UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

 

Filed by the Registrant  ☒
Filed by a Party other than the Registrant  ☐
Check the appropriate box:
☒		Preliminary Proxy Statement
☐		CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
☐		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material Pursuant to Section 240.14a-12

 

Leslie’s, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):
☒		No fee required
☐		Fee paid previously with preliminary materials.
☐		Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

2023

NOTICE OF ANNUAL MEETING

OF SHAREHOLDERS AND

PROXY STATEMENT

 

 

 

    LETTER FROM THE CHIEF EXECUTIVE OFFICER

 

Dear Fellow Shareholders,

On behalf of the Board of Directors, it is our pleasure to invite you to attend the 2023 Annual Meeting of Shareholders of Leslie’s, Inc. The meeting will be held in a virtual format on Thursday, March 16, 2023, beginning at 12:00 p.m. (Eastern Time). The meeting will be conducted via a live audiocast at www.virtualshareholdermeeting.com/LESL2023.

The following pages contain the formal Notice of Annual Meeting of Shareholders and Proxy Statement, which describe the specific business to be considered and voted upon at the Annual Meeting. The meeting will include a report on Leslie’s activities for the fiscal year ended October 1, 2022, and there will be an opportunity for comments and questions from shareholders.

Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. After reviewing the Proxy Statement, we ask you to vote as described in the Proxy Statement as soon as possible.

On behalf of our Board of Directors, we would like to thank you for your continued interest and investment in Leslie’s.

 

 

Yours Sincerely,
		Chief Executive Officer 2005 East Indian School Road Phoenix, Arizona 85016 January [    ], 2023

 

 

 

Proxy Statement and Annual Meeting Report 2023

 

Notice of Annual Meeting of Shareholders

 

				DATE AND TIME Thursday, March 16, 2023 12:00 p.m. Eastern Time				WHO CAN VOTE Shareholders of record as of 5:00 p.m. Eastern Time on January 17, 2023 will be entitled to notice of, and to vote at, the Annual Meeting, or any adjournment thereof.
				LOCATION Online via live audiocast on www.virtualshareholdermeeting.com/LESL2023

VOTING ITEMS

 

Proposals				Board Vote Recommendation		For Further Details
1.		Election of two Class II directors, as named in this proxy statement		“FOR” each director nominee listed in Proposal 1		Page 16
2.		Ratification of appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2023		“FOR”		Page 23
3.		Non-binding, advisory vote to approve named executive officer compensation		“FOR”		Page 25
4.		Adoption of Sixth Amended and Restated Certificate of Incorporation of Leslie’s, Inc., which declassifies our Board of Directors and deletes certain obsolete provisions from our Certificate of Incorporation		“FOR”		Page 41

Shareholders will also transact any other business that may be properly presented at the Annual Meeting. This proxy statement is first being made available to our shareholders on or about January [    ], 2023.

The purpose of the Annual Meeting is to consider and take action on the proposals stated above and discussed more thoroughly in the proxy materials. We are holding the Annual Meeting in a virtual-only format this year. To attend the Annual Meeting online, vote, submit questions or view the list of registered shareholders during the meeting, shareholders of record will need to go to the meeting website listed above and log in using their 16-digit control number included on their proxy card. Beneficial owners should review these proxy materials and their voting instruction form for how to vote in advance of and how to participate in the Annual Meeting.

In the event of a technical malfunction or other situation that the meeting chair determines may affect the ability of the Annual Meeting to satisfy the requirements for a meeting of shareholders to be held by means of remote communication under the Delaware General Corporation Law, or that otherwise makes it advisable to adjourn the Annual Meeting, the chair or secretary of the Annual Meeting will convene the meeting at 12:30 p.m. Eastern Time on the date specified above and at the Company’s address specified below solely for the purpose of adjourning the meeting to reconvene at a date, time and physical or virtual location announced by the meeting chair. Under either of the foregoing circumstances, we will post information regarding the announcement on the Company’s Investor Relations page at https://ir.lesliespool.com/.

We encourage you to review these proxy materials and vote your shares before the Annual Meeting, your vote is important.

By Order of the Board of Directors,

 

Brad Gazaway

Chief Legal Officer and Corporate Secretary

2005 East Indian School Road

Phoenix, Arizona 85016

January [    ], 2023

HOW TO VOTE

 

INTERNET www.proxyvote.com		TELEPHONE 1-800-690-6903		MAIL Mark, sign, date and promptly mail the enclosed proxy card in the postage-paid envelope
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 16, 2023   The notice, Proxy Statement, and 2022 Annual Report on Form 10-K are available at www.proxyvote.com.

 

 

Proxy Statement and Annual Meeting Report 2023

TABLE OF CONTENTS

 

Table of Contents

 

 

Proxy Statement and Annual Meeting Report 2023			i

TABLE OF CONTENTS

 

FORWARD-LOOKING STATEMENTS AND WEBSITE REFERENCES     This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current facts, including statements regarding our environmental and other sustainability plans and goals, made in this document are forward-looking. We use words such as “may,” “will,” “likely,” “anticipates,” “believes,” “expects,” “estimates,” “future,” “intends,” “continue,” “maintain,” “remain,” “goal,” “target,” “recurring,” and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. Risks and uncertainties that could cause our actual results to differ significantly from management’s expectations are described in our 2022 Annual Report on Form 10-K. Our forward-looking statements speak only as of the date of this document or as of the date they are made, and we undertake no obligation to update them, notwithstanding any historical practice of doing so. Forward-looking and other statements in this document may also address our corporate responsibility and sustainability progress, plans, and goals (including environmental and diversity & inclusion matters), and the inclusion of such statements is not an indication that these contents are necessarily material to investors or required to be disclosed in the Company’s filings with the SEC. In addition, historical, current, and forward-looking environmental and social-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. We caution you that these statements are not guarantees of future performance, nor promises that goals or targets will be met, and are subject to numerous and evolving risks and uncertainties that we may not be able to predict or assess. In some cases, we may determine to adjust our commitments, goals or targets or establish new ones to reflect changes in our business, operations or plans. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.

 

ii    Leslie’s, Inc.

 

Proxy Statement Summary

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

 

DATE AND TIME   March 16, 2023, at 12:00 p.m. Eastern Time		LOCATION   Online at www.virtualshareholdermeeting.com/LESL2023		RECORD DATE   January 17, 2023

 

Voting Matters				Board’s Vote Recommendations		For Further Information
PROPOSAL 1		Election of two Class II directors, as named in this proxy statement		“FOR” each director nominee listed in Proposal 1		Page 16
PROPOSAL 2		Ratification of appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2023		“FOR”		Page 23
PROPOSAL 3		Non-binding, advisory vote to approve named executive officer compensation		“FOR”		Page 25
PROPOSAL 4		Adoption of Sixth Amended and Restated Certificate of Incorporation of Leslie’s, Inc., which declassifies our Board of Directors and deletes certain obsolete provisions from our Certificate of Incorporation		“FOR”		Page 41

COMPANY OVERVIEW AND BUSINESS STRATEGY

We are the largest and most trusted direct-to-consumer brand in the $15 billion United States pool and spa care industry, serving residential and professional consumers. Founded in 1963, we are the only direct-to-consumer pool and spa care brand with national scale, operating an integrated marketing and distribution ecosystem powered by a physical network of 990 branded locations and a robust digital platform. We have a market-leading share of approximately 15% of residential aftermarket product spend as of 2021, our physical network is larger than the sum of our 20 largest competitors and our digital sales are estimated to be greater than five times as large as that of our largest digital competitor. We offer an extensive assortment of professional-grade products, the majority of which are exclusive to Leslie’s, Inc. (“Company” or “Leslie’s”), as well as certified installation and repair services, all of which are essential to the ongoing maintenance of pools and spas. Our dedicated team of associates, pool and spa care experts, and experienced service technicians are passionate about empowering our consumers with the knowledge, products, and solutions necessary to confidently maintain and enjoy their pools and spas. Over the last five fiscal years, we have spent more than $215 million in foundational investments across new technologies and capabilities focused on transforming our consumer experience and advancing our industry leadership. The unprecedented scale of our integrated marketing and distribution ecosystem, which is powered by our direct-to-consumer network, uniquely enables us to efficiently reach and service every pool and spa in the continental United States, capabilities no competitor can match.

