SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[x] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LADD FURNITURE, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box): $125.00 FILING FEE PAID BY WIRE TRANSFER
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
LADD
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500
(919) 889-0333
April 6, 1995
Dear Shareholder:
The Board of Directors cordially invites you to attend LADD's Annual
Meeting of Shareholders to be held on Friday, May 12, 1995, in High Point, NC.
In the following pages, you will find information about the meeting plus a Proxy
Statement.
During the business session, we will review LADD's past year and look at
our plans and prospects for the future. Shareholders will also have the
opportunity to discuss their company with the directors and officers of LADD.
If you cannot be with us in person, please be sure to vote your shares by
proxy. Just mark, sign and date the enclosed proxy card and return it in the
postage-paid envelope. Your prompt return of the card will help LADD avoid
additional solicitation costs. In person or by proxy, your vote is important.
I hope you can join us at the Annual Meeting.
Sincerely,
Richard R. Allen
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Lea Industries (Bullet) American Drew (Bullet) Daystrom (Bullet) Clayton
Marcus (Bullet) Barclay (Bullet) American of Martinsville
Design Horizons (Bullet) Brown Jordan (Bullet) Pennsylvania
House (Bullet) Fournier (Bullet) Pilliod
LADD Furniture, Inc. companies
LADD Furniture, Inc.
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
LADD FURNITURE, INC.
The annual meeting of the shareholders of LADD Furniture, Inc. will be held
at the Radisson Hotel, 135 S. Main Street, High Point, North Carolina, on May
12, 1995, at 10:00 a.m., for the purpose of considering and acting upon the
following:
1. The election of [seven/eight] directors;
2. Approval of an Amendment to the Company's Articles of Incorporation and
the concurrent one-for-three reverse stock split of the Company's Common Stock.
3. Ratification of the appointment of KPMG Peat Marwick LLP as
independent public accountants for the 1995 fiscal year; and
4. All other business as may properly come before the meeting.
Only shareholders of record as of the close of business on April 3, 1995,
will be entitled to notice of, and to vote at, this meeting or at any
adjournment thereof.
A copy of the Company's Annual Report for the fiscal year ended December
31, 1994, is enclosed. It is not to be considered part of the proxy soliciting
material.
Shareholders are requested to date, sign and return the enclosed proxy. An
envelope is provided requiring no postage for mailing in the United States. Your
prompt response will be appreciated.
WILLIAM S. CREEKMUIR
SECRETARY
April 6, 1995
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500
LADD FURNITURE, INC.
One Plaza Center, Box HP-3
High Point, North Carolina 27261-1500
PROXY STATEMENT
GENERAL
This Proxy Statement and form of proxy (the "Proxy") is solicited by and on
behalf of the Board of Directors of LADD Furniture, Inc. (the "Company") for use
at the 1995 Annual Meeting of Shareholders to be held at the Radisson Hotel, 135
S. Main Street, High Point, North Carolina, on May 12, 1995, at 10:00 a.m. and
at any subsequent time which may be made necessary by its adjournment. This
Proxy Statement and Proxy were mailed to shareholders on or about April 6, 1995.
Only shareholders of record at the close of business on April 3, 1995, will
be entitled to notice of, and to vote at the meeting. There were 23,171,799
shares of Common Stock outstanding on April 3, 1995.
If the accompanying Proxy is properly signed and returned, the shares
represented thereby will be voted. Where a choice is specified on any Proxy as
to the vote on any matter to come before the meeting, the Proxy will be voted in
accordance with such specification. If no choice is specified in a Proxy that is
properly executed and returned, the Proxy will be voted FOR the nominees for
directors named herein and FOR Items 2 and 3 of the accompanying Notice. Any
shareholder giving the solicited Proxy may revoke it at any time before it is
exercised, and any shareholder who has executed a Proxy and attends the meeting
may elect to vote in person rather than by proxy. The Proxy may be revoked by
the shareholder filing with the Secretary of the Company either a written
instrument of revocation or a duly executed proxy bearing a later date.
VOTING SECURITIES
The laws of North Carolina under which the Company is incorporated provide
that each shareholder present or represented and entitled to vote on a matter at
the meeting or any adjournment thereof, including with respect to the election
of directors, will be entitled to one vote on such matter for each share held by
him at the close of business on the record date. Other than the election of
directors, which requires a plurality of the votes cast, each matter to be
submitted to the shareholders requires the affirmative vote of a majority of the
votes cast at the meeting. For purposes of determining the numbers of votes cast
with respect to any voting matter (except with respect on the vote for Item 2,
approval of the amendment of the Company's Articles of Incorporation and the
concurrent one-for-three reverse stock split), only those cast "for" or
"against" are included. Abstentions and broker non-votes are counted only for
purposes of determining whether a quorum is present at the meeting, except with
respect to the vote on Item 2, as to which abstentions are counted as a vote
"against."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth in the table below are all persons known by management to own
beneficially five percent or more of the Company's outstanding Common Stock as
of December 31, 1994, except for Mr. Allen whose beneficial ownership has been
determined as of April 3, 1995. The persons have sole voting and investment
power except as noted:
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
Richard R. Allen
ONE PLAZA CENTER, BOX HP-3
HIGH POINT, NC 27261 2,570,919(1) 11.1%
Brinson Partners, Inc.
THREE FIRST NATIONAL PLAZA
CHICAGO, IL 60602 1,923,100(2) 8.3%
FMR Corp.
82 DEVONSHIRE STREET
BOSTON, MASS. 02109 1,743,700(3) 7.6%
The Capital Group Companies, Inc.
333 SOUTH HOPE STREET
LOS ANGELES, CA 90071 1,316,400(4) 5.7%
(1) Includes currently exercisable options as to 29,755 shares and 36,482 shares
of restricted stock. Does not include 40,000 shares owned by Mr. Allen's
wife and 31,389 shares held by Mr. Allen's wife as custodian or trustee for
their children, as to such shares Mr. Allen disclaims beneficial ownership.
(2) Includes 443,900 shares owned by Brinson Trust Company, a wholly-owned
subsidiary of Brinson Partners, Inc.
(3) Includes 1,742,000 shares owned by various funds as to which Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR
Corp., acts as investment advisor. As to these shares, Fidelity carries out
the voting of the shares under written guidelines established by the funds'
boards of trustees.
(4) Capital Research and Management Company, a registered investment adviser and
an operating subsidiary of The Capital Group Companies, Inc., exercised as
of December 31, 1994, investment discretion with respect to 1,316,400
shares, or 5.70% of outstanding shares of the class, which were owned by
various institutional investors. Said subsidiary has no power to direct the
vote of the above shares.
2
The following table shows the number of shares of the Company's Common
Stock beneficially owned at April 3, 1995 by each director and each nominee for
election to the Board of Directors of the Company and all named executive
officers of the Company in addition to Mr. Richard R. Allen named in the table
above who is a director, nominee and executive officer. Also shown is
information as to the beneficial ownership of all directors and executive
officers as a group. The persons have sole voting and investment power except as
noted:
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED OUTSTANDING SHARES
Daryl B. Adams 4,600(1) --(11)
William B. Cash 22,123(2) --(11)
James H. Corrigan, Jr. 24,221(3) --(11)
William S. Creekmuir 12,930(4) --(11)
O. William Fenn, Jr. 970,492(5) 4.2%
Gerald R. Grubbs (12) 72,674(6) --(11)
Don A. Hunziker 724,756(7) 3.1%
Thomas F. Keller 23,423(8) --(11)
Fred L. Schuermann, Jr. 45,931(9) --(11)
All executive officers and directors as a
group (10 persons) (12) 4,472,069(10) 19.2%
(1) Includes currently exercisable options as to 4,600 shares.
(2) Includes currently exercisable options as to 6,125 shares. Excludes 1,332
shares owned by Mr. Cash's wife, as to such shares Mr. Cash disclaims
beneficial ownership.
