company. Bonus targets are set forth as percentages of base salaries and the earned bonus is 0% to 200% of such targets based on fiscal 2014 Adjusted EBITDA (Performance Plans) compared to the MIP Earnings Target. The threshold amount of 50% of
the target bonuses is based on achievement of 80% of the MIP Earnings Target, the target amount of 100% of the target bonuses is based on achievement of 100% of the
37
MIP Earnings Target, and the maximum amount of 200% of the target bonuses is based on the achievement of 120% or more of the MIP Earnings Target, with a linear increase in the target bonuses
between such threshold, target and maximum amounts. No bonus amounts were earned for fiscal 2014 due to the Companys failure to satisfy the threshold performance measure.
Performance Units. Each performance unit represents the right to receive, upon the achievement of specified performance goals and vesting criteria and
the satisfaction of any required withholding obligation, either one share of the Companys common stock or the corresponding cash value of such stock or a combination of shares and cash value (at the employees option on each vesting
date). The earned performance units vest in five equal installments on the first through fifth anniversaries of the grant date, provided the person continues to be employed by the Company on such respective dates. The threshold amount of 80% of the
performance units is based on Adjusted EBITDA (Performance Plans) of 80% of the Performance Unit Earnings Target, and the target and maximum amount of 100% of the performance units is based on Adjusted EBITDA (Performance Plans) of 100% or more of
the Performance Unit Earnings Target, with a linear increase between the threshold and target/maximum amounts. All performance units granted in fiscal 2014 were forfeited due to the Companys failure to satisfy the threshold performance
measure.
Outstanding Equity Awards at October 31, 2014
The following table presents information on the unvested
performance units held by the named executive officers as of October 31, 2014. As of October 31, 2014, no named executive officer held any unexercised stock options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
|
Name |
|
Grant Date(1) |
|
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(2) |
|
J. Brendan Barba |
|
|
01/06/2011 |
|
|
|
14,993 |
|
|
|
689,528 |
|
|
|
|
01/05/2012 |
|
|
|
21,283 |
|
|
|
978,805 |
|
|
|
|
01/07/2013 |
|
|
|
26,594 |
|
|
|
1,223,058 |
|
|
|
|
|
Paul M. Feeney |
|
|
01/06/2011 |
|
|
|
2,901 |
|
|
|
133,417 |
|
|
|
|
01/05/2012 |
|
|
|
4,035 |
|
|
|
185,570 |
|
|
|
|
01/07/2013 |
|
|
|
3,081 |
|
|
|
141,695 |
|
|
|
|
|
John J. Powers |
|
|
01/06/2011 |
|
|
|
2,390 |
|
|
|
109,916 |
|
|
|
|
01/05/2012 |
|
|
|
3,369 |
|
|
|
154,940 |
|
|
|
|
01/07/2013 |
|
|
|
2,810 |
|
|
|
129,232 |
|
|
|
|
|
Paul C. Vegliante |
|
|
01/06/2011 |
|
|
|
445 |
|
|
|
20,466 |
|
|
|
|
01/05/2012 |
|
|
|
560 |
|
|
|
25,754 |
|
|
|
|
01/07/2013 |
|
|
|
560 |
|
|
|
25,754 |
|
|
|
|
|
Linda N. Guerrera |
|
|
01/05/2012 |
|
|
|
2,100 |
|
|
|
96,579 |
|
(1) |
The performance units vest in five equal installments on the first through fifth anniversaries of the grant date. |
(2) |
Based on the closing price of our common stock on Nasdaq on October 31, 2014, which was $45.99. |
38
Option Exercises and Stock Vested in Fiscal 2014
The following table provides information on the vesting of
earned performance units in fiscal 2014. The number of shares acquired and the value realized for each award excludes the payment of any fees, commissions or taxes. No named executive officer exercised any stock options during fiscal 2014.
|
|
|
|
|
|
|
|
|
|
|
Stock Awards (1) |
|
Name |
|
Number of Shares Acquired on Vesting (#) |
|
|
Value Realized on Vesting ($) |
|
J. Brendan Barba |
|
|
33,158 |
|
|
|
1,747,485 |
|
Paul M. Feeney |
|
|
5,925 |
|
|
|
312,134 |
|
John J. Powers |
|
|
5,060 |
|
|
|
266,444 |
|
Paul C. Vegliante |
|
|
1,470 |
|
|
|
76,525 |
|
Linda N. Guerrera |
|
|
1,890 |
|
|
|
99,111 |
|
(1) |
The value realized is based on the number of performance units received on the vesting date multiplied by the closing price of our common stock on Nasdaq on the vesting date. If Nasdaq is closed on the vesting date, the
closing price on the preceding business day is used. For all vesting in fiscal 2014, the named executive officers elected to receive cash in lieu of shares, as permitted under the award agreements. |
Potential Payments Upon Termination or Change in Control
The following section describes potential payments and
benefits to the named executive officers under the Companys compensation and benefit plans and arrangements upon termination of employment or a change in control of the Company as of October 31, 2014. All of the named executive officers
have employment agreements with the Company as of October 31, 2014, and certain of the Companys benefit plans and arrangements contain provisions regarding acceleration of vesting and payment upon specified events.
AEP Industries Inc. 2005 Stock Option Plan
The Compensation Committee
retains discretionary authority at any time, including immediately prior to or upon a change in control, to accelerate the exercisability of any award.
Performance Units. The earned performance units will immediately vest (subject to pro-ration and satisfaction of applicable performance criteria, if
such termination event occurs during or as of the end of the fiscal year in which the initial grant was made) in the event of (A) the death of an employee, (B) the permanent disability of an employee (within the meaning of the Code) or
(C) a termination of employment due to the disposition of any asset, division, subsidiary, business unit, product line or group of the Company or any of its affiliates. In the case of any other termination, any unvested performance units will
be forfeited.
