| |
(20) | Ms. Hilda S. Murray's beneficial ownership may be summarized as follows: |
|
| | |
| Number of Shares Common Stock |
| Shares held outright | —34,325 | |
| Unvested Restricted Stock | 93,557 | |
| Total | 127,882 | |
(14)Mr. Michael L. Owens' beneficial ownership may be summarized as follows:
| | | | | |
| Number of Shares Common Stock |
| Director's Vested Restricted Stock Award | 8,000 | |
| Director's Unvested Restricted Stock Award | 8,000 | |
| Shares held outright | — | |
| Performance Units, convertible into shares of Common Stock on retirement as a director | 14,54121,175 |
|
| Total | 14,54137,175 |
|
(15)Includes: (i) 234,124 shares of Common Stock owned directly by individuals in this group; (ii) 7,909 shares of Common Stock allocated to accounts in the 401(k) Plan of members of this group; (iii) 130,320 shares of Common Stock held pursuant to performance units issued as payment of one-half of the annual retainer for the Company's non-employee directors; (iv) 40,000 shares of Common Stock held by the Company's non-employee directors as an unvested award of Restricted Stock; (v) 40,000 shares of Common Stock held by the Company's non-employee directors as a vested award of Restricted Stock; (vi) 17,688 shares of Common Stock owned by immediate family members of certain members of this group; (vii) 3,567 shares held in individual retirement accounts; (viii) 307,515 unvested restricted shares of Common Stock held by individuals in this group, which shares may be voted by such individuals; and (ix) 1,129,158 shares of Class B Common Stock held by individuals in this group, that could be converted on a share for share basis into shares of Common Stock.
(16)Includes: (i) 1,129,158 shares of Class B Common Stock held subject to the Shareholder Agreement described in Note (4) above.
| |
(21) | Mr. John W. Murrey's beneficial ownership may be summarized as follows: |
|
| | |
| Number of Shares Common Stock |
Shares held outright | 3,468 |
|
Held by wife | 500 |
|
Performance Units, convertible into shares of Common Stock on retirement as a director | 39,711 |
|
Total | 43,679 |
|
| |
(22) | Mr. T.M. Nuckols, Jr.'s beneficial ownership may be summarized as follows: |
|
| | |
| Number of Shares Common Stock |
Shares held outright | — |
|
Unvested Restricted Stock | 20,000 |
|
Held in 401(k) plan | — |
|
Exercisable Stock Options | — |
|
Total | 20,000 |
|
| |
(23) | Mr. Michael L. Owens' beneficial ownership may be summarized as follows: |
|
| | |
| Number of Shares Common Stock |
Shares held outright | — |
|
Performance Units, convertible into shares of Common Stock on retirement as a director | 10,375 |
|
Total | 10,375 |
|
| |
(24) | Includes: (i) 215,401 shares of Common Stock owned directly by individuals in this group; (ii) 8,154 shares of Common Stock allocated to accounts in the 401(k) Plan of members of this group; (iii) options, which are either immediately exercisable, or exercisable within 60 days of the Record Date to purchase 118,500 shares of Common Stock; (iv) options which are not yet vested of 110,000 shares of Common Stock; (v) 141,432 shares of Common Stock held pursuant to performance units issued as payment of one-half of the annual retainer for the Company's non-employee directors; (vi) 81,508 shares of Common Stock owned by immediate family members of certain members of this group; (vii) 3,567 shares held in individual retirement accounts; (viii) 136,537 unvested restricted shares of Common Stock held by individuals in this group, which shares may be voted by such individuals; and (ix) 861,499 shares of Class B Common Stock held by individuals in this group, that could be converted on a share for share basis into shares of Common Stock. |
| |
(25) | Includes: (i) 861,499 shares of Class B Common Stock held subject to the Shareholder Agreement described in Note (4) above. |
PROPOSAL ONE
ELECTION OF DIRECTORS
Information About Nominees for Director
Pursuant to the Company’s Bylaws, all Directors are elected to serve a one year term, or until their successors are elected and qualified. The Board of Directors is permitted to appoint directorsDirectors to fill the unexpired terms of directorsDirectors who resign.
The names of the nominees for election to the Board, their ages, their principal occupation or employment (which has continued for at least the past five years unless otherwise noted), directorships held by them in other publicly-held corporations or investment companies, the dates they first became directorsDirectors of the Company, and certain other relevant information with respect to such nominees are as follows:
William F. Blue, Jr., age 59,64, is Chairman of the Board of The Hopeway Foundation in Charlotte, North Carolina. From 2008 until his retirement in 2014, he served as Vice Chairman of Investment Banking and Capital Markets, part of Wells Fargo Securities, LLC, in Charlotte. Throughout his 29-year investment banking career, he represented foreign and domestic corporations in financing and advisory assignments, including acquisitions, divestitures, recapitalizations, fairness opinions, and public and private equity and debt offerings. From 1998 until 2008, Mr. Blue served as group head of the Wachovia Consumer and Retail Investment Banking group. Before joining Wachovia, he was a managing director in the Mergers and Acquisitions group of NationsBanc Montgomery Securities, the predecessor firm to Banc of America Securities. Mr. Blue is a member of the Company's Audit Committee, the Company's CompensationExecutive Committee and Chairman of the Company'sCompany’s Compensation/Nominations and Corporate Governance Committee. Mr. Blue serves as Lead Independent Director and chairs Executive Committee. HeSessions of the Board. Mr. Blue has been a directorDirector of the Company since October 2014.2014
Charles E. Brock, age 53,58, is the owner of Brock Partnerships, an entrepreneurial advisory and investment firm. From 2013-2018, Mr. Brock served as President and Chief Executive Officer of Launch Tennessee, a public-private partnership, focused on the development of high-growth companies in Tennessee. Previously, he served as the Executive Entrepreneur of The Company Lab, a Chattanooga organization that serves as “the Front Door for Entrepreneurs” in Southeast Tennessee and one of Launch Tennessee's regional accelerators. Mr. Brock was a founding partner of the Chattanooga Renaissance Fund, a locally based angel investment group. Mr. Brock also serves as a director of Four Bridges Capital Advisors, a Chattanooga based boutique investment bank as well as director of Pinnacle Financial Partners. Mr. Brock is a member of the Company’s Audit Committee and a member of the Company's Compensation/Nominations and Corporate Governance Committee.Committee. He has been a directorDirector of the Company since 2012.
Daniel K. Frierson, age 76,81, is Chairman of the Board of the Company, a position he has held since 1987. He also has been Chief Executive Officer of the Company since 1980 and a directorDirector of the Company since 1973. Mr. Frierson serves as a directorDirector of Astec Industries, Inc., a manufacturer of specialized equipment for building and restoring the world’s infrastructure headquartered in Chattanooga, Tennessee, and Printpack, Inc., a world leading Flexible Packaging Company, headquartered in Atlanta, Georgia.Georgia and serves as Chairman of its Compensation Committee. Mr. Frierson is Chairman of the CompensationExecutive Committee.
D. Kennedy Frierson, Jr., age 51,56, is Chief Operating Officer of the Company, a position he has held since 2009. He has been President of Masland Residential, General Manager of Dixie Home, and President of Bretlin as well as various other positions in operations, sales and senior management of the Company since 1998. He has been a directorDirector of the Company since 2012.
Walter W. Hubbard, age 74, served as President and Chief Executive Officer of Honeywell Nylon, Inc., a wholly-owned subsidiary of Honeywell International, a manufacturer of nylon products from 2003 until his retirement in 2005. Prior to becoming President of Honeywell Nylon, Mr. Hubbard served as Group Vice President, Fiber Products of BASF Corporation from 1994 until 2003. Mr. Hubbard is a member of the Company’s Audit Committee and the Company's Compensation Committee. He has been a director of the Company since 2005.
Lowry F. Kline, age 77,82, served as a director of Coca-Cola Enterprises, Inc. from April 2000 until April 2008, serving as Chairman from April 2002 until April 2008, and as Vice Chairman from April 2000 to April 2003. Mr. Kline served as Chief Executive Officer of Coca-Cola Enterprises, Inc. from April 2001 until January 2004 and from December 2005 to April 2006. Prior to becoming Chief Executive Officer for Coca-Cola Enterprises, Inc., he held a number of positions with said company, including Chief Administrative Officer, Executive Vice President and General Counsel. Mr. Kline is a member of the Board of Directorsformer director of Jackson Furniture Industries, Inc., headquarteredheadquarter in Cleveland, Tennessee and is a former director of McKee Foods Corporation, headquartered in Collegedale, Tennessee. Mr. Kline is Chairmana member of the Company’s CompensationCompensation/Nominations and Corporate Governance Committee, and a member of the Company’s Audit Committee, and is a member of the Company’s Executive Committee. He has been a directorDirector of the Company since 2004.