(3) Includes 266 shares owned jointly by Mr. and Mrs. Corrigan and currently
exercisable options as to 6,125 shares.
(4) Includes currently exercisable options as to 4,445 shares and 7,647 shares
of restricted stock.
(5) Does not include 26,666 shares held by Mr. Fenn's wife, as to such shares
Mr. Fenn disclaims beneficial ownership. Includes currently exercisable
options as to 375 shares and 11,953 shares of restricted stock.
(6) Includes currently exercisable options as to 23,262 shares and 20,996 shares
of restricted stock.
(7) Does not include 58,666 shares held by Mr. Hunziker's wife, as to such
shares Mr. Hunziker disclaims beneficial ownership. Includes currently
exercisable options as to 375 shares and 23,118 of restricted stock.
(8) Includes currently exercisable options as to 6,125 shares.
(9) Includes currently exercisable options as to 21,200 shares and 24,731 shares
of restricted stock.
(10) Includes currently exercisable options as to 102,125 shares and 124,927
shares of restricted stock.
(11) Less than 1%.
(12) Effective January 26, 1995, Mr. Grubbs resigned as a director and Vice
Chairman of the Company and was appointed president of Daystrom Furniture,
a division of the Company. As of that date, Mr. Grubbs ceased being an
executive officer of the Company but is included in the group total because
he was an executive officer as of the fiscal year ended December 31, 1994.
3
NOMINEES FOR ELECTION OF DIRECTORS
(Proposal numbered (1) in the accompanying Notice)
At the 1995 Annual Meeting, [seven/eight] directors will be elected to hold
office until the 1996 Annual Meeting or until their successors have been elected
and qualified. It is proposed to nominate the [seven/eight] persons listed below
with brief statements of their principal occupations and other biographical
information. All of the nominees other than are current
directors. It is intended that the Proxyholders named in the Proxy will vote for
the persons listed in the table below. Should any nominee named become unable to
serve as a director, the shares represented by valid proxies will be voted for
the election of such other person as the Board of Directors may recommend in his
place, or the Board may recommend the nomination of only the remaining nominees.
DIRECTOR BUSINESS EXPERIENCE DURING PAST FIVE YEARS, DIRECTORSHIPS
NAME AGE SINCE IN PUBLIC COMPANIES AND FAMILY RELATIONS
Richard R. Allen 54 1981 Chairman of the Board of Directors and Chief Executive Officer since October
1991; President from October 1991 to January 1995; Vice Chairman of the Board
of Directors from January 1990 to October 1991; Secretary from 1981 to July
1990; currently a director of Lighthouse Financial Corporation and the
American Furniture Manufacturers Association.
William B. Cash(2) 80 1983 Retired; chairman of board of directors of Turnpike Properties, Inc. from 1980
to June 1985.
James H. Corrigan, Jr.(1) 69 1984 Chairman of the Board of Directors and chief executive officer of Mebane
Packaging Corporation since 1980; currently chairman of Piedmont BancShares
Corp.
O. William Fenn, Jr.(1) 68 1982 Vice Chairman of the Board of Directors from January 1990 to March 1992;
President and Chief Operating Officer of the Company from 1982 to January
1990; since October 1993, Director, Furniture Export Office, International
Trade Division, N.C. Department of Commerce; currently a director of the
American Furniture Hall of Fame, International Home Furnishings Marketing
Association, and Southern National Corporation.
Don A. Hunziker(2) 67 1981 Chairman Emeritus of the Board of Directors from October 1991 to September
1992; Chairman of the Board of Directors and Chief Executive Officer of the
Company from 1982 to October 1991.
Thomas F. Keller(2) 63 1983 Dean and R. J. Reynolds Industries Professor, Fuqua School of Business, Duke
University, from 1974 to present; currently a director of Hatteras Income
Securities, Inc., Nations Funds, Inc., Nations Funds Trust, American Business
Products, Monk-Austin, Inc., Mentor Growth Fund, Inc., Wendy's International,
Welbilt Corporation and Mebane Packaging Corporation.
Fred L. Schuermann, Jr. 49 1991 President and Chief Operating Officer since January 1995; Executive Vice
President from October 1991 to January 1995; Chief Financial Officer,
Secretary and Treasurer from January 1990 to July 1992; Senior Vice President
from January 1990 to October 1991.
Nominee
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
In addition to Messrs. Richard R. Allen and Fred L. Schuermann, Jr., listed
above under "Nominees for Election of Directors," the Company currently has the
following executive officers:
NAME AGE POSITION HELD
Daryl B. Adams 48 Vice President since January 1994; Corporate Controller, Assistant Secretary,
and Assistant Treasurer of the Company since January 1988.
William S. Creekmuir 39 Senior Vice President, Chief Financial Officer, Secretary and Treasurer since
July 1992; partner with KPMG Peat Marwick from July 1987 to July 1992.
4
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership (Form 3) and
reports of changes in ownership (Forms 4 and 5) of Common Stock of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1994, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were met.
EXECUTIVE CASH COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives generally are made by
the three-member Compensation Committee of the Board. Each member of the
Compensation Committee is a non-employee director. Recommendations on
compensation for the Company's Senior Executives (as defined below) are made to
the Compensation Committee by Richard R. Allen, Chairman of the Board and Chief
Executive Officer. All decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reviewed by the full Board,
except for decisions about awards under certain of the Company's incentive stock
option plan, which must be made solely by the Committee in order for the grants
under such plan to satisfy Exchange Act Rule 16b-3. Set forth below is a report
prepared by Messrs. Cash and Hunziker and Dr. Keller in their capacity as the
Board's Compensation Committee addressing the Company's compensation policies
for 1994 as they affected Mr. Allen, Chairman of the Board and Chief Executive
Officer, and Messrs. Grubbs, Schuermann, and Creekmuir and Ms. Adams, the four
executive officers other than Mr. Allen who, for 1994, were the Company's most
highly paid executive officers (collectively with Mr. Allen, the "Senior
Executives"). Effective January 26, 1995, Mr. Grubbs resigned as a director and
Vice Chairman of the Company and was appointed president of Daystrom Furniture,
a division of the Company. As of that date, Mr. Grubbs ceased being an executive
officer of the Company.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Compensation Committee's executive policies are designed to provide
competitive levels of compensation that integrate pay with the Company's annual
and long-term performance goals, reward above average corporate performance,
recognize individual initiative and achievements, and assist the Company in
attracting and retaining qualified executives. In that regard, the Compensation
Committee has adopted the following Policy on Executive Compensation:
IT SHALL BE THE POLICY OF LADD FURNITURE, INC. TO MAINTAIN AN
EXECUTIVE COMPENSATION PROGRAM THAT WILL:
(BULLET) SUPPORT A PAY-FOR-PERFORMANCE POLICY THAT DIFFERENTIATES THE
AMOUNT OF COMPENSATION ON THE BASIS OF CORPORATE, BUSINESS
UNIT AND INDIVIDUAL PERFORMANCE;
(BULLET) MOTIVATE SENIOR OFFICERS TO ACHIEVE STRATEGIC BUSINESS
INITIATIVES AND GOALS AND REWARD THEM FOR THEIR ACHIEVEMENT;
(BULLET) PROVIDE COMPENSATION OPPORTUNITIES WHICH ARE COMPARABLE TO
THOSE OFFERED BY OTHER LEADING COMPANIES, THUS ALLOWING THE
COMPANY TO COMPETE FOR AND RETAIN TALENTED EXECUTIVES WHO ARE
CRITICAL TO THE COMPANY'S LONG-TERM SUCCESS; AND
(BULLET) ALIGN THE INTERESTS OF EXECUTIVES WITH THE LONG-TERM
INTERESTS OF SHAREHOLDERS THROUGH AWARD OPPORTUNITIES THAT
CAN RESULT IN OWNERSHIP OF LADD COMMON STOCK.