AEP Industries Inc. 2013 Omnibus Incentive Plan
The
Compensation Committee retains discretionary authority at any time, including immediately prior to or upon a change in control, to accelerate the exercisability of any award or the end of a performance period.
Performance Units. The earned performance units will vest (A) immediately, in the event of an employees death; and (B) in the
Compensation Committees discretion, in the event of an employees disability, retirement or termination by the Company without cause. If such event occurs before the end of the fiscal year in which the initial grant was made, the
Committee may, in its discretion, waive all or a portion of the performance conditions and determine that the employee has earned all or a lesser portion of the performance units subject to the award. In the case of any termination other than upon
death, disability or retirement or termination by the Company without cause, any unvested performance units will be forfeited.
39
AEP Industries Inc. 2014 Management Incentive Plan
If an employee is terminated during the plan period:
|
|
|
due to the employees voluntary termination, no bonus will be earned by the employee; |
|
|
|
due to the employees involuntary termination as a result of job elimination or reorganization, the bonus will be earned and paid, if the MIP Earnings Target is achieved, on a pro-rata basis as of the termination
date; |
|
|
|
due to the employees involuntary termination for other reason, including but not limited to termination due to unsatisfactory performance or other cause, no bonus will be earned by the employee; and
|
|
|
|
due to death, the bonus will be earned and paid, if the MIP Earnings Target is achieved, on a pro-rata basis as of the termination date. |
If any employee is disabled for more than 30 days during the plan period, then the bonus may only be earned for fiscal quarters in which the employee worked more than 60
days.
The payment of pro-rata bonuses will be made only if the applicable performance measure is satisfied for the applicable year.
Employment Agreements
The employment agreements, effective November 1,
2004 (or, for Ms. Guerrera, November 1, 2008), provided for an initial term of three years (or, for Ms. Guerrera, one year), and are extended for successive one-year periods unless either party gives sufficient notice.
The employment agreements established a base salary as of November 2004 (or, for Ms. Guerrera, November 2008), with annual increases guaranteed to be at least equal
to the percentage increase in the Consumer Price Index for all Urban Consumers for the New York-Northeastern New Jersey metropolitan area as published by the Bureau of Labor & Statistics for the twelve-month period ended on the
September 30th immediately prior to the applicable fiscal year. The Compensation Committee may increase base salaries further at its discretion.
The named executive officers are also entitled to an annual bonus pursuant to the MIP. Grants of share-based compensation awards are determined by the Board or
Compensation Committee, in their sole discretion. The named executive officers are entitled to coverage under all employee pension and compensation programs, plans and practices that are available generally to the Companys senior executives.
Termination Due to Death or Disability, By Company For Cause or By Executive Without Good Reason. If the named executive officers employment
is terminated by reason of death or disability, by the Company for cause or by the executive without good reason, the executive will receive:
|
|
|
earned but unpaid base salary through the termination date (payable in accordance with ordinary payroll practices); |
|
|
|
earned but unpaid bonus for the prior fiscal year (payable at the same time payment is made to participants employed through the end of the fiscal year); |
|
|
|
if other than for cause, a pro-rata portion of the bonus for the current fiscal year (payable at the same time payment is made to participants employed through the end of the fiscal year); |
|
|
|
if due to death or disability, payment for any accrued and unused vacation; and |
|
|
|
the continuation of benefits through the termination date, or in cases of death or disability, in accordance with the terms of the Companys plans and policies. |
40
The named executive officers employment will terminate immediately upon death. If the named executive officer has a
disability during the employment period, the Company may terminate such employee by giving at least 30 days written notice of such termination. Disability is defined as:
|
|
|
if the person has elected coverage under the Companys long-term disability plan, the persons inability to perform the duties and obligations required by the job by reason of any medically determined physical
or mental impairment, as determined in accordance with the provisions of the long-term disability coverage of the Companys plan; or |
|
|
|
if the person has not elected coverage under the Companys long-term disability plan, any medically determined physical or mental impairment by the Compensation Committee or the Companys insurers, and
acceptable to such executive, that prevents such person from performing the duties and obligations required by such persons job for more than 90 days during any 180-day consecutive period. |
Cause is defined as:
|
|
|
the commission of a crime of moral turpitude or a felony involving financial misconduct, moral turpitude or which has resulted, or reasonably may result, in adverse publicity regarding such executive or the Company or
economic injury to the Company; |
|
|
|
a dishonest or willful act or omission that has resulted, or reasonably may result, in adverse publicity regarding such executive or the Company or demonstrable and serious economic injury to the Company; or
|
|
|
|
a material breach of the employment agreement or any other agreement between such executive and the Company or any of its subsidiaries or affiliates (other than as a result of a disability or other factors outside such
persons control), after notice and a reasonable opportunity to cure, if cure is possible. |
Good reason is defined as:
|
|
|
any material breach by the Company of the employment agreement; |
|
|
|
a significant diminution in the responsibilities or authority of such person which are materially inconsistent with such persons position, except for an insubstantial and inadvertent diminution that is remedied
promptly after notice or if such person is terminated for cause or disability; or |
|
|
|
a significant diminution in base salary and bonus, except for general compensation reductions not limited to any particular person. |
Further, the executive must notify the Company of the event qualifying for a good reason termination, and the Company must have failed to cure such event
within 15 days, in the case of a material breach of the employment agreement, or within 30 days for any other reason.