Hilda S. Murray, age 63,68, is the Corporate Secretary and Executive Vice President of TPC Printing & Packaging, a specialty packaging and printing company in Chattanooga, TN. She is also founder and President of Greener Planet, LLC, an environmental compliance consultant to the packaging and printing industry. Ms. Murray has been a Director of the Company since 2012, is a member of the Company’s Audit Committee, and is a member of the Company’s Compensation/Nominations and Corporate Governance Committee. She has been a director of the Company since 2012.
Michael L. Owens, age 61,66, is Assistant Dean of Graduate Programs and Lecturer in the College of Business at the University of Tennessee at Chattanooga, Chattanooga, Tennessee. Prior to joining the University of Tennessee at Chattanooga, Mr. Owens was President of Coverdell & Company, Atlanta, Georgia. Prior to joining Coverdell, he was Senior Vice President
and Chief Operating Officer of Monumental Life Insurance Company. He has been a directorDirector of the Company since 2014 and is Chairman of the Company's Audit Committee.
D. Kennedy Frierson, Jr., the Company’s Vice President and Chief Operating Officer, is the son of Daniel K. Frierson. No other director, nominee, or executive officer of the Company has any family relationship, not more remote than first cousin, to any other director, nominee, or executive officer.
Considerations with Respect to Nominees
In selecting the slate of nominees for 2018,2023, the independent directorsDirectors of the Board considered the familiarity of the Company’s incumbent Directors with the business and prospects of the Company, developed as a result of their service on the Company’s Board. The Board believes that such familiarity will be helpful in their service on the Company’s Board. With respect to all nominees, the independent directorsDirectors of the Board noted the particular qualifications, experience, attributes and skills possessed by each nominee. These qualifications are reflected in the business experience listed under each nominee’s name above. In order of the list of nominees, such information may be summarized as follows: Mr. Blue is an experienced investment banker having been Vice Chairman of Wells Fargo Securities and involved with capital formation, mergers, acquisitions and financing of various types of ventures.venture; he chairs the Company's Compensation/Nominations and Corporate Governance Committee. Mr. Brock is experienced in establishing new businesses having been involved in the establishment of both Foxmark Media and CapitalMark Bank and Trust. Mr. Daniel K. Frierson has served with the Company in several management and executive capacities his entire adult life, and has been Chief Executive Officer since 1980 and a Board member since 1973. In such capacity, he has been instrumental in planning and implementing the transition of the Company to its current position as a manufacturer of residential and commercial floorcovering products. Additionally, Mr. Frierson has experience as a board member of other public companies as well as significant trade group experience relevant to the Company’s business. He is well known and respected throughout the industry. Mr. D. Kennedy Frierson, Jr. has served with the Company in various capacities since 1992. He is currently Chief Operating Officer and has most recently led the Company’s Masland Residential business. Mr. Hubbard has highly relevant industry experience with businesses that are fiber producers and fiber suppliers, and that have served as fiber suppliers to the Company. Mr. Hubbard’s experience in the management of Honeywell Nylon and BASF Corporation, as outlined above, has given him valuable experience in management, relevant to his duties as a Director of the Company. Ms. Murray has a long history of executive management experience at TPC Printing and Packaging, a provider to the specialty packaging business as well as experience with environmental controls and footprint through Greener Planet.Officer. Mr. Kline has a long history of management and board level experience with the world’s largest bottler and distributor of Coca Cola Products. Additionally, he has an extensive background in business, corporate and securities law. Mr. Kline has served as a Director of the Company for several years, as reflected above,above. Ms. Murray has a long history of executive management experience at TPC Printing and chairsPackaging, a provider to the Company’s Compensation Committee.specialty packaging business as well as experience with environmental controls and footprint through Greener Planet. Mr. Owens has extensive business and management experience, having served as President of Coverdell & Company prior to joining the University of Tennessee at Chattanooga. In addition, he has auditing experience having been employed as a certified public accountant and is Chairman of the Company's Audit CommitteeCommittee.
The Board of Directors recommends that the Company’s shareholders vote FOR electing the eight (8)seven (7) nominees for director.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Meetings of the Board of Directors
The Board of Directors of the Company met five (5) times in 2017.2022.
Committees, Attendance, and Directors' Fees
The Company has a standing Executive Committee, Audit Committee Compensation Committee, and a Compensation/Nominations and Corporate Governance Committee. Copies of the Charters of the Company’s Audit Committee Compensation Committee and Compensation/Nominations and Corporate Governance CommitteesCommittee charters, and the Company’s resolution establishing the Executive Committee’s authority may be found on the Company’s website at www.thedixiegroup.com/investor/investor.html.www.dixiegroup.com/investor.
Members of the Executive Committee are Daniel K. Frierson, Chairman, William F. Blue, Jr. and Lowry F. Kline. Except as otherwise limited by law or by resolution of the Board of Directors, the Executive Committee has and may exercise all of the powers and authority of the Board of Directors for the management of the business and affairs of the Company, which power the Executive Committee exercises between the meetings of the full Board of Directors. The Executive Committee met two (2) times in 2017.
Members of the Audit Committee are Michael L. Owens, Chairman, William F. Blue, Jr., Charles E. Brock, Walter W. Hubbard, Lowry F. Kline, and Hilda S. Murray, and John W. Murrey, III.Murray. All of the members of the Audit Committee are “independent directors” as that term is defined by applicable regulations and rules of the National Association of Securities Dealers, Inc. (“NASD”). The Audit Committee evaluates audit performance, handles relations with the Company’s independent auditors, and evaluates policies and procedures relating to internal accounting functions and controls. The Audit Committee has the authority to engage the independent accountants for the Company. The Audit Committee operates pursuant to an Audit Committee Charter adopted by the Board of Directors. The Audit Committee has implemented pre-approval policies and procedures related to the provision of audit and non-audit services performed by the independent auditors. Under these procedures, the Audit Committee approves the type of services to be provided and the estimated fees related to those services.
The Audit Committee met four (4)five (5) times in 2017.2022.
Members of the CompensationCompensation/Nominations and Corporate Governance Committee are Lowry F. Kline, Chairman, William F. Blue, Jr., Chairman, Charles E. Brock, Lowry F. Kline and Walter W. Hubbard. TheHilda S. Murray. In its role as a Compensation Committee it administers the Company’s compensation plans, reviews and may establish the compensation of the Company’s officers, and makes recommendations to the Board of Directors concerning such compensation and related matters. The Compensation Committee acts pursuant to a written Charter adopted by the Board of Directors.
The Compensation Committee may request recommendations from the Company’s management concerning the types and levels of compensation to be paid to the Company’s executive officers. Additionally, the Compensation Committee is authorized to engage compensation consultants and may review and consider information and recommendations of compensation consultants otherwise engaged by the Company or the Board of Directors in connection with the assessment, review and structuring of compensation plans and compensation levels. For a description of the Compensation Committee actions with respect to Compensation of Executive Officers in 2017,for 2022, see Compensation Discussion and Analysis - Compensation for 2017.2022.
Annually, the Compensation Committee reviews the performance of the Chief Executive Officer against goals and objectives established by the Committee as part of the process of determining his compensation. The Compensation Committee reports to the Board on its performance review.
The CompensationCompensation/Nominations and Corporate Governance Committee met two (2) times in 2017.
The members of the2022, in its role as a Compensation Committee and once in its role as a Nominations and Corporate Governance Committee. In its role as a Nominations and Corporate Governance Committee, in 2017 were John W. Murrey, III, Chairman, Charles E. Brock, and Hilda S. Murray. The Nominations and Corporate Governancethe Committee develops and recommends for board approval corporate governance guidelines.guidelines.
The Compensation/Nominations and Corporate Governance Committee’s Charter includes the duties of a corporate governance committee and of a nominating committee. Nominees approved by a majority of the Committee are recommended to the full Board. In selecting and approving director nominees, the Committee considers, among other factors, the existing composition of the Board and the mix of Board members appropriate for the perceived needs of the Company. The Committee believes continuity in leadership and board tenure increase the Board’s ability to exercise meaningful board oversight. Because qualified incumbent directors provide stockholders the benefit of continuity of leadership and seasoned judgment gained through experience as a director of the Company, the Committee will generally give priority as potential candidates to those incumbent directors interested in standing for re-election who have satisfied director performance expectations, including regular attendance at, preparation for and meaningful participation in Board and committee meetings.
The Nominations and Corporate Governance Committee also considers the following in selecting the proposed nominee slate:
•at all times at least a majority of directors must be “independent” in the opinion of the Board as determined in accordance with relevant regulatory and NASD standards;
•at all times at least three members of the Board must satisfy heightened standards of independence for Audit Committee members; and
•at all times the Board should have at least one member who satisfies the criteria to be designated by the Board as an “audit committee financial expert”.