We operate primarily in the pool and spa aftermarket industry, which is broadly comprised of: (i) chemicals; (ii) equipment, parts and accessories; and (iii) services, and is one of the most fundamentally attractive consumer categories given its scale, predictability, and growth outlook. We have a highly predictable, recurring revenue model, as evidenced by our 59 consecutive years of sales growth. Approximately 80% of our assortment is comprised of non-discretionary products essential to the care of residential and commercial pools and spas.

 

Proxy Statement and Annual Meeting Report 2023			1

PROXY STATEMENT SUMMARY

 

Consumers receive the benefit of extended vendor warranties on products purchased through our locations and on on-site installations or repairs by our certified in-field technicians. We offer complimentary, commercial-grade in-store water testing and analysis via our proprietary AccuBlue^® system, which increases consumer engagement, conversion, basket size, and loyalty, resulting in higher lifetime value. Our water treatment expertise is powered by data and intelligence accumulated from the millions of water tests we have performed over the years, positioning us as the most trusted water treatment service provider in the industry. Due to the non-discretionary nature of our products and services, our business has historically delivered strong, uninterrupted growth and profitability in all market environments, including through the Great Recession and the ongoing COVID-19 pandemic.

We have a legacy of leadership and disruptive innovation. Since our founding in 1963, we have been the leading innovator in our category and have provided our consumers with the most advanced pool and spa care available. As we have scaled, we have leveraged our competitive advantages to strategically reinvest in our business and intellectual property to develop new value-added capabilities. We have pioneered complimentary in-store water testing, offered complimentary in-store equipment repair services, introduced the industry’s first loyalty program, implemented the industry’s first scale omni-channel capabilities and developed an expansive platform of owned and exclusive brands. These differentiated capabilities allow us to meet the needs of any pool and spa owner, whether they care for their pool or spa themselves or rely on a professional, whenever, wherever, and however they choose to engage with us.

 

2    Leslie’s, Inc.

PROXY STATEMENT SUMMARY

 

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE

We recognize that strong corporate responsibility is essential for good governance. It bolsters the accountability of our Board of Directors (“Board”) and Management team and supports the long-term interests of all our stakeholders—our customers, our associates, our business partners, our communities, and our shareholders. The Board’s responsibility is grounded in a duty to govern and support our corporate strategy and to ensure decisions are made in alignment with its mission, values, purpose, and environmental, social, and governance (“ESG”) priorities. Our dedicated ESG sub-committee of the Nominating and Corporate Governance committee participates in the establishment, review, and observation of ESG matters. Our full committees, including the Audit, Compensation, and Nominating and Corporate Governance committees, stay apprised and advise on specific ESG elements, such as cybersecurity and data privacy, executive compensation, human capital management, and board refreshment. It is this robust structure at the Board-level that contributes to the effective oversight of the company’s activities and management’s decision-making process. At the management level, our Chief Legal Officer leads our strategic ESG initiatives with the support from our Director of ESG.

The consideration of ESG issues is at the core of our strategic initiatives and is approached from the perspective of, and for the benefit of, all our stakeholders and the many other individuals and groups we coordinate with daily. As a pool and spa retailer, our ESG priorities include diversity, equity, and inclusion, environmental, health, and safety management, sustainable products, community engagement and water safety, and human capital management. We also published our second annual ESG report, which highlights our priorities and initiatives on environmental stewardship, social commitments, corporate governance, and community service. We will aim to continue to align our ESG reporting with leading frameworks including the Sustainable Accounting Standards Board (“SASB”) standards and the United Nations Sustainable Development Goals (“UN SDGs”).

More information on Leslie’s ESG efforts is available on our Investor Relations page at https://ir.lesliespool.com/esg.

Diversity & inclusion

As champions of Diversity, Equity, & Inclusion (“DEI”), our values encourage us all to create spaces where we can proudly work together, do our best, and have fun along the way. Key aspects of this commitment are valuing ideas from multiple viewpoints, knowing that our ultimate success is directly linked to having talented associates from all backgrounds and perspectives, and developing, fostering, and celebrating a culture of DEI. Our Diversity and Inclusion Advisory Council (“Dive In”) is a goal-oriented group of 59-employee members focused on advancing discussions, strategies, and action plans that promote inclusive hiring and development opportunities across the company and within our communities. The Council’s overarching goal is to achieve a diverse workforce, at all levels, that mirrors the US census population by 2025. As part of our commitment to transparency, we have disclosed our workforce diversity data by gender, race and ethnicity in our consolidated EEO-1 report in 2021. Leslie’s EEO-1 Report can be found on our Investor Relations page at https://ir.lesliespool.com/esg.

Environmental, health, and safety management

Providing a safe shopping experience for our customers and a safe and healthy workplace for our associates is our highest operational priority. This responsibility starts at the top of the organization and extends to every level of management and every associate. As a company dedicated to being customer focused, owning our outcomes, and measuring our impact, we are committed to identifying and implementing the appropriate policies, programs, and procedures to support safe behaviors.

As part of our efforts to reduce our emissions and create deeper environmental efficiencies, in the 2021 ESG report we initiated our inaugural greenhouse gas (“GHG”) emissions assessment for our total operations with full support from our Board and Management team. This assessment will serve as a valuable resource in the development of our mitigation and reduction strategies. We will continue to enhance our transparency and accountability by annually reporting our Scope 1 and 2 emissions in addition to select Scope 3 emissions.

Sustainable products

Across our product assortment, we offer a variety of eco-product options, which help our customers reduce water and energy consumption and improve water chemistry efficacy. Our expansion of sustainable products is one way we are upholding our value of investing in big ideas and new technologies. By working alongside our third-party vendors, we are continuously increasing the range of sustainable offerings.

 

Proxy Statement and Annual Meeting Report 2023			3

PROXY STATEMENT SUMMARY

 

Community engagement and water safety

We take pride in giving back to the communities in which we live and work from the local to the national arena. In fiscal year 2021, we established our Philanthropy Council, which oversees Leslie’s Charitable Foundation in addition to our philanthropic partnerships and volunteerism and charitable giving programs. We supported our philanthropic partners with over $700,000 in funding during fiscal year 2022.

Nothing is more important to us than keeping our communities safe in and around pools. Our goal is to provide the tools and information needed to protect our family and friends by promoting guidelines on learning to swim, securing one’s swim area, and maintaining a healthy water environment. In fiscal year 2022, we continued our water safety campaign with the YMCA of the USA and Boys & Girls Clubs of America, which collected donations at our store registers to raise money for water safety education, swimming lessons, lifeguard training, and healthy water.

HUMAN CAPITAL MANAGEMENT

As of October 1, 2022, we employed approximately 4,200 employees. Of these employees, approximately 3,150 work in our physical network, approximately 350 work as in-field service technicians, approximately 350 work in our corporate office, and approximately 350 work in our distribution centers. We believe that we have good relations with our employees. None of our employees are currently covered under any collective bargaining agreements.

We consider our employees to be the foundation for our growth and success. As such, our future success depends in large part on our ability to attract, train, retain, and motivate qualified personnel. The growth and development of our workforce is an integral part of our success. We place a priority on promoting from within. Over the last three years, approximately 70% of our retail and corporate management openings have been filled by existing employees.

We are also committed to developing and fostering a culture of diversity and inclusion and know that a company’s ultimate success is directly linked to its ability to identify and hire talented individuals from all backgrounds and perspectives.

DIRECTOR NOMINEES

The following provides summary information about each director nominee up for election at the 2023 Annual Meeting.

 

Name and Occupation

Age

Other Public Boards

Committee Memberships

AC

CC

NCGC

James Ray, Jr.   (1) Former President, STANLEY Engineered Fastening, Stanley Black & Decker, Inc.

59

2

John Strain     Former Head of e-Commerce and Technology, Gap, Inc.

54

0

 

4    Leslie’s, Inc.

PROXY STATEMENT SUMMARY

 

ALL OTHER DIRECTORS

The following provides summary information about all other directors not up for election at the 2023 Annual Meeting, as of January 1, 2023.

 

Name and Occupation		Age					Other Public Boards					Committee Memberships
												AC					CC					NCGC
Steven L. Ortega     Former CEO, Current Chairman, Leslie’s, Inc.		61					0
Michael R. Egeck     CEO, Leslie’s, Inc.		64					0
Marc Magliacano(2)     Managing Partner, L Catterton Global Flagship Fund		48					1
Susan O’Farrell       Former CFO, BlueLinx Holdings, Inc.		59					0
Yolanda Daniel   Former VP Finance, Federal Reserve Bank of Chicago		56					0
Eric Kufel Former CEO, West Marine, Inc.		56					0
Claire Spofford     CEO and President, J.Jill		61					1
Jodeen Kozlak (3)     Founder & CEO, Kozlak Capital Partners		59					3

 

AC – Audit Committee CC – Compensation Committee NCGC – Nominating and Corporate Governance Committee        Independent     Lead Independent Director		Chair                      Member Audit Committee Financial Expert

 

(1)	Following the conclusion of the 2023 Annual Meeting, James Ray, Jr. will become chairman of the Nominating and Corporate Governance Committee.