Termination By Company Subsequent to Change
in Control or Other than for Cause, Death or Disability or by Executive with Good Reason. If the named executive officers employment is terminated within 30 days of a change in control or other than for cause, death or
disability, or by the executive for good reason, the executive will receive:
|
|
|
severance payments equal to two times such executives (A) annual base salary in effect immediately prior to the event giving rise to the termination (payable in equal pro-rata installments over two years in
accordance with ordinary payroll practices, but no less frequently than semi-monthly) and (B) the bonus earned for the fiscal year immediately preceding the fiscal year in which the termination event occurs (payable at the same time payment is
made to participants employed through the end of the fiscal year); |
|
|
|
a pro-rata portion of the bonus for the current fiscal year (payable at the same time payment is made to participants employed through the end of the fiscal year); |
41
|
|
|
payment for any accrued and unused vacation; and |
|
|
|
continued participation in Companys medical and dental plans at normal contribution rates, ending on the earlier of (A) the last day of the severance period or (B) until the Company ceases to be
obligated to make such payments under COBRA. |
A change in control (referred to as a discontinuation event) occurs upon any one
of the following:
|
|
|
any person or group becomes the beneficial owner of 50% or more of the voting power of the Company, except for those persons in control as of November 1, 2004 (or, for Ms. Guerrera, November 1,
2008), any person acting on behalf of the Company in a public equity distribution or a trustee or other fiduciary under an employee benefit plan of the Company; |
|
|
|
as a result of, or in connection with, any tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing, the persons who were directors of the
Company prior to the transaction cease to be a majority of the Board of the Company or any successor to the Company or its assets; or |
|
|
|
at any time (A) the Company consolidates with or merges with any other person and the Company is not the continuing or surviving corporation, (B) any person consolidates with or merges with the Company, the
Company is the continuing or surviving corporation, and in connection therewith, all or part of the outstanding stock of the Company is changed into or exchanged for stock or other securities of any other person or cash, (C) the Company is
party to a statutory share exchange with any other person after which the Company is a subsidiary of any other person, or (D) the Company sells or otherwise transfers 50% or more of the assets or earning power of the Company and its
subsidiaries, taken as a whole, to any person. |
Confidentiality, Non-Solicit and Non-Compete. The employment agreements also contain customary
confidentiality terms, as well as non-solicitation and non-competition provisions effective until the later of (A) the second anniversary of the termination date or (B) the first anniversary of the date the executive ceases to receive any
payments from the Company related to salary, bonus or severance. If the executive violates any of the foregoing, the Companys payment obligations under the employment agreement cease.
Change in Control/Severance Payment Table
The following table estimates the
potential payments and benefits to the named executive officers upon termination of employment or a change in control, assuming such event occurred on October 31, 2014. These estimates do not reflect the actual amounts that will be paid to such
persons upon such events in the future, if any, the amounts of which would only be known at the time the persons become eligible for payment and would be payable only if the specified event occurs.
The table assumes that none of the fiscal 2014 performance units are earned, and that the Compensation Committee exercises its discretion to accelerate all other
unvested share-based awards earned as of October 31, 2014 for any termination of employment and upon a change in control (with termination), except in respect of terminations for cause, resignation without good reason or a change in control
(without termination). The table reflects the intrinsic value of such acceleration or vested securities, which for each performance unit is $45.99, the closing price of the Companys common stock on Nasdaq on October 31, 2014. Further, the
table assumes the MIP bonus was not earned for fiscal 2014.
The following items are not reflected in the table set forth below:
|
|
|
earned and unpaid salary and accrued and unused vacation through October 31, 2014, all of which is de minimis; |
|
|
|
costs of COBRA or any other mandated governmental assistance program to former employees, which is de minimis; and |
|
|
|
amounts outstanding under the Companys 401(k) Savings Plan. |
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer |
|
Cash Severance ($) |
|
|
Acceleration of Share- Based Awards ($) |
|
|
Life Insurance Proceeds ($)(1) |
|
|
Miscellaneous Health Benefits ($)(2) |
|
|
Total ($) |
|
J. Brendan Barba |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
|
|
|
|
|
2,891,391 |
|
|
|
|
|
|
|
|
|
|
|
2,891,391 |
|
Death |
|
|
|
|
|
|
2,891,391 |
|
|
|
958,700 |
|
|
|
|
|
|
|
3,850,091 |
|
Disability |
|
|
|
|
|
|
2,891,391 |
|
|
|
|
|
|
|
|
|
|
|
2,891,391 |
|
By Company (for cause) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Executive (without good reason) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Company (without cause) |
|
|
2,891,436 |
|
|
|
2,891,391 |
|
|
|
|
|
|
|
9,067 |
|
|
|
5,791,894 |
|
By Executive (for good reason) |
|
|
2,891,436 |
|
|
|
2,891,391 |
|
|
|
|
|
|
|
9,067 |
|
|
|
5,791,894 |
|
Change in Control (without termination of employment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control (with termination of employment) |
|
|
2,891,436 |
|
|
|
2,891,391 |
|
|
|
|
|
|
|
9,067 |
|
|
|
5,791,894 |
|
|
|
|
|
|
|
Paul M. Feeney |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
|
|
|
|
|
460,682 |
|
|
|
|
|
|
|
|
|
|
|
460,682 |
|
Death |
|
|
|
|
|
|
460,682 |
|
|
|
463,800 |
|
|
|
|
|
|
|
924,482 |
|
Disability |