In selecting the current slate of director nominees, the Committee considered overall qualifications and the requirements of the makeup of the Board of Directors rather than addressing separate topics such as diversity in its selection.Directors. The Board considered the value of the incumbents’ familiarity with the Company and its business as well as the considerations outlined above under the heading Considerations with Respect to Nominees.
The Nominations and Corporate Governance Committee met one (1) time in 2017.
Board Leadership Structure
Mr. Daniel K. Frierson currently serves as the Chairman of the Board and the Chief Executive Officer of the Company. The positions of Chief Executive Officer and Chairman of the Board are combined. Executive sessionsSessions of the Board are chaired by the chairman of the Compensation Committee, LowryDirector William F. Kline, who, as noted above, has extensive management and Board experience independent of his experience with the Company.Blue, Jr. Mr. KlineBlue and the independent directors set their own agenda for meetings in executive sessionExecutive Session and may consider any topic relevant to the Company and its business. The Company believes that regular, periodic, meetings held in executive session,Executive Session, in the absence of management members or management directors, provide the Board an adequate opportunity to review and address issues affecting management or the Company that require an independent perspective. Additionally, the Company’s Audit Committee holds separate executive sessionsExecutive Sessions with the Company’s independent registered public accounts, internal auditor and management. The Audit Committee also sets its own agenda and may consider any relevant topic in its executive sessions.
Director Attendance
During 2017,2022, no director attended fewer than 75% of the total number of meetings of the Board of Directors and any Committee of the Board of Directors on which he or she served. All directors are invited and encouraged to attend the annual meeting of shareholders. In general, all directors attend the annual meeting of shareholders unless they are unable to do so due to unavoidable commitments or intervening events.
Director Compensation
Directors who are employees of the Company do not receive any additional compensation for their services as members of the Board of Directors. Non-employee directors receive an annual retainer of $36,000,$40,000, payable one-half in cash and one-half in valuequarterly installments of Performance Units (subject to a $5.00 per share minimum value for determination of the number of performance units to be issued). Performance Units are redeemable upon a director’s retirement for an equivalent number of shares of the Company’s Common Stock. In addition to the annual retainer, directors who are not employees of the Company receive $1,500 for each Board meeting attended and $1,000 for each committee meeting attended. Chairmen of the Audit and Compensation committees$10,000 each. Committee Chairs receive an additional annual paymentretainer of $8,000 and$10,000, also payable in quarterly installments. There are no additional individual Board or Committee meeting fees. Each non-employee director also receives an equity award of $40,000 in value of restricted stock with such value determined by reference to the Chairmenpublic share price (the closing price) as of the Nominations and Corporate Governance Committee receives an additionaldate of the annual paymentmeeting at which the individual is elected, or, if the individual is appointed to the Board, then with reference to the stock price as of $4,000. For an additional discussionthe date of Director Compensation, seeappointment (subject to a deemed minimum stock price of $5 per share). The restricted stock award will vest five business days after the tabular information below under the heading, succeeding annual meeting.
“Director Compensation.”
Independent Directors
The Board has determined that William F. Blue, Jr., Charles E. Brock, Walter W. Hubbard, Lowry F. Kline, Hilda S. Murray, and Michael L. Owens are independent within the meaning of the standards for independence set forth in the Company’s corporate governance guidelines, which are consistent with the applicable Securities and Exchange Commission (“SEC”) rules and NASDAQ standards.
Executive Sessions of the Independent Directors
The Company’s independent directors meet in executive session at each regularly scheduled quarterly meeting of the Board, with the chair of the Compensation CommitteeDirector William F. Blue serving as chair of such executive sessions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, and regulations of the SEC thereunder, require the Company’s executive officers and directors and persons who beneficially own more than 10% of the Company’s Common Stock, as well as certain affiliates of such persons, to file initial reports of such ownership and monthly transaction reports covering any changes in such ownership with the SEC and the National Association of Securities Dealers. Executive officers, directors and persons owning more than 10% of the Company’s Common Stock are required by SEC regulations to furnish the Company with all such reports they file. Based on its review of the copies of such reports received by it, the Company believes that, during fiscal year 2017, all filing requirements applicable to its executive officers, directors, and owners of more than 10% of the Company's Common Stock have been met.
Management Succession
Periodically, the Board reviews a succession plan, developed by management, addressing the policies and principles for selecting successors to the Company’s executive officers, including the Company’s CEO. The succession plan includes an assessment of the experience, performance and skills believed to be desirable for possible successors to the Company’s executive officers.
Certain Transactions between the Company and Directors and Officers
The Company’s Compensation/Nominations and Corporate Governance Committee has adopted written policies and procedures concerning the review, approval or ratification of all transactions required to be disclosed under the SEC’s Regulation S-K, Rule 404. These policies and procedures cover all related party transactions required to be disclosed under the SEC’s rules as well as all material conflict of interest transactions as defined by relevant state law and the rules and regulations of NASDAQ that are applicable to the Company, and require that all such transactions be identified by management and disclosed to the committeeCommittee for review. If required and appropriate under the circumstances, the committeeCommittee will consider such transactions for approval or ratification. Full disclosure of the material terms of any such transaction must be made to the committee,Committee, including:
•the parties to the transaction and their relationship to the Company, its directors and officers;
•the terms of the transaction, including all proposed periodic payments; and
•the direct or indirect interest of any related parties or any director, officer or associate in the transaction.
To be approved or ratified, the committeeCommittee must find any such transaction to be fair to the Company. Prior approval of such transactions must be obtained generally, if they are material to the Company. If such transactions are immaterial, such transactions may be ratified and prior approval is not required. Ordinary employment transactions may be ratified.
Certain Related Party Transactions
During its fiscal year ended December 30, 2017,31, 2022, the Company purchased a portion of its product needs in the form of fiber, yarn, and carpet from Engineered Floors, an entity substantially controlled by Robert E. Shaw, a shareholder of the Company. Mr. Shaw has reported holdingholding approximately 7.4%7.8% of the Company’s Common Stock, which, as of year-end, represented approximately 3.5%3.0% of the total vote of all classes of the Company’s Common Stock. Engineered Floors is one of several suppliers of such products to the Company. Total purchases from Engineered Floors for 20172022 were approximately $7.2$0.9 million; or approximately 2.3%0.4% of the Company’s cost of goods sold in 2017.2022. In accordance with the terms of its charter,Charter, the CompensationCompensation/Nominations and Corporate Governance Committee reviewed the Company’s supply relationship with Engineered Floors. The dollar value of Mr. Shaw’s interest in the transactions with Engineered Floors is not known to the Company.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is composed of sevenfive members, each of whom is an independent, non-employee director. The Audit Committee operates under a written Audit Committee Charter adopted and approved by the Board of Directors. The Charter is reviewed at least annually by the Committee. While the Committee has the responsibilities and powers set forth in its written charter, it is not the duty of the Committee to plan or conduct audits. This function is conducted by the Company’s management and its independent registered public accountants.
The Committee has reviewed and discussed with management the audited financial statements of the Company for the year ended December 30, 201731, 2022 (the “Audited Financial Statements”). In addition, the Committee has discussed with Dixon Hughes GoodmanFORVIS, LLP all matters required by applicable auditing standards.
The Committee also has received the written report, disclosure and the letter from Dixon Hughes GoodmanFORVIS, LLP required by PCAOB Rule 3526, “Communication with Audit Committees Concerning Independence”, and the Committee has reviewed, evaluated, and discussed with that firm the written report and its independence from the Company. The Committee also has discussed with management of the Company and Dixon Hughes GoodmanFORVIS, LLP such other matters and received such assurances from them as the Committee deemed appropriate.
Based on the foregoing review and discussions and relying thereon, the Committee has recommended to the Company’s Board of Directors the inclusion of the Company’s Audited Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 30, 2017,31, 2022, to be filed with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Michael L. Owens, Chairman
William F. Blue, Jr.
Charles E. Brock
Walter W. Hubbard
Lowry F. Kline
Hilda S. Murray
John W. Murrey, III
AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that Michael L. Owens, Chairman of the Audit Committee, is an audit committee financial expert as defined by Item 407(d)(5) of Regulation S-K of the Securities Exchange Act of 1934, as amended, and is independent within the meaning of Rule 10A-3(b)(l) of the Securities Exchange Act of 1934 of the Securities Exchange Act of 1934. For a brief list of Mr. Owens’ relevant experience, please refer to Mr. Owens’ biographical information as set forth in the Election of Directors section of this proxy statement. Additionally, the Board believes the remaining members of the Audit Committee would qualify as audit committee financial experts, within the meaning of applicable rules, based on each individual's qualification and expertise.