THE LADD EXECUTIVE COMPENSATION PROGRAM SHALL BE COMPRISED OF BASE
SALARY, ANNUAL CASH INCENTIVE OPPORTUNITIES, LONG-TERM INCENTIVE
OPPORTUNITIES IN THE FORM OF STOCK OPTIONS, RESTRICTED STOCK AND CASH
INCENTIVES, AND OTHER BENEFITS TYPICALLY OFFERED TO EXECUTIVES BY MAJOR
CORPORATIONS.
AS AN EXECUTIVE'S LEVEL OF RESPONSIBILITY INCREASES, A GREATER PORTION
OF HIS OR HER POTENTIAL TOTAL COMPENSATION OPPORTUNITY SHALL BE BASED ON
PERFORMANCE INCENTIVES AND LESS ON SALARY AND EMPLOYEE BENEFITS, CAUSING
GREATER VARIABILITY IN THE INDIVIDUAL'S ABSOLUTE COMPENSATION LEVEL FROM
YEAR-TO-YEAR. IN ADDITION, THE HIGHER ONE RISES IN THE LADD
5
FURNITURE ORGANIZATION, THE GREATER THE COMPENSATION MIX SHIFTS TO RELY ON
THE VALUE OF LADD'S COMMON STOCK THROUGH STOCK-BASED AWARDS.
SUMMARY OF INCENTIVE COMPENSATION PLANS
While not required by the SEC disclosure rules, the Compensation Committee
believes a brief description of each of the Company's incentive compensation
plans will enable shareholders to understand better the information presented
below.
MANAGEMENT INCENTIVE PLAN. The Company maintains a Management Incentive
Plan designed to compensate officers and key managers for accomplishment of
divisional and Company annual profit plans, subject to the Company achieving
certain specified after-tax earnings levels and the participant achieving
specific individual performance objectives. All amounts paid for fiscal 1992,
1993 and 1994 to the Senior Executives have been included in the "Bonus" column
in the Summary Compensation Table. For fiscal 1995, depending upon an
individual's assigned incentive category, participants can earn incentive
compensation payments up to a maximum of 10% to 100% of their annual salaries.
Payments under the plan, if any, will be made following completion of the annual
audit and after evaluation of the Company's and participants' performances. The
awards will be paid in cash.
LONG-TERM INCENTIVE PLAN. On February 28, 1991, the Board of Directors
approved a Long-Term Incentive Plan for certain executive officers and operating
officers. The plan was effective January 1, 1991, and was amended effective
January 3, 1993. This plan was designed to compensate officers for
accomplishment of divisional and Company long-range (3-year) objectives of
specified levels of return on average shareholders' equity, return on average
divisional invested capital, and sales growth. The weighting of each factor is
55% for return on average shareholders' equity or return on average divisional
invested capital (depending on whether the participant is a corporate or
divisional officer) and 45% for sales growth. For the first three year
(1991-1993) plan, depending on an individual's assigned incentive category,
participants could earn cash compensation incentive payments up to a maximum of
56% to 75% of beginning base salary for the three year performance cycle,
payable in two equal annual installments. No cash incentive payments were paid
for 1992, 1993 or 1994 to the Senior Executives. For the three year plans
(1993-1995 and 1994-1996) pursuant to which grants were made in February 1993
and 1994, depending upon an individual's assigned incentive category,
participants could earn cash compensation incentive payments up to a maximum of
28% to 38% of beginning base salary. In conjunction with the plan, restricted
stock has been issued and incentive stock option grants under the Company's
incentive stock option plan have been made to certain participants, including
the Senior Executives. The restricted stock agreements provide that if the
employee should cease to be employed by the Company for any reason other than
death or disability or ceases to be employed by the Company in an appropriate
executive capacity prior to five years from the date of the agreement, the
Company may repurchase the shares for $.10 per share. The employee may not sell,
assign, or transfer the shares in any way (except to a spouse or child, and then
the shares are still subject to the Company's right of repurchase) so long as
the shares are subject to the Company's right of repurchase. All issuances of
restricted stock and incentive stock options to the Senior Executives during
1992, 1993 and 1994 have been shown under the "Restricted Stock Award" and
"Option" columns in the Summary Compensation Table. Awards made in 1994 with
respect to the cash portion of the Long Term Incentive Plan to the Senior
Executives are shown in the Long Term Incentive Plan -- Awards in 1994 Table.
1994 INCENTIVE STOCK OPTION PLAN. On February 24, 1994, the Company adopted
the LADD Furniture, Inc. 1994 Incentive Stock Option Plan (the "Plan"). Pursuant
to the Plan, 1,200,000 shares (subject to adjustments in the event of stock
dividends, stock splits and certain other events) of the Company's Common Stock
have been reserved for the issuance of stock options under the Plan. Incentive
stock options are issued by the Administrative Committee of the Plan (the
Compensation Committee of the Board of Directors) at current fair market prices
(based upon the closing price of the Company's Common Stock on the
over-the-counter market on the date of grant). Only key employees (as determined
by the Administrative Committee) are eligible to receive options. The Committee
does not consider a participant's current stock ownership or prior stock option
or restricted stock grants when making new stock option grants. The Committee
does consider, however, beneficial ownership of Company Common Stock when
setting the price of incentive stock options for optionees, such as Mr. Allen,
who own more than 10% of the Company's Common Stock. For these individuals, the
option price is 110% of fair market value on the date of grant. The Plan also
provides for the granting of nonqualified stock options as to 2,000 shares of
the Company's Common Stock to nonemployee directors of the Company upon their
initial election to the Board and additional nonqualified stock options as to
1,500 shares each year thereafter so long as the nonemployee director remains
eligible under the terms of the Plan. The Plan also provides for the granting of
nonqualified stock options to eligible employees at option prices less than fair
market value. In order to comply with the terms of the Plan and federal income
tax regulations, a portion of the 1994 option grants to Mr. Allen were granted
as
6
nonqualified stock options at an option price equal to fair market value of the
Company's common stock on date of grant. Options granted under the Plan are
typically for a term of ten years, first becoming exercisable in 25% increments
over a four year period beginning one year after the date of grant. The Plan
replaced the Company's Amended and Restated 1983 Incentive Stock Option Plan
which expired in June 1993, pursuant to which options were granted to eligible
employees, including the Senior Executives, and directors upon terms and
conditions substantially the same as contained in the Plan.
RELATIONSHIP OF COMPANY PERFORMANCE TO SENIOR EXECUTIVE 1994 COMPENSATION.
Compensation paid the Company's executive officers in 1994, as reflected in
the following tables as to the Senior Executives, consisted of the following
elements: base salary, annual bonus for 1994, and various payments associated
with employee benefits provided to Senior Executives. The Compensation
Committee's emphasis on tying pay to performance criteria is demonstrated by the
fact that no amounts were paid to the Senior Executives for 1994 from
performance-based compensation arrangements reflecting the Company's performance
being below annual performance targets in 1994, in comparison to incentive
payments comprising six percent of Senior Executive compensation for 1993 and
24% for 1992.
The measures of performance that are utilized under the Company's
compensation plans are as follows: (1) actual versus targeted annual profit
performance, (2) return on average shareholders' equity, both annually and over
a three-year period, and (3) sales growth over a three-year period. A portion of
the annual incentive opportunity is also based on specific individual
performance objectives established for each Senior Executive. Subjective
considerations of individual performance are considered only in establishing
base salaries.
ACTUAL VERSUS TARGETED PROFIT PERFORMANCE. Actual versus targeted profit
performance and, with the exception of Mr. Allen, performance against specific
individual objectives are the criteria utilized to determine the extent to which
targeted annual bonuses will be paid to the Company's Senior Executives. The
actual versus target profit performance bonus opportunity represented 35% to 50%
of the Senior Executives' beginning base salary for 1994. Target annual profits
utilized for purposes of evaluating annual bonuses are based on business plans
developed by the management teams of the individual operating companies and the
senior management team of the Company, and are approved by the Company's Board
of Directors.