(2)	Marc Magliacano is resigning from the Board at the conclusion of the 2023 Annual Meeting.

(3)	Jodeen Kozlak is not standing for re-election at the 2023 Annual Meeting.

 

		BOARD SNAPSHOT
		(as of January 1, 2023)

 

 

 

Proxy Statement and Annual Meeting Report 2023			5

PROXY STATEMENT SUMMARY

 

		SKILLS & EXPERIENCE
		(as of January 1, 2023)

 

 

SKILLS AND EXPERIENCE

Daniel

Egeck

Kufel

Kozlak

Ray,

Strain

Magliacano

O’Farrell

Ortega

Spofford

Retail/Merchandising

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

Strategic Management

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

Supply Chain

🌑

🌑

🌑

🌑

🌑

🌑

Brand and Consumer Marketing

🌑

🌑

🌑

🌑

Digital Commerce and Marketing

🌑

🌑

🌑

🌑

🌑

Human Capital Management

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

Information Technology and Cyber Security

🌑

🌑

Finance/Accounting

🌑

🌑

🌑

🌑

🌑

🌑

🌑

Governance/Risk Management

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

Senior Leadership

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

ESG/DEI

🌑

🌑

🌑

🌑

Public Company Experience

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

🌑

BACKGROUND

Gender 🌑 Male         O Female

O

🌑

🌑

O

🌑

🌑

🌑

O

🌑

O

African American or Black

🌑

🌑

Hispanic or Latinx

🌑

White

🌑

🌑

🌑

🌑

🌑

🌑

🌑

 

Skills and Experience Categories
		Retail/Merchandising		Important in understanding our industry, business needs and strategic goals
		Strategic Management		Important in implementing our goals and aligning on long-term business investments and objectives and our capital allocation
		Supply Chain		Important to oversee upstream and downstream structure and design of the supply chain, all of which are critical to our strategic goals
		Brand and Consumer Marketing		Important as marketing and communications are critical to building and expanding our market share
		Digital Commerce and Marketing		Important in overseeing the development of our multi-channel strategy
		Human Capital Management		Important to oversee our significant associate base that is growing, so that we place the best investments in our associates
		Information Technology and Cyber Security		Important as we assess our technology and cybersecurity needs, along with the needs of our customers, among other reasons to protect our customers’ data
		Finance/Accounting		Important to oversee and understand our financial statements, capital structure and internal controls
		Governance/Risk Management		Supports our objective to have corporate governance and risk management practices that reflect industry best practices
		Senior Leadership		Important as leadership experience can provide insight on business operations, growth and culture
		ESG/DEI		Helpful in our work as a values driven organization
		Public Company Experience		Important to oversee the workings of a public company

 

6    Leslie’s, Inc.

PROXY STATEMENT SUMMARY

 

Board Diversity Matrix (as of January 1, 2023)
Total Number of Directors			10
		Female				Male
Part I: Gender Identity
Directors			4				6
Part II: Demographic Background
African American or Black			1				1
Hispanic or Latinx			0				1
White			3				4

CORPORATE GOVERNANCE HIGHLIGHTS

 

•

The Board consists of a diverse mix of individuals with distinctive skills and experience

 

•

Separate Chairman, Chief Executive Officer, and Lead Independent Director

 

•

Majority of Board directors are independent directors

 

•

Only independent directors sit on Board committees

 

•

Average director age of 58 years

 

•

Annual Board and committee self-evaluations

 

•

Annual director evaluations

 

•

Executive sessions for Independent Directors

 

•

Directors and other designated officers are subject to stock ownership guidelines

 

•

Consistent outreach with our shareholders related to governance and other matters

 

•

Hedging/pledging prohibited

 

Proxy Statement and Annual Meeting Report 2023			7

 

Corporate Governance

DIRECTOR INDEPENDENCE

Our Board has undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information provided by each director, our Board has determined that none of our directors, with the exception of Messrs. Egeck, Kufel, Magliacano and Ortega, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is independent under applicable Nasdaq rules. In making these determinations, our Board considered the current and prior relationships that each non-employee director has with the Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”

BOARD LEADERSHIP STRUCTURE

The Board annually reviews its leadership structure to evaluate whether the structure remains appropriate for the Company. The Board selects its Chairman and the Chief Executive Officer (“CEO”) in a way it considers is in the best interests of the Company. The Board does not have a policy on whether the role of Chairman and CEO should be separate or combined. The Board has determined, however, that wherever and for so long as the Chairman is not an independent director, then there shall also be a lead independent director.

Currently, our Chairman is Steven L. Ortega, and the Lead Independent Director is James Ray, Jr.

LEAD INDEPENDENT DIRECTOR

The Lead Independent Director’s responsibilities include the following:

 

•

presiding at all meetings of the Board at which the chairperson of the Board is not present, including executive sessions of non-employee directors and independent directors;

 

•

approving information sent to the Board and overseeing that the scope, quality, quantity and timeliness of the flow of information between management and the Board is adequate for the Board to effectively and responsibly perform its duties;

 

•

consulting with the chairperson of the Board regarding agendas for all meetings of the Board as well as contributing to and approving them;

 

•

approving Board meeting schedules to provide that there is sufficient time for discussion of all agenda items;

 

•

serving as a liaison between the chairperson of the Board and the independent directors; and

 

•

if requested by major shareholders, being available for consultation and direct communication.

In addition, the Lead Independent Director also has the authority to call meetings of the independent directors.

DIRECTOR NOMINATIONS

In accordance with its charter, the Nominating and Corporate Governance Committee determines the qualifications, qualities, skills, and other expertise required to be a director and recommends to the Board criteria to be considered in selecting nominees for directors. These will inform the committee’s annual evaluation of the experience and characteristics appropriate for Board members and director candidates in light of the Board’s composition, and the skills and expertise needed for effective operation of the Board and its committees. The Board and the Nominating and Corporate Governance Committee also ensures that qualified director candidates with a diversity of gender, ethnicity, tenure, skills and experience are included by the Company or any search firm it engages in each pool of candidates from which Board nominees are chosen.

 

8    Leslie’s, Inc.

CORPORATE GOVERNANCE

 

The Nominating and Corporate Governance Committee reviews the qualifications of director candidates and incumbent directors in light of the criteria approved by Board, and any shareholder recommendations for director are evaluated in the same manner as other candidates considered by the Nominating and Corporate Governance Committee. Shareholders that wish to nominate a director for election to our Board should follow the procedures described under the “Submission of Shareholder Proposals for the 2024 Annual Meeting” heading.

We generally evaluate the following criteria regarding minimum director qualifications for our directors to possess: educational background, gender, ethnic diversity, diversity of professional experience, including whether the person is a current or was a former chief executive officer or chief financial officer of a public company or the head of a division of a prominent international organization, knowledge of our business, integrity, professional reputation, independence, wisdom, and ability to represent the best interests of our shareholders.

The Nominating and Corporate Governance Committee of the Board prepares policies regarding director qualification requirements and the process for identifying and evaluating director candidates for adoption by the Board. The above-mentioned attributes, along with the leadership skills and other experiences of our officers and Board members described above, are expected to provide us with a diverse range of perspectives and judgment necessary to facilitate our goals of shareholder value appreciation through organic and acquisition growth.

BOARD AND BOARD COMMITTEES ANNUAL SELF-ASSESSMENTS

On an annual basis, the Board and the Board Committees conduct written self-assessments on their respective performance throughout the past year. These written self-assessments are completed by each Board director and Board Committee member, and then the results are compiled and reviewed by the Board and/or respective Board Committee.

BOARD COMMITTEES

Our Board has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee.

In accordance with our Corporate Governance Guidelines, the independent directors meet in executive session without management present on a regularly scheduled basis.

During the fiscal year ended October 1, 2022, the Board held 9 meetings, and there were 10 meetings of the Audit Committee, 6 meetings of the Compensation Committee and 5 meetings of the Nominating and Corporate Governance Committee. All incumbent directors attended at least 75% of the aggregate of the meetings of the Board and committees on which they served occurring during 2022.