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation/Nominations and Corporate Governance Committee, acting in its capacity as a Compensation Committee, reviews and sets compensation for the Company’s executive officers, and its decisions are reported to and reviewed by the Board of Directors.officers. The Compensation Committee currently consists of threefour independent directors (currently all independent directors with the exception of Michael L. Owens, Chairman of the Company’s Audit Committee) chosen annually by the Board.
Compensation of the Company’s executive officers is intended to be competitive with compensation offered by other companies generally similar to the Company in size and lines of business. In determining what types and levels of compensation to offer, the Committee may review relevant, publicly available data and, from time to time, it may receive advice and information from professional compensation consultants.
The Elements of Executive Officer Compensation
Compensation for each of the Company’s executive officersExecutive Officers consists generally of base salary, retirement plan benefits and other customary employment benefits, as well as potential cash incentive awards and stock plan awards pursuant to an annual incentive planplans reviewed and adopted by the Committee at the beginning of each year. The annual incentive plan is customarily structured so that a significant portion of each executive’s potential annual compensation may consist of equity awards, the award value of which is tied to accomplishing both financial and non-financial goals and objectives.
Compensation for 20172022. .
Effective February 20, 2017,March 2022, the Compensation Committee selected performance goals and objectives and a range of possible incentives for the Company’s 2017annual 2022 Incentive Compensation Plan (the “2017“2022 Plan”). Pursuant to the 20172022 Plan, each executive officer had the opportunity to earnbe granted a Cash Incentive Award,cash incentive award, a Primary Long-Term Incentive Award of restricted stock, and an award of restricted stock denominated as “Career Shares.”
In addition to required levels of achievement of certain financial goals related to the Company as a whole and the Company’s business units, the 2022 Plan established certain individual goals and objectives for each officer participating in the Plan. The potential rangeCommittee retained significant discretion in evaluating achievement of the financial and individual goals.
No cash incentivesincentive awards or stock awards were paid or granted under the 2022 Plan.
Compensation Paid under the 2021 Incentive Plan. Continued employment at the time of grant or payment were required under the incentive plan applicable to 2021 (the "2021 Plan"). Accordingly, all bonus and conditionsstock awards paid or awarded under the 2021 plan for performance during 2021 were paid or granted in 2022.
Incentive Compensation Applicable to vesting2023. Following year-end, the Committee adopted an incentive plan for 2023 (the "2023 Plan") providing for possible cash incentive awards and restricted stock awards in the form of Long-Term Incentive Share Awards and Career Share awards, as in prior years. The Committee has reserved to itself the discretion to increase as well as reduce awards based on its evaluation of various factors applicable to the Plan and each participant. The Committee is authorized to modify the Plan and the assessment of individual performance based on unusual or extraordinary items. Any such awards, if earned, will be paid, in the case of the cash award, or granted, in the case of the restricted stock awards, are described below.
For 2017, each executive officer also received customary retirement plan benefits and other customary employment benefits, as in prior years.
March 2024.
Salary for 2017. The base salaries for the executive officers were not adjusted during 2017, except we increased Mr. Hobbs compensation to $250,000 in February 2017. See the 2017 Summary Compensation Table for a tabular presentation of the amount of salary and other compensation elements paid in proportion to total compensation for each named executive officer.
Potential Incentive Awards for 20172023. The CEO and the Chief Operating Officer have the opportunity to earn a cash payment ranging from 45% to not more than 105% of such executive’s base salary. The Chief Financial Officer and all executiveother officers whose responsibilities primarily relate to corporate level administration hadwill have the opportunity to earn a cash payment ranging from 15% to no more than 105%75% of such executive’sofficer’s base salary (from 45%salary. Subject to 105% for the Chief Executive Officer and Chief Operating Officer, and from 30% to 90% for the Chief Financial Officer and from 15% to 75% for all other officers). FiftyCommittee discretion, 100% percent of the potential amount of the potential award waswill be based on achievement of specified levels of operating income from continuing operations forof the Company, as adjusted for unusual items, 30%items.
The President of the amount was based on achievement of specified levels of operating income of the Company’sCompany's residential business operations, as adjusted for unusual items, and 20% of the amount was based on achievement of specified levels of the Company’s commercial business operating income, as adjusted for unusual items.
Executive officers whose responsibilities primarily relate to one of the Company’s business units, hadunit will have the opportunity to earn a cash payment ranging from 15%30% to no more than 75%90% of such participant’shis base salary. Fifty fiveSubject to Committee discretion, 100% percent of the amount waswill be based on achievement of specified levels of their annual business unit operating income, as adjusted for unusual items, 30% was based on the achievement of specified levels of the Company’s consolidated operating income, as adjusted for unusual items, and 15% was based on achievement of specified levels of the annual operating income of the Company’s other business units, as adjusted for unusual items.
Primary Long-Term Incentive Share Awards and Career Shares Awards for 2017. The incentive plan provided for two possible awards of restricted stock: Primary Long-Term Incentive Share Awards and Career Share Awards. Receipt of the Primary Long-Term Incentive Share Awards was contingent on the Company’s achievement of minimum levels of adjusted operating income and, in the case of Career Share Awards was contingent on the Company's having a profitable operating income, as adjusted.
The Primary Long-Term Incentive Share Award wasis designed as a possible award of restricted shares, in value equal to no more than 35% of the executive’s base salary as of the beginning of 20172023 (45% in the case of the Chief Executive Officer) plus any cash incentive award paid for such year. Any Primary Long-Term Incentive Share Awards, if earned, vest ratably over three years.
Career Shares wereare designed as a possible award of restricted stock valued at 20% of each executive officer’s base salary as of the beginning of the year, excluding the Company’s Chief Operating Officer and Chief Financial Officer. The level of potential career share awards was setset at 35% and 30%, respectively, of the ChiefChief Operating Officer’s and Chief Financial Officer’s base salary for 2017.2023.
In accordance with past practice, any such award, if earned, wouldwill be granted in 2018.2024. For participants age 61 or older, the Career Share Awards vest ratably over two years from the date of the grant. For the participants age 60 or younger, shares vest ratably over five years from the date of grant after the participant reaches age 61.
Additionally, all Share Awards are subject to vesting or forfeiture under certain conditions as follows: death, disability or a change in control will result in immediate vesting of all Share Awards; termination without cause will also result in immediate vesting of all Career Share Awards and in immediate vesting of that portion of Long-Term Incentive Share Awards that havehas been expensed; voluntary termination of employment prior to retirement, or termination for cause will result in forfeiture of all unvested awards; to the extent that the Company has recognized compensation expense related to the shares subject to the awards, such amounts vest at retirement age and are paid out by March 15th of the subsequent year.
All awards of restricted stock are subject to a $5.00 minimum price per share when determining the number of shares awarded. The Compensation Committee has retained the discretion to reduce or increase any award by up to 30% of the amount otherwise earned based on the participant’s failure to achieveachievement of individual performance goals set by the committee.Committee.
Grant of Special Incentive Options.
During 2017, the Compensation Committee authorized the special issuance ofPolicies with Respect to Hedging Company Securities. All incentive stock options structured to vest only upon meeting both a two-year holding period and a performance target related to the price of the Company’s common stock. The two-year holding period began May 30, 2017. The performance target requires that the average high and low share price for the Company’s common stock must be at least $7.00 per share for five consecutive trading days any time during the period beginning on May 30, 2019 and ending on May 30, 2021. The options expire if either the holding period or the performance target are not met.
The special options wereEquity Awards issued to the Company’s named executive officers and to other employees and key executives. Options issued toCompany's executives (including the Company’s named executive officers were as follows: Daniel K. Frierson - 40,000 at a strike priceCompany's Named Executive Offices) expressly prohibit hedging or hypothecation of $4.59 per share; D. Kennedy Frierson, Jr. - 25,000 at a strike price of $4.59 per share; Jon Faulkner- 15,000 - at a strike price of $4.17 per share; T. M. Nuckols 15,000 - at a strike price of $4.17 per share; and E. David Hobbs - 15,000- at a strike price of $4.17 per share.
2017 Awards. Cash awards were made to the following named executive officers in 2018 for 2017: Mr. Daniel K. Frierson - $257,656, Mr. D. Kennedy Frierson, Jr. - $125,975, Mr. Jon A. Faulkner - $84,351, Mr. T.M. Nuckols - $123,750, and Mr. E. David Hobbs - $55,000. Primary long-term incentive share awards were granted in 2018 with respect to 2017 for the following named executive officers: Mr. Daniel K. Frierson - 47,575 shares, Mr. D. Kennedy Frierson, Jr. - 24,038 shares, Mr. Jon A. Faulkner - 19,100 shares, Mr. T.M. Nuckols - 21,493 shares, and Mr. E. David Hobbs - 15,362 shares. Career Share Awards were granted in 2018 for 2017 for the following named executive officers: Mr. Daniel K. Frierson - 25,000 shares, Mr D. Kennedy Frierson, Jr. - 22,400 shares, Mr. Jon A. Faulkner - 16,200 shares, Mr. T.M. Nuckols - 11,000 shares, and Mr. E. David Hobbs - 9,200 shares.