|
|
|
|
|
|
460,682 |
|
|
|
|
|
|
|
|
|
|
|
460,682 |
|
By Company (for cause) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Executive (without good reason) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Company (without cause) |
|
|
1,310,464 |
|
|
|
460,682 |
|
|
|
|
|
|
|
9,067 |
|
|
|
1,780,213 |
|
By Executive (for good reason) |
|
|
1,310,464 |
|
|
|
460,682 |
|
|
|
|
|
|
|
9,067 |
|
|
|
1,780,213 |
|
Change in Control (without termination of employment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control (with termination of employment) |
|
|
1,310,464 |
|
|
|
460,682 |
|
|
|
|
|
|
|
9,067 |
|
|
|
1,780,213 |
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer |
|
Cash Severance ($) |
|
|
Acceleration of Share- Based Awards ($) |
|
|
Life Insurance Proceeds ($)(1) |
|
|
Miscellaneous Health Benefits ($)(2) |
|
|
Total ($) |
|
John J. Powers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Death |
|
|
|
|
|
|
394,088 |
|
|
|
349,300 |
|
|
|
|
|
|
|
743,388 |
|
Disability |
|
|
|
|
|
|
394,088 |
|
|
|
|
|
|
|
|
|
|
|
394,088 |
|
By Company (for cause) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Executive (without good reason) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Company (without cause) |
|
|
920,382 |
|
|
|
394,088 |
|
|
|
|
|
|
|
9,067 |
|
|
|
1,323,537 |
|
By Executive (for good reason) |
|
|
920,382 |
|
|
|
394,088 |
|
|
|
|
|
|
|
9,067 |
|
|
|
1,323,537 |
|
Change in Control (without termination of employment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control (with termination of employment) |
|
|
920,382 |
|
|
|
394,088 |
|
|
|
|
|
|
|
9,067 |
|
|
|
1,323,537 |
|
|
|
|
|
|
|
Paul C. Vegliante |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Death |
|
|
|
|
|
|
71,974 |
|
|
|
317,300 |
|
|
|
|
|
|
|
389,274 |
|
Disability |
|
|
|
|
|
|
71,974 |
|
|
|
|
|
|
|
|
|
|
|
71,974 |
|
By Company (for cause) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Executive (without good reason) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Company (without cause) |
|
|
836,108 |
|
|
|
71,974 |
|
|
|
|
|
|
|
9,067 |
|
|
|
917,149 |
|
By Executive (for good reason) |
|
|
836,108 |
|
|
|
71,974 |
|
|
|
|
|
|
|
9,067 |
|
|
|
917,149 |
|
Change in Control (without termination of employment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control (with termination of employment) |
|
|
836,108 |
|
|
|
71,974 |
|
|
|
|
|
|
|
9,067 |
|
|
|
917,149 |
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer |
|
Cash Severance ($) |
|
|
Acceleration of Share- Based Awards ($) |
|
|
Life Insurance Proceeds ($)(1) |
|
|
Miscellaneous Health Benefits ($)(2) |
|
|
Total ($) |
|
Linda N. Guerrera |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Death |
|
|
|
|
|
|
96,579 |
|
|
|
229,500 |
|
|
|
|
|
|
|
326,079 |
|
Disability |
|
|
|
|
|
|
96,579 |
|
|
|
|
|
|
|
|
|
|
|
96,579 |
|
By Company (for cause) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Executive (without good reason). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Company (without cause) |
|
|
531,860 |
|
|
|
96,579 |
|
|
|
|
|
|
|
9,067 |
|
|
|
637,506 |
|
By Executive (for good reason) |
|
|
531,860 |
|
|
|
96,579 |
|
|
|
|
|
|
|
9,067 |
|
|
|
637,506 |
|
Change in Control (without termination of employment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Control (with termination of employment) |
|
|
531,860 |
|
|
|
96,579 |
|
|
|
|
|
|
|
9,067 |
|
|
|
637,506 |
|
(1) |
Employees receive term life insurance in the amount of their base salary up to a maximum of $1 million. This column excludes any supplemental benefits with premiums paid solely by the employee. |
(2) |
The Company pays the health benefit claims of its covered employees up to a stop loss gap and also pays a monthly administrative fee. The amounts in this column represent (A) an estimated dollar amount paid by the
Company per covered employee based on the Companys recent historical average of claims paid and (B) the administrative fee. |
45
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Family Relationships between Directors and Executive Officers
Messrs. Powers and Vegliante are sons-in-law of
Mr. Barba. Additionally, Ms. Guerrera is the daughter-in-law of Mr. Feeney.
As of February 17, 2015, Mr. Barba and members of his immediate
family owned or controlled the right to vote 1,025,154 shares of our common stock, in aggregate, representing 20.2% of our outstanding shares as of such date. We believe Mr. Barba and members of his immediate family will vote
their shares of our common stock in accordance with managements recommendations. Mr. Barba and members of his immediate family disclaim group status under Section 13(d) of the Exchange Act.
Related Person Transactions
Under SEC rules, a related person transaction is any
transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000 and a related person has a direct or indirect material interest. A related person is a director, officer,
nominee for director or a more than 5% stockholder since the beginning of the Companys last completed fiscal year, and their immediate family members.
The
Audit Committee is responsible for review and approval or ratification of related person transactions involving the Company or its subsidiaries to ensure there are no conflicts of interest. The Companys Code of Conduct sets forth the
Companys written policy on procedures for reviewing and approving or ratifying potential conflicts of interests, which include related person transactions. The Code of Conduct requires officers and directors to provide full disclosure of any
potential conflicts of interest to the Audit Committee, while other Company employees must provide such information to the Companys compliance officer. Persons are encouraged to speak with the Companys compliance officer (or, if an
officer or director, to members of the Audit Committee) if there is any doubt as to whether a transaction could comprise a conflict of interest. Further, each of the Companys officers and directors is required to complete an annual
questionnaire in connection with the proxy statement for the annual meeting of stockholders, which includes questions regarding potential and ongoing related person transactions.