Directors are expected to attend the annual meeting of shareholders absent unusual circumstances.

 

Proxy Statement and Annual Meeting Report 2023			9

CORPORATE GOVERNANCE

 

AUDIT COMMITTEE
MEMBERS Susan O’Farrell (Chair) Yolanda Daniel John Strain		PRINCIPAL RESPONSIBILITIES:   The primary role of the Audit Committee is to oversee the Company’s accounting and financial reporting processes and the audits of the Company’s financial statements. Management of the Company is responsible for preparing the Company’s financial statements, determining that they are complete, accurate, and in accordance with generally accepted accounting principles in the United States (“US GAAP”) and establishing and maintaining satisfactory disclosure controls and internal control over financial reporting. The independent public accounting firm is responsible for auditing the Company’s financial statements and expressing an opinion on the conformity of those consolidated financial statements with US GAAP and expressing an opinion as to the effectiveness of the Company’s internal controls over financial reporting.   We have adopted a committee charter that details the principal functions of the Audit Committee, including:   •  selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;   •  helping to ensure the independence and performance of the independent registered public accounting firm;   •  reviewing financial statements and discussing the scope and results of the independent audit and quarterly reviews with the independent registered public accounting firm, and reviewing, with management and the independent registered public accounting firm, our interim and year-end results of operations;   •  preparing the audit committee report that the Securities and Exchange Commission (“SEC”) requires to be included in our annual proxy statement;   •  reviewing the adequacy and effectiveness of our internal control over financial reporting and disclosure controls and procedures, and overseeing procedures for employees to submit concerns anonymously about accounting, internal control, or audit matters;   •  reviewing and approving the function of our internal audit department;   •  reviewing our policies on risk assessment and risk management;   •  reviewing related party transactions; and   •  approving or, as required, pre-approving, all audit and all permissible non-audit services and fees, to be performed by the independent registered public accounting firm.   Under the Nasdaq listing rules and applicable SEC rules, we are required to have at least three members of the Audit Committee, all of whom must be independent. Each member of the Audit Committee is financially literate, and our Board has determined that Ms. O’Farrell and Ms. Daniel both qualify as an “audit committee financial expert” as defined in applicable SEC rules and have accounting or related financial management expertise.   The Audit Committee has established and oversees procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls over financial reporting and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters. The Audit Committee has the authority to retain counsel and other advisers as it determines necessary to fulfill its duties and responsibilities.

 

10    Leslie’s, Inc.

CORPORATE GOVERNANCE

 

COMPENSATION COMMITTEE
MEMBERS John Strain (Chair) Jodeen Kozlak James Ray, Jr. Claire Spofford		PRINCIPAL RESPONSIBILITIES:   The primary role of the Compensation Committee is to assist the Board with the oversight of executive compensation.   We have adopted a committee charter that details the principal functions of the Compensation Committee, including:   •  reviewing, approving and determining, or making recommendations to our Board regarding the compensation of our executive officers;   •  overseeing our overall compensation philosophy and compensation policies, plans and benefit programs for service providers, including our executive officers;   •  administering our equity compensation plans; and   •  reviewing, approving, and making recommendations to our Board regarding incentive compensation and equity compensation plans.   The Compensation Committee may delegate its duties and responsibilities to one or more subcommittees as it determines appropriate.   The Compensation Committee is comprised of four directors, each director meets the Nasdaq independence requirements and all four directors qualify as “non-employee directors” under the Securities Exchange Act of 1934, as amended (“Exchange Act”).   The Compensation Committee has the authority, in its sole discretion, to retain a compensation consultant, legal counsel or other advisers, and are directly responsible for the compensation, retention terms and overseeing the work of any such advisers.   The Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) in April 2021 to serve as the compensation consultant for the Compensation Committee and to provide advice in connection with the design of the Company’s 2022 compensation program for directors and executive officers. FW Cook did not provide any other services to the Company or management, and FW Cook only received fees from the Company for the services it provided to the Compensation Committee. The Compensation Committee evaluated FW Cook’s independence under the applicable Nasdaq and SEC standards and concluded that FW Cook was independent of the Company and that its services raised no conflicts of interest. The Company’s Chief Executive Officer and Chief Financial Officer were invited to participate in discussions regarding the 2022 compensation program and to give their recommendations.

 

Proxy Statement and Annual Meeting Report 2023			11

CORPORATE GOVERNANCE

 

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
MEMBERS Jodeen Kozlak (Chair) Yolanda Daniel James Ray, Jr. Claire Spofford		PRINCIPAL RESPONSIBILITIES:   The primary role of the Nominating and Corporate Governance Committee is to assist the Board with oversight of the director nominations process and the Company’s corporate governance.   We have adopted a committee charter, which details the purpose and responsibilities of the Nominating and Corporate Governance Committee, including:   •  identifying, evaluating, and selecting, or making recommendations to our Board regarding, nominees for election to our Board and its committees;   •  evaluating the performance of our Board and of individual directors;   •  considering and making recommendations to our Board regarding the composition of our Board and its committees;   •  reviewing developments in corporate governance practices;   •  evaluating the adequacy of our corporate governance practices and reporting;   •  reviewing the succession planning for our executive officers; and   •  developing and making recommendations to our Board regarding corporate governance guidelines and matters.   The Board has delegated to the Nominating and Corporate Governance Committee oversight of our ESG matters. The Nominating and Corporate Governance Committee has an ESG Sub-Committee which reviews and monitors our ESG sustainability and corporate governance trends, and conducts ESG shareholder outreach.   The Nominating and Corporate Governance Committee may delegate its duties and responsibilities to one or more subcommittees, consisting only of independent directors, as it determines appropriate.   The Nominating and Corporate Governance Committee is comprised of four directors and each director meets the Nasdaq independence requirements.   The Nominating and Corporate Governance Committee has the authority to retain counsel and other advisers as it determines necessary to fulfill its duties and responsibilities, including search firms to be used to identify director candidates. The Nominating and Corporate Governance Committee is responsible for setting the compensation and retention terms and overseeing the work of any director search firm, outside legal counsel or any other advisors.

 

12    Leslie’s, Inc.

CORPORATE GOVERNANCE

 

RISK OVERSIGHT

A core responsibility of the Board is to understand the principal risks associated with the Company’s business on an ongoing basis, and oversee the key risk decisions of management, which includes comprehending the appropriate balance between risks and rewards. While the Audit Committee has primary responsibility for risk oversight, both the Audit Committee and the Board are actively involved in risk oversight and both receive reports on our risk management activities from our executive management team on a regular basis. Members of both the Audit Committee and the Board also engage in periodic discussions with members of management as they deem appropriate to review and address the proper management of the Company’s risks. In addition, each committee of the Board considers risks associated with its respective area of responsibility.

 

 

COMMUNICATIONS WITH DIRECTORS

Shareholders may contact the Board by mailing correspondence “c/o Corporate Secretary” to the Company’s principal offices at 2005 East Indian School Road, Phoenix, Arizona 85016. Correspondence will be forwarded to the respective director, except that the Corporate Secretary reserves the right not to forward advertisements or solicitations, customer complaints, obscene or offensive items, communications unrelated to the Company’s affairs, business or governance, or otherwise inappropriate materials.

GOVERNANCE DOCUMENTS

The Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee each operate pursuant to written charters adopted by the Board. These charters, along with the Corporate Governance Guidelines and the Code of Ethics, are available at the Company’s website and in print to any shareholder who requests a copy. To access these documents from the Company’s website, go to ir.lesliespool.com and select “Governance Documents” from the “Governance” drop-down menu. Requests for a printed copy should be addressed to Corporate Secretary, Leslie’s, Inc., 2005 East Indian School Road, Phoenix, Arizona 85016.

 

Proxy Statement and Annual Meeting Report 2023			13

CORPORATE GOVERNANCE

 

POLICIES PROHIBITING HEDGING OR PLEDGING

The Board has adopted a policy prohibiting all executive officers and directors from engaging in any form of hedging transaction involving the securities of the Company. The policy addresses short sales and transactions involving publicly traded options and also prohibits such individuals from holding our securities in margin accounts and from pledging our securities as collateral for loans. We believe that these policies further align our executives’ interests with those of our shareholders.