Incentive Compensation Applicable to 2018. Following year-end, the Committee adopted an incentive plan for 2018 providing for possible cash incentive awards and restricted stock awards in the form of Long-Term Incentive Share Awards and Career Share awards, as in prior years, and similar in structure to the annual plan adopted for 2017, but with a lower initial level of Primary Long Term Incentive Share Awards. Any such awards, if earned, would be paid, in the case of the cash award, or granted, in the case of the restricted stock awards, in March 2019.vesting.
Retirement Plans and Other Benefits. The Company’s compensation for its executive officers also includes the opportunity to participate in two retirement plans, one qualified and one non-qualified for federal tax purposes, and certain health insurance, life insurance, relocation allowances, and other benefits. Such benefits are designed to be similar to the benefits available to other exempt, salaried associates of the Company, and to be comparable to and competitive with benefits offered by businesses with which the Company competes for executive talent.
Executive officers may elect to contribute a limited amount of their compensation to the qualified plan and make deferrals into the non-qualified plan (up to 90% of total compensation). Although the plans permit the Company to make discretionary contributions in an aggregate amount equal to up to 3% of the executive officer’s cash compensation, for 20172022 the Company made a contribution of 1%3% to the qualified plan, while no Company contributions were made to the non-qualified plan.
Compensation Considerations for 20172022 and 20182023.The tax effect of possible forms of compensation on the Company and on the executive officers is a factor considered in determining types of compensation to be awarded. Similarly, the accounting treatment accorded various types of compensation may be an important factor used to determine the form of compensation. The deductibility, for tax purposes, of compensation paid to named executive officers is subject to limits imposed by Section 162 of the Internal Revenue Code. Annual compensation exceeding $1 million was non-deductible unless earned and paid as qualifying “performance based compensation,” under technical rules established by Code section 162(m). The "Tax Cuts and Jobs Act of 2017", eliminated the performance based compensation exception to the non-deductibility rules of section 162. is non-deductible. Accordingly, all compensation in excess of $1 million paid to any of the Company's named executive officersNamed Executive Officers (and the Chief Financial Officer) in any given year will be non-deductible. In determining whether to grant otherwise earned awards for 2017 that would be non-deductible, under the new rules, the Committee considered the possible tax effects of any such awards.
The Company held a “Say on Pay” vote at its annual meeting in 2017.2022. At that meeting, in excess of 98% ofof the votes were cast “For” approval of our executive compensation as described in the Proxy Statement for that meeting. The Committee intends to consider these results as part of its ongoing review of executive compensation.
Termination Benefits. Upon a Participant's reaching retirement age (as defined in the plan), all Long-Term Incentive Plan and Career Share restricted stock awards vest to the extent such awards have been expensed in the Company’s financial statements. As of year-end, Daniel K. Frierson and Mr. E. David Hobbs wereis the only Named Executive OfficersOfficer eligible for retirement in accordance with the terms of the restricted stock awards. If Mr. Frierson had retired at year end, the number of shares subject to such awards that would have vested and the value of such shares would have been 9,856 69,650 shares and $37,945. If Mr. Hobbs had retired at year end, the number of shares subject to such awards that would have vested and the value of such shares would have been 1,518 shares and $5,844.$54,327. For purposes of valuing the foregoing awards, the Company used the year-end market value of the Company’s Common Stock, which was $3.85/$0.78/share.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis, set forth above, withmanagement.
Based on our review and the discussions we held with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Materials.
Respectfully submitted,
Lowry F. Kline, Chairman
William F. Blue, Jr., Chairman
Walter W. HubbardCharles E. Brock
Lowry F. Kline
Hilda S. Murray
PAY VS PERFORMANCE
The following is a tabular presentation of pay vs performance presenting certain information regarding the compensation earned by the Chief Executive Officer and the Named Executive Officers, and comparing such information to a "total shareholder return" (or "TSR") measure.
| | | | | | | | | | | | | | | | | |
| Year | Summary Compensation Table (SCT) Total for Principal Executive Officer (PEO)(1) ($) | Compensation Actually Paid to PEO(2) ($) | Average SCT Total for Non-PEO NEOS(3) ($) | Value of Initial Fixed $100 Investment Based on: Company TSR ($) | Company Net Income ($) |
| 2022 | 976,093 | 271,437 | 498,379 | 30 | (35,079) | |
| 2021 | 1,512,883 | 1,744,532 | 690,563 | 216 | 1,616 | |
| | | | | |
1. The Summary Compensation Table upon which this is based presents bonuses in the year in which they were accrued such that any bonus earned for performance in 2021 is shown for 2021 (although paid following year-end) while equity awards are shown for the year such awards were granted.
2. To determine amounts actually paid with respect to equity awards [as defined and required by applicable rules] the following amounts were deducted for 2022 and 2021: a) $346,079 for 2022; $363,877 for 2021, representing the value of awards granted and unvested in those years; b) $310,298 for 2022, representing the decrease in fair value of awards granted in prior years outstanding as of year-end 2022 and valued as of year-end; and c) $148,161 for 2021, and $18,716 for 2021 representing the decrease in fair value of awards granted in prior years and vesting in 2022, and 2021 respectively, valued at vesting date. The following amounts were added for 2022 and 2021: a) $99,881 for 2022 and $575,493 for 2021, representing the value at year-end of awards granted and outstanding at year-end 2022 and 2021 respectively; and b) $37,750 for 2021 representing the increase in fair value of awards granted in prior years and outstanding as of year-end 2021 and valued as of year-end.
3. For all years presented the Named Executive Officers were: Daniel K. Frierson (PEO); D. Kennedy Frierson, Jr. and T.M. Nuckols, Jr.
EXECUTIVE COMPENSATION INFORMATION
The following table sets forth information as to all compensation earned during the fiscal years ended December 26, 2015,25, 2021 and December 31, 2016 and December 30, 20172022 for (i) the Company's Chief Executive Officer; and (ii) the Company's Chief Financial Officer, (iii) the threetwo other most highly compensated executive officers who served as such during the fiscal year ended December 30, 201731, 2022 (the “Named Executive Officers”). For a more complete discussion of the elements of executive compensation, this information should be read in conjunction with the other tabular information presented in the balance of this section.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(4) | Stock Awards ($)(2)(4) | Option Awards ($) | Nonqualified Compensation Earnings ($)(3) | All Other Compensation ($)(5) | Total ($) |
| | | | | | | | |
Daniel K Frierson
Chief Executive Officer | 2022 | 625,000 | — | 346,079 | — | — | 5,014 | 976,093 |
| 2021 | 625,000 | 520,042 | 362,877 | — | — | 4,964 | 1,512,883 |
| | | | | | | |
| | | | | | | | |
| D. Kennedy Frierson, Jr. Chief Operating Officer | 2022 | 375,000 | — | 175,523 | — | — | 5,907 | 556,430 |
| 2021 | 320,000 | 266,261 | 219,873 | — | — | 5,636 | 811,770 |
| | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | |
| T.M. Nuckols, Jr., Vice President, President Residential | 2022 | 325,000 | — | 109,718 | — | — | 5,609 | 440,327 |
| 2021 | 275,000 | 141,013 | 147,879 | — | — | 5,463 | 569,355 |
| | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Name and Principal Position (a) | Year (b) | Salary ($)(c)(1) | Bonus ($)(d)(2) | Stock Awards ($)(e)(3) | Option Awards ($)(f) | Nonqualified Compensation Earnings ($)(h)(4) | All Other Compensation ($)(i)(5) | Total ($) (j) |
| | | | | | | | | |
Daniel K Frierson Chief Executive Officer | 2017 | 625,000 |
| — |
| — |
| 55,748 |
| — |
| 5,087 |
| 685,835 |
|
| 2016 | 625,000 |
| — |
| 109,000 |
| — |
| — |
| 5,479 |
| 739,479 |
|
| 2015 | 625,000 |
| — |
| 1,102,427 |
| — |
| — |
| 5,004 |
| 1,732,431 |
|
| | | | | | | | | |
| D. Kennedy Frierson, Jr. Chief Operating Officer | 2017 | 320,000 |
| — |
| — |
| 34,842 |
| — |
| 4,874 |
| 359,716 |
|
| 2016 | 320,000 |
| — |
| 97,664 |
| — |
| — |
| 5,479 |
| 423,143 |
|
| 2015 | 320,000 |
| — |
| 108,355 |
| — |
| — |
| 5,004 |
| 433,359 |
|
| | | | | | | | | |
| Jon A. Faulkner, Chief Financial Officer | 2017 | 270,000 |
| — |
| — |
| 23,366 |
| — |
| 4,602 |
| 297,968 |
|
| 2016 | 270,000 |
| — |
| 70,632 |
| — |
| — |
| 5,389 |
| 346,021 |
|
| 2015 | 270,000 |
| — |
| 78,363 |
| — |
| — |
| 5,004 |
| 353,367 |
|
| | | | | | | | | |
| T.M. Nuckols, Vice President, President, Dixie Residential | 2017 | 248,958 |
| — |
| 87,200 |
| 23,366 |
| — |
| 2,172 |
| 361,696 |
|
| 2016 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| 2015 | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | | | | | | | | |
E. David Hobbs, Vice President, President, Dixie Commercial | 2017 | 247,500 |
| — |
| — |
| 23,366 |
| — |
| — |
| 270,866 |
|
| 2016 | 203,437 |
| — |
| 16,786 |
| — |
| — |
| 3,705 |
| 223,928 |
|
| 2015 | 192,500 |
| — |
| 18,622 |
| — |
| — |
| 3,651 |
| 214,773 |
|
| |
(1) | Includes all amounts deferred at the election of the Named Executive Officer. |
| |
(2) | Cash bonuses are shown in the year granted, not earned, because employment through year-end is a condition of earning the award. |
| |
(3) | Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for the year presented of stock awards to the Named Executive Officers. |
| |
(4) | The Dixie Group does not provide above-market or preferential earnings on deferred compensation. The Named Executive Officers did not participate in any defined benefit or actuarial pension plans for the periods presented. |
| |
(5) | The following table is a summary and quantification of all amounts included in column (i). |
(1)Includes all amounts deferred at the election of the Named Executive Officer.
