A stockholder can revoke a proxy at any time prior to the exercise of the authority granted under that proxy. A proxy may be revoked by a stockholder in any of the following ways:
1
by attending the Annual Meeting and voting the shares covered by the original proxy in person at the Annual Meeting;
by delivering to the Secretary an instrument revoking the proxy; or
by delivering a later-dated, properly executed proxy with respect to shares covered by the original proxy.
Actions to Be Taken by Proxy
If any stockholder fails to provide instructions on a proxy properly submitted via the Internet or mail, its proxy will be voted, as recommended by the Board of Directors, at the Annual Meeting:
“FOR” the election of each of the Board nominees named under the heading “ELECTION OF DIRECTORS – Identification Of Directors and Executive Officers”.
| ● | “FOR” the election of each of the Board nominees named under the heading “ELECTION OF DIRECTORS – Identification of Directors and Executive Officers”; |
| ● | “FOR” Management’s proposal under the heading “EXECUTIVE COMPENSATION AND OTHER INFORMATION – Proposal for Advisory Vote on Executive Compensation”; |
| ● | “FOR” Management’s proposal under the heading “PROPOSAL TO AMEND ARTICLES OF INCORPORATION”; |
| ● | “AGAINST” the stockholder proposal under the heading “STOCKHOLDER PROPOSAL ON EQUAL VOTING RIGHTS FOR EACH SHARE”; |
| ● | “AGAINST” the stockholder proposal under the heading “STOCKHOLDER PROPOSAL REGARDING CAGE FREE EGG PROGRESS DISCLOSURE”. |
As of the date of this Proxy Statement, the Company’s management knows of no other matter to be brought before the Annual Meeting. Should any other matter properly come before the Annual Meeting, all shares of Common Stock represented by effective proxies will be voted, at their discretion, by the persons acting under such proxies.
Only holders of record of shares of Class A Common Stock or Class B Common Stock at the close of business on the Record Date are entitled to vote at the meeting or adjournments or postponements of the meeting. At the close of business on the Record Date, there were 14,192,98514,296,235 shares of Class A Common Stock and 6,066,7914,698,141 shares of Class B Common Stock issued and outstanding.
Quorum Requirements. Each share of Class A Common Stock entitles its holder to one vote per share, and each share of Class B Common Stock entitles its holder to ten votes per share, in each case with respect to any matter properly submitted to a vote of such holders. The presence in person or by proxy of holders of a majority of the outstanding shares of Class A Common Stock constitutes a quorum for purposes of the election of directors by the holders of Class A Common Stock. The presence in person or by proxy of holders of a majority of the outstanding shares of Class B Common Stock constitutes a quorum for purposes of the election of directors by the holders of Class B Common Stock. IfThe presence in person or by proxy of holders of sharescommon stock possessing a majority of the aggregate votes represented by the Class A Common Stock and Class B Common Stock, taking into account the ten votes per share attributable to the Class B Common Stock, are present at the Annual Meeting in person or by proxy,taken together, constitutes a quorum will be present for purposes of anyall other mattermatters that may beproperly presented at the Annual Meeting.
Abstentions and Broker Non-Votes. Abstentions with respect to a proposal and broker non-votes are counted for purposes of establishing a quorum. A broker non-vote occurs if a broker or other financial intermediary does not receive instructions from the beneficial owner of shares held in street name for certain types of proposals, and the broker indicates it does not have authority to vote such shares. A broker is entitled to vote shares held for a beneficial owner on “routine” matters without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on “non-routine” matters. All five proposals described in this Proxy Statement constitute “non-routine” matters; therefore, if you hold your shares of Common Stock in street name, and you do not instruct your broker, bank or other nominee how to vote, then your shares will not be voted at the Annual Meeting with respect to the five proposals described in this Proxy Statement. Abstentions and broker non-votes will not be counted as votes cast for or against any proposal, and they will not have any effect on the outcome of any proposal.
2
Election of Directors. If a quorum of each class is present at the Annual Meeting, the holders of Class A Common Stock, voting as a class, will elect two directors, and the holders of Class B Common Stock, voting as a class, will elect six directors. For purposes of the election of directors, each stockholder will have one vote for each share of Common Stock held by the stockholder as of the Record Date. Pursuant to the North Carolina Business Corporation Act, directors will be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election. Thus, abstentions and broker non-votes will not be included in vote totals and will not affect the outcome of the vote.
In accordance with New York Stock Exchange rules, a broker that is a member firm of that exchange does not have authority to vote shares held by it in “street name” in the election of directors unless it is instructed by the beneficial owner of such shares as to how such shares are to be voted in such election. Accordingly, if you hold your shares through a broker, you are urged to provide it voting instructions in accordance with your broker’s directions.
Cumulative voting is not applicable to the election of directors at the Annual Meeting.
Other Matters. Unless otherwise provided in the Company’s Articles of Incorporation or the North Carolina Business Corporation Act, holders of Class A Common Stock and Class B Common Stock will vote as a single class with respect to any matter. In any such vote, stockholders will be entitled to one vote for each share of Class A Common Stock held as of the Record Date and ten votes for each share of Class B Common Stock held as of the Record Date. For purposes of any such vote, if a quorum is present, a proposal will pass if the votes cast “for” the action exceed the votes cast “against” the action, unless otherwise provided in the Company’s Articles of Incorporation or the North Carolina Business Corporation Act. Shares not voted with respect to any such matters (whether by abstention or broker non-vote) would not be included in vote totals and would not impact the vote.
As of the date of this Proxy Statement, the Company knows of no matters other than those listed on the Notice of Annual Meeting of Stockholders to be presented for action at the Annual Meeting.
Each member of the Board is elected for a term of one year and until his/her successor is elected and qualified or until his/her earlier death, resignation or removal from office. The Company’s Articles of Incorporation and Bylaws provide that the Board may from time to time fix by resolution the number of directors that constitutes the Board, which shall be not less than five nor more than eleven. The Board has determined by resolution that the number of directors will be fixed at eight for purposes of this election.election; however, because Mr. Ronald B. Freeman has notified the Company of his retirement and his determination not to stand for reelection, only seven directors will stand for election at the Annual Meeting. In accordance with the Company’s Articles of Incorporation and Bylaws, two of the eight directors will be elected by a vote of the holders of the Class A Common Stock, voting as a separate class, and the remaining sixfive directors will be elected by a vote of the holders of the Class B Common Stock, voting as a separate class.
Identification of Directors and Executive Officers
The Board has nominated, and recommends a vote FOR, Ernest E. Ferguson and John R. Lowden as directors to be elected by the holders of the Class A Common Stock and Fred D. Ayers, Ronald B. Freeman, Robert P. Ingle, II, James W. Lanning, Laura Ingle Sharp, and Brenda S. Tudor as directors to be elected by the holders of the Class B Common Stock.
Proxies received by the Board will be voted “For” the election of all of the nominees unless stockholders specify a contrary choice in their proxy. We expect each director nominee to be able to serve if elected. If any director nominee is not able to serve, proxies will be voted “for” the remainder of those nominated and may be voted for substitute nominees.
Mr. Ronald B. Freeman, a director of the Company since 2005, will not stand for re-election to the Board of Directors at the Annual Meeting. The Company thanks Mr. Freeman for his years of service.The biographical information set forth below was furnished by each named director and executive officer of the Company. Except as otherwise indicated, each such person has been engaged in his or her most recent occupation or employment for more than five years.
| DIRECTORS AND EXECUTIVE OFFICERS | | |
| Robert P. Ingle, II | | Robert P. Ingle, II has been a member of the Board of Directors since February 1997, has served as Chairman of the Board since May 2004, and served as Chief Executive Officer from March 2011 until March 2016. He has been employed by the Company in a variety of positions since 1985. Mr. Ingle is 51.
53. |
| | |
| James W. Lanning | | Mr. Lanning has served as a director of the Company since May 2003 and was appointed Chief Executive Officer in March 2016. He has served as President since March 2003. He has been employed by the Company in a variety of positions since 1975. Mr. Lanning is 60.
62. |
Ronald B. Freeman | | Mr. Freeman has served as a director of the Company since May 2005 and has served as Chief Financial Officer of the Company since 2005. Mr. Freeman is 62.
|
| Fred D. Ayers | | Mr. Ayers has served as a director of the Company since February 2006. Mr. Ayers retired in 2002 as a senior officer of Wachovia Bank. He has served on numerous boards and remains active in the Asheville community. Mr. Ayers is 77.79. |
Ronald B. Freeman
| | Mr. Freeman has notified the Company of his retirement, and his term as Director will cease at the conclusion of the Annual Meeting, and his role as Chief Financial Officer will cease on February 16, 2022.
|
| | | |
| Ernest E. Ferguson | | Mr. Ferguson has served as a director of the Company since December 2014. Mr. Ferguson retired in 2007 as a senior vice president and commercial sales director of Wachovia Bank (now Wells Fargo). He has continued to serve on numerous boards and remains active in the Asheville community. Mr. Ferguson is 72.