RETURN ON AVERAGE SHAREHOLDERS' EQUITY. Return on average shareholders'
equity is an important component of the annual bonus for all Senior Executives
(with the exception of Ms. Adams) and is also a performance measurement
criterion under the Company's Long-Term Incentive Plan. For 1994, the Company's
average return on shareholders' equity was below the established bonus threshold
and, therefore, there were no payouts based upon this performance criterion. The
return on average equity target is set such that if it is achieved, the Company
would be recognized as a top performer in the furniture industry. The return on
average equity component of the 1994 bonus opportunity represented 35% to 50% of
the Senior Executives' beginning base salary for 1994 under the Management
Incentive Plan.
Under the cash portion of the Long-Term Incentive Plan (as amended in
1993), Senior Executives participating in the plan at the beginning of each
three-year performance cycle can earn a maximum of 15% to 21% of their beginning
base salary for the three-year performance cycle by exceeding target goals tied
to the Company's three-year average return on shareholders' equity. The first
three-year performance cycle under the Long-Term Incentive Plan was completed in
1993. No payouts based upon return on average shareholders' equity were made to
Senior Executives with respect to 1994 under the Long-Term Incentive Plan
because the Company's performance was below the return on average shareholders'
equity target. Awards with respect to the cash portion of the Long Term
Incentive Plan made in 1994 to Senior Executives are shown in the Long Term
Incentive Plan -- Awards in 1994 Table.
SALES GROWTH. Under the cash portion of the Long-Term Incentive Plan (as
amended in 1993), Senior Executives participating in the plan at the beginning
of each three-year performance cycle can earn a maximum of 13% to 17% of their
beginning base salary for the three-year performance cycle by exceeding target
goals tied to the Company's sales growth relative to the furniture industry as
measured by the U.S. Commerce Department Furniture Growth Index. No bonuses
based upon sales growth will be paid unless the Company's sales growth rate is
at least equal to the industry growth rate. The first three-year performance
cycle under the Long-Term Incentive Plan was completed 1993. No payouts based
upon three year sales growth were made with respect to 1994 under the Long-Term
Incentive Plan because the Company's performance was below the furniture
industry growth rate. Awards with respect to the cash portion of the Long Term
Incentive Plan made in 1994 to Senior Executives are shown in the Long Term
Incentive Plan -- Awards in 1994 Table.
7
INDIVIDUAL PERFORMANCE OBJECTIVES. Under the 1994 Management Incentive Plan
a bonus opportunity of 10% of beginning base salary is also based on specific
individual performance objectives ("IPOs") established for each Senior
Executive, with the exception of Mr. Allen. Mr. Allen's incentive compensation
under the Management Incentive Plan is based entirely upon attaining
profitability and return on average shareholders' equity objectives. At the
beginning of each year, IPOs specific to each Senior Executives' areas of
responsibility are established in consultation with Mr. Allen. Such IPOs may
include sales growth, cost control, balance sheet management, and quality
improvement. No payouts for attaining IPOs in 1994 were made because the
Company's performance did not meet the minimum profitability threshold for
payment of incentives to Senior Executives.
OTHER COMPENSATION PLANS. At various times in the past, the Company has
adopted certain broad-based employee benefit plans in which Senior Executives,
once eligible, have been permitted to participate and has adopted certain
executive officer retirement, life and health insurance plans. The benefits
under these plans are not directly or indirectly tied to a company performance.
CHIEF EXECUTIVE OFFICER'S 1994 COMPENSATION
Mr. Richard R. Allen, Chairman of the Board and Chief Executive Officer of
the Company, is eligible to participate in the same executive compensation plans
available to other Senior Executives. The Compensation Committee's general
approach to setting Mr. Allen's target annual compensation is to seek to be
competitive with other companies in the furniture industry, but have a large
percentage of his target compensation based upon objective short-term and
long-term performance criteria. While this may result in some fluctuations in
the actual level of Mr. Allen's annual compensation, the Compensation Committee
believes its objectives appropriately motivate the Company's chief executive
officer toward clearly defined long-term goals, while acknowledging the
importance to Mr. Allen of his having some certainty in the level of his
compensation through its non-performance based elements. Mr. Allen's base salary
is designed to be competitive with base salaries paid other chief executive
officers of public companies in the furniture industry and other corporations of
similar size. During 1994, Mr. Allen did not receive an increase in his base
compensation.
In December 1993, the Compensation Committee established Mr. Allen's target
annual bonus for 1994 after giving consideration to the Company's performance in
1993, the then present furniture manufacturing and retail sales environment, as
well as emphasis which the Compensation Committee places on compensation being
paid under the long-term incentive arrangements provided by the Long-Term
Incentive Plan. Fifty percent of Mr. Allen's incentive opportunity under the
annual bonus program is based upon net profit performance and the other 50% is
based upon return on average shareholders' equity of the Company - both based
upon incentive target ranges. In 1994, Mr. Allen did not qualify for a bonus as
the Company did not satisfy either of the performance criteria.
In February 1993 and 1994, the Compensation Committee established target
payout levels and target performance levels for the 1993 through 1995 and 1994
through 1996 performance cycles under the Company's Long-Term Incentive Plan
following a review of Mr. Allen's pay relative to others in similar
corporations, expected trends in executive pay, and the Company's performance
goals. The performance criteria utilized by the Committee as criteria for Mr.
Allen under the Long-Term Incentive Plan - sales growth and return on average
shareholders' equity - are designed to strike a reasonable balance between
measuring performance based upon growth of the Company and upon the performance
of the Company in terms of return on average shareholders' equity. The
Compensation Committee believes these criteria are consistent with the financial
objectives of the Company, the primary goal of which is to significantly
increase the value of shareholders' investment in the Company. The Compensation
Committee believes that Company performance at these levels will indicate that
the Company is an industry leader.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
William B. Cash Thomas F. Keller Don A. Hunziker
8
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Summary Compensation Table below indicates the Cash Compensation paid
by the Company as well as other compensation paid or accrued to the Chief
Executive Officer and the next four highest compensated executive officers at
the end of fiscal 1994 (the "Senior Executives") for services rendered in all
capacities during fiscal years 1994, 1993, and 1992, respectively.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
AWARDS PAYOUTS
ANNUAL COMPENSATION RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(3) ($)(4) (#) ($) ($)(5)
Richard R. Allen 1994 $365,500 $ -0- -0- $ 68,023 30,965 $ -0- $1,840
CHAIRMAN OF THE BOARD AND 1993 $361,625 $ -0- -0- $ 48,253 7,778 -0- $2,497
CHIEF EXECUTIVE OFFICER 1992 $329,125 $77,738 -0- -0- -0- -0- $1,687
Gerald R. Grubbs(1) 1994 $235,000 $ -0- -0- $ 43,738 22,050 $ -0- $ 896
PRESIDENT OF DAYSTROM FURNITURE 1993 $232,500 $ -0- -0- $ 31,017 5,000 -0- $ 974
1992 $218,750 $86,755 -0- -0- -0- -0- $ 928
Fred L. Schuermann, Jr. 1994 $235,000 $ -0- -0- $ 43,738 22,050 $ -0- $ 896
PRESIDENT AND CHIEF OPERATING 1993 $232,500 $11,250 -0- $ 31,017 5,000 -0- $ 974
OFFICER 1992 $218,750 $56,255 -0- -0- -0- -0- $ 928
William S. Creekmuir(2)
SENIOR VICE PRESIDENT, CHIEF 1994 $161,250 $ -0- -0- $ 19,364 11,956 $ -0- $2,553
FINANCIAL OFFICER, SECRETARY AND 1993 $153,250 $37,350 -0- $ 13,752 1,389 -0- $ 532
TREASURER 1992 $ 73,269 $33,439 -0- -0- 6,000 -0- 132
Daryl B. Adams
VICE PRESIDENT, CORPORATE 1994 $ 93,000 $ -0- -0- -0- 2,400 $ -0- $ 553
CONTROLLER, ASSISTANT SECRETARY 1993 $ 88,150 $14,868 -0- -0- 1,200 -0- $ 539
AND ASSISTANT TREASURER 1992 $ 80,600 $30,960 -0- -0- -0- -0- $ 515
(1) Effective January 26, 1994, Mr. Grubbs resigned as Vice Chairman and was
appointed president of Daystrom Furniture, a division of the Company. As of
that date, Mr. Grubbs ceased being an executive officer of the Company.