(2)Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for the year presented of stock awards to the Named Executive Officers. Continued employment is a condition of the Plan so the grant date is in the year after the year for which the performance was earned.
(3)The Dixie Group does not provide above-market or preferential earnings on deferred compensation. The Named Executive Officers did not participate in any defined benefit or actuarial pension plans for the periods presented.
(4) Continued employment at the time of grant and payment was required under the 2021 Incentive Plan; the bonus shown for each year was accrued in the year shown, but paid in the first quarter of the following year, and the stock award is shown in the year granted. As stated herein under the heading, "Compensation Discussion and Analysis," no bonus or stock award was paid or granted under the 2022 Plan.
(5)The following table is a summary and quantification of all amounts included in All Other Compensation.
All Other Compensation | | | | | | | | | | | | | | | | | | | | |
| Name | Year | Registrant Contributions to Defined Contributions Plans ($) | Insurance Premiums ($) | Other ($)(1) | Total Perquisites and Other Benefits($) | |
| | | | | | |
| Daniel K. Frierson | 2022 | 2,900 | 2,114 | — | 5,014 | |
| 2021 | 2,850 | 2,114 | — | 4,964 | |
| | | | | | |
| D. Kennedy Frierson, Jr. | 2022 | 2,900 | 3,007 | — | 5,907 | |
| 2021 | 2,850 | 2,786 | — | 5,636 | |
| | | | | | |
| | | | | | |
| | | | | |
| | | | | |
| | | | | | |
| | | | | | |
| | | | | |
| | | | | |
| | | | | | |
| T.M. Nuckols, Jr. | 2022 | 2,900 | 2,709 | — | 5,609 | |
| 2021 | 2,850 | 2,613 | — | 5,463 | |
| | | | | | |
| | | | | | |
| | | | | |
| | | | | |
(1)No named Executive Officer received any tax reimbursement, discounted securities purchases, or payment or accrual on termination for the period presented.
|
| | | | | | | | | |
| Name (a) | Year (b) | Registrant Contributions to Defined Contributions Plans ($)(c) | Insurance Premiums ($)(d) | Other ($)(f) (1&2) | Total Perquisites and Other Benefits($)(g) |
| | | | | | |
| Daniel K. Frierson | 2017 | 2,208 |
| 2,879 |
| | 5,087 |
|
| 2016 | 2,600 |
| 2,879 |
| | 5,479 |
|
| 2015 | 2,125 |
| 2,879 |
| | 5,004 |
|
| | | | | | |
| D. Kennedy Frierson, Jr. | 2017 | 2,208 |
| 2,666 |
| | 4,874 |
|
| 2016 | 2,600 |
| 2,879 |
| | 5,479 |
|
| 2015 | 2,125 |
| 2,879 |
| | 5,004 |
|
| | | | | | |
| Jon A. Faulkner | 2017 | 2,208 |
| 2,394 |
| | 4,602 |
|
| 2016 | 2,600 |
| 2,789 |
| | 5,389 |
|
| 2015 | 2,125 |
| 2,879 |
| | 5,004 |
|
| | | | | | |
| T.M. Nuckols | 2017 | | 2,172 |
| | 2,172 |
|
| 2016 | | | | — |
|
| 2015 | | | | — |
|
| | | | | | |
| E. David Hobbs | 2017 | 2,034 |
| 1,845 |
| | 3,879 |
|
| 2016 | 1,925 |
| 1,780 |
| | 3,705 |
|
| 2015 | 1,808 |
| 1,793 |
| 50 |
| 3,651 |
|
| |
(1) | No named Executive Officer received any tax reimbursement, discounted securities purchases, or payment or accrual on termination plans for the period presented. |
| | | | | | | | | | | | | | | | | |
| Name | Fees earned or paid in cash ($)(1) | Director's Restricted Stock Awards ($)(2) | Option Awards ($) | All Other Compensation ($) | Total ($) |
|
|
|
| William F. Blue, Jr. | 50,000 | 21,360 | — | — | 71,360 |
| | | | | |
| Charles E. Brock | 40,000 | 21,360 | — | — | 61,360 |
| | | | | |
| Lowry F. Kline | 40,000 | 21,360 | — | — | 61,360 |
| | | | | |
| Hilda S. Murray | 40,000 | 21,360 | — | — | 61,360 |
| | | | | |
| Michael L. Owens | 50,000 | 21,360 | — | — | 71,360 |
Grants(1)Non-employee directors receive an annual retainer of Plan-Based Awards
|
| | | | | | |
| | Estimated Future Payouts Under Equity Incentive Plan Awards (1) |
| | Name (a) | Grant Date (b) | | | Shares of Stock or Units (#) (i) | Grant Date Fair Value of Stock and Option Awards ($) |
| | Securities Underlying Options (#) (j) | Base Price of Option ($/#) (k) |
| |
| |
| | | | | | | |
| | Daniel K. Frierson | 5/30/2017 | 40,000 | $4.59 | | $55,748 |
| | | | | | | |
| | D. Kennedy Frierson, Jr. | 5/30/2017 | 25,000 | $4.59 | | $34,842 |
| | | | | | | |
| | Jon A. Faulkner | 5/30/2017 | 15,000 | $4.17 | | $23,366 |
| | | | | | | |
| | T.M. Nuckols | 3/10/2017 | | | 20,000 | $87,200 |
| | | 5/30/2017 | 15,000 | $4.17 | | $23,366 |
| | | | | | | |
| | E. David Hobbs | 5/30/2017 | 15,000 | $4.17 | | $23,366 |
| |
(1) | The amount set forth$40,000, payable in quarterly installments of $10,000 each. Committee Chairs receive an additional annual retainer of $10,000, also payable in quarterly installments. There are no additional individual Board or Committee meeting fees. Each non-employee director also receives an equity award of $40,000 in the table reflects the grant date fair value of the award determined in accordance with FASB ASC Topic 718. |
All awards of restricted stock madewith such value determined by reference to the Named Executive Officers underpublic share price (the closing price) as of the 2017 Incentive Compensation Plan were granteddate of the annual meeting at which the individual is elected, or, if the individual is appointed to the Board, then with reference to the stock price as of the date of appointment (subject to a deemed minimum stock price of $5 per share). The restricted stock award will vest five business days after the succeeding annual meeting.
in 2018,
(2)The value presented is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, using the terms of the plan. Such awards are as follows:
|
| | | |
| Name | Long-Term Incentive Award Shares (1) | Career Shares (1) | Total Shares |
| Daniel K. Frierson* | 47,575 | 25,000 | 72,575 |
| | | |
|
| D. Kennedy Frierson, Jr.* | 24,038 | 22,400 | 46,438 |
| | | |
|
| Jon A. Faulkner | 19,100 | 16,200 | 35,300 |
| | | |
|
| T.M. Nuckols | 21,493 | 11,000 | 32,493 |
| | | |
|
| E. David Hobbs | 15,362 | 9,200 | 24,562 |
*Pursuant to Mr. Daniel K. Frierson's election 36,288 shares of the total of his awards were granted as shares of Class B Common Stock and pursuant to Mr. D. Kennedy Frierson, Jr.'s election, 45,268 shares of the total of his awards were granted as Class B Common Stock.