74. |
| | |
| John R. Lowden | | Mr. Lowden has served as a director of the Company since April 2018. Mr. Lowden is President and Chief Investment Officer of NewCastle Partners, LLC, a private investment firm founded in 2001. Mr. Lowden is 62.
64. |
| | |
| Laura Ingle Sharp | | Ms. Sharp has been a director of the Company since February 1997. She has in the past served the Company in several capacities on a full-time and part-time basis. The Company’s “Laura Lynn” private label products are named after Ms. Sharp. Ms. Sharp is 62.
64. |
| | |
Brenda S. Tudor | | Ms. Tudor has served as a director of the Company since December 2014. Ms. Tudor is a certified public accountant. She retired May 31, 2019 as President and Chief Financial Officer of Morgan-Keefe Builders, Inc. Ms. Tudor is 62.64. |
| | |
Messrs. Ingle and Lanning, Freeman, and Ms. Sharp have been employeesassociates and/or directors of the Company, or its subsidiaries, for many years and, as such, are uniquely qualified to serve on the Company’s Board of Directors. Messrs. Ayers, Lowden, and Ferguson, and Ms. Tudor provide unique and diverse qualities to our Board of Directors as a result of their backgrounds as senior banking officers, chief investment officer, and corporate executive officer, respectively.
The Company does not have a policy with regard to the considerationBoard currently consists of diversity in identifying director nominees.
six white males and two white females.Robert P. Ingle, II and Laura Ingle Sharp are brother and sister. There are no other family relationships among any of the directors or executive officers of the Company. Based upon the voting power of Mr. Robert P. Ingle, II in the election of directors, the Company meets the definition of a “Controlled Company” for purposes of the Nasdaq corporate governance rules and thus is exempt from certain of its corporate governance requirements, including the requirement that a majority of the board members be “Independent Directors.”
Director Independence and Committees of the Board of Directors
The Board reviews director independence annually based on the rules of the Nasdaq Stock Market. On such basis, the Board has affirmatively determined that Messrs. Ayers, Ferguson and Lowden and Ms. Tudor are independent.
The Board had two standing committees during fiscal 2019:2021: an Executive Committee, and an Audit/Compensation Committee. The Company did not have a separate nominating committee during fiscal 2019.2021. As a Controlled Company under the Nasdaq corporate governance rules, the continued listing requirements of Nasdaq do not require that the Company have a nominating committee.
The Executive Committee. The Executive Committee can exercise the powers of the full Board between meetings of the Board, except for powers that may not be delegated to a committee of the Board under the North Carolina Business Corporation Act. During fiscal 2019,2021, the Executive Committee consisted of Messrs. Robert P. Ingle, II, Ronald B. Freeman and James W. Lanning.
The Audit/Compensation Committee. The Board has established, through the Company’s Bylaws, an Audit/Compensation Committee. When acting in its capacity as Audit Committee, this committee acts under the authority of and has the responsibilities described in the Company’s Audit Committee Charter. The Audit Committee Charter is available on the Company’s website at www.ingles-markets.com (information contained on or accessible through our website is not part of this Proxy Statement). In this capacity, the committee is responsible for, among other things, recommending the engagement of the Company’s independent registered public accounting firm, approving the fees and services to be provided by the independent registered public accounting firm, overseeing the independent registered public accounting firm, reviewing and evaluating significant matters relating to the audit and internal controls of the Company, reviewing the scope and results of audits by, and recommendations of, the Company’s independent registered public accounting firm and establishing and administering the Company’s Related Party Transaction policy. In addition, the committee reviews the audited consolidated financial statements of the Company.
The Committee does not have a separate Compensation Committee charter. When the committeeCommittee is acting in its capacity as the Compensation Committee, the Board has empowered the committee to:
approve compensation levels and increases in compensation of each executive officer and of other employees of the Company whose annual base salary is in excess of $150,000; and
approve all incentive payments to executive officers and any incentive payments in excess of $25,000, paid in cash or property, in any calendar year to any other employee that does not work in one of the Company’s supermarkets.
| ● | approve compensation levels and increases in compensation of each executive officer and of other associates of the Company whose annual base salary is in excess of $500,000; and |
| ● | approve all incentive payments to executive officers and any incentive payments in excess of $250,000, paid in cash or property, in any calendar year to any other associate that does not work in one of the Company’s supermarkets. |
Furthermore, the Committee, when acting as the Compensation Committee, administers the Company’s employeeassociate benefit plans and other compensation matters where independent, disinterested administration is required by applicable tax or securities laws and regulations. Where such laws or regulations require that grants or awards under a stock-based employee benefit plan be made by the full Board or by a committee of non-employee or outside directors, the Committee or the Board, as appropriate, makes such decisions.
During fiscal 2019,2021, the Audit/Compensation Committee consisted of Messrs. Ayers and Ferguson and Ms. Tudor. The Board has determined that each member of the committee is independent for purposes of the provisions of the Sarbanes-Oxley Act of 2002, the applicable rules of the Securities and Exchange Commission, and the Nasdaq corporate governance rules regarding audit committees. The Board has also determined that Mr. Ayers is an “audit committee financial expert” as defined under the rules of the Securities and Exchange Commission, is independent of management of the Company.Commission.
6
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
All compensation decisions made during fiscal 20192021 that were not made exclusively by the Board or the Audit/Compensation Committee were made by the Chairman of the Board, in certain instances in consultation with the Chief Executive Officer. Messrs. Ayers and Ferguson and Ms. Tudor who were the members of the Audit/Compensation Committee during fiscal 2019, were not officers or employees of the Company or its subsidiaries during fiscal 2019 or any of the five prior fiscal years. Messrs. Ayers and Ferguson and Ms. Tudor did not have any relationships with the Company that would require disclosure under “Transactions With Related Persons.Persons,”
nor would any relationship be considered a compensation committee interlock requiring disclosure in this Proxy Statement pursuant to SEC rules and regulations. None of our named executive officers served as a member of a compensation committee or a director of another entity under the circumstances requiring disclosure in this Proxy Statement pursuant to SEC rules and regulations.5
Meetings of the Board of Directors and Committees
Committees; Director CompensationThe Board held four formal meetings during fiscal 2019.2021. The Executive Committee held no formal meetings during fiscal 2019,2021, but met periodically on an informal basis. The Audit/Compensation Committee held nine11 formal meetings during fiscal 2019,2021, and met periodically on an informal basis during Board meetings and as required for other purposes. Each director attended at least 75% of all meetings of the Board and of the committees of the Board on which he or she served during fiscal 2019.2021. See “Committees of the Board of Directors.”
Directors who are not officers of the Company or any of its subsidiaries are paid an annual retainer of $15,000 plus $1,250 for each Board or Committee meeting they attend in person. Audit/Compensation Committee members other than the Chairman are also paid an additional annual retainer of $10,000 for service on such Committee, and the Chairman of the Audit/Compensation Committee is paid an additional annual retainer of $15,000.
The following director compensation table sets forth, for the fiscal year ended September 28, 2019,25, 2021, the cash compensation paid by the Company to its outside directors. There were no other items of compensation paid to outside directors for the fiscal year ended September 28, 2019. Mr. Lowden was elected to the Board in April 2018.
| Name | | Fees Earned or Paid in Cash ($) | | | Total ($) | |
| Fred D. Ayers | | | 35,000 | | | | 35,000 | |
| Ernest E. Ferguson | | | 30,008 | | | | 30,008 | |
| John R. Lowden | | | 18,750 | | | | 18,750 | |
| Laura Ingle Sharp | | | 20,000 | | | | 20,000 | |
| Brenda S. Tudor | | | 30,008 | | | | 30,008 | |
25, 2021.| Name | | Fees Earned or Paid in Cash ($) | | Total ($) |
| Fred D. Ayers | | 35,000 | | 35,000 |
| Ernest E. Ferguson | | 30,008 | | 30,008 |
| John R. Lowden | | 20,000 | | 20,000 |
| Laura Ingle Sharp | | 20,000 | | 20,000 |
| Brenda S. Tudor | | 30,008 | | 30,008 |
Director Nominations
As noted above, the Company did not have a standing nominating committee in fiscal 2019.2021. Historically, the Board of Directors has not considered a nominating committee necessary in that there have been few vacancies on the Company’s Board, and vacancies have been filled through discussions between the Chairman of the Board and the Chief Financial Officer of the Company with input from other Board members as needed. Under the Company’s Articles of Incorporation, 25% of the directors of the Company are elected by the holders of Class A Common Stock, voting as a separate class, and the remaining directors are elected by holders of the Class B Common Stock, voting as a separate class. Mr. Ingle II, the Chairman of the Company, is also the majority holder of the outstanding shares of Class B Common Stock as a result of being appointed the trustee with sole voting and dispositive power of trusts established by his father, Robert P. Ingle, in connection with his estate plan.