(2) Mr. Creekmuir joined the Company as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer in July 1992. Accordingly, all 1992
compensation numbers for Mr. Creekmuir relate to the six-month period July
6, 1992 through January 2, 1993.
(3) Perquisites and other personal benefits paid to each of the named executive
officers were less than 10% of the total of their respective annual salary
and bonus in each of 1992, 1993 and 1994.
(4) Dividends are paid on restricted stock awards at the same rate as paid to
all shareholders. See the discussion under "Long-Term Incentive Plan"
included in the preceding Compensation Committee Report on Executive
Compensation for the general terms and conditions of the restricted stock
grants. On December 31, 1994, the above named executive officers held the
number of restricted shares having a then current market value as follows:
Allen (23,698/$147,667); Grubbs (16,926/$108,326); Schuermann
(15,637/$100,077); Creekmuir (3,345/$21,408); and Adams (0/$0).
(5) The Company has made a $400 annual contribution on behalf of each of the
named executives to match pre-tax elective deferral contributions (included
under Salary) made by each under the Company's 401(k) Savings Plan for
Salaried Employees. Mr. Creekmuir's total for 1994 includes $2,000 of
director fees for subsidiary corporations. The balance of each of the named
executive officer's "all other compensation" represents premiums paid by the
Company on group term life insurance equal to one year's salary (up to
$300,000). The Company provides this benefit for all salaried employees at
the Company's headquarters.
STOCK OPTIONS
The following table sets forth information with regard to grants of stock
options during the fiscal year ended December 31, 1994, to each of the named
Senior Executives. All such grants were made under the Company's 1994 Incentive
Stock Option Plan. Additionally, the values assigned to each reported option are
shown assuming five percent and ten
9
percent compounded annual growth rates in the market value of the Company's
Common Stock. In assessing these values it should be kept in mind that no matter
what theoretical value is placed on a stock option on the date of grant, its
ultimate value will be dependent on the market value of the Company's stock at a
future date.
STOCK OPTION GRANTS IN 1994
POTENTIAL
REALIZABLE
VALUE
AT
ASSUMED
ANNUAL
RATES
OF
STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR
NUMBER OF % OF TOTAL OPTION
SECURITIES OPTIONS GRANTED EXERCISE OR TERM
UNDERLYING TO EMPLOYEES IN BASE PRICE EXPIRATION (3)
NAME OPTIONS (#)(1) FISCAL YEAR (2) ($/SH) DATE 5% ($)
10,965 1.9% $ 11.00 02/24/99 $19,298
16,000 2.8% 6.29 10/27/99 16,800
Richard R. Allen 4,000 .7% 5.75 10/27/04 14,480
7,050 1.2% $ 10.00 02/24/04 $44,345
Gerald R. Grubbs 15,000 2.7% 5.75 10/27/04 54,300
7,050 1.2% $ 10.00 02/24/04 $44,345
Fred L. Schuermann, Jr. 15,000 2.7% 5.75 10/27/04 54,300
1,956 .3% $ 10.00 02/24/04 $12,303
William S. Creekmuir 10,000 1.8% 5.75 10/27/04 36,200
Daryl B. Adams 2,400 .4% $ 5.75 10/27/04 $ 8,688
NAME 10% ($)
$ 56,031
47,520
Richard R. Allen 36,720
$112,448
Gerald R. Grubbs 137,700
$112,448
Fred L. Schuermann, Jr. 137,700
$ 31,198
William S. Creekmuir 91,800
Daryl B. Adams $ 22,032
(1) The options are for a term of ten years (except for grants to Mr. Allen
which are for a term of five years other than the one ten year grant of
nonqualified stock options for 4,000 shares at an option price equal to fair
market value on date of grant), first becoming exercisable in 25% increments
over a four-year period beginning one year after the date of grant.
(2) In fiscal 1994, 565,933 options were granted to all employees as a group.
(3) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth.
The following table sets forth information with regard to exercises of
stock options during the fiscal year ended December 31, 1994, by each of the
named Senior Executives and the 1994 fiscal year end value of all unexercised
options held by such individuals.
AGGREGATED OPTION EXERCISES IN FISCAL 1994
AND FISCAL YEAR END OPTION VALUES
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS
UNDERLYING UNEXERCISED AT
SHARES ACQUIRED VALUE OPTIONS AT FY-END (#) FY-END($)(1)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
Richard R. Allen -0- -0- 20,287 37,581 $ 840
Gerald R. Grubbs -0- -0- 16,500 29,550 $ -0-
Fred L. Schuermann, Jr. -0- -0- 14,952 29,036 $ -0-
William S. Creekmuir -0- -0- 3,347 15,998 $ -0-
Daryl B. Adams -0- -0- 4,050 3,550 $ -0-
NAME UNEXERCISABLE
Richard R. Allen $ 5,520
Gerald R. Grubbs $11,250
Fred L. Schuermann, Jr. $11,250
William S. Creekmuir $ 7,500
Daryl B. Adams $ 1,800
(1) Closing price of Company Common Stock at December 31, 1994 was $6.50.
10
LONG TERM INCENTIVE PLAN -- AWARDS IN 1995
In February 1994, the Compensation Committee made awards to the Senior
Executives with respect to the cash portion of the Company's Long Term Incentive
Plan for the 1994-1996 performance cycle and are shown in the following table.
All issuances of restricted stock and incentive stock options to the Senior
Executives during 1994 under the Long Term Incentive Plan have been shown under
the "Restricted Stock Award" and "Option" columns in the Summary Compensation
Table.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1994
ESTIMATED FUTURE
PAYOUTS
PERFORMANCE PERIOD UNDER NON-STOCK
NUMBER OF SHARES, OR OTHER PERIOD UNTIL PRICE-BASED PLANS
UNITS OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS# PAYMENT $ $ $
Richard R. Allen 687 units 1994-1996 $34,350 $68,700 $103,050
Gerald R. Grubbs 442 units 1994-1996 $22,100 $44,200 $ 66,300
Fred L. Schuermann, Jr. 442 units 1994-1996 $22,100 $44,200 $ 66,300
William S. Creekmuir 391 units 1994-1996 $19,550 $39,100 $ 58,650
Daryl B. Adams -0- -- -- -- --
DEFINED BENEFIT PLANS
SALARIED PLAN
The Salaried Plan covers eligible exempt and nonexempt employees who
receive compensation from the Company and certain subsidiaries on a salaried
basis. The benefit formula for the Salaried Plan, as amended effective January
1, 1989, is .65% of "Average Final Compensation" for each year of service, plus
.65% of Average Final Compensation in excess of Covered Compensation for each of
the first 35 Years of Service; provided, however, no participant will receive
benefits under the amended plan less than the sum of the benefits that would
have been payable under the plan prior to its amendment, plus benefits accrued
after December 31, 1988 under the new formula. Average Final Compensation under
the amended plan is defined as the average of annual compensation during the
five consecutive years of service which produces the highest average.