(1) Share awards are subject to a $5.00 minimum valuation per share when determining the amount of shares to be rewarded.
Option Exercises and Stock Vested
|
| | | | | | | | |
| | Option Awards | Stock Awards |
| Name (a) | Number of Shares Acquired on Exercise (#)(b) | Value Realized on Exercise ($)(c) (1) | Number of Shares Acquired on Vesting (#)(d) | Value Realized on Vesting ($)(e)(2) |
| Daniel K. Frierson | — |
| — |
| 26,814 |
| 92,919 |
|
| | | | | |
| D. Kennedy Frierson, Jr. | — |
| — |
| 3,469 |
| 12,021 |
|
| | | | | |
| Jon A. Faulkner | — |
| — |
| 2,946 |
| 10,209 |
|
| | | | | |
| T.M. Nuckols | — |
| — |
| — |
| — |
|
| | | | | |
| E. David Hobbs | — |
| — |
| 2,970 |
| 10,292 |
|
| |
(1) | The value realized is calculated as average of the high and low price on the relevant exerciseannual meeting date minus the option price times the number of acquired shares. |
(2) The value realized is calculated as the average of the high and low price on the relevant vesting date times the number of vested shares.
The following table sets forth information concerning the Company’s Non-Qualified Defined Contribution Plan for each of the Named Executive Officers for the fiscal year ended December 30, 2017. The Company does not maintain any other non-tax qualified deferred compensation plans. There were no withdrawals or distributions by or to the Named Executive Officers in the fiscal year ended 2016.grant date.
Nonqualified Deferred Compensation
|
| | | | | | | | | | |
| Name (a) | Executive Contribution in Last FY ($)(b)(1)(2) | Registrant Contribution in Last FY ($)(c)(1)(2) | Aggregate Earnings in Last FY ($) (d)(1)(2)(3) | Aggregate Withdrawals/ Distributions ($)(e) | Aggregate Balance at Last FYE ($)(f) |
| Daniel K. Frierson | 31,250 |
| — |
| 496,420 |
| — |
| 2,718,643 |
|
| | | | | | |
| D. Kennedy Frierson, Jr. | 19,200 |
| — |
| 113,578 |
| — |
| 625,011 |
|
| | | | | | |
| Jon A. Faulkner | — |
| — |
| 219,885 |
| — |
| 1,489,103 |
|
| | | | | | |
| T.M. Nuckols | — |
| — |
| — |
| — |
| — |
|
| | | | | | |
| E. David Hobbs | 29,700 |
| — |
| 10,566 |
| — |
| 94,482 |
|
| |
(1) | For each of the named executive officers, the entire amount reported in this column (b) is included within the amount report in column (c) of the 2017 Summary Compensation Table. |
| |
(2) | None of the amounts reported in this column (d) are reported in column (h) of the 2017 Summary Compensation Table because the Company does not pay guaranteed, above-market or preferential earnings on deferred compensation. |
| |
(3) | Amounts reported in this column (f) for each named executive officer include amounts previously reported in the Company's Summary Compensation Table last year when earned if that officer's compensation was required to be disclosed in the previous year. This total reflects the cumulative value of each named executive officer's deferrals and investment experience. |
The following table sets forth information concerning outstanding equity awards for each of the Named Executive Officers at fiscal year-end.
Outstanding Equity Awards at Fiscal Year-End
|
| | | | | | | | | | | | |
| Option Awards | Stock Awards |
| Name (a) | Exercisable(#)(b) | Unexercisable (#)(c) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Option (#)(d) | Option Exercise Price ($)(e) | Option Expiration Date (f) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(j) |
| | | | | | | | |
| Daniel K. Frierson | 50,000 |
| — |
| — |
| 5.00 |
| 11/4/2019 | 112,500 |
| 433,125 |
| | 40,000 |
| | 4.59 |
| 5/30/2022 | | |
| | | | | | | | |
| D. Kennedy Frierson, Jr. | 22,000 |
| — |
| — |
| 5.00 |
| 11/4/2019 | 86,892 |
| 334,534 |
| | 25,000 |
| | 4.59 |
| 5/30/2022 | | |
| | | | | | | | |
| Jon A. Faulkner | 11,000 |
| — |
| — |
| 5.00 |
| 11/4/2019 | 71,543 |
| 275,441 |
| | 15,000 |
| | 4.17 |
| 5/30/2022 | | |
| | | | | | | | |
| T.M. Nuckols | — |
| 15,000 |
| — |
| 4.17 |
| 5/30/2022 | 20,000 |
| 77,000 |
| | | | | | | |
| | | | | | | | |
| E. David Hobbs | — |
| 15,000 |
| — |
| 4.17 | 5/30/2022 | 1,925 |
| 7,411 |
| | | | | | | |
| |
(1) | The market value of the restricted stock set forth in the table has been calculated by multiplying the closing price of the Company’s Common Stock at year-end ($3.85/share) by the number of shares of unvested restricted stock subject to the award. |
DIRECTOR COMPENSATION
|
| | | | | | |
| | Name (a) | Fees earned or paid in cash ($) (b)(1) | Stock Awards ($) (c)(2) | Option Awards ($) (d)(3) | All Other Compensation ($) (e)(4) | Total ($) |
| |
| |
| |
| | William F. Blue, Jr. | 33,500 | 14,040 | — | — | 47,540 |
| | | | | | | |
| | Charles E. Brock | 30,500 | 14,040 | — | — | 44,540 |
| | | | | | | |
| | Walter W. Hubbard | 31,500 | 14,040 | — | — | 45,540 |
| | | | | | | |
| | Lowry F. Kline | 41,500 | 14,040 | — | — | 55,540 |
| | | | | | | |
| | Hilda S. Murray | 30,500 | 14,040 | — | — | 44,540 |
| | | | | | | |
| | John W. Murrey, III | 34,500 | 14,040 | — | — | 48,540 |
| | | | | | | |
| | Michael L. Owens | 37,500 | 14,040 | — | — | 51,540 |
| |
(1) | Directors who are employees of the Company do not receive any additional compensation for their services as members of the Board of Directors. Non-employee directors receive an annual retainer of $36,000, payable $18,000 in cash and the remainder in Performance Units (subject, for payments made in 2015, 2016 and 2017, to a $5.00 minimum value per unit). For 2017 the value awarded was $14,040 in Performance Units determined as of the date of grant. In addition to the annual retainer, directors who are not employees of the Company received $1,500 for each Board meeting attended and $1,000 for each committee meeting attended. Chairmen of the Audit and Compensation committees receive an additional annual payment of $8,000 and the Chairmen of the Nominations and Corporate Governance Committee receives an additional annual payment of $4,000. Also, directors receive reimbursement of the expenses they incur in attending all board and committee meetings. In addition to the annual retainer, directors who are not employees of the Company receive $1,500 for each Board meeting attended and $1,000 for each committee meeting attended. |
| |
(2) | The value presented is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The value of the Performance Units awarded to each non-employee director under the Company's 2016 Incentive Compensation Plan was $14,040. |
At fiscal year-end, each non-employee director was issued the following outstanding equity awards, with respect to service for 2017:
|
| | | |
| | |
| Name (a) | Performance Units (#)(b)(1) |
|
|
|
| William F. Blue, Jr. | 3,600 |
|
| | |
| Charles E. Brock | 3,600 |
|
| | |
| Walter W. Hubbard | 3,600 |
|
| | |
| Lowry F. Kline | 3,600 |
|
| | |
| Hilda S. Murray | 3,600 |
|
| | |
| John W. Murrey, III | 3,600 |
|
| | |
| Michael L. Owens | 3,600 |
|
| |
(1) | The performance units represent an equal number of shares of the Company's Common Stock. At year-end, the aggregate value of such stock was $97,020, determined by multiplying the number of performance units issued by the year-end per share market value of the Company's Common Stock ($3.85/share). |
PROPOSAL TWO
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required under recent amendments to the Securities Exchange Act of 1934, our stockholders may cast an advisory vote on the compensation of our Named Executive Officers, as described in this proxy statement.
Our executive compensation programs are designed to attract, motivate and retain our Named Executive Officers, who are critical to our success. Please read the Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the fiscal 20172022 compensation of our Named Executive Officers.
We are asking our Shareholders to indicate their approval of our Named Executive Officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this proxy statement.
We recommend that stockholders vote, on an advisory basis, “FOR” the following resolution:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as discussed and disclosed in the Compensation Discussion and Analysis, the executive compensation tables and related narrative executive compensation disclosure in this proxy statement.”