DIRECTOR COMPENSATION

The Board reviews the Company’s director compensation program annually with the assistance of FW Cook. Board compensation is reviewed in relation to the same peer group used to benchmark the executive compensation program and with reference to the market median to ensure that directors are paid competitively for their time commitment. The following table sets forth the compensation earned by our non-employee directors for service as a member of the Board for the fiscal year ended October 1, 2022.

 

Name		Fees Earned or Paid in Cash ($)					Stock Awards ($)(1)					All Other Compensation ($)(2)					Total ($)
Yolanda Daniel				80,000					171,886					-					251,886
Jodeen Kozlak				85,000					171,886					-					256,886
Eric Kufel(3)				65,316					171,886					-					237,202
Matt Lischick(3)				4,107					-					-					4,107
Marc Magliacano(3)				65,632					171,886					-					237,518
Susan O’Farrell				87,720					171,886					9,130					268,735
Steven L. Ortega				125,000					365,270					9,915					500,185
James Ray, Jr.				103,489					73,973					-					177,462
Claire Spofford(4)				29,670					103,779					-					133,449
John Strain				90,000					171,886					-					261,886

 

(1)

The amounts in this column reflect the aggregate grant date fair value of the restricted stock units (“RSUs”) granted to our non-employee directors during the fiscal year, computed in accordance with Accounting Standards Codification 718. The valuation assumptions used in determining such amounts are described in Note 17 – Equity-Based Compensation to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended October 1, 2022. The grant dates for the RSUs for all non-employee directors were November 2, 2021 and March 16, 2022, with the exception of Ms. Spofford and Mr. Ray, who received awards on May 18, 2022 and August 13, 2022, respectively. The November 2, 2021 RSU grants represented a prorated RSU award to bring the director grants through the date of the 2022 Annual Meeting and the March 16, 2022 RSU grants represented the directors’ annual RSU award. The August 13, 2022 RSU grant to Mr. Ray consisted of an annual catch up of seven months prior to the 2023 Annual Meeting.

In addition, Mr. Ortega received an additional stock award as former Chief Executive Officer in fiscal year 2021, as disclosed in last year’s proxy statement. Mr. Ortega received performance-vesting stock options eligible to vest 50% on the Company’s achievement of the Adjusted net income target for fiscal year 2021 and 50% on the Company’s achievement of the Adjusted net income target for fiscal year 2022. Although the performance-vesting options were approved in fiscal year 2021, the fiscal year 2022 Adjusted net income target was not established until after the end of fiscal year 2021. Therefore, the portion of the awards attributable to the fiscal year 2022 Adjusted net income target was not considered granted for accounting purposes until fiscal year 2022 and is included in the stock award values disclosed for fiscal year 2022. See our Compensation Discussion and Analysis below for the definition of Adjusted net income.

(2)

The amounts in this column reflect the portion of health insurance premiums paid by the Company. All directors are eligible to participate in the health plans generally provided to our executives (provided that they pay the same portion of the premiums, related deductibles, and copays as required to be paid by our actively employed executives).

(3)	Mr. Lischick received prorated fees for his time on the Board prior to his resignation on October 25, 2021. In addition, Messrs. Kufel and Magliacano received prorated fees for their service prior to resignation from their respective committees on October 25, 2021.

(4)	Ms. Spofford joined the Board effective May 18, 2022 and received a prorated portion of the annual director cash compensation and RSU grant for service prior to the 2023 Annual Meeting (determined as described below).

 

14    Leslie’s, Inc.

CORPORATE GOVERNANCE

 

Our non-employee directors are eligible to receive cash compensation for their service on our Board and committees in the form of annual cash retainers as follows.

 

Position		Retainer ($)
Non-Executive Chairman			125,000
Board Member (other than the Non-Executive Chairman)			65,000
Lead Independent Director			25,000
Audit Committee:
Chairperson			25,000
Committee Member			10,000
Compensation Committee:
Chairperson			15,000
Committee Member			10,000
Nominating and Corporate Governance Committee:
Chairperson			10,000
Committee Member			5,000

Equity Compensation. Upon initial election and re-election to our Board, our non-employee directors receive an award of RSUs, with the number of shares determined by dividing $125,000 by the closing price of our common stock on the date of the grant. All RSUs granted to our non-employee directors’ vest on the one-year anniversary date from the grant date. For grants made in connection with a director’s initial election or appointment to our Board, the $125,000 dollar amount is pro-rated based on the number of days remaining in the 365-day period following the last annual meeting.

Expense Reimbursement. Our directors will be reimbursed for travel, food, lodging and other expenses directly related to their activities as directors. Our directors are also entitled to the protection provided by the indemnification provisions in our bylaws. Our Board may revise the compensation arrangements for our directors from time to time.

Share Ownership. Our Board believes that, in order to more closely align the interests of our non-employee directors with the long-term interests of the Company’s shareholders, all non-employee directors should maintain a minimum level of equity interests in the Company’s common stock. Such stock ownership guidelines are based on the value of common stock owned as a multiple of the non-employee director’s retainer. For a non-employee director, the stock ownership multiple is 5x their annual cash retainer. The guidelines will be reviewed annually and revised as appropriate to keep pace with competitive and good governance practices. For purposes of determining stock ownership levels, the following forms of equity interests in the Company are included: common stock of the Company; Company restricted stock or RSUs granted under the Company’s 2020 Omnibus Incentive Plan (or any predecessor or successor plan) which are to be settled in shares of common stock, except to the extent such restricted stock or RSUs are subject to vesting conditions other than conditions based solely on the passage of time and continued service. Under the guidelines, non-employee directors are required to hold 50% of the net shares resulting from stock option exercises or vesting of other stock-based awards until they reach the applicable level. As of the record date, all non-employee directors were in compliance with the guidelines either by virtue of holding the required number of shares or by compliance with the 50% retention ratio.

 

Proxy Statement and Annual Meeting Report 2023			15

 

Proposal 1: Election of Directors

Our Fifth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) specifies that the Board consists of three classes of directors serving staggered three-year terms. There are three Class II directors whose term of office expires at the 2023 Annual Meeting of Shareholders (the “Annual Meeting”). Based on the recommendation of the Nominating and Corporate Governance Committee, the Board nominated two Class II directors for election at the Annual Meeting to hold office until the 2026 annual meeting of our shareholders or until their successors have been elected and qualified, or his or her earlier death, resignation, retirement, disqualification or removal.

Each of the nominees has consented to serve as a director, if elected, and all of the nominees are currently directors. We have no reason to believe that any of the nominees will be unavailable or, if elected, will decline to serve. If any nominee becomes unable or unwilling to stand for election as a director, proxies will be voted for any substitute as designated by the Board, or alternatively, the Board may reduce the size of the Board.

 

		Our Board recommends a vote “FOR” the election of each nominee.

 

16    Leslie’s, Inc.

PROPOSAL 1: ELECTION OF DIRECTORS

 

DIRECTOR NOMINEES

For each of the two director nominees standing for election, as well as the six other directors with terms expiring at future annual meetings, the following describes certain biographical information and the specific experience, qualifications, attributes or skills that qualify them to serve as our directors and, as applicable, the Board committees on which they serve.

NOMINEES FOR ELECTION TO A THREE-YEAR TERM EXPIRING AT THE 2026 ANNUAL MEETING OF SHAREHOLDERS

Jodeen Kozlak, a Class II director, notified the Company that she is not standing for re-election at the 2023 Annual Meeting.

 

 

Proxy Statement and Annual Meeting Report 2023			17

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

18    Leslie’s, Inc.

PROPOSAL 1: ELECTION OF DIRECTORS

 

DIRECTORS CONTINUING IN OFFICE UNTIL THE 2024 ANNUAL MEETING OF SHAREHOLDERS

Marc Magliacano notified the Company that he is resigning from the Board at the conclusion of the 2023 Annual Meeting.

 

 

Proxy Statement and Annual Meeting Report 2023			19

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

20    Leslie’s, Inc.

PROPOSAL 1: ELECTION OF DIRECTORS

 

DIRECTORS CONTINUING IN OFFICE UNTIL THE 2025 ANNUAL MEETING OF SHAREHOLDERS

 

 

Proxy Statement and Annual Meeting Report 2023			21

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

22    Leslie’s, Inc.

 

Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm

Ernst & Young LLP (“E&Y”) has served as the Company’s independent registered public accounting firm since 2000. Representatives of E&Y are expected to be present at the Annual Meeting online and will have an opportunity to make a statement if they wish and be available to respond to appropriate questions from shareholders.

