DEF 14A: Alto Ingredients Seeks Stockholder Approval for Amended Stock Incentive Plan and Director Elections at Upcoming Annual Meeting

Sentiment:

Proxy Statement 26 April 2024 5:27 PM

Alto Ingredients is asking stockholders to vote on key proposals at the 2024 annual meeting, including electing directors and approving an amendment to the 2016 Stock Incentive Plan.

Delay expectedThe document mentions challenges such as extended EPA approval processes and longer equipment lead times for the CCS project.

Worse than expectedThe company's Adjusted EBITDA of $20,766,000 fell below the payout threshold for 2023 of Adjusted EBITDA of $25,000,000.

Summary

Alto Ingredients has scheduled its 2024 annual meeting of stockholders for June 20, 2024, at its headquarters in Pekin, Illinois.
Stockholders of record as of April 22, 2024, are eligible to vote on several key proposals.
The proposals include the election of six directors, an advisory vote on executive compensation, and an amendment to the 2016 Stock Incentive Plan to increase the number of shares authorized for issuance from 11,400,000 to 15,200,000.
The company is also asking stockholders to ratify the appointment of RSM US LLP as its independent registered public accounting firm for the year ending December 31, 2024.
Alto Ingredients is focusing on sustainability, including carbon capture and storage initiatives, and has entered an exclusive non-binding letter of intent with Vault 44.01 for CO2 storage.
The company is exploring alternatives to enhance energy capacity at its Pekin campus to support CCS and general operations.
The Board recommends voting in favor of all proposals.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While there are positive aspects such as investments in facilities and sustainability initiatives, there are also challenges and risks mentioned, such as EPA approval delays and commodity price volatility. The overall tone is cautiously optimistic.

Positives

The company is making significant investments in facilities to expand margins and improve capacity utilization rates.
Alto Ingredients is advancing its carbon capture and storage (CCS) initiative, aiming to significantly reduce CO2 emissions.
The company has entered an exclusive non-binding letter of intent with Vault 44.01 to partner for safe and permanent CO2 storage.
The company is exploring alternatives to enhance energy capacity at its Pekin campus, which will provide significant economic and environmental benefits.
The company is committed to sustainability and has received Together for Sustainability certifications and EcoVadis awards.

Negatives

The document mentions challenges such as extended EPA approval processes and longer equipment lead times for the CCS project.
The company experienced extreme commodity price volatility in 2023.
The company's Adjusted EBITDA of $20,766,000 fell below the payout threshold for 2023 of Adjusted EBITDA of $25,000,000.

Risks

Extended EPA approval processes and longer equipment lead times could delay the carbon capture and storage (CCS) project.
Dynamic markets served by Alto Ingredients require agility and financial prudence.
The company faces risks associated with water depletion in the region of its Magic Valley facility.
The company is subject to various rules and regulations imposed by government entities that require compliance.

Future Outlook

The company is optimistic about its potential and steadfast in its commitment to driving long-term growth, focusing on promising and profitable opportunities while remaining financially prudent.

Management Comments

Douglas L. Kieta, Chairman of the Board: 'Thank you again for your ownership and support of Alto Ingredients. We hope that you will be able to join us on June 20th.'
Bryon T. McGregor, President and Chief Executive Officer: 'We are optimistic about our potential and steadfast in our commitment to driving long-term growth.'

Industry Context

Alto Ingredients operates in the renewables sector, producing ingredients for various industries, including food, beverage, and renewable fuels, and is positioning itself as a leader in the high-quality beverage alcohol industry.

Comparison to Industry Standards

The Compensation Committee benchmarks the total compensation of our NEOs using compensation market data as a reference to assist it in understanding the competitive pay positioning of total compensation and each element of compensation.
Our Compensation Committee reviews compensation for each executive officer in relation to the 25th , 50th and 75th percentiles of the compensation market data that, along with other factors, provides context for executive pay decisions.
Korn Ferry provided, for comparative purposes, compensation data from surveys of third parties that includes information from United States industrial companies, including organizations engaged in the chemicals, light and heavy manufacturing, and construction and materials industries.
For compensation data pertinent to establishing compensation for Bryon T. McGregor upon his appointment as our President and Chief Executive Officer and for Robert R. Olander upon his appointment as our Chief Financial Officer, Pay Governance provided, for comparative purposes, compensation data from surveys of executive compensation information in publicly filed peer company documents.
In considering our peer group, our Compensation Committee, aided by Pay Governance, reviewed various business attributes and financial metrics to assess whether a company is reasonable for inclusion in the peer group.
Our Compensation Committee evaluated factors such as each peer companys industry, products, revenues, EBITDA, market capitalization and employee headcount, among others.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
President and Chief Executive Officer	Michael D. Kandris	Bryon T. McGregor	August 1, 2023	Succession planning
Chief Financial Officer	Bryon T. McGregor	Robert R. Olander	August 1, 2023	Succession planning
Chief Operating Officer	Michael D. Kandris (Interim)	Todd E. Benton	April 1, 2024	Succession planning