The Board has not adopted a policy with respect to minimum qualifications for Board members. Conversely, with respect to each individual vacancy, the Board has determined the specific qualifications and skills required to fill that vacancy and to complement the existing qualifications and skills of the other Board members. Historically, the Company has not engaged third parties to assist in identifying and evaluating potential nominees, but would do so in those situations where particular qualifications are required to fill a vacancy and the Board’s and management’s contacts are not sufficient to identify an appropriate candidate.
Stockholder Communication with Board Members
The Company maintains contact information, both telephone and email, on its website, www.ingles-markets.com, under the heading “Talk to Us.” By following the “Talk to Us” link, a stockholder will be given access to the Company’s telephone number and mailing address as well as a link for providing email correspondence to Investor Relations. Communications sent to Investor Relations and specifically marked as a communication for the Board will be forwarded to the Board or specific members of the Board as directed in the stockholder communication. In addition, communications received via telephone for the Board are forwarded to the Board by an officer of the Company.
Board Member Attendance at Annual Meetings
The Company generally requires that all directors attend the annual meeting of stockholders, absent extraordinary circumstances. All directors attendedDue to the annual meeting of stockholdersCOVID-19 pandemic, all Board and Committee meetings since March 2020 have been held in 2019.
The Company has adopted a Code of Ethics that applies to its senior financial officers, including without limitation, its Chairman, Chief Executive Officer, Chief Financial Officer and Controller. The full text of the Code of Ethics is published on the Company’s website at www.ingles-markets.com under the caption “Corporate.” In the event that the Company makes any amendments to, or grants any waivers of, any provision of the Code of Ethics applicable to its principal executive officer, principal financial officer or principal accounting officer, the Company intends to promptly disclose such amendment or waiver on its website.
electronically.AUDIT/COMPENSATION COMMITTEE REPORT
The following report of the Audit/Compensation Committee does not constitute soliciting material and should not be deemed filed with the Securities and Exchange Commission nor shall this report be incorporated by reference into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Audit/Compensation Committee oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the Company’s financial statements and the financial reporting process including the systems of internal controls. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those audited financial statements with generally accepted accounting principles.
In connection with the preparation and filing of the Company’s Annual Report on Form 10-K for its fiscal year ended September 28, 2019:
25, 2021:(1) The Audit/Compensation Committee reviewed and discussed the audited consolidated financial statements with management;
(2) The Audit/Compensation Committee discussed with Deloitte & Touche LLP, the Company’s independent registered public accounting firm those matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board, (the “PCAOB”), and the matters required to be reported to the Audit Committee by the independent registered public accounting firm pursuant to SEC Regulation S-X, Rule 2.07; and
(3) The Audit/Compensation Committee received the written disclosures and the letter from Deloitte & Touche LLP required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit/Compensation Committee concerning independence and has discussed with Deloitte & Touche LLP its independence.
The Audit/Compensation Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for their audit of the Company’s financial statements. The Audit/Compensation Committee meets periodically with the Company’s independent registered public accounting firm to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting. The Audit/Compensation Committee held nine11 meetings during fiscal 2019.
2021.Based on the review and discussions referred to above, the Audit/Compensation Committee recommended to the Company’s Board of Directors (and the Board approved) that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2019,25, 2021, for filing with the Securities and Exchange Commission.
| | | SUBMITTED BY: |
| | THE AUDIT/COMPENSATION COMMITTEE |
| | |
| | Fred D. Ayers Ernest E. Ferguson Brenda S. Tudor |
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation Discussion and Analysis
The following discussion and analysis is intended to provide an understanding of the actual compensation earned by each of the Company’s named executive officers (“Executive Officers”), and describes the Company’s compensation objectives and policies as applied to these Executive Officers.
Compensation Philosophy. The objectives of the Company’s compensation program are to (1) attract, motivate, develop and retain top quality executives who will drive long-term stockholder value and (2) deliver competitive total compensation packages based upon both Company and individual performance. The Company wants its executives to balance the risks and related opportunities inherent in its industry and in the performance of their duties and share the upside opportunity and the downside risks once actual performance is measured.
The Audit/Compensation Committee is responsible for administering executive compensation. The duties of this committee are set forth under the heading “ELECTION OF DIRECTORS – Committees of the Board of Directors – Audit/Compensation Committee.” To achieve the objectives of the Company’s compensation program, the Company’s Chief Executive Officer and the Audit/Compensation Committee have set forth a compensation program for its Executive Officers that is reviewed annually. It includes the following elements:
Annual cash incentive bonuses; and
Retirement, health and other benefits.
| ● | Base annual cash salary; |
| ● | Annual cash incentive bonuses; and |
| ● | Retirement, health and other benefits. |
The Company does not have any Employment, Change in Control or Severance Agreements with any of its Executive Officers. The Company believes in trust, loyalty and commitment from both the Company and the Executive Officers, and believes that such agreements are not necessary to achieve its goals and the needs of the Executive Officers.
Factors Considered in Determining Compensation. The Company’s Chairman of the Board and Chief Executive Officer periodically review the compensation paid by the Company to its Executive Officers and other employees.associates. Based on the Company’s general performance and that of the individual Executive Officer, they make final subjective determinations with respect to any changes to be made to that compensation. Bonuses paid to officers of the Company’s subsidiary, Milkco, Inc. (“Milkco”), are based on a percentage of Milkco’s earnings before taxes and payment of bonuses.
Neither the full Board nor the Audit/Compensation Committee generally reviews or ratifies the decisions of the Chairman of the Board and Chief Executive Officer relating to executive compensation unless otherwise required by the Company’s Bylaws, by resolutions adopted by the Board, or by the North Carolina Business Corporation Act. Decisions are made by the Board or the Audit/Compensation Committee if such decisions require the adoption of documents relating to employee benefit plans or programs. In addition, the Audit/Compensation Committee is required by resolution of the Board of Directors to approve any increases in compensation that the Company will pay to an employeeassociate whose base salary is in excess of $150,000,$500,000, all incentive compensation that the Company will pay to Executive Officers and any incentive payments in excess of $25,000$250,000 that the Company will pay to any other employeeassociate who does not work in one of the Company’s supermarkets. Certain managers that work in the Company’s supermarkets are paid incentive compensation based on each individual store’s operating profit. These incentive payments may exceed $25,000$250,000 and are not approved by the Audit/Compensation Committee.
The Internal Revenue Code generally provides that corporate deductions will be disallowed for annual compensation in excess of $1 million paid to certain executive officers of publicly held corporations. “Performance-based” compensation is excluded from the cap. The $1 million compensation deduction cap would be applicable to the Executive Officers named in the “SUMMARY COMPENSATION TABLESummary Compensation Table”. The Chairman, Chief Executive Officer and the Audit/Compensation Committee, as appropriate, intend to consider the Internal Revenue Code’s compensation deductibility cap when they determine compensation levels and to evaluate appropriate alternatives to mitigate any adverse impact this limitation may have on the deductibility of executive compensation paid by the Company and its subsidiaries.
Elements of Executive Compensation
Base Salary.Base salary is used to attract and retain Executive Officers and is determined using publicallypublicly available comparisons with industry competitors and other relevant factors, including, among others, the seniority of the individual, the functional role of the position, the level of the individual’s responsibility and ability to replace the individual, etc.individual. The information is used subjectively without benchmarking in the determination of base salaries. The base salaries paid to the Executive Officers during fiscal 20192021 are shown in the Summary Compensation Table presented in this proxy statement.
Cash Incentive Bonus Awards. Annual cash bonuses are a significant component of each Executive Officer’s compensation, reflecting the Company’s belief that management’s contribution to long-term stockholder returns comes from maximizing earnings and the potential of the Company.
Executive Officers of the Company received a bonus, the amounts of which were subjectively determined taking into consideration Company profitability and the Executive Officer’s performance for the fiscal year to which the bonus relates. This subjective determination is made by Mr. Ingle II and Mr. Lanning, and approved by the Audit/Compensation Committee. The bonus paid to Mr. Collins, President of the Company’s subsidiary, Milkco, Inc., is based on a percentage of Milkco’s earnings before taxes and payment of bonuses. Mr. Collins receives a bonus equal to a percentage of Milkco’s earnings before taxes and payment of bonuses, up to a maximum of $49,950 per year. Based on Milkco’s expected financial performance, the Company anticipates Mr. Collins will continue to receive at or near the maximum bonus.
Retirement, Health and Other Benefits.