We are asking shareholders to ratify the Audit Committee’s selection of E&Y as our independent registered public accounting firm for the fiscal year ending September 30, 2023. While such ratification is not required, the Board is submitting the selection of E&Y to our shareholders for ratification as a matter of good corporate practice. If shareholders do not ratify the selection of E&Y as our independent registered public accounting firm for the fiscal year ending September 30, 2023, our Audit Committee may reconsider the selection of E&Y as our independent registered public accounting firm. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

 

		Our Board recommends a vote “FOR” the ratification of the selection by the Audit Committee of E&Y as our independent registered public accounting firm.

FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The following is a summary of fees paid or to be paid to E&Y for services rendered over the prior two fiscal years. All such services were pre-approved by our Audit Committee in accordance with the “Pre-Approval Policy” described below.

 

		For the Year Ended October 1, 2022					For the Year Ended     October 2, 2021
Audit Fees(1)			$	1,954,000				$	1,359,000
Audit-Related Fees				-					-
Tax Fees				-					-
All Other Fees(2)				2,000					2,000
Total			$	1,956,000				$	1,361,000

 

(1)	Audit fees consist of fees associated with (i) the audits of our consolidated financial statements, (ii) reviews of our interim quarterly consolidated financial statements and (iii) assistance with SEC filings including consents and related services in connection with the Company’s offerings.

(2)	All other fees consist of license fees for E&Y’s accounting research software.

PRE-APPROVAL POLICY

The Audit Committee has adopted policies and procedures with respect to the pre-approval of all audit and permitted non-audit services by the Company’s independent registered public accounting firm. The Audit Committee undertakes a review of such policies at least quarterly, and if necessary, modifies such pre-approval procedures and policies. The Audit Committee may delegate its pre-approval responsibilities to one or more subcommittees as the Audit Committee may deem appropriate, provided that any pre-approval of services by such subcommittees pursuant to this delegated authority must be presented to the full Audit Committee at its next scheduled meeting.

 

Proxy Statement and Annual Meeting Report 2023			23

PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

AUDIT COMMITTEE REPORT⁽¹⁾

The Audit Committee has reviewed and discussed our audited financial statements with management, and has discussed with our independent registered public accounting firm the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and SEC. Additionally, the Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm, as required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence. Based upon such review and discussion, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the last fiscal year for filing with the SEC.

Submitted by:

Audit Committee of the Board of Directors

Susan O’Farrell (Chair)

Yolanda Daniel

John Strain

 

(1)

The information contained in this Audit Committee Report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of Exchange Act, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (“Securities Act”) or the Exchange Act.

 

24    Leslie’s, Inc.

 

Proposal 3: Non-Binding, Advisory Vote to Approve Named Executive Officer Compensation

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) enables our shareholders to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules (commonly referred to as a “say-on-pay” vote).

As described in detail under the heading “Compensation Discussion and Analysis,” our executive compensation program is designed to provide an attractive, flexible and market-based compensation program tied to company and individual performance and aligned with the interests of our shareholders. Please read the “Compensation Discussion and Analysis” section for additional details about our executive compensation program, including information about the compensation of our named executive officers (“NEOs”).

We are asking shareholders to vote “FOR” the following resolution:

“RESOLVED, that the shareholders approve, on a non-binding, advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion disclosed in this Proxy Statement.”

This resolution will not be binding on our Board or the Compensation Committee. However, our Board and the Compensation Committee will review and consider the results of this Proposal 3 when making future compensation decisions for our named executive officers. In accordance with our policy of holding annual “say-on-pay” advisory votes, the next “say-on-pay” advisory vote is expected to occur at our 2024 annual meeting of shareholders.

 

		Our Board recommends a vote “FOR” the approval, on a non-binding, advisory basis, of the compensation of our named executive officers.

 

Proxy Statement and Annual Meeting Report 2023			25

 

Information about Our Executive Officers

 

Name		Age		Title
Michael R. Egeck		64		Chief Executive Officer
Steven M. Weddell		48		Executive Vice President and Chief Financial Officer
Paula F. Baker		55		Chief Revenue Officer
Brad Gazaway		53		Chief Legal Officer and Corporate Secretary
Moyo LaBode		52		Chief Merchandising Officer

Michael R. Egeck’s biographical information can be found with the other director biographies in the Director Nominees section.

 

 

26    Leslie’s, Inc.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

 

 

Proxy Statement and Annual Meeting Report 2023			27

Compensation Discussion and Analysis

In this Compensation Discussion and Analysis (“CD&A”) we provide an overview and analysis of our compensation program and policies, the material compensation decisions we have made under those programs and policies for fiscal year 2022 with respect to our NEOs, and the material factors that we considered in making those decisions.

Fiscal year 2022 was a transitional year in our executive compensation program. All our NEOs were paid base salary and were eligible for cash incentive opportunities in the ordinary course, however, we made only selective long-term equity grants in light of the front-loaded grants certain NEOs received in connection with our initial public offering (“IPO”) in fiscal year 2021. Looking forward, fiscal year 2023 will represent the first year of our ongoing executive compensation program. Our NEOs will receive a mix of base salary, annual cash bonus opportunities, and long-term equity incentives comprised of an equal value-based mix of performance vesting restricted stock units (“PSUs”) and time-vesting RSUs.

EXECUTIVE COMPENSATION PHILOSOPHY

We believe our compensation philosophy and design are well aligned with the interest of our shareholders, as well as our performance culture, growth strategy, and desire to attract and retain high-quality executives. Our executive compensation philosophy is to provide an attractive, flexible and market-based compensation program tied to company and individual performance and aligned with the interests of our shareholders. In establishing compensation levels and designing the elements of our executive compensation program, we aim to set overall compensation levels that are both internally equitable and commensurate with the companies with which we compete for talent. The principal objectives of our executive compensation program are to attract and retain highly talented executives to serve in leadership positions and advance our long-term growth strategy. Within our ongoing program, we motivate such executives to succeed by providing compensation that is based on both short- and long-term performance and aligns the interests of our officers with those of our shareholders by delivering a substantial portion of the officers’ compensation through incentives that drive long-term enterprise value creation. We regularly review our executive compensation program with the goal of motivating our executive team to achieve our strategic goals and aligning their interests with those of our shareholders.

The following features of our compensation program are designed to align the interests of our executive team with those of our shareholders and with market best practice:

 

What We Do		What We Don’t Do
✓ Grant compensation that is primarily at-risk and variable		û  Allow hedging or pledging of Company stock
✓ Subject short-term incentive compensation to measurable and rigorous goals		û  Reprice stock options without shareholder approval
✓ Use an independent compensation consultant		û  Provide excessive perquisites
✓ Cap incentive payments		û  Provide supplemental executive retirement plans
✓ Structure compensation to avoid excessive risk taking		û  Provide tax gross-ups, including with respect to a change in control
✓ Provide competitive compensation that is compared against a size appropriate industry peer group		û  Provide “single trigger” change in control payments
✓ Maintain rigorous stock ownership guidelines		û  Provide excessive severance benefits
✓ Have a robust recoupment policy

 

28    Leslie’s, Inc.

COMPENSATION DISCUSSION AND ANALYSIS

 

PROCESS FOR SETTING EXECUTIVE COMPENSATION

Generally, our Compensation Committee reviews and, as appropriate, modifies compensation arrangements for executive officers during the first quarter of each fiscal year (with equity grants generally made during the first quarter or early in the second quarter). The CEO reviews the performance and compensation of our executive officers and makes recommendations as to their compensation to the Compensation Committee. In making its decisions regarding executive compensation, the Compensation Committee meets outside the presence of executive officers when making final decisions about each executive officer. The CEO is periodically present during portions of these deliberations that relate to the compensation for other executives, but does not participate in discussions regarding his own pay.

During fiscal year 2022, we engaged FW Cook as a third-party consultant to provide services including review and analysis of our executive compensation levels and practices, executive officer and non-employee director equity ownership guidelines, peer group compensation, and long-term incentive plan design and equity grant practices. As part of this review process, the Board and the Compensation Committee applied its values, philosophy and understanding of market trends and practices, while considering the compensation levels needed to ensure that our executive compensation program remains competitive and aligned with the interests of our shareholders.