The above resolution will be deemed to be approved if it receives the affirmative vote of a majority of the total votes cast on Proposal Two at the annual meeting. Abstentions and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote. As this vote is an advisory vote, the outcome is not binding on us with respect to future executive compensation decisions, including those relating to our named executive officers.Named Executive Officers. Our Board of Directors and our Compensation Committee, however, value the opinions of our stockholders, and to the extent there is any significant vote against the Named Executive Officer compensation as disclosed in this proxy statement, the Compensation Committee will consider our stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns.
The Board of Directors recommends that the Company’s shareholders vote FOR the approval of Proposal Two.
PROPOSAL THREE
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY SAY-ON-PAY VOTES
Our stockholders also have the opportunity to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers. By voting on Proposal Three, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years. You will have the opportunity to vote on this issue at least once every six years.
Our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for our company. Accordingly, our Board of Directors recommends that you vote for a one-year interval for the advisory vote on executive compensation.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, or three years. You may also abstain from voting. The option that receives the highest number of advisory votes by shareholders will be the frequency for the advisory vote on executive compensation deemed to have been selected by stockholders. Abstentions and broker non-votes wil have no effect on the outcome of the vote.
As the vote is advisory and not binding, the Board of Directors may decide that it is in the best interests of the Company and its shareholders to hold an advisory vote on executive compensation more or less frequently than the option selected by our shareholders (but not less often than once every three years). However, we value the opinions of our shareholders and will consider the outcome of the advisory vote in deciding how often to hold the advisory vote on executive compensation in future years.
The Board of Directors recommends a vote FOR the frequency of the say-on-pay advisory vote to be "one year".
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR 20182023
On June 1, 2022, The firm ofDixie Group, Inc. (the “Company”) was informed by its independent registered accountants, Dixon Hughes Goodman, Certified Public Accountants (“DHG”), that it merged with BDK, LLP served as(“BDK”) effective June 1, 2022 in a merger of equals. FORVIS, LLP was the surviving firm and the merged entities will practice under that name. As a result of the merger, DHG effectively ceased being the Company’s independent registered public accountantsaccounting firm and FORVIS, LLP, as the successor to DHG following the merger, became the Company’s independent registered public accounting firm. The engagement of FORVIS, LLP was approved by the Audit Committee of the Company’s Board of Directors on June 2, 2022. As a result, the reports previously issued by DHG with respect to the Company will be reissued by, and any consents to the use of such reports will be issued by FORVIS, LLP.
DHG’s report on the Company’s financial statements as of and for the years ended December 26, 2020 and December 25, 2021 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended December 26, 2020 and December 25, 2021 and the subsequent period through the effective date of this filing (i) there have been no disagreements with DHG, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of DHG, would have caused DHG to make reference to the subject matter of the disagreement in connection with its reports, (ii) no such disagreement was discussed with the Company’s Board of Directors or any committee of the Board of Directors of the Company, for fiscal year 2017. and (iii) there have been no “reportable events” as described in Item 304(a)(1)(v) of Regulation S-K.
Neither the Company nor anyone on behalf of the Company consulted BDK or FORVIS, LLP regarding either (a) the application of accounting principles to a specified transaction, either completed or contemplated, or the type of audit opinion that might be rendered on the financial statements of the Company, and no written or oral advice of BDK or FORVIS, LLP was provided with respect to any accounting, auditing, or financial reporting issue, or (b) any matter that was either the subject of a disagreement of the type described in Item 304(a)(iv) of Regulation S-K or any “reportable event” described in Item 304(a)(1)(v) of Regulation S-K.
On June 3, 2022 the Company filed a current report on Form 8-K reporting the change in its certifying accountant and provided FORVIS, LLP (as successor by merger to DHG) with a copy of the “Report” and requested FORVIS, LLP to review the disclosures contained in the Report and furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether it agreed with the statements made therein. A copy of the FORVIS, LLP letter dated June 3, 2022, provided in response to that request, was filed as Exhibit 16.1 to that Report.
On June 2, 2022, the Audit Committee of the Company’s Board of Directors approved the engagement of FORVIS, LLP as the Company’s independent registered accounting firm, effective as of June 2, 2022.
Subject to ratification of its decision by the Company’s shareholders, the Company has selected the firm of Dixon Hughes GoodmanFORVIS, LLP to serve as its independent registered public accountants for its 20182023 fiscal year. A representative of Dixon Hughes GoodmanFORVIS, LLP is expected to be present at the Annual Meeting and will have the opportunity to make a statement if he so desires and to respond to appropriate questions from shareholders.
The Board of Directors recommends that that the Company’s shareholders vote FOR Proposal Four.Three.
In the event that the Company’s shareholders do not ratify the selection of Dixon Hughes GoodmanFORVIS, LLP as independent registered public accountants for fiscal 2018,2023, the Board of Directors will consider other alternatives, including appointment of another firm to serve as independent registered public accountants for fiscal 2018.2023.
AUDIT FEES DISCUSSION
The following table sets forth the fees paid to FORVIS, LLP and Dixon Hughes Goodman LLP for services provided during fiscal year 20162021 and 2017:2022:
|
| | | | | | |
| | 2017 | 2016 |
| Audit fees paid to Dixon Hughes Goodman LLP (1) | $ | 652,536 |
| $ | 663,899 |
|
| Audit related fees (2) | $ | 23,612 |
| $ | — |
|
| Tax fees (3) | $ | 174,975 |
| $ | — |
|
| All other fees (4) | $ | — |
| $ | 8,187 |
|
| Total Audit Fees | $ | 851,123 |
| $ | 672,086 |
|
| | | | | | | | |
| 2022 | 2021 |
| Audit fees paid (1) | $ | 696,005 | | $ | 849,364 | |
| Tax fees (2) | 10,327 | | 7,800 | |
| All other fees (3) | 11,000 | | — | |
| Total Audit Fees | $ | 717,332 | | $ | 857,164 | |
| |
(1) | Represents fees for professional services paid to Dixon Hughes Goodman LLP provided in connection with the audit of the Company’s annual financial statements, review of the Company’s quarterly financial statements, review of other SEC filings and technical accounting issues during 2016 and 2017. |
| |
(2) | Represents fees for discussions of recent accounting pronouncements and review of SEC comment letter. |
| |
(3) | Represents fees for tax compliance and tax planning services. |
| |
(4) | Represents fees related to a registration statement. |
1. Represents fees for professional services paid to FORVIS, LLP (for 2022) and Dixon Hughes Goodman LLP (for 2021) provided in connection with the audit of the Company’s annual financial statements, review of the Company’s quarterly financial statements, review of other SEC filings and technical accounting issues during 2021 and 2022.
2. Represents fees for tax compliance and tax planning services.
3. Represents fees related to an S-8 Registration Statement filing.
It is the policy of the Audit Committee to pre-approve all services provided by its independent registered public accountants. In addition, the Audit Committee has granted the Chairman of the Audit Committee the power to pre-approve any services that the Committee, as a whole, could approve. None of the fees were approved by the Audit Committee pursuant to the de minimis exception of Reg. S-X T Rule 2-01(c)(7)(i)(C).
SHAREHOLDER PROPOSALS
FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT
In the event any shareholder wishes to present a proposal at the 20192024 Annual Meeting of Shareholders, such proposal must be received by the Company on or before November 1710, 2018,2023, to be considered for inclusion in the Company's proxy materials. All shareholder proposals should be addressed to the Company at its principal executive offices, P.O. Box 2007, Dalton, Georgia 30722-2007, Attention: Corporate Secretary, and must comply with the rules and regulations of the Securities and Exchange Commission.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders who wish to communicate with members of the Board, including the independent directors individually or as a group, may send correspondence to them in care of the Corporate Secretary at the Company’s corporate headquarters, P.O. Box 2007, Dalton, Georgia 30722-2007.
ADDITIONAL INFORMATION
The entire cost of soliciting proxies will be borne by the Company. In addition to solicitation of proxies by mail, proxies may be solicited by the Company’s directors, officers, and other employees by personal interview, telephone, and telegram. The persons making such solicitations will receive no additional compensation for such services. The Company also requests that brokerage houses and other custodians, nominees and fiduciaries forward solicitation materials to the beneficial owners of the shares of Common Stock held of record by such persons and will pay such brokers and other fiduciaries all of their reasonable out-of-pocket expenses incurred in connection therewith.
OTHER MATTERS
As of the date of this Proxy Material, the Board does not intend to present, and has not been informed that any other person intends to present, any matter for action at the Annual Meeting other than those specifically referred to herein. If other matters should properly come before the Annual Meeting, it is intended that the holders of the proxies will vote in accordance with their best judgment.
The Dixie Group, Inc.
Daniel K. Frierson
Chairman of the Board
Dated: March 23, 2018
17, 2023