Investment/Profit Sharing Plan. The Company maintains the Ingles Markets, Incorporated Investment/Profit Sharing Plan (the “Profit Sharing Plan”) to provide retirement benefits to eligible employees,associates, including Executive Officers. The Profit Sharing Plan includes 401(k) employeeassociate elective contributions, discretionary employer matching contributions and discretionary profit sharing contribution features. The assets of the Profit Sharing Plan are held in trust for participants and are distributedavailable for distribution upon the retirement, disability, death, in-service following age 59 ½ (upon request) or other termination of employment of the participant. Quarterly, the Company, in its discretion, determines the amount of any Company profit sharing contributions and the amount of any matching contributions to be made based on participants’ 401(k) contributions for the quarter. During fiscal 2019,2021, the Company matched employeeassociate contributions at a rate of $0.50$0.75 for each dollar of employeeassociate contributions up to 5% of the employee’sassociate’s salary.
EmployeesAssociates who participate in the Profit Sharing Plan may contribute to their 401(k) account between 1% and 50% (in increments of 1%) of their compensation by way of salary reductions that cannot exceed a maximum amount that varies annually in accordance with the Internal Revenue Code. Highly compensated participants are limited to 3%. The Company also makes available to Profit Sharing Plan participants the ability to direct the investment of their 401(k) accounts (including the Company’s matching contributions) in various investment funds, including a fund holding Class A Common Stock of the Company.
The Company did not make a discretionary profit sharing contribution to the Profit Sharing Plan for fiscal 2019.
Company discretionary employer matching cash contributions to the Profit Sharing Plan totaled $2.9$5.1 million for fiscal 2019.2021. These contributions were allocated to the matching contribution accounts in each participant’s 401(k) account. The Company’s contributions to each of the Executive Officers are reflected in the Summary Compensation Table. As of September 28, 2019,25, 2021, all of the Executive Officers who are named in the Summary Compensation Table were 100% vested in their accounts. Participants’ interests in employer contributions allocated to their accounts vest over six years.
Nonqualified Investment Plan. The Company maintains an Executive Nonqualified Excess Plan to provide benefits similar to the Investment/Profit Sharing Plan to certain of the Company’s management employeeshighly compensated associates and pharmacists (in the Company’s stores) who are otherwise limited in their employeeassociate elective contributions under the 401(k) feature of the Profit Sharing Plan. EmployeesAssociates who participate in the Executive Nonqualified Excess Plan may contribute between one percent and seventy-five percent of base pay and up to one hundred percent of bonus pay (in increments of one percent) of their compensation by way of salary reductions. In addition, the Company may make discretionary matching contributions. The Company’s contributions to each of the Executive Officers are reflected in the Summary Compensation Table. During fiscal 2019,2021, the Company matched employeeassociate contributions at a rate of $0.50$0.75 for each dollar of employeeassociate contributions up to 2% of the employee’sassociate’s earnings. As of September 28, 2019,25, 2021, all of the Executive Officers who are named in the Summary Compensation Table were 100% vested in their accounts. Participants’ interests in contributions allocated to their accounts vest over six years. Company contributions to the Nonqualified Excess Plan were approximately $224,000$375,000 in fiscal 2019.
2021.Insurance.The Company currently makes available to its Executive Officers and all employeesassociates a comprehensive health, dental, vision, life and disability insurance program. The health care insurance offers a variety of coverage options, at the employee’sassociate’s discretion. The Company maintains, at its expense, for the benefit of each of its full-time employeesassociates, life insurance policies in amounts up to $150,000 based on the compensation of the employee.associate. The premiums paid by the Company for the benefit of Executive Officers are included in the Summary Compensation Table.
Management of Compensation – Related Risk
The Company’s Board of Directors has considered and determined that risks arising from the Company’s compensation policies and practices for its employeesassociates are not reasonably likely to have a material adverse effect on the Company.
Audit/Compensation Committee Report on Executive Compensation
The Audit/Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” set forth above in this Proxy Statement. Based on such review, the related discussions and such other matters deemed relevant and appropriate by the Audit/Compensation Committee, the Audit/Compensation Committee has recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the year ended September 28, 2019.
Statement.| | | SUBMITTED BY: |
| | THE AUDIT/COMPENSATION COMMITTEE |
| | |
| | Fred D. Ayers Ernest E. Ferguson Brenda S. Tudor |
| | |
Executive Compensation Summary
The following tables set forth information concerning the compensation of the Company’s Chief Executive Officer, Chief Financial Officer and each of its other Named Executive Officers atfor the end of fiscal 2019.
year ended September 25, 2021.SUMMARY COMPENSATION TABLE
Name and Principal Position during 2019 | | Fiscal Year | | Salary ($) | | | Bonus ($) | | | Non-Equity Incentive Plan Compensation ($) | | | All Other Compensation ($) (1) | | | Total ($) | |
| James W. Lanning | | 2019 | | | 742,293 | | | | 470,000 | | | | — | | | | 27,246 | | | | 1,239,539 | |
| Chief Executive Officer and | | 2018 | | | 722,692 | | | | 450,000 | | | | — | | | | 26,987 | | | | 1,199,679 | |
| President | | 2017 | | | 716,250 | | | | 450,000 | | | | — | | | | 19,610 | | | | 1,185,860 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Robert P. Ingle | | 2019 | | | 682,692 | | | | 400,000 | | | | — | | | | 32,967 | | | | 1,115,660 | |
| Chairman of the Board | | 2018 | | | 672,692 | | | | 400,000 | | | | — | | | | 37,440 | | | | 1,110,132 | |
| | 2017 | | | 677,788 | | | | 400,000 | | | | — | | | | 39,036 | | | | 1,116,825 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Ronald B. Freeman | | 2019 | | | 363,117 | | | | 112,000 | | | | — | | | | 9,415 | | | | 484,532 | |
| Vice President Finance, | | 2018 | | | 354,654 | | | | 105,000 | | | | — | | | | 9,425 | | | | 469,079 | |
| Chief Financial Officer | | 2017 | | | 353,202 | | | | 105,000 | | | | — | | | | 8,606 | | | | 466,808 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| L. Keith Collins (2) | | 2019 | | | 248,761 | | | | — | | | | 45,981 | | | | 11,830 | | | | 306,572 | |
| President, Milkco, Inc. | | 2018 | | | 234,308 | | | | — | | | | 49,950 | | | | 11,758 | | | | 296,016 | |
| | | 2017
| | | 230,539 | | | | — | | | | 49,950 | | | | 9,061 | | | | 289,549 | |
(1) All other fiscal 2019 compensation for each of the Executive Officers consists of the following:
| | | Fiscal 2019 | |
| | | James W. Lanning | | | Robert P. Ingle, II | | | Ronald B. Freeman | | | L. Keith Collins | |
| Employer Match for 401(k) Plan | | $ | 4,200 | | | $ | 4,200 | | | $ | 4,465 | | | $ | 4,260 | |
| Employer Match for Non-Qualified Plan | | | 12,123 | | | | 10,827 | | | | 3,627 | | | | 2,947 | |
| Life Insurance | | | 234 | | | | 234 | | | | 234 | | | | 234 | |
| Accidental Death & Dismemberment and | | | | | | | | | | | | | | | | |
| Long-Term Disability Insurance | | | 1,089 | | | | 1,089 | | | | 1,089 | | | | 1,089 | |
| Travel Expenses | | | 9,600 | | | | 16,617 | | | | — | | | | 3,300 | |
| Name and Principal Position during 2021 | | Fiscal
Year | | Salary ($) | | Bonus ($) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($) (1) | | Total ($) |
| James W. Lanning | | 2021 | | 903,333 | | 1,025,000 | | — | | 46,337 | | 1,974,670 |
| Chief Executive Officer and | | 2020 | | 752,892 | | 475,000 | | — | | 32,048 | | 1,259,940 |
| President | | 2019 | | 742,293 | | 470,000 | | — | | 27,246 | | 1,239,539 |
| | | | | | | | | | | | | |
| Robert P. Ingle | | 2021 | | 853,333 | | 975,000 | | — | | 49,303 | | 1,877,636 |
| Chairman of the Board | | 2020 | | 693,293 | | 400,000 | | — | | 37,545 | | 1,130,838 |
| | | 2019 | | 682,692 | | 400,000 | | — | | 32,967 | | 1,115,660 |
| | | | | | | | | | | | | |
| Ronald B. Freeman | | 2021 | | 383,979 | | 225,000 | | — | | 13,915 | | 622,894 |
| Vice President Finance, | | 2020 | | 371,803 | | 130,000 | | — | | 11,257 | | 513,060 |
| Chief Financial Officer (3) | | 2019 | | 363,117 | | 112,000 | | — | | 9,415 | | 484,532 |
| | | | | | | | | | | | | |
| L. Keith Collins | | 2021 | | 271,875 | | 60,000 | | 47,740 | (2) | 16,727 | | 396,342 |
| President, Milkco, Inc. | | 2020 | | 261,362 | | — | | 46,187 | | 13,928 | | 321,477 |
| | | 2019 | | 248,761 | | — | | 45,981 | | 11,830 | | 306,572 |
| | | | | | | | | | | | | |
| (1) | All other fiscal 2021 compensation for each of the Executive Officers consists of the following: |
| | | Fiscal 2021 |
| | | | James W.