The following table shows estimated annual benefits payable upon retirement
at age 65 to salaried employees at the specified remuneration and in various
years of service classifications:
YEARS OF SERVICE
AVERAGE FINAL COMPENSATION 15 20 25 30 35
$ 50,000............................................................... $ 7,223 $ 9,730 $12,038 $14,446 $16,853
100,000............................................................... 16,973 22,630 28,288 33,946 39,603
200,000............................................................... 26,723 35,630 44,538 53,446 62,353
300,000............................................................... 26,723 35,630 44,538 53,446 62,353
400,000............................................................... 26,723 35,630 44,538 53,446 62,353
500,000............................................................... 26,723 35,630 44,538 53,446 62,353
* Maximum compensation taken into account was $150,000 in 1994 and 1995. The
estimated annual benefits in the foregoing table assumes retirement on
December 31, 1994.
The years of credited service as of December 31, 1994 and Average Final
Compensation under the Salaried Plan for each of Messrs. Allen, Grubbs,
Schuermann, Creekmuir and Ms. Adams are as follows:
AVERAGE
YEARS FINAL
OFFICER/DIRECTOR OF SERVICE COMPENSATION
Richard R. Allen 14.17 $230,387
Gerald R. Grubbs 21.20 197,681
Fred L. Schuermann, Jr. 7.00 193,353
William S. Creekmuir 2.52 136,608
Daryl B. Adams 6.99 91,913
11
NONQUALIFIED SUPPLEMENTAL RETIREMENT PLAN
Effective January 1, 1990, the Company established a nonqualified
supplemental retirement plan known as the LADD Furniture, Inc. Supplemental
Retirement Income Plan (the "SERP") for certain of its salaried employees. The
SERP has a three-fold purpose: (1) to provide "make-up" benefits to salaried
employees whose benefits under the Salaried Plan were reduced as a result of
bringing the Salaried Plan into compliance with the Tax Reform Act of 1986
("Category One Participants"); (2) to provide supplemental retirement income for
key executive officers ("Category Two Participants"); and (3) to provide the
Company with the necessary flexibility for designing an effective compensation
package to attract new executives ("Category Three Participants"). The SERP also
provides supplemental survivor benefits for the designated beneficiary of each
participant. Messrs. Allen, Grubbs, Schuermann, and Creekmuir are Category Two
Participants under the SERP. Ms. Adams is not currently a participant under the
SERP. The supplemental retirement benefit payable to a Category Two Participant
in the form of a 10-year certain annuity in a monthly amount equal to the
difference between (a) and (b) below:
(a) Two percent (2%) of Average Final Compensation (defined as the
average of annual compensation during the three consecutive years of
service which produces the highest average), multiplied by a Participant's
Years of Service (subject to maximum of 25);
LESS
(b) The sum of a Participant's:
(i) Qualified Plan Retirement Benefit;
(ii) Primary Social Security Benefit;
(iii) Nonqualified Deferred Compensation Agreement Benefit; and
(iv) Category One Benefit received under the SERP.
The following table shows estimated annual benefits payable upon retirement
to Category Two Participants in the SERP at the specified remuneration in the
various Years of Service classifications:
EXECUTIVE CASH COMPENSATION
YEARS OF SERVICE
AVERAGE FINAL COMPENSATION 15 20 25 30 35
$100,000......................................................... $ 239 $ 5,090 $ 9,942 $ 4,794 $ 0
200,000......................................................... 21,366 33,260 45,154 37,049 28,943
300,000......................................................... 51,366 73,260 95,154 87,049 78,943
400,000......................................................... 81,366 113,260 145,154 137,049 128,943
500,000......................................................... 111,366 153,260 195,154 187,943 178,943
The years of credited service and Average Final Compensation as of December
31, 1994 for Messrs. Allen, Grubbs, Schuermann, and Creekmuir are as follows:
AVERAGE
YEARS OF FINAL
EXECUTIVE OFFICER SERVICE COMPENSATION
Richard R. Allen 14.17 $384,245
Gerald R. Grubbs 21.20 269,002
Fred L. Schuermann, Jr. 17.56 253,752
William S. Creekmuir 2.52 152,853
Since the SERP is a nonqualified deferred compensation plan, it is not
subject to the discrimination requirements or the annual benefit limits of the
Internal Revenue Code and the Employee Retirement Income Security Act of 1974.
Although the SERP is, technically speaking, an unfunded plan, the Company
established a "Rabbi Trust" to provide participants with increased security with
respect to benefits due them from the SERP. In 1991, the Company funded the
Rabbi Trust with a $500,000 contribution and made additional contributions of
$60,000 and $100,000 in 1994 and 1993, respectively.
12
OTHER COMPENSATION
COMPENSATION OF DIRECTORS
The Company compensates each director who is not an employee an annual fee
of $14,000, plus $800 for each meeting of the Board and $400 for each committee
meeting which he attends on the same day as a Board meeting or $800 for each
committee meeting he attends if it is held on a day other than a day of a Board
meeting. Directors are compensated $200 for telephonic meetings. In addition to
such fees, the Company reimburses each director for travel and other related
expenses incurred by him in attending the meetings.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into executive employment agreements (the
"Executive Agreements") with each of Messrs. Allen, Schuermann and Grubbs
(collectively the "Executives"). The Executive Agreements (all of which are
substantially similar) have an initial term of two years which is automatically
extended for successive one-year periods until terminated by either party. The
Executive Agreements for Messrs. Allen and Schuermann provide that if the
Executive's employment with the Company is terminated at any time during the
term of the Executive Agreement for any reason other than "for cause" (as
defined in the Executive Agreement), the Executive shall be entitled to receive
in 24 equal monthly payments an amount equal to two times the sum of (i) his
then current base salary and (ii) the average annual incentive payments to the
Executive during the preceding three years, less earned income received by him
during the 24-month severance period. The severance formula in Mr. Grubbs'
Executive Agreement is based upon his salary and incentive payments as of 1994
and will not adjust for further changes in his compensation. The Executive shall
also be deemed to be 100% vested with respect to the SERP.
The Executive Agreements are intended to encourage the Executives to remain
in the employ of the Company during periods of uncertainty in the event that the
Company undergoes a change in control. For the purposes of the Executive
Agreements, a "change in control" shall be deemed to have occurred when (i) any
person, corporation, or group of associated persons, excluding affiliates of the
Company, acquires a beneficial ownership of an aggregate of more than 50% of the
then outstanding shares of voting stock of the Company or (ii) a merger or
consolidation to which the Company is a party and where the Company is not a
surviving or continuing entity has been completed. The Executive Agreements
provide for the payment of severance benefits to the Executive if he terminates
his employment for "Good Reason" (as such term is defined in the Executive
Agreement) during the 12 months immediately preceding or following the effective
date of a change in control of the Company. If the Executive terminates his
employment for Good Reason, then the Company shall pay him a lump sum severance
payment in an amount equal to two times the sum of (i) his then current base
salary and (ii) the average annual incentive payments to the Executive during
the preceding three years. Further, the Executive shall immediately become 100%
vested in the SERP, all outstanding stock options shall become immediately
exercisable, and all restrictions under restricted stock agreements shall be
eliminated.
The Company's 1994 Incentive Stock Option Plan also has a change in control
provision similar to that discussed above. In the event of a change of control,
all awards of options become immediately exercisable for all option holders,
including the Executives, if provision is not made in the change of control
transaction for continuance of the option plan and the assumption of options
previously granted under the Plan.
COMPARATIVE COMPANY PERFORMANCE
The following line graph compares cumulative total shareholder return for
the Company with a performance indicator of the overall stock market, the NASDAQ
Composite Index, and an industry index, the Household Furniture Index, for the
preceding five fiscal years.
13
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG LADD FURNITURE, INC.
NASDAQ COMPOSITE INDEX AND PEER INDUSTRY INDEX
(Comparison chart appears here plot points are as followed)
1989 1990 1991 1992 1993 1994
CRSP NASDAQ MARKET INDEX $100.00 $84.92 $136.28 $158.58 $180.93 $176.92
PEER INDEX $100.00 $75.47 $105.85 $145.84 $192.83 $139.96
LADD FURNITURE, INC. $100.00 $56.83 $ 69.99 $ 97.99 $ 94.36 $ 62.31
ASSUMES $100 INVESTED ON DECEMBER 30, 1989 IN COMPANY
COMMON STOCK, NASDAQ COMPOSITE INDEX(1), AND HOUSEHOLD FURNITURE INDUSTRY
INDEX(2)
ASSUMES REINVESTMENT OF DIVIDENDS
(1) NASDAQ Total Return Index for U.S. Companies prepared for NASDAQ by the
Center for Research in Securities Prices at the University of Chicago.