PEER GROUP

To assist the Compensation Committee in its review of executive compensation for fiscal year 2022, the Compensation Committee developed, with FW Cook, a peer group of similarly-situated companies to use for compensation benchmarking purposes. The peer group used to inform compensation decisions for fiscal year 2022 was comprised of:

 

Boot Barn Holdings, Inc.		Johnson Outdoors Inc.		Terminix Global Holdings Inc.
Container Store Group, Inc.		MarineMax, Inc.		Topgolf Callaway Brands Corp.
Crocs, Inc.		Monro, Inc.		Trex Company, Inc.
Floor & Décor Holdings, Inc.		National Vision Holdings, Inc.		YETI Holdings, Inc.
Haverty Furniture Companies, Inc.		Ollie’s Bargain Outlet Holdings, Inc.

At the time the peer group was approved (May 2021), our market capitalization and trailing four quarters revenues approximated the median of the peer group. The peer group will continue to be reviewed annually to ensure it best represents the Company’s size, industry and scope of operations.

Peer group data were supplemented with national retail and general industry survey data, scoped by each executive’s revenue responsibility, to provide an additional market reference point.

ELEMENTS OF COMPENSATION

The compensation of our NEOs generally consists of base salary, annual cash bonus opportunities, long-term equity incentives in the form of equity awards and other benefits, each as described below.

Base salary

Base salary is a fixed element within a total compensation package intended to attract and retain the talent necessary to successfully manage our business and execute our business strategies. Base salaries for our NEOs are established based on the scope of their responsibilities, taking into account relevant experience, internal pay equity, tenure, competitive market practice, and other factors deemed relevant. Base salaries for our NEOs in fiscal year 2022 and 2021 were as follows:

 

Name		FY2021				FY2022				% Increase
Michael R. Egeck		$	1,025,000			$	1,025,000				-%
Steven M. Weddell		$	570,000			$	570,000				-%
Paula F. Baker		$	400,000			$	400,000				-%
Brad Gazaway		$	350,000			$	350,000				-%
Moyo LaBode		$	400,000			$	400,000				-%

 

Proxy Statement and Annual Meeting Report 2023			29

COMPENSATION DISCUSSION AND ANALYSIS

 

Annual cash bonus opportunities

The target performance-based cash bonus opportunity for each of the NEOs is expressed as a percentage of his or her base salary and can be earned by meeting certain predetermined corporate performance objectives, subject to an individual/strategic performance modifier. Fiscal year 2022 annual cash bonuses for Mr. Egeck and Mr. Weddell were targeted at 100% of their base salaries, and fiscal year 2022 annual cash bonuses for Ms. Baker, Mr. Gazaway, and Mr. LaBode were targeted at 50% of their base salaries. The target percentages did not change from those in effect for fiscal year 2021.

The Board set corporate performance objectives based on the achievement of an annual Adjusted EBITDA target, which the Board believed to best align the interest of the NEOs and our shareholders. The Board established the following matrix to map Adjusted EBITDA performance to bonus earnouts, with pre-established threshold, target and maximum performance levels, with linear interpolation applying between such levels.

 

		Adjusted EBITDA(1)					Payout as % of Target
Threshold				$270.0 M					0	%
Target				$300.0 M					100	%
Maximum				$330.0 M					200	%
Actual				$292.3 M					74.3	%

 

(1)	Adjusted EBITDA was as reported in the Company’s Annual Report on Form 10-K for fiscal year 2022.

The amount earned relative to corporate performance was then subject to potential modification up or down by up to 20% based on performance against individual and strategic objectives, on a zero sum basis across all eligible employees of the Company, including the CEO and the CEO’s senior team. For fiscal year 2022 the individual and strategic objectives for the CEO’s senior team, including the NEOs were focused on diversity, equity and inclusion, where, in each case improvements were achieved, and a determination was made not to modify the earned bonuses in either direction.

Based on actual fiscal year 2022 Adjusted EBITDA performance of $292.3 million, the annual cash bonus earned by each NEO for fiscal year 2022 was equal to 74.3% of his or her target amount, as reflected in the “Summary Compensation Table” below. These amounts were paid out in December 2022.

Adjusted EBITDA is defined as earnings before interest (including amortization of debt issuance costs), taxes, depreciation and amortization, management fees, equity-based compensation expense, loss on debt extinguishment, costs related to equity offerings, strategic project costs, executive transition costs, loss (gain) on disposition of assets, mark-to-market on interest rate cap and other non-recurring, non-cash or discrete items.

Long-term equity incentives

Historically, we granted stock options and RSUs under our 2020 Omnibus Incentive Plan, including to certain of our NEOs and certain of our directors, from time to time to provide additional retention and performance incentives to these individuals. As noted above, fiscal year 2022 was a transitional year with respect to equity incentives. Taking into consideration the equity grants certain of our NEOs received in connection with our IPO, the Committee approved limited equity grants during the year. As described in further detail below, in fiscal year 2023 we commenced our ongoing equity grant program.

Fiscal year 2022 restricted stock units

During fiscal year 2022, only two NEOs received RSU equity grants. Mr. Gazaway received a grant of RSUs with a value of $200,002 and Mr. LaBode received a grant of RSUs with a value of $450,004. In each case, the RSUs vest in equal, annual installments over four years, subject to continued employment.

 

30    Leslie’s, Inc.

COMPENSATION DISCUSSION AND ANALYSIS

 

Fiscal year 2022 stock options

As disclosed in last year’s proxy statement, in fiscal year 2021, certain of our NEOs received performance-vesting stock options eligible to vest 50% on the Company’s achievement of the Adjusted net income target for fiscal year 2021 and 50% on the Company’s achievement of the Adjusted net income target for fiscal year 2022. In December 2022, the Compensation Committee determined that the Company’s Adjusted net income for fiscal year 2022 was $176 million. This did not exceed the Adjusted net income target of $185 million, accordingly all performance-vesting options subject to the Company’s fiscal year 2022 performance were forfeited. Although the performance-vesting options were approved in fiscal year 2021, the fiscal year 2022 Adjusted net income target was not established until after the end of fiscal year 2021. Therefore, the portion of the awards attributable to the fiscal year 2022 Adjusted net income target was not considered granted for accounting purposes until fiscal year 2022 and is included in the option award values disclosed in the Summary Compensation Table and Grants of Plan-Based Awards table below.

Adjusted net income is defined as net income adjusted to exclude management fees, equity-based compensation expense, loss on debt extinguishment, costs related to equity offerings, strategic project costs, executive transition costs, loss (gain) on disposition of assets, mark-to-market on interest rate cap, and other non-recurring, non-cash or discrete items.

Fiscal year 2023 PSUs and RSUs

In fiscal year 2023, we commenced our ongoing equity grant program. Each of the NEOs received equity grants comprised 50% of PSUs and 50% of RSUs. The PSUs are subject to cumulative Adjusted net income and revenue goals, weighted 75% and 25%, respectively. For the first year of the PSU program only, there are one-, two-, and three-year performance periods, after each of which one-third of the target number of PSUs is eligible to vest (at 0% - 200% of target) based on actual performance. It is anticipated that the PSU awards in fiscal year 2024 and forward will be subject to one three-year performance period. The RSUs vest in equal, annual installments over four years, subject to continued employment.

Other benefits

We currently provide broad-based welfare benefits to our NEOs that are available to all of our employees, including health, dental, life, vision and disability insurance.

In addition, we maintain, and certain of the NEOs participate in, a 401(k) plan that provides eligible employees with an opportunity to save for retirement on a tax-advantaged basis and under which we are permitted to make discretionary employer contributions. Employees’ pre-tax contributions are allocated to their respective individual accounts and are then invested in selected investment alternatives according to their directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code. We currently match participant contributions to the 401(k) plan up to 4% of eligible earnings, up to IRS limits.

We do not maintain any defined benefit pension plans or non-qualified deferred compensation plans.

Post-employment compensation arrangements

The NEOs are entitled to certain severance benefits, the terms of which are described below under “Potential Payments upon Termination or Change in Control.” The severance benefits are an essential element of the overall executive compensation package, and assist the Company in recruiting and retaining talented individuals and aligning the executive’s interests with the best interests of the shareholders.

OTHER MATTERS

Risk assessment

During fiscal year 2022, the Compensation Committee worked with FW Cook and management to assess our compensation policies and practices. Our Board and our Compensation Committee do not believe that our executive and non-executive compensation programs encourage excessive or unnecessary risk taking, and any risk inherent in our compensation programs is unlikely to have a material adverse effect on us.