Lanning | | | | Robert P.
Ingle, II | | | | Ronald B. Freeman | | | | L. Keith
Collins | |
| Employer Match for 401(k) Plan | | $ | 6,413 | | | $ | 6,413 | | | $ | 6,837 | | | $ | 6,361 | |
| Employer Match for Non-Qualified Plan | | | 29,002 | | | | 27,358 | | | | 5,755 | | | | 5,743 | |
| Life Insurance | | | 234 | | | | 234 | | | | 234 | | | | 234 | |
| Accidental Death & Dismemberment and | | | | | | | | | | | | | | | | |
| Long-Term Disability Insurance | | | 1,089 | | | | 1,089 | | | | 1,089 | | | | 1,089 | |
| Travel Expenses | | | 9,600 | | | | 14,210 | | | | — | | | | 3,300 | |
| (2) | Mr. Collins receives a bonus equal to a percentage of Milkco’s earnings before taxes and payment of bonuses, up to a maximum of $49,950 per year. |
| (3) | Mr. Freeman announced his retirement from the Company on December 27, 2021, effective February 16, 2022. |
CEO Pay Ratio
SEC rules require that the Company to disclose the total annual compensation of James W. Lanning, our Chief Executive Officer (“CEO”), the median of the total annual compensation of all employeesassociates other than Mr. Lanning (“Median Annual Compensation”), as well as their ratio to each other (referred to as the “CEO pay ratio”) based, which we base on data as of September 28, 201917, 2021 (the “Determination Date”). Our employeeassociate population consists of a number of part-time employees,associates, most of them compensated on an hourly basis. As noted in our Annual Report on Form 10-K for the fiscal year ended September 28, 2019,25, 2021, approximately 62%58% of the Company’s employeesassociates work on a part-time basis. The Company’s median employeeassociate for fiscal 20182021 was a part-time,full-time, hourly employee thatassociate who was paid for less than forty hours during the week containing the Determination Date. In accordance with SEC guidelines, the Company is using the same median employee and Determination Date for fiscal 2019 as the Company does not believe there has been a significant change in its employee population or employee compensation arrangements.
2021:
| •● | Mr. Lanning’s total compensation: $1,239,539
|
$1,974,670 |
Median Annual Compensation: $17,119
| •● | Median Annual Compensation: $19,793 |
| ● | Ratio of CEO total compensation to Median Annual Compensation: 72: 100:1
|
|
This CEO pay ratio is a reasonable estimate calculated in good faith, in a manner consistent with Item 402(u) of Regulation S-K. To identify the Median Annual Compensation we took the following steps:
For the week ending with the Determination Date 22,485 active employees received cash compensation. This population consisted of full-time, part-time and temporary employees for the Company and all of its subsidiaries.
The Company used gross wages including salary, wages, overtime and any other cash compensation for the week ending the determination date to identify the median employee.
For this employee, we multiplied the weekly wages by 52 weeks to determine Median Annual Compensation of $17,119.
We calculated the CEO pay ratio taking into account that CEO compensation includes amounts other than weekly salary.
| ● | This CEO pay ratio is a reasonable estimate calculated in good faith, in a manner consistent with Item 402(u) of Regulation S-K. To identify the Median Annual Compensation we took the following steps: |
| ● | For the week ending with the Determination Date, 23,326 active associates received cash compensation. This population consisted of full-time, part-time and temporary associates for the Company and all of its subsidiaries. |
| ● | The Company used gross wages including salary, wages, overtime and any other cash compensation for the week ending the determination date to identify the median associate. |
| ● | For this associate, we multiplied the weekly wages by 52 weeks to determine Median Annual Compensation of $19,793. |
| ● | We calculated the CEO pay ratio taking into account that CEO compensation includes amounts other than weekly salary. |
SEC rules for the CEO pay ratio allow companies to adopt a variety of methodologies and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the CEO pay ratio reported by other companies may not be comparable to what the Company reports.
Proposal for Advisory Vote on Executive Compensation
The Board of Directors is providing stockholders with the opportunity to cast an advisory vote on the compensation of our Executive Officers. This proposal, commonly known as a “say on pay” proposal, gives you, as a stockholder, the opportunity to endorse or not endorse our fiscal 2021 executive compensation programs and policies and the compensation paid to the Executive Officers.
The Company’s compensation program is administered by the Audit/Compensation Committee of the Board, which is composed entirely of independent directors and carefully considers many different factors, as described in “Compensation Discussion and Analysis,” in order to provide appropriate compensation for the Company’s executives. The objectives of the Company’s compensation program are to (1) attract, motivate, develop and retain top quality executives who will drive long-term stockholder value and (2) deliver competitive total compensation packages based upon both the Company and individual performance. The Company wants its executives to balance the risks and related opportunities inherent in its industry and in the performance of their duties, and share the upside opportunity and the downside risks once actual performance is measured.
The Board appreciates and values stockholders’ views and recommends a vote “FOR” the proposal for the advisory vote on executive compensation.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Except where indicated in the footnotes below, the following table sets forth the number of shares of Class A Common Stock and Class B Common Stock owned beneficially as of September 28, 2019,25, 2021, by each director and nominee for director, each of the executive officers of the Company named in the Summary Compensation Table, all directors and executive officers as a group and each person known by the Company to be a beneficial owner of more than five percent (5%) of either class of the outstanding Common Stock. The table also sets forth the percentage of each class of Common Stock held by such stockholders. As of September 28, 2019,25, 2021, there were 14,180,48514,271,335 shares of Class A Common Stock and 6,079,2914,723,041 shares of Class B Common Stock outstanding. Except as otherwise indicated, each beneficial owner has sole voting and investment power with respect to the Common Stock listed.