If a related person transaction is proposed and it involves an officer or director, the Audit Committee reviews such transaction to ensure that the Companys
involvement in such transaction is on terms comparable to those that could be obtained in arms length dealings with an unrelated third party and is in the best interests of the Company and its stockholders. The Committee affirmatively
determined that none of the related person transactions below constituted a conflict of interest.
Mr. Feeneys son-in-law, and the brother-in-law of
Ms. Guerrera, is a principal of the publisher of our annual report to stockholders and certain advertising material. Competitive bids for annual report services were solicited by an independent business consultant in June 2004 and have not
increased since such time. We paid $56,610 to such vendor for services in fiscal 2014, and we paid $37,500 to such vendor for services in fiscal 2015 through February 17, 2015.
The brother of Ms. Guerrera is a partner of Skadden, Arps, Slate, Meagher & Flom LLP, an entity that provides legal services to us. We paid $71,619 for
legal services in fiscal 2014 and we paid $0 for legal services in fiscal 2015 through February 17, 2015.
In September 2008, Mr. Powers
brother became the principal of a distributor who purchases product from us. Prior to such date, he was a sales representative in the FIAP Films Division of the Company from May 2002 to September 2008. We sold $650,591 of product to such distributor
in fiscal 2014, and we sold $185,515 of product to such distributor in fiscal 2015 through February 17, 2015.
46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of our common stock as of
February 17, 2015 by (A) each of the directors and named executive officers, (B) all of the directors and executive officers as a group, and (C) to our knowledge, beneficial owners of more than 5% of our common stock. As of
February 17, 2015, there were 5,083,095 shares of our common stock outstanding. Unless otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment powers with respect to the securities listed
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner |
|
Shares Owned (1) |
|
|
Right to Acquire (2) |
|
|
Total |
|
|
Aggregate Percent of Class |
|
J. Brendan Barba(3) |
|
|
535,105 |
|
|
|
|
|
|
|
535,105 |
|
|
|
10.5 |
|
Robert T. Bell |
|
|
4,798 |
|
|
|
10,800 |
|
|
|
15,598 |
|
|
|
* |
|
Ira M. Belsky |
|
|
5,298 |
|
|
|
1,200 |
|
|
|
6,498 |
|
|
|
* |
|
Richard E. Davis |
|
|
3,298 |
|
|
|
12,800 |
|
|
|
16,098 |
|
|
|
* |
|
Paul M. Feeney |
|
|
55,249 |
|
|
|
|
|
|
|
55,249 |
|
|
|
1.1 |
|
Frank P. Gallagher |
|
|
5,298 |
|
|
|
12,800 |
|
|
|
18,098 |
|
|
|
* |
|
Linda N. Guerrera |
|
|
5,043 |
|
|
|
|
|
|
|
5,043 |
|
|
|
* |
|
John J. Powers(4) |
|
|
264,866 |
|
|
|
|
|
|
|
264,866 |
|
|
|
5.2 |
|
Lee C. Stewart |
|
|
5,448 |
|
|
|
12,800 |
|
|
|
18,248 |
|
|
|
* |
|
Paul C. Vegliante(5) |
|
|
329,308 |
|
|
|
|
|
|
|
329,308 |
|
|
|
6.5 |
|
Executive officers and directors as a group (12 persons) |
|
|
1,119,971 |
|
|
|
50,400 |
|
|
|
1,170,371 |
|
|
|
22.8 |
|
KSA Capital Management, LLC, et al.(6)
67 East Park Place, 8th Floor, Suite 800
Morristown, NJ 079604 |
|
|
865,584 |
|
|
|
|
|
|
|
865,584 |
|
|
|
17.0 |
|
Renaissance Technologies LLC, et al.(7)
800 Third Avenue
New York, NY 10022 |
|
|
288,443 |
|
|
|
|
|
|
|
288,443 |
|
|
|
5.7 |
|
Thomson Horstmann & Bryant, Inc.(8)
501 Merritt 7
Norwalk, CT 06851 |
|
|
284,436 |
|
|
|
|
|
|
|
284,436 |
|
|
|
5.6 |
|
First Eagle Investment Management, LLC(9)
1345 Avenue of the Americas
New York, NY 10105 |
|
|
281,314 |
|
|
|
|
|
|
|
281,314 |
|
|
|
5.5 |
|
(1) |
These amounts include the following number of shares credited under our 401(k) Savings Plan as of February 17, 2015: Mr. Barba, 0 shares; Mr. Feeney, 0 shares; Ms. Guerrera, 2,460 shares;
Mr. Powers, 4,390 shares; and Mr. Vegliante, 4,467 shares (including 307 shares held by spouse). Executive officers and directors as a group includes 15,295 shares credited under such plan. |
(2) |
These amounts reflect the number of shares that such holder could acquire through the exercise of stock options within 60 days of February 17, 2015. Excludes shares of restricted stock to be granted on
April 14, 2015 under the fiscal 2014 non-employee director compensation program. |
(3) |
Includes 51,500 shares in each of the 2012 Carolyn Vegliante Childrens Trust and the 2012 Paul Vegliante Childrens Trust of which Mr. Barba is a trustee. |
(4) |
Includes 148,727 shares held by Mr. Powers spouse and 90,500 shares held in four trusts established in 2012 by Mrs. Powers for her children of which Mr. Powers is a trustee. |
47
(5) |
Includes 216,727 shares held by Mr. Vegliantes spouse, 51,500 shares in the 2012 Carolyn Vegliante Childrens Trust of which Mr. Vegliante is a trustee, 51,500 shares in the 2012 Paul Vegliante
Childrens Trust and 1,125 shares held by Mr. Vegliantes spouse as UGMA custodian for her children. |
(6) |
Based on Schedule 13D/A (Amendment No. 7) filed with the SEC on January 21, 2015 by KSA Capital Management, LLC (or KSA) and Daniel Khoshaba, the managing member of KSA. In the Schedule 13D/A, all
persons report shared voting and dispositive power over all of such shares. |
(7) |
Based on Schedule 13G/A filed with the SEC on February 12, 2015 by Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation. Each of such persons has sole power to vote 273,900 shares and sole
power to dispose 288,443 shares. |
(8) |
Based on Schedule 13G filed with the SEC on January 21, 2015 by Thomson Horstmann & Bryant, Inc. Such person reports shared power to vote 142,876 shares and sole power to dispose 284,436 shares.