 

Proxy Statement and Annual Meeting Report 2023			31

COMPENSATION DISCUSSION AND ANALYSIS

 

Say-on-pay

Our Compensation Committee considers feedback from our shareholders and the results of our Say-on-Pay vote in making compensation decisions for our NEOs. Our fiscal year 2021 Say-on-Pay vote reflected 97.6% support from our shareholders, based on the percentage of shares voted. The Compensation Committee believes this indicates that our shareholders support the philosophy, strategy, objectives, and administration of our executive compensation program.

Clawback/Forfeiture

Our Board has adopted a clawback policy which provides for the recoupment of certain cash or equity-based compensation in the event the Company is required to restate its financial statements due to the Company’s material noncompliance with any financial reporting requirements under the securities laws. The Board may require reimbursement or forfeiture of all or a portion of the incentive compensation received by any current or former executive officer (including NEOs) or other designated officer (as covered by the policy).

In connection with the SEC’s recent finalization of the Dodd-Frank compensation recoupment rules, we will revise our existing clawback policy or adopt an additional clawback policy that complies with the Nasdaq listing standards within the required time frame.

Share ownership guidelines

Our Board believes that, in order to more closely align the interests of our NEOs and other designated officers with the long-term interests of the Company’s shareholders, all NEOs and other designated officers should maintain a minimum level of equity interests in the Company’s common stock. Such stock ownership guidelines are based on the value of common stock owned as a multiple of base salary. The guidelines will be reviewed annually and revised as appropriate to keep pace with competitive and good governance practices. The multiples are set based upon each officer’s position, as set forth below:

 

Position		Stock Ownership Multiple
Chief Executive Officer			6x base salary
Chief Financial Officer & Chief Operating Officer (if any)			3x base salary
Other Designated Officers			2x base salary

For purposes of determining stock ownership levels, the following forms of equity interests in the Company are included: common stock of the Company; Company restricted stock or RSUs granted under the Company’s 2020 Omnibus Incentive Plan (or any predecessor or successor plan) which are to be settled in shares of common stock, except to the extent such restricted stock or RSUs are subject to vesting conditions other than conditions based solely on the passage of time and continued service; and common stock of the Company held for the individuals account in the 401(k) Plan. Unearned performance-based restricted stock or PSUs, and shares underlying unexercised stock options (whether vested or unvested, whether time- or performance-based and whether in-the-money or not) do not count as stock owned for purposes of the guidelines. Under the guidelines, NEOs and other designated officers are required to hold 50% of the net shares resulting from stock option exercises or vesting of other stock-based awards until they reach the applicable level. In the case of time-vested RSUs in the categories above which are not yet fully vested, only a portion representing the net after-tax holdings at vesting will count as stock owned. For purposes of calculating these estimated net holdings, the tax withholding rate assumed to apply at vesting shall equal 40%.

As of the record date, all NEOs were in compliance with the guidelines either by virtue of holding the required number of shares or by compliance with the 50% retention ratio.

 

32    Leslie’s, Inc.

COMPENSATION DISCUSSION AND ANALYSIS

 

Prohibition on hedging or pledging

We have a policy prohibiting all executive officers and directors from engaging in any form of hedging transaction involving the securities of the Company. The policy addresses short sales and transactions involving publicly traded options and also prohibits such individuals from holding our securities in margin accounts and from pledging our securities as collateral for loans. We believe that these policies further align our executives’ interests with those of our shareholders.

Tax deductibility

In connection with its determination of the various elements of compensation for our executive officers, the Compensation Committee has taken into account the impact of Section 162(m) of the Internal Revenue Code on the deductibility of compensation for federal income tax purposes. Section 162(m) limits the deductibility of compensation paid to covered employees to $1 million annually. Notwithstanding Section 162(m), the Compensation Committee has the discretion to design and implement elements of executive compensation that may not be fully deductible for income tax purposes.

COMPENSATION COMMITTEE REPORT⁽¹⁾

Our Compensation Committee oversees our compensation program on behalf of our Board. In fulfilling its oversight responsibilities, our Compensation Committee reviewed and discussed with management the “Compensation Discussion and Analysis” included in this proxy statement. In reliance on the review and discussion referred to above, our Compensation Committee recommended to our Board that the “Compensation Discussion and Analysis” be included in our proxy statement.

Submitted by:

Compensation Committee of the Board of Directors

John Strain (Chair)

Jodeen Kozlak

James Ray, Jr.

Claire Spofford

  

 

(1)

The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

 

Proxy Statement and Annual Meeting Report 2023			33

COMPENSATION DISCUSSION AND ANALYSIS

 

SUMMARY COMPENSATION TABLE

The following table presents information regarding the compensation of our NEOs for services rendered during the fiscal years 2022, 2021 and 2020.

 

Name and Principal Position		Year				Salary ($)				Bonus ($)				Stock Options ($)				Stock Awards ($)(1)				Non-Equity Incentive Plan Compensation ($)				All Other Compensation ($)(2)				Total ($)
Michael R. Egeck			2022				1,025,000				-				1,547,063	(3)			-				761,575				5,800				3,339,438
Chief Executive Officer			2021				1,023,077	(4)			550,000	(5)			4,803,926	(3)			-				1,534,512				-				7,911,515
			2020				654,987	(4)			-				7,179,102	(6)			-				1,460,916				95,100				9,390,105
Steven M. Weddell			2022				570,000				-				966,920	(3)			-				423,510				5,800				1,966,230
Executive Vice President and     Chief Financial Officer			2021				560,769	(7)			550,000	(5)			3,002,451	(3)			-				840,165				5,700				4,959,085
			2020				450,000				-				-				-				900,000				39,694				1,389,694
Paula F. Baker(8)			2022				400,000				-				154,707	(3)			-				148,600				5,800				709,107
Chief Revenue Officer			2021				400,000				-				480,396	(3)			-				300,000				5,700				1,186,096
			2020				327,224				75,000	(9)			633,750	(6)			-				327,224				127,342				1,490,540
Brad Gazaway			2022				350,000				-				219,366	(3)			200,002				130,025				5,800				905,193
Chief Legal Officer
Moyo LaBode			2022				400,000				-				361,630	(3)			450,004				148,600				-				1,360,234
Chief Merchandising Officer

 

(1)

The amounts reported in this column represent the grant date fair value of the RSUs granted to each of the NEOs in the specified fiscal year, calculated in accordance with FASB Accounting Standards Codification Topic 718. The grant date fair value is determined by multiplying the number of units granted by the closing price of our common stock on the grant date.

(2)	The amounts in this column are detailed in the table immediately below.

(3)

Represents the aggregate fair value of the stock options that were granted to each of our NEOs during fiscal year 2021 and 2022. As disclosed in last year’s proxy statement, in fiscal year 2021, certain of our NEOs received performance-vesting stock options eligible to vest 50% on the Company’s achievement of the Adjusted net income target for fiscal year 2021 and 50% on the Company’s achievement of the Adjusted net income target for fiscal year 2022. Although the performance-vesting options were approved in fiscal year 2021, the fiscal year 2022 Adjusted net income target was not established until after the end of fiscal year 2021. Therefore, the portion of the awards attributable to the fiscal year 2022 Adjusted net income target was not considered granted for accounting purposes until fiscal year 2022 and is included in the option award values disclosed for fiscal year 2022.

(4)	Mr. Egeck joined us in February 2020 as Chief Executive Officer. Mr. Egeck received a prorated base salary of $654,987 for fiscal year 2020. Mr. Egeck also received a prorated base salary of $1,023,077 due to the increase in his base salary from $1,000,000 to $1,025,000 during fiscal year 2021.

(5)	Pursuant to Messrs. Egeck and Weddell’s amended and restated employment agreements, each executive received a one-time cash bonus of $550,000 during fiscal year 2021 in connection with the Company’s IPO.

(6)

During fiscal year 2020, Mr. Egeck and Ms. Baker received an award of profits interest units in our then parent company, and the amount reflects the aggregate grant date fair value of these profits interest units. The unvested profits interest units upon IPO were then converted into restricted stock units.

(7)	Mr. Weddell received a prorated base salary of $560,769 as result of entering into an amended and restated employment agreement which increased this base salary from $450,000 to $570,000 during fiscal year 2021.

(8)	Ms. Baker joined us in November 2019 as our Chief Performance Officer and transitioned to the role of Chief Revenue Officer in March 2020. Ms. Baker received a prorated base salary of $327,224 for fiscal year 2020.

(9)	Ms. Baker received a sign-on bonus of $75,000 in connection with commencement of her employment for fiscal year 2020.

 

34    Leslie’s, Inc.