| | | Number of Shares Owned Beneficially | | Percentage of Common Stock | | | | Percentage
of Total
Voting
Power
| | |
Name | | Class A(2) | | Class B | | Class A(2) | | | Class B
| | | | | | |
Robert P. Ingle, II(1) | | | 5,701,299 | (3)(4) | | | 5,701,299 | (3)(4) | | 28.7 | % | (3)(4) | | 93.8 | % | (3)(4) | | 76.0 | % | (3)(4) |
James W. Lanning(1) | | | 242,649 | (3) | | | 232,649 | (3) | | 1.7 | % | (3) | | 3.9 | % | (3) | | 3.2 | % | (3) |
Laura Ingle Sharp(1) | | | 115,411 | (5) | | | 79,725 | (5) | | * | | (5) | | 1.3 | % | (5) | | 1.1 | % | (5) |
Ronald B. Freeman(1) | | | 235,514 | (3) | | | 232,649 | (3) | | 1.6 | % | (3) | | 3.8 | % | (3) | | 3.1 | % | (3) |
Fred D. Ayers(1) | | | 463 | | | | 0 | | | * | | | | * | | | | * | | |
Brenda S. Tudor(1) | | | 300 | | | | 0 | | | * | | | | * | | | | * | | |
Ernest E. Ferguson(1) | | | 250 | | | | 0 | | | * | | | | * | | | | * | | |
John R. Lowden(1) | | | 0 | | | | 0 | | | * | | | | * | | | | * | | |
Mario J. Gabelli et al(6) | | | 2,122,952 | (7) | | | 0 | | | 15.0 | % | (7) | | * | | | | 2.8 | % | (7) |
Dimensional Fund Advisors, LP(8) | | | 1,186,426 | (9) | | | 0 | | | 8.4 | % | (9) | | * | | | | 1.6 | % | (9) |
The Vanguard Group (10) | | | 973,190 | (11) | | | 0 | | | 6.9 | % | (11) | | * | | | | 1.3 | % | (11) |
Black Rock, Inc.(12) | | | 1,103,946 | (13) | | | 0 | | | 7.8 | % | (13) | | * | | | | 1.5 | % | (13) |
River Road Asset Management, LLC (14) | | | 863,425 | | | | 0 | | | 6.1 | % | | | * | | | | 1.2 | % | |
LSV Asset Management (15) | | | 889,156 | | | | | | | 6.3 | % | | | * | | | | 1.2 | % | |
Ingles Investment/Profit Sharing Plan(1) | | | 232,649 | | | | 232,649 | | | 1.6 | % | | | 3.8 | % | | | 3.1 | % | |
| All Directors and Executive Officers as a group (8 persons) | | | 5,830,588 | (3) | | | 5,781,024 | (3) | | 29.2 | % | (3) | | 95.1 | % | (3) | | 77.2 | % | (3) |
| | | Number of Shares Owned Beneficially | | | Percentage of Common Stock | | | | Percentage of Total Voting Power | |
| Name | | | Class A(2) | | | | Class B | | | | Class A(2) | | | | Class B | | | | | |
| Robert P. Ingle, II(1) | | | 4,350,649 | (3)(4) |
| | 4,350,649 | (3)(4) | | | 23.4 | %(3)(4) | | | 92.1 | %(3)(4) | | | 70.7 | %(3)(4) |
| James W. Lanning(1) | | | 157,399 | (3) | | | 147,399 | (3) | | | 1.1 | %(3) | | | 3.1 | %(3) | | | 2.4 | %(3) |
| Laura Ingle Sharp(1) | | | 87,911 | (5) | | | 79,725 | (5) | | | 0.6 | %(5) | | | 1.7 | %(5) | | | 1.3 | %(5) |
| Ronald B. Freeman(1) | | | 150,339 | (3) | | | 147,399 | (3) | | | 1.0 | %(3) | | | 3.1 | %(3) | | | 2.4 | %(3) |
| Fred D. Ayers(1) | | | 463 | | | | 0 | | | | * | | | | * | | | | * | |
| Brenda S. Tudor(1) | | | 300 | | | | 0 | | | | * | | | | * | | | | * | |
| Ernest E. Ferguson(1) | | | 250 | | | | 0 | | | | * | | | | * | | | | * | |
| John R. Lowden(1) | | | 600 | | | | 0 | | | | * | | | | * | | | | * | |
| Mario J. Gabelli et al(6) | | | 1,561,940 | (7) | | | 0 | | | | 11.0 | %(7) | | | * | | | | 2.5 | %(7) |
| Dimensional Fund Advisors, LP(8) | | | 1,181,113 | (9) | | | 0 | | | | 8.3 | %(9) | | | * | | | | 1.9 | %(9) |
| The Vanguard Group (10) | | | 1,153,511 | (11) | | | 0 | | | | 8.1 | %(11) | | | * | | | | 1.8 | %(11) |
| Black Rock, Inc.(12) | | | 1,171,145 | (13) | | | 0 | | | | 8.2 | %(13) | | | * | | | | 1.9 | %(13) |
| River Road Asset Management, LLC (14) | | | 892,609 | (15) | | | 0 | | | | 6.3 | %(15) | | | * | | | | 1.5 | %(15) |
| LSV Asset Management (16) | | | 740,835 | (17) | | | 0 | | | | 5.2 | %(17) | | | * | | | | 1.2 | %(17) |
| Ingles Investment/Profit Sharing Plan(1) | | | 147,399 | | | | 147,399 | | | | 1.0 | % | | | 3.1 | % | | | 2.4 | % |
| All Directors and Executive Officers as a group (8 persons) | | | 4,453,113 | (3) | | | 4,430,374 | (3) | | | 23.8 | %(3) | | | 93.8 | %(3) | | | 72.1 | %(3) |
| |
| (1) | The address of this beneficial owner is P.O. Box 6676, Asheville, North Carolina 28816. |
| |
(2)
| Each share of Class B Common Stock is convertible, at any time at the option of the holder, into one share of Class A Common Stock. If the holder of any shares of Class B Common Stock transfers the shares to anyone other than a “qualified transferee” as defined in the Company’s Articles of Incorporation, then each share of Class B Common Stock will automatically convert into a share of Class A Common Stock. Accordingly, for each holder of Class B Common Stock the number of shares and percentage of Class A Common Stock set forth in this table also reflect the Class A Common Stock into which such stockholder’s shares of Class B Common Stock are convertible. However, these converted shares are not used to calculate such percentages for any other stockholder in this table. The number of shares and percentage of Class A Common Stock held by all directors and executive officers as a group also reflects the conversion into Class A Common Stock of each share of Class B Common Stock held by each director and executive officer. Because the Class B Common Stock converts into Class A Common Stock on a one to one basis, the number of shares of Class B Common Stock noted in the table above also represents the number of shares of Class A Common Stock each holder would beneficially own upon conversion of the Class B Common Stock beneficially owned by them. |
| (3) | Includes the 232,649147,399 shares of Class B Common Stock and 0 shares of Class A Common Stock held by the Company’s Investment/Profit Sharing Plan, and Trust, of which Messrs. Ingle II, Freeman and Lanning are trustees. The trustees, by a majority vote, have sole voting power and dispositive power with respect to such shares. However, Messrs. Ingle II, Freeman and Lanning disclaim beneficial ownership of such shares. |
| (4) | Includes a total of 5,468,6504,350,649 shares of Class B Common Stock held by trusts of which Mr. Ingle II is sole trustee with sole voting power and dispositive power with respect to such shares. |
| (5) | Includes 686 shares of Class A Common Stock and 2,025 shares of Class B Common Stock held by Ms. Sharp’s minor children. |
| (6) | The address of this beneficial owner is GAMCO Investors, Inc., One Corporate Center, Rye, New York 10580-1435. |
| (7) | The information as to Mario J. Gabelli (includes entities controlled directly or indirectly by Mario Gabelli, collectively, the “Gabelli Entities”) with respect to the number of shares beneficially owned by the Gabelli Entities is derived from its Schedule 13D/A filed with the Securities and Exchange Commission on MayAugust 17, 2019.2021. All other information regarding the Gabelli Entities is derived from such Schedule. Such Schedule discloses that (i) Mario Gabelli is the chief investment officer for most of the Gabelli Entities signing such statements and is deemed to have beneficial ownership of the shares owned by all Gabelli Entities, (ii) Mario Gabelli and the Gabelli Entities do not admit that they constitute a group within the meaning of Section 13(d) of the Exchange Act and the rules and regulations thereunder and (iii) Mario Gabelli and the Gabelli Entities have the sole power to vote or direct the vote and dispose or to direct the disposition of all the shares of which they are beneficial owners. The Gabelli Entities that beneficially own shares of the Company’s Class A Common Stock are registered investment advisors and beneficially own such shares in an agent capacity. |
| (8) | The address for this beneficial owner is Palisades West, Building One, 6300 Bee Cave Road, Austin, TX 78746. |
| (9) | The information as to the number of shares beneficially owned by Dimensional Fund Advisors, LP is derived from its Schedule 13G/A filed with the Securities and Exchange Commission on February 8, 2019.16, 2021. All other information as to Dimensional Fund Advisors, LP is also derived from such Schedule. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) possess voting and/or investment power over the securities of the Issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. However, all securities reported in this schedule are owned by the Funds. |
| (10) | The address for this beneficial owner is 100 Vanguard Blvd., Malvern, PA 19355. |
| (11) | The shares are beneficially owned by The Vanguard Group (“Vanguard”) and subsidiaries of Vanguard. The information as to Vanguard with respect to the number of shares beneficially owned by Vanguard is derived from its Schedule 13G/A filed with the Securities and Exchange Commission on February 8, 2021. |
| (12) | The address for this beneficial owner is 55 West 52nd Street, New York, NY 10055. |
(13) The shares are beneficially owned by subsidiaries of Black Rock, Inc.
(14)The address for this beneficial owner is 462 S. 4th Street, Suite 2000, Louisville, KY 40202.
(15) The address for this beneficial owner is155 N. Wacker Drive, Suite 4600, Chicago, IL 60606.
| (13) | The shares are beneficially owned by subsidiaries of Black Rock, Inc. The information as to this beneficial owner with respect to the number of shares beneficially owned by Black Rock, Inc. is derived from its Schedule 13G/A filed with the Securities and Exchange Commission on January 29, 2021. |
| (14) | The address for this beneficial owner is 462 S. 4th Street, Suite 2000, Louisville, KY 40202. |
| (15) | The information as to this beneficial owner with respect to the number of shares beneficially owned by River Road Asset Management, LLC is derived from its Schedule 13G/A filed with the Securities and Exchange Commission on February 8, 2021. |
| (16) | The address for this beneficial owner is 155 N. Wacker Drive, Suite 4600, Chicago, IL 60606. |
| (17) | The information as to this beneficial owner with respect to the number of shares beneficially owned by LSV Asset Management is derived from its Schedule 13G/A filed with the Securities and Exchange Commission on February 11, 2021. |
TRANSACTIONS WITH RELATED PERSONS
regulatory guidelines.The Company believes that the transactions described above have been and will continue to bewere on terms no less favorable to the Company than those available from unaffiliated third parties in transactions negotiated at arms-length. The Company does not intend to enter into any transactions in the future with or involving any of its executive officers or directors or any members of their immediate family on terms that would be less favorable to the Company than those that would be available from unaffiliated third parties in arms-length transactions.