|
(9) |
Based on Schedule 13G filed with the SEC on January 29, 2015 by First Eagle Investment Management, LLC. |
48
AUDIT COMMITTEE REPORT
The Board has determined that each of the members of the Audit Committee is independent under applicable rules and regulations of Nasdaq and the SEC. The Committee
operates under a written charter approved by the Board, which is reviewed annually by the Committee and the Board, and is posted on the Investor Relations section of the Companys website at www.aepinc.com.
As described more fully in its charter, the purpose of the Audit Committee is to assist the Board in its general oversight of the Companys financial reporting and
internal control functions, to review our reports filed with or furnished to the SEC that include financial statements or results, to monitor compliance with significant legal and regulatory requirements and other risks related to financial
reporting and internal control, and the Committee is directly responsible for the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm, currently KPMG, and our third-party consultant
that handles certain internal audit functions. See Audit Committee Matters below for a description of the Committees pre-approval policies regarding KPMG services. The Committee further has the authority to engage independent
advisors as it determines appropriate, apart from counsel or advisors hired by management. Management has the primary responsibility for the preparation, presentation and integrity of the Companys financial statements, accounting and financial
reporting principles, internal controls and compliance with applicable laws and regulations. KPMG is responsible for performing an independent audit of the Companys consolidated financial statements and the effectiveness of the Companys
internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (U.S.) (PCAOB) and for expressing their opinions thereon.
During fiscal 2014, among other matters, the Audit Committee:
|
|
|
Reviewed and discussed with management and KPMG the unaudited quarterly financial statements included in Form 10-Qs filed with the SEC. |
|
|
|
Reviewed and discussed with KPMG the overall scope and plans for its audit for fiscal 2014. |
|
|
|
Reviewed and discussed with management and KPMG the audited consolidated financial statements, and KPMGs opinion thereon, included in the Form 10-K for fiscal 2014 filed with the SEC and the fiscal 2014 annual
report delivered to stockholders. |
|
|
|
Reviewed and discussed with management its assessment and report, and reviewed and discussed with KPMG its opinion, on the effectiveness of the Companys internal control over financial reporting as of
October 31, 2014. |
|
|
|
Discussed with KPMG the matters required to be discussed by the Statement on Auditing Standard No. 16, as amended (Communications With Audit Committees). |
|
|
|
Received the written disclosures and the letter from KPMG required by the applicable requirements of the PCAOB regarding KPMGs communications with the Committee concerning independence, and discussed with KPMG its
independence with respect to the Company, including any relationships which may impact its objectivity and independence and whether the provision of specified non-audit services is compatible with the auditors independence under current
guidelines. |
Based on the foregoing, the Audit Committee recommended to the Board that the audited consolidated financial statements of the Company be
included in the Companys annual report on Form 10-K for fiscal 2014, which was filed with the SEC on January 14, 2015.
|
Submitted by the Audit Committee: |
|
Robert T. Bell, Chairman |
Ira M. Belsky |
Richard E. Davis |
Lee C. Stewart |
49
AUDIT COMMITTEE MATTERS
Pre-Approval Policies and Procedures
In accordance with Audit Committee policy and applicable
law, the Committee must pre-approve all services to be provided by KPMG, including audit services, audit-related services, tax services and other services. In determining whether to pre-approve such services, the Committee must consider whether the
provision of such services is consistent with the independence of KPMG. Generally, the full Committee provides pre-approval for up to a year related to a particular defined task or scope of work and subject to a specific budget. In other cases, the
chair of the Committee may pre-approve such services between Committee meetings pursuant to delegated authority from the Committee; the chair then communicates such pre-approvals to the full Committee at the next regularly scheduled meeting.
KPMG Fees
The following table sets forth the fees we were billed for audit and other services provided by KPMG in fiscal 2014 and 2013. All of such services described below were
approved in conformity with the Audit Committees pre-approval policies and procedures described above.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2014 ($) |
|
|
Fiscal 2013 ($) |
|
Audit Fees(1) |
|
|
1,264,755 |
|
|
|
1,302,207 |
|
Audit-Related Fees(2) |
|
|
52,656 |
|
|
|
40,250 |
|
Tax Fees(3) |
|
|
22,750 |
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
Total Fees |
|
|
1,340,161 |
|
|
|
1,348,457 |
|
(1) |
Audit fees in fiscal 2014 and 2013 consisted of fees related to the annual audit of our financial statements, the audit of the effectiveness of internal control over financial reporting and the review of quarterly
financial statements. Audit fees in fiscal 2013 also consisted of fees related to the review of our SEC filings associated with the 2013 Omnibus Incentive Plan and SEC comment letter. |
(2) |
Audit-related fees in fiscal 2014 and 2013 consisted of fees for limited scope audits of our 401(K) Savings Plan and the pension plan for AEP Canada Inc. |
(3) |
Tax fees in fiscal 2014 and 2013 consisted of fees for tax consultation and tax compliance services. |
50
PROPOSAL NO . 2RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2015
In accordance with applicable law, the Audit Committee has ultimate authority and responsibility to
appoint, compensate, evaluate and, when appropriate, replace our independent registered public accounting firm. In January 2015, the Committee reappointed KPMG to be our independent registered public accounting firm for fiscal 2015. See Audit
Committee Report and Audit Committee Matters for additional information on KPMGs services provided to us in fiscal 2014.