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Amendment to 2016 Stock Incentive Plan	Increase the number of shares of common stock authorized for issuance under the plan from 11,400,000 shares to 15,200,000 shares.	June 20, 2024 (if approved by stockholders)	Enables continued use of the 2016 Plan for stock-based grants consistent with the objectives of our compensation program.
Cybersecurity Oversight	Comprehensive review of committee and other charters, broadening their collective scope to include cybersecurity oversight.	2023	Enhances the company's ability to protect business data and ensure business continuity.
Compensation Recovery Policy	Adopted a compensation recovery policy as required by Rule 10D-1 under the Exchange Act and the corresponding listing standard adopted by The Nasdaq Stock Market.	October 2, 2023	Allows the company to recover incentive-based compensation that was erroneously received by current and former executive officers.

Related Party Transactions

We are or have been a party to employment and compensation arrangements with related parties, as more particularly described above in Executive Compensation and Related Information.
In addition, we have entered into an indemnification agreement with each of our directors and executive officers.
On March 20, 2024, we made grants of restricted common stock to our executive officers in consideration of services to be provided.
On March 20, 2024, we made awards under a performance-based equity incentive compensation program that may be paid out in the following amounts of restricted stock to our executive officers in consideration of services to be provided based on the attainment of Adjusted EBITDA ROA amounts for 2024, 2025 and 2026.
Todd E. Benton is employed as our Chief Operating Officer.
On March 31, 2023, we granted 37,500 shares of our restricted common stock to Mr. Benton in consideration of services to be provided.
In March 2023, we granted Mr. Benton an award to be paid based on our financial performance and Mr. Bentons individual performance for the January 1, 2023 to December 31, 2023 performance period under our annual performance-based cash incentive compensation plan.
On March 27, 2008, we sold to Lyles United, LLC an aggregate of 2,051,282 shares of our Series B Preferred Stock, all of which were initially convertible into an aggregate of 58,608 shares of our common stock based on an initial preferred-to-common conversion ratio of approximately 1-for-0.03, and warrants to purchase an aggregate of 29,304 shares of our common stock at a split-adjusted exercise price of $735 per share, for an aggregate purchase price of $40,000,000.
On May 20, 2008, we sold to Neil M. Koehler, 256,410 shares of our Series B Preferred Stock, all of which were initially convertible into an aggregate of 7,326 shares of our common stock based on an initial preferred-to-common stock conversion ratio of approximately 1-for-0.03, and warrants to purchase an aggregate of 3,663 shares of our common stock at a split-adjusted exercise price of $735 per share, for an aggregate purchase price of $5,000,000.
The Greinke Personal Living Trust Dated April 20, 1999 (the Greinke Trust) acquired shares of Series B Preferred Stock from Lyles United, LLC in December 2009.
SCF Investments LLC acquired shares of Series B Preferred Stock from the Greinke Trust in January 2021.

Stakeholder Impact

Shareholders are asked to vote on key proposals that will impact the company's governance and executive compensation.
Employees may benefit from the amended stock incentive plan, which aims to align their interests with the company's long-term success.
Customers can expect continued focus on producing high-quality, sustainable ingredients.
Local communities may benefit from the company's carbon capture and storage (CCS) initiative.

Next Steps

Stockholders are urged to vote on the proposals outlined in the proxy statement.
The company will continue to advance its carbon capture and storage (CCS) project.
Alto Ingredients will explore alternatives to enhance energy capacity at its Pekin campus.
The company will continue to focus on progressing its governance and sustainability initiatives.

Key Dates

Date	Description
March 25, 2016	Board adopted the 2016 Stock Incentive Plan
June 16, 2016	Stockholders ratified and approved the 2016 Stock Incentive Plan
March 29, 2018	Board approved an increase in the number of shares of common stock authorized for issuance under the 2016 Plan
June 14, 2018	Stockholders ratified and approved an increase in the number of shares of common stock authorized for issuance under the 2016 Plan
August 6, 2019	Board approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
November 7, 2019	Stockholders ratified and approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
September 2, 2020	Board approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
November 18, 2020	Stockholders ratified and approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
March 30, 2022	Board approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
June 22, 2022	Stockholders ratified and approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
April 20, 2023	Board approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
June 22, 2023	Stockholders ratified and approved a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
April 22, 2024	Record date for stockholders entitled to notice of and to vote at the Annual Meeting
April 23, 2024	Board approved, subject to stockholder approval, a further increase in the number of shares of common stock authorized for issuance under the 2016 Plan
May 3, 2024	Date of the letter to stockholders
June 20, 2024	Date of the 2024 annual meeting of stockholders

Keywords

Alto Ingredients, annual meeting, stockholders, directors, executive compensation, stock incentive plan, carbon capture, sustainability, RSM US LLP, proxy statement

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