20
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP has served as the independent registered public accounting firm for the Company and its subsidiaries since February 27, 2012. The Company had no disagreements with Deloitte & Touche LLP on accounting and financial disclosures. Deloitte & Touche LLP’s work on the Company’s audit for fiscal year 20192021 was performed by full-time, permanent employees and partners of the firm. Representatives of Deloitte & Touche LLP are not expected to be present at the 20202022 Annual Meeting. TheseMeeting due to the COVID-19 pandemic. Appropriate stockholder questions will be forwarded to representatives will have the opportunity to make a statement if they desire to do so and will respond to appropriate stockholder questions.
of Deloitte & Touche LLP.The Company has not yet appointed Deloitte & Touche LLP as thean independent registered public accounting firm to audit the Company’s fiscal 20202022 financial statements.
statements, but expects Deloitte & Touche LLP to be appointed in the near future.17
Principal Accountant Fees and Services
As reflected in the tables below, theThe Company incurred fees in fiscal years 20192021 and 20182020 for services performed by Deloitte & Touche LLP related to such periods.
Deloitte & Touche LLP
| | | | | | | |
| | | Year Ended September 28, 2019 | | | Year Ended September 29, 2018 | |
| Audit Fees | | $ | 967,000 | | | $ | 967,000 | |
| Audit-related Fees | | | — | | | | — | |
| Tax Fees | | | — | | | | — | |
| All Other Fees | | | — | | | | — | |
| Total Fees | | $ | 967,000 | | | $ | 967,000 | |
as set forth in the table below. | | | Deloitte & Touche LLP Year Ended September 25, 2021 | | | | Year Ended September 26, 2020 | |
| Audit Fees | | $ | 1,158,000 | | | $ | 1,025,000 | |
| Audit-related Fees | | | — | | | | — | |
| Tax Fees | | | — | | | | — | |
| All Other Fees | | | — | | | | — | |
| Total Fees | | $ | 1,158,000 | | | $ | 1,025,000 | |
In the above tables:
“Audit fees” are fees billed by the independent registered public accounting firms for professional services for the audit of the consolidated financial statements included in the Company’s Annual Report on Form 10-K, the audit of internal controls over financial reporting, review of consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q, and for services that are normally provided by the auditors in connection with statutory and regulatory filings or engagements;
“Audit-related fees” are fees for services performed during the respective years by the independent registered accounting firm for assurance and related services not reported under the caption “Audit Fees” in the tables above.
“Tax“Tax fees” are fees for services performed during the respective years by the independent registered public accounting firm for professional services related to certain tax compliance, tax advice, and tax planning; and
“All other fees” are fees for any other services performed during the respective years.
The Company’s Audit/Compensation Committee pre-approved all services described above for fiscal 2019,2021, including non-audit services, and has determined that these fees and services are compatible with maintaining the independence of Deloitte & Touche LLP. The Company’s Audit/Compensation Committee requires that each service provided by Deloitte & Touche LLP be pre-approved by the committee. However, the Committee has empowered the chair of the committee to grant such approval on its behalf as to matters that arise between Audit/Compensation Committee meetings.
CORPORATE ENVIRONMENTAL, SOCIAL AND GOVERNANCE RESPONSIBILITY
Environmental Stewardship
The Company has several Green Initiatives to improve sustainability in our stores, our products, and our distribution system. We believe these initiatives help combat the dangers of climate change and help protect our stakeholders from the risks of climate change. The most significant initiatives include:
| ● | LED lighting in our glass enclosed fixtures, saving 55-65% in energy consumption; |
| ● | Skylights and automated energy management systems in our stores to turn down/turn off lights and equipment based on ambient light levels and customer proximity to coolers and freezers; |
| ● | Heat rejection systems to recapture and recycle heat from refrigeration compressors, which also use less refrigerant and utilize types of refrigerant with a lower environmental impact; |
| ● | Recycling of all plastic wrap, bags, pallets and wood products in our stores and our distribution center; |
| ● | Recycling single-use plastic bags and promoting the use of re-usable bags, subject to safe COVID-19 practices; |
| ● | Replacing our trucks with more energy efficient models and using backhauls wherever possible to minimize empty trucks on the roads; |
| ● | Our car washes have reclaim systems to recycle water; |
| ● | Many of our stores contain free charging stations for electric vehicles; and |
| ● | We have reduced our paper advertising in favor of electronic communications. |
Social Impact
The Company has always supported our communities across our entire store base. Each year, millions of pounds of food are provided to local food banks, food that might otherwise end up in landfills.
Our other community giving initiatives are focused on the education of children and meeting the specific needs of our communities. Each year we provide hundreds of thousands of dollars in direct financial support through our Tools for Schools program. We also conduct collection drives for school supplies, coats and toys for at-risk children.
Since the beginning of the COVID-19 pandemic in early 2020, our pharmacies have administered vaccines and have conducted outreach programs to enhance access to vaccines.
Governance
Other parts of this Proxy Statement address corporate governance issues at the Board and Audit/Compensation Committee level. Our Audit/Compensation Committee met 11 times in fiscal year 2021, including meetings directly with the Company’s Internal Audit Department and with the Company’s Independent Registered Public Accounting Firm without Company management being present.
The Company has adopted a Code of Ethics that applies to its senior financial officers, including without limitation, its Chairman, Chief Executive Officer, Chief Financial Officer and Controller. The full text of the Code of Ethics is published on the Company’s website at www.ingles-markets.com under the caption “Corporate.” In the event that the Company makes any amendments to, or grants any waivers of, any provision of the Code of Ethics applicable to its principal executive officer, principal financial officer or principal accounting officer, the Company intends to promptly disclose such amendment or waiver on its website.
At Ingles Markets, we know we are so much more than a grocery store. We are made up of associates, customers, and vendors. The Company supports and encourages equality, diversity and inclusion throughout our Corporate Office, Distribution Center, Retail Stores and within each community we are located. The Company has enhanced its training and awareness programs for all associates to better understand our biases and to increase the encouragement of equality, diversity and inclusion.
Please refer to the “Human Capital”, “Environmental Matters” and “Government Regulation” sections in the Annual Report on Form 10-K for the year ended September 25, 2021, filed by the Company under the Securities Exchange Act of 1934, as amended, on November 24, 2021.
PROPOSAL TO AMEND ARTICLES OF INCORPORATION
Currently our Articles of Incorporation permit the transfer of Class B Common Stock to only a limited group of “Qualified Transferees”, as currently defined in our Articles of Incorporation without the Class B Common Stock automatically converting into Class A Common Stock. The proposed amendment to the Articles of Incorporation would revise and update the provision on permitted transfers to permit the transfer of Class B Common Stock to any corporation, limited liability company, partnership or other entity that is controlled by (a) the transferor, (b) an Immediate Family Member of the transferor, or (c) any one or more persons or entities that are each (w) a holder of Class B Common Stock on the date of transfer, or (x) an Immediate Family Member of a holder of Class B Common Stock on the date of transfer, or (z) a descendant of Robert P. Ingle. The amendment to the Articles would redefine “qualified transferees” to permit such transfers. This amendment has been approved by the Board of Directors and recommended by the Board of Directors for approval by our stockholders.
As noted elsewhere in this proxy, 4,350,649 shares of Class B Common Stock are held by trusts that are part of the estate of Robert P. Ingle, former CEO and Director of the Company, and the effect of the proposed amendment would be to permit the transfer of such shares more freely without their conversion to Class A Common Stock. Currently, Robert P. Ingle II is sole trustee with sole voting power and dispositive power with respect to such shares, and any currently contemplated transfer of such shares would likely be to an entity for estate planning purposes.