As the Audit
Committee has responsibility for the appointment of our independent registered public accounting firm, your ratification of the appointment of KPMG is not necessary. However, the Committee will take your vote on this proposal into consideration when
appointing our independent registered public accounting firm in the future. Even if the stockholders ratify the appointment of KPMG, the Committee may in its sole discretion terminate the engagement of KPMG and direct the appointment of another
independent auditor at any time during the year, although it has no current intent to do so.
Representatives of KPMG will attend the meeting, will have the
opportunity to make a statement, if they desire to do so, and will be available to answer appropriate questions from our stockholders.
The Board recommends that you vote FOR the ratification of the Audit Committees appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015.
51
PROPOSAL NO . 3ADVISORY VOTE ON NAMED EXECUTIVE OFFICER
COMPENSATION
Our Board proposes that stockholders provide advisory (non-binding) approval of the compensation of our named executive officers, as
disclosed in this proxy statement in accordance with the SECs rules (commonly known as a say-on-pay proposal). We recognize the interest our stockholders have in the compensation of our executives and we are providing this advisory
proposal in recognition of that interest and as required by Section 14 of the Exchange Act.
In a non-binding advisory vote on the frequency of the say-on-pay
proposal held at our 2011 annual meeting of stockholders, stockholders voted in favor of holding say-on-pay votes annually. In light of this result and other factors considered by the Board, the Board determined that the Company would hold advisory
say-on-pay votes on an annual basis until the next required advisory vote on such frequency. The next advisory say-on-pay vote will occur at our 2016 annual meeting of stockholders.
As described in detail under the heading Compensation Discussion and Analysis, our named executive officer compensation program is designed to attract,
motivate, and retain our named executive officers who are critical to our success, and to ensure alignment of such persons with stockholders. Under this program, our named executive officers are rewarded for their service to the Company, the
achievement of specific performance goals and the realization of increased stockholder value. We believe our executive officer compensation program also is structured appropriately to support our Company and business objectives, as well as to
support our culture. The Compensation Committee regularly reviews the compensation program for our named executive officers to ensure the fulfillment of our compensation philosophy and goals.
Please read the Compensation Discussion and Analysis, beginning on page 19, and the Named Executive Officer Compensation Tables, beginning on
page 36, for additional details about our named executive officer compensation program, including information about the target and earned compensation of our named executive officers in fiscal 2014.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This vote is not intended to
address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we will ask our stockholders to vote
FOR the following resolution at the 2015 annual meeting:
RESOLVED, that the Companys stockholders approve, on an advisory
basis, the compensation of the named executive officers, as disclosed in the Companys Proxy Statement for the 2015 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.
The say-on-pay vote is
advisory, and therefore not binding on the Company, the Compensation Committee or our Board. We value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in
this proxy statement, we will consider our stockholders concerns and the Committee will evaluate whether any actions are necessary to address those concerns.
The Board recommends a vote FOR the approval of the compensation of our named executive
officers, as disclosed in this proxy statement pursuant to the rules of the SEC.
52
ADDITIONAL INFORMATION
Equity Compensation Plans
The following table sets forth certain information as of
October 31, 2014 concerning our equity compensation plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan category |
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
|
|
Weighted-average exercise price of outstanding options, warrants and rights (b) |
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding
securities reflected in column (a)) (c) |
|
Equity compensation plans approved by security holders |
|
|
209,322 |
(1) |
|
$ |
29.62 |
(2) |
|
|
362,727 |
(3) |
Equity compensation plans not approved by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
209,322 |
|
|
$ |
29.62 |
|
|
|
362,727 |
|
(1) |
Consists of (A) 72,446 outstanding options for our common stock under the 2005 Stock Option Plan, (B) 129,311 outstanding performance units under the 2005 Stock Option Plan and (C) 7,575 outstanding
shares of restricted stock under the 2013 Omnibus Incentive Plan. Upon vesting of each performance unit, employees have the option to receive one share of the Companys common stock or the equivalent cash value or a combination of both. This
column assumes the forfeiture of performance units granted for the fiscal 2014 performance period and the election by all employees to receive common stock upon the vesting of earned performance units. However, in January 2015, many employees
elected to receive cash in lieu of common stock upon the vesting of performance units on such date and therefore the number of performance units included in the table overstates the expected dilution by 43,110 shares of common stock.
|
(2) |
Excludes performance units and restricted stock, which have no exercise price. |
(3) |
Consists of shares of common stock that may be issued pursuant to stock options, restricted stock, performance units and other equity awards under the 2013 Omnibus Incentive Plan. No additional awards may be issued
under the 2005 Stock Option Plan. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our
directors, our executive officers and persons who beneficially own more than 10% of a registered class of our equity securities (insiders) to file reports with the SEC regarding their pecuniary interest in our equity securities and any
changes thereto, and to furnish copies of these reports to us. Based on our review of the insiders forms furnished to us or filed with the SEC and representations made by the directors and applicable executive officers, no insider failed to
file on a timely basis a Section 16(a) report in fiscal 2014, except that (A) Crown Cork & Seal Company, Inc. Pension Plan filed one late Form 3 (reporting beneficial ownership of more than 10% of the Companys common stock)
and three late Form 4s (reporting a total of 45 purchase transactions and 38 sale transactions), and (B) KSA Capital Management, LLC filed one late Form 3 (reporting beneficial ownership of more than 10% of the Companys common stock) and
six late Form 4s (reporting a total of 116 purchase transactions and 38 sale transactions).