(2) SIC Code 251 Household Furniture Index as prepared by Media General
Financial Services, Inc., which index includes Ameriwood Industries, Bassett
Furniture, Bush Industries, Chromcraft Revington, DMI Furniture, Ethan Allen
Interiors, Flexsteel Industries, Industrie Natuzzi, Interco, La-Z-Boy Chair,
LADD Furniture, Leggett & Platt, MASCO Corp., O'Sullivan Industries, Pulaski
Furniture, River Oaks Furniture, Rowe Furniture, Stanley Furniture,
Wellington Hall and WinsLoew Furniture. The returns of each company have
been weighted according to each company's market capitalization.
14
THE BOARD OF DIRECTORS
COMMITTEES AND MEETINGS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has established a Compensation Committee consisting
of Messrs. Cash and Hunziker and Dr. Keller. Mr. Hunziker was Chairman Emeritus
of the Board of Directors of the Company from October 1991 to September 1992,
and was Chairman of the Board of Directors and Chief Executive Officer of the
Company from 1982 to October 1991. The Compensation Committee acts to review and
recommend major changes in policy of various compensation or benefits programs
and salary levels for top management positions. During 1994, the Compensation
Committee met five times.
AUDIT COMMITTEE
The Board of Directors has also established an Audit Committee. It provides
general oversight of financial reporting and of the adequacy of the internal
controls of the Company. The Audit Committee functions by meeting with the
independent auditors and by informal meetings and contact with members of
management concerned with financial and control functions. The Audit Committee
met three times in 1994. The current members of the Audit Committee are Messrs.
Fenn and Corrigan.
BOARD ATTENDANCE
The Board of Directors held six meetings in person and three telephonic
meeting during 1994. All directors attended at least 75% of the Board and
committee meetings they were responsible for attending. The Board has not
established a nominating committee.
APPROVAL OF AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION AND REVERSE
STOCK SPLIT
(Proposal numbered (2) in the accompanying Notice)
GENERAL
The Board of Directors of the Company has proposed to amend the Articles of
Incorporation of the Company (the "Articles") to effect a one-for-three reverse
stock split (the "Reverse Split") of the presently issued and outstanding shares
of the Company's Common Stock. The complete text of the amendment to the
Articles (the "Amendment to the Articles") for the Reverse Split is set forth in
Exhibit A to this Proxy Statement; however, such text is subject to change as
may be required by the North Carolina Secretary of State. If the Reverse Split
is approved by the requisite vote of the Company's shareholders, upon filing of
the Amendment to the Articles with the North Carolina Secretary of State, (i)
the Reverse Split will be effective, (ii) each holder of record of Common Stock
on the effective date of the Amendment will thereafter be deemed to hold one
share of Common Stock for every three presently issued and outstanding shares of
Common Stock held of record on that date, and (iii) each certificate
representing shares of Common Stock outstanding immediately prior to the Reverse
Split (the "Old Shares") will be deemed automatically without any action on the
part of the shareholders to represent one-third the number of shares of Common
Stock after the Reverse Split (the "New Shares"); provided, however, that no
fractional New Shares will be issued as a result of the Reverse Split. In lieu
thereof, each shareholder whose Old Shares are not evenly divisible by three
will receive one additional New Share for the fractional New Share that such
shareholder would otherwise be entitled to receive as a result of the Reverse
Split. After the Reverse Stock Split becomes effective, shareholders will be
asked to surrender certificates representing Old Shares in accordance with the
procedures set forth in a letter of transmittal to be sent by the Company. Upon
such surrender, a certificate representing the New Shares will be issued and
forwarded to the shareholders; however, each certificate representing Old Shares
will continue to be valid and represent New Shares equal to one-third the number
of Old Shares (plus one additional New Share where such Old Shares are not
evenly divisible by three).
The number of shares of capital stock authorized by the Articles will not
change, but the par value of the Company's Common Stock will be changed from
$.10 to $.30 per share as a result of the proposed Reverse Split. The Common
Stock issued pursuant to the Reverse Split will be fully paid and nonassessable.
The voting and other rights that presently characterize the Common Stock will
not be altered by the Reverse Split. The Amendment does not effect the Company's
authorized class of $100 par value Preferred Stock in any way.
15
PURPOSES OF THE PROPOSED REVERSE SPLIT
The Board of Directors believes the Reverse Split is desirable for several
reasons. The relatively low per-share market price of the Common Stock may
impair the acceptability of the Common Stock to certain institutional investors
and other members of the investing public. The reduction in the number of issued
and outstanding shares of Common Stock caused by the Reverse Split is expected
to increase the trading price of the Common Stock. The Board of Directors also
believes that the proposed Reverse Split will result in a broader market for the
Common Stock than that which currently exists. Theoretically, the number of
shares outstanding should not, by itself, affect the marketability of the stock,
the type of investor who acquires it, or the Company's reputation in the
financial community. In practice this is not necessarily the case, as certain
investors view low-priced stock as unattractive or, as a matter of policy, are
precluded from purchasing low-priced shares. In addition, certain brokerage
houses, as a matter of policy, will not extend margin credit on stocks trading
at low prices. A variety of brokerage house policies and practices tend to
discourage individual brokers within those firms from dealing with lower priced
stocks. Some of those policies and practices pertain to the payment of broker's
commissions and to time consuming procedures that function to make the handling
of lower priced stocks economically unattractive to brokers. In addition, the
structure of trading commissions also tends to have an adverse impact upon
holders of lower priced stock because the brokerage commission on a sale of
lower priced stock generally represents a higher percentage of the sales price
than the commission on a relatively higher priced issue. The proposed Reverse
Split should result in a price level for the Common Stock that will reduce, to
some extent, the effect of the above-referenced policies and practices of
brokerage firms and diminish the adverse impact of trading commissions on the
market for the Common Stock. The expected increased price level may also
encourage interest and trading in the Common Stock and possibly promote greater
liquidity for the Company's shareholders, although such liquidity could be
adversely affected by the reduced number of shares of Common Stock outstanding
after the Reverse Split Effective Date. Further, certain investors may be
attracted to low-priced stock because of greater trading volatility sometimes
associated with such securities.
However, there can be no assurance that any or all of these effects will
occur; including, without limitation, that the trading price per New Share of
Common Stock after the Reverse Split will be three times the trading price per
Old Share of Common Stock before the Reverse Split, or that such price will
either exceed or remain in excess of the current trading price. Further, there
is no assurance that the market for the Common Stock will be improved.
Shareholders should note that the Board of Directors cannot predict what effect
the Reverse Split will have on the trading price of the Common Stock.
EFFECT OF THE REVERSE SPLIT
The Reverse Split will be effected by means of filing the Amendment to the
Articles with the North Carolina Secretary of State. Assuming approval of the
Reverse Split by the requisite vote of the shareholders at the meeting, the
Amendment to the Articles will thereafter be filed with the North Carolina
Secretary of State as promptly as practicable and the Reverse Split will become
effective as of 5:00 p.m., Eastern daylight time, on the date of such filing
(the "Reverse Split Effective Date"). Without any further action on the part of
the Company or the shareholders, after the Reverse Split, the certificates
representing Old Shares will be deemed to represent one-third the number of New
Shares (plus one additional New Share where such Old Shares are not evenly
divisible by three).
Shareholders have no right under North Carolina law to dissent from the
Reverse Split of the Common Stock.