If this amendment is approved, Paragraph (b)(4)(A) of Article 4 of our Articles of Incorporation will be amended to read in its entirety as follows:
“4 Transfer.
| (A) | Any transfer of shares of Class B Common Stock other than to a “Qualified Transferee,” as hereinafter defined, shall be conclusively deemed to constitute an election by the holder thereof to convert said shares of Class B Common Stock into an equal number of shares of Class A Common Stock. As used herein, the term “Qualified Transferee” means any one or more of: (i) any holder of Class B Common Stock that is a holder of Class B Common Stock immediately preceding the transfer, or (ii) any Immediate Family Member, as hereinafter defined, of a holder of Class B Common Stock on the date of transfer, or (iii) in the event of death or legal disability of a holder of Class B Common Stock, (a) such holder’s executor, administrator or personal representative, or (iv) the Ingles Markets, Incorporated Profit Sharing Plan and Trust, or (iv) any participant in the Ingles Markets, Incorporated Profit Sharing Plan and Trust that holds shares of Class B Common Stock in the participant’s Plan account on the date of transfer, or (v) a trust for the benefit of (a) the transferor, or (b) any Immediate Family Member of the transferor, or (c) any holder of Class B Common Stock, or (d) any Immediate Family Member of a holder of Class B Common Stock, or any descendant of Robert P. Ingle (individually referred to as a “Qualified Beneficiary”), if the trustee of such trust is (w) the transferor or an Immediate Family Member of the transferor, or (x) a holder of Class B Common Stock, or (y) an Immediate Family Member of a holder of Class B Common Stock, or (z) a descendant of Robert P. Ingle (individually referred to as a “Qualified Trustee”), or (vi) a beneficiary of a trust described in the immediately preceding clause (v) or, (vii) a trust for the benefit of a beneficiary of a trust described in clause (v) if the trustee of such second trust is a Qualified Trustee, or (viii) any corporation, limited liability company, partnership or other entity that is controlled on the date of transfer by (a) the transferor, (b) an Immediate Family Member of the transferor, or (c) any one or more persons or entities that are each (w) a holder of Class B Common Stock on the date of transfer, or (x) an Immediate Family Member of a holder of Class B Common Stock on the date of transfer, or (z) a descendant of Robert P. Ingle. For purposes of clause (viii) of the immediately preceding sentence, “control” means (a) the ownership of more than 50% of the voting securities or other voting interest of any entity, or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities, by contract or other agreement, as a general partner, as a manager or otherwise. Any shares of Class B Common Stock transferred beneficially but not of record may be denied the right to vote and receive payment of dividends until the shares have been transferred of record. “Immediate Family Member” shall mean a person’s spouse, parents and such parent’s descendants. Any transfer by a deceased holder’s executor, administrator or personal representative shall be deemed made by the deceased holder.” |
STOCKHOLDER PROPOSAL ON EQUAL VOTING RIGHTS FOR EACH SHARE
The following proposal and supporting statement were submitted by a stockholder, the name and stockholdings of which will be furnished promptly to any stockholder upon written or oral request to the Company’s Secretary at the Company’s executive offices, with the intention of presenting it for a vote at the Annual Meeting:
STOCKHOLDER PROPOSAL
Equal Voting Rights for Each Share
RESOLVED: Shareholders request that our Board take the steps necessary to eventually enable all of our company’s outstanding stock to have an equal one-vote per share in each voting situation. This would encompass all practicable steps including encouragement and negotiation with current and future shareholders, who have more than one vote per share, to request that they relinquish, for the common good of all shareholders, any preexisting rights, if necessary.
This proposal topic may have received majority support from all the non-insider Ingles Markets shares in 2019 and 2021. Dual-class stocks tend to under-perform the stock market.
Dual-class stocks tend to create an inferior class of shareholders and hand over power to a select few, who are then allowed to pass the financial risk onto others. With few constraints placed upon them, managers holding super-class stock can spin out of control. Families and senior managers can entrench themselves into the operations of the company, regardless of their abilities and performance. Dual-class structures may allow management to make bad decisions with few consequences.
Hollinger International presented a sad example of the negative effects of dual-class shares. Former CEO Conrad Black controlled all of the company’s class-B shares, which gave him 30% of the equity and 73% of the voting power. He ran the company as if he were the sole owner, exacting huge management fees, consulting payments and personal dividends. Hollinger’s board of directors was filled with Black’s friends who were unlikely to forcefully oppose his authority.
Holders of publicly traded shares of Hollinger had almost no power to have any influence in terms of executive pay, mergers and acquisitions, board composition or poison pills. Hollinger’s financial and share performance suffered under Black’s control.
The Council for Institutional Investors (CII) recommends a 7-year phase-out of dual class share offerings. The International Corporate Governance Network supports CII’s recommendation to require a time-based sunset clause for dual class shares to revert to a traditional one-share/one-vote structure in no more than 7-years.
Please vote yes:
Equal Voting Rights for Each Share
STATEMENT OF OPPOSITION
The Board has given the stockholder proposal careful consideration and believes that it should not be implemented.
The voting powers, preferences and relative rights of Class A Common Stock and Class B Common Stock are identical in all respects, except that each share of Class A Common Stock is entitled to receive a cash dividend and liquidation payment in an amount equal to 110% of any cash dividend or liquidation payment on Class B Common Stock and the holders of Class A Common Stock have one vote per share and the holders of Class B Common Stock have ten votes per share.
The Company has had two classes of common stock since it became a publicly traded company in September 1987, giving Class A shareholders over 34 years to balance the risks and rewards of stock ownership in the Company, including receiving higher dividends versus lesser voting control compared to Class B shareholders. Class A stockholders have received 10% more cash dividends than Class B stockholders for every quarterly cash dividend since becoming a publicly traded company in September 1987.
Over the years, Management’s focus has been to serve the interests of its customers, associates and holders of both Class A and Class B Common Stock, with no preference to one stockholder group over any other.
Robert P. Ingle II has informed the Company that he, in his capacity as a stockholder, intends to vote against the stockholder proposal. Mr. Ingle II controls approximately 71% of the outstanding voting power. If Mr. Ingle II does vote against the proposal, it will not receive a sufficient number of favorable votes to be approved.
STOCKHOLDER PROPOSAL REGARDING CAGE FREE EGG PROGRESS DISCLOSURE
In the “Animal Welfare” section of its website, Ingles states that “Ingles Markets associates and customers are passionate about Animal Welfare” and that the company “is committed to supporting the humane treatment of animals.”
Toward this end, in 2016, Ingles Markets announced in a press release that “Ingles’ goal is to have 100% of both the shell and liquid eggs it sells come from cage-free hens by 2025.” (Ingles had been permitting its egg suppliers to lock hens in cages so small and cramped, the animals could barely move for their entire lives.)
However, serious concerns have arisen as to what steps and progress—if any—the company has made toward implementing this policy.
For context, hundreds of the world’s largest food companies and retailers have addressed concerns about the extreme, inhumane confinement of laying hens by adopting similar policies to switch to 100% cage-free eggs—including Kroger, Albertsons, Walmart, Target, Costco, Ahold Delhaize and others.
Indeed, the treatment of animals within the supply chain can be viewed as materially impacting food companies:
| ● | Northern Trust—a major Ingles shareholder with $1 trillion in assets under management—has reported that it, “generally votes for proposals requesting increased disclosure or reporting regarding animal treatment issues that may impact a company’s operations and products…especially in relation to food production.” |
| ● | Citigroup concluded that “headline risks” endangering food purveyors include “concerns over animal cruelty.” |
| ● | Glass Lewis reports: a company “should consider its exposure to regulatory, legal and reputational risk due to its animal welfare policies and practices.” |
| ● | “In the case of animal welfare,” reported the World Bank’s International Finance Corporation, “failure to keep pace could put companies and their investors at a competitive disadvantage.” |
Many leading food companies have already reached 100% cage-free eggs in their supply chains, and others are disclosing their progress. Just some include Walmart, Sam’s Club, Kroger, Target, Nestle, Unilever, Conagra Brands, KraftHeinz, Campbell Soup, Mondelez, McDonald’s and more.
It would benefit shareholders to understand what progress, if any, Ingles has made toward implementing its policy of switching to 100% cage-free eggs.
THEREFORE, BE IT RESOLVED: Shareholders request that Ingles disclose what percentage of its eggs were cage-free at the time it announced its egg policy in 2016, what percentage are cage-free today, the specific steps the company has taken toward implementing its cage-free egg commitment, and what next steps the company will take to reach its goal of sourcing only cage-free eggs by 2025. These disclosures should be made within three months of the 2022 annual meeting, at reasonable cost, and omit proprietary information.
STATEMENT OF OPPOSITION
The Board has given the stockholder proposal careful consideration and believes that it should not be implemented.
The Company and its associates are passionate about animal welfare, and the Company has previously stated its goal to have 100% of both the shell and liquid eggs it sells come from cage-free hens by 2025. Of all shell and liquid eggs that the Company has sold since setting its cage-free goal in 2016, the Company has increased the percentage of such sales comprising cage free shell and liquid eggs each year, and the Company currently believes that the 2025 goal is attainable. However, the Company believes that reporting periodic progress towards this goal could be misunderstood by certain stakeholders and could place the Company at a competitive disadvantage, which could negatively impact its stockholders. At the present time, the Company believes that there is an inadequate supply of cage-free eggs at a reasonable cost to meet all of its customer demand with 100% cage free shell and liquid eggs. The Company continues to work with its suppliers to meet the 2025 goal.
Robert P. Ingle II has informed the Company that he, in his capacity as a stockholder, intends to vote against the stockholder proposal. Mr. Ingle II controls approximately 71% of the outstanding voting power. If Mr. Ingle II does vote against the proposal, it will not receive a sufficient number of favorable votes to be approved.
OTHER MATTERS