53
Availability of Fiscal 2014 Annual Report to Stockholders
SEC rules require us to provide a copy of our fiscal 2014
annual report to stockholders who receive this proxy statement. Our fiscal 2014 annual report to stockholders includes our annual report on Form 10-K for fiscal 2014 (including certain exhibits). We will also provide copies of our fiscal 2014 annual
report to stockholders, and to brokers, dealers, banks, voting trustees and their nominees for the benefit of beneficial owners. Additional copies of the fiscal 2014 annual report to stockholders (excluding certain exhibits or documents incorporated
by reference in our annual report on Form 10-K for fiscal 2014) are available to stockholders at no charge upon written request to: Investor Relations, AEP Industries Inc., 95 Chestnut Ridge Road, Montvale, NJ 07645 or on the Investor Relations
section of our website at www.aepinc.com.
Requirements for Submission of Stockholder Proposals and Nominations for 2016 Annual Meeting
Under the rules of the SEC, if a stockholder wants us to
include a proposal in our proxy statement and form of proxy for presentation at our 2016 annual meeting of stockholders (pursuant to Rule 14a-8 of the Exchange Act), the proposal must be received by us at our principal executive offices (Corporate
Secretary, AEP Industries Inc., 95 Chestnut Ridge Road, Montvale, NJ 07645) by the close of business on October 29, 2015. As the rules of the SEC make clear, simply submitting a proposal does not guarantee that it will be included.
Any stockholder director nomination or proposal of other business intended to be presented for consideration at the 2016 annual meeting, but not intended to be
considered for inclusion in our proxy statement and form of proxy relating to such meeting (i.e. not pursuant to Rule 14a-8 of the Exchange Act), must be received by us at the address stated above not less than 90 days and not more than 120 days
before the first anniversary of the date of the 2015 annual meeting. Therefore, such notice must be received between December 16, 2015 and the close of business on January 15, 2016 to be considered timely. However, if our 2016 annual
meeting occurs more than 30 days before or 60 days after April 14, 2016, we must receive nominations or proposals (A) not later than the close of business on the later of the 90th day
prior to the date of the 2016 annual meeting or the 10th day following the day on which public announcement is made of the date of the 2016 annual meeting, and (B) not earlier than the 120th day prior to the 2016 annual meeting.
The above-mentioned proposals must also be in compliance with our By-Laws
and the proxy solicitation rules of the SEC and Nasdaq, including but not limited to the information requirements set forth in our By-Laws. 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 the foregoing and other applicable requirements.
Solicitation by Board; Expenses
We will pay the cost of preparing, assembling, and
mailing the proxy materials. We have requested banks, brokers and other nominees to send the proxy materials to, and to obtain proxies from, the beneficial owners and we will reimburse such record holders for their reasonable expenses in doing so.
In addition, our directors, officers and regular employees may solicit proxies by mail, telephone, facsimile or in person, but they will not receive any additional compensation for such work.
54
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on April 14, 2015
The 2015 proxy statement and fiscal 2014 annual report are
available at https://materials.proxyvote.com/001031.
Your cooperation in giving this matter your immediate attention and in voting your proxies promptly is
appreciated.
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By Order of the Board of Directors, |
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Sandra C. Major |
Vice President and Secretary |
February 25, 2015 |
55
ANNUAL MEETING OF STOCKHOLDERS OF
AEP INDUSTRIES INC.
April 14, 2015
GO
GREEN
e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material,
statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access.
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and annual report
are available at https://materials.proxyvote.com/001031
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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20330300000000000000 3 |
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041415 |
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THE BOARD OF DIRECTORS
RECOMMENDS YOU VOTE FOR PROPOSALS 1, 2 AND 3. PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x |
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FOR |
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AGAINST |
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ABSTAIN |
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1. Election of Class B Directors: |
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Ratification of the appointment of KPMG LLP as the Companys independent registered public accounting firm for fiscal 2015. |
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FOR ALL NOMINEES |
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NOMINEES:
¡
Robert T. Bell ¡ Paul M. Feeney
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Frank P. Gallagher |
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WITHHOLD AUTHORITY
FOR ALL NOMINEES |
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3. |
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Advisory approval of named executive officer compensation. |
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FOR ALL EXCEPT (See instructions below) |
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The shares represented by this Proxy will be voted as directed. If no direction is indicated as to Items 1, 2 or 3: (i) if the shares are subject to the AEP
Industries Inc. 401(k) Savings Plan, the shares will not be voted for such Item(s), and (ii) if the shares are otherwise owned, the shares will be voted as the Board recommends, as noted above. |
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INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: l |
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on
the account may not be submitted via this method. |
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Signature of Stockholder |
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Date: |
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Signature of Stockholder |
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Date: |
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Note: |
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If
signing as a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signing as a partnership, please sign in partnership name by authorized person. |
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0 ¢
AEP INDUSTRIES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS - APRIL 14, 2015
The undersigned, a stockholder of AEP INDUSTRIES INC., hereby appoints Sandra C. Major and
James B. Rafferty, and each of them, with full
power of substitution, as proxies to represent and vote all shares of common stock of the Company which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held on Tuesday, April 14, 2015, at 10:00 A.M., local time,
or any postponements or adjournments thereof.
The undersigned hereby instructs said proxies or their substitutes to vote as specified on
the reverse side of this card on each of the listed matters and, in their discretion, on any other matters which may properly come before the meeting or any postponement or adjournment thereof.
(Continued on reverse side.)
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