16
The Amendment and Reverse Split will not change the shareholders' equity of
the Company. The Company has authorized capital stock of 50,000,000 shares of
Common Stock and 500,000 shares of Preferred Stock. The authorized capital stock
will not be changed by reason of the Amendment or the Reverse Split. As of April
3, 1995, the number of issued and outstanding Old Shares was 23,171,799. There
were no shares of Preferred Stock outstanding. The following table illustrates
the principal effects of the proposed Reverse Split and decrease in outstanding
Common Stock assuming no additional shares of Common Stock are issued prior to
the Reverse Split Effective Date as a result of the exercise of any options:
SHARES OF PRIOR TO PROPOSED AFTER PROPOSED
CAPITAL STOCK REVERSE SPLIT REVERSE SPLIT
Authorized Common Stock 50,000,000 50,000,000
Outstanding Common Stock 23,171,799 7,723,933(1)
Authorized Preferred Stock 500,000 500,000
Outstanding Preferred Stock -0- -0-
(1) Does not include New Shares of Common Stock to be issued in lieu of
fractional shares.
The Common Stock is currently registered under Section 12(b) of the
Securities Exchange Act of 1934 (the "Exchange Act") and, as a result, the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The Reverse Split will not affect the registration of the Common
Stock under the Exchange Act. For the first 20 business days after the Reverse
Split Effective Date, trades of the New Shares will be reported on NASDAQ
under the Company's symbol "LADFD." Thereafter, New Shares will be reported
under the Company's current symbol "LADF."
Other than pursuant to the 1983 Incentive Stock Option Plan and the 1994
Incentive Director Stock Option Plan, the Company has no outstanding options or
warrants to purchase shares of Common Stock. Under the terms of both of these
stock option plans, the Reverse Split will reduce the number of shares reserved
for such plans by a factor of three, will reduce the number of shares
purchasable under outstanding options by a factor of three and will increase the
exercise price of outstanding options by a factor of three.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Reverse Split Effective Date, the Company
will send a letter of transmittal to each holder of record of Old Shares of
Common Stock outstanding on the Reverse Split Effective Date. The letter of
transmittal will contain instructions for the surrender of certificate(s)
representing such Old Shares to Wachovia Bank of North Carolina, N.A., the
Company's exchange agent (the "Exchange Agent"). Upon proper completion and
execution of the letter of transmittal and return thereof to the Exchange Agent,
together with the certificate(s) representing Old Shares, a shareholder will be
entitled to receive a certificate representing the number of New Shares of
Common Stock into which his Old Shares have been reclassified and changed as a
result of the Reverse Split.
Shareholders should not submit any certificates until requested to do so.
No new certificate(s) will be issued to a shareholder until he has surrendered
his outstanding certificate(s) together with the properly completed and
executed letter of transmittal to the Exchange Agent.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Split. The Company, however, believes that because
the Reverse Split is not part of a plan to periodically increase a shareholder's
proportionate interest in the assets or earnings and profits of the Company, the
Reverse Split will have the following federal income tax effects.
1. A shareholder will not recognize gain or loss on the exchange. In the
aggregate, the shareholder's basis in the New Shares will equal his basis in the
Old Shares.
2. A shareholder's holding period for the New Shares will be the same as
the holding period of the Old Shares exchanged therefor.
3. The Company will not recognize any gain or loss as a result of the
Reverse Split.
17
MISCELLANEOUS
The Board of Directors may abandon the proposed Reverse Split at any time
before or after the Annual Meeting and prior to the Reverse Split Effective Date
if for any reason the Board of Directors deems it advisable to abandon the
proposal. The Board of Directors may consider abandoning the proposed Reverse
Split if it determines, in its sole discretion, that the Reverse Split would
adversely affect the ability of the Company to raise capital or the liquidity of
the Common Stock, among other things. In addition, the Board of Directors may
make any and all changes to the Amendment to the Articles that it deems
necessary to file the Amendment to the Articles with the North Carolina
Secretary of State and give effect to the Reverse Split.
RECOMMENDATION AND VOTE
The affirmative vote of a majority of the outstanding Common Stock present
in person or by proxy and entitled to vote at the Annual Meeting is required to
approve the Amendment and the Reverse Split. The Board is of the opinion that
the Reverse Split is advisable and in the best interests of the Company and
recommends a vote FOR the approval of the Amendment and the Reverse Split. All
proxies will be voted to approve the Amendment and the Reverse Split unless a
contrary vote is indicated on the enclosed proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT AND
THE REVERSE SPLIT.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal numbered (3) in the accompanying Notice)
The appointment of auditors is approved annually by the Board of Directors
and subsequently submitted to the shareholders for ratification. In recommending
the ratification by the shareholders of the appointment of KPMG Peat Marwick
LLP, the Board of Directors is acting upon the recommendation of the Audit
Committee, which is composed entirely of non-employee Directors and which has
satisfied itself as to the firm's professional competence and standing. In
making its recommendation, the Audit Committee has taken into consideration the
audit scope and audit fees associated with such retention. A representative of
KPMG Peat Marwick LLP will attend the 1995 Annual Meeting of Shareholders to
answer appropriate questions and to make any statement that such representative
may desire to make.
The Board of Directors unanimously recommends a vote "FOR" the approval of
the selection of KPMG Peat Marwick LLP as independent public accountants to
audit the books and accounts of the Company for the 1995 fiscal year. A
favorable vote by the holders of a majority of the Company's outstanding shares
of Common Stock represented at the meeting is required for ratification of
independent auditors. It is intended that, unless otherwise specified by the
shareholders, votes will be cast pursuant to the proxies hereby solicited in
favor of the approval of the selection of KPMG Peat Marwick LLP as independent
public accountants to audit the books and accounts of the Company for the 1995
fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
INDEPENDENT PUBLIC ACCOUNTANTS.
DATE FOR THE RECEIPT OF PROPOSALS
In order for shareholder proposals to be included in the proxy materials
for the 1996 Annual Meeting, any such proposal must be received by the Company
at its executive offices not later than December 4, 1995 and meet all other
applicable requirements for inclusion therein.
OTHER BUSINESS
The Company does not intend to bring any business before the meeting other
than that stated above in this Proxy Statement. However, if any other matters
properly come before the meeting, the Proxyholders named in the enclosed Proxy
will vote on such matters pursuant to the Proxy in accordance with their best
judgment or as instructed by the Board of Directors.
18
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION FORM 10-K ANNUAL REPORT WILL BE PROVIDED
FREE OF CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST DIRECTED TO: LADD FURNITURE,
INC., ONE PLAZA CENTER, BOX HP-3, HIGH POINT, NORTH CAROLINA 27261-1500,
ATTENTION: WILLIAM S. CREEKMUIR, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER.
METHOD AND EXPENSE OF SOLICITATION
The Company expects to solicit proxies primarily by mail. Proxies may be
solicited personally and by telephone by regular employees of the Company. The
only expenses anticipated are those which are ordinarily incurred in connection
with preparing, assembling and mailing the proxy material, including charges and
expenses of communicating with shareholders. The total amount of such expenses
will be borne by the Company.
If you cannot be present at the meeting, you are requested to SIGN, DATE,
and RETURN the accompanying Proxy in the enclosed envelope.
WILLIAM S. CREEKMUIR
SECRETARY
19
EXHIBIT A
ARTICLES OF AMENDMENT
OF
LADD FURNITURE, INC.
The undersigned corporation hereby submits these Articles of Amendment for
the purpose of amending its articles of incorporation:
1. The name of the corporation is LADD Furniture, Inc.
2. The following amendment to the articles of incorporation of the
corporation was adopted by its shareholders on the 12th day of May, 1995,
in the manner prescribed by law:
Article 4 is hereby amended and restated in its entirety as
follows:
The aggregate number of shares which the Corporation shall have
the authority to issue is Fifty Million Five Hundred Thousand
(50,500,000), divided into Five Hundred Thousand (500,000) shares of
series preferred stock of par value of $100 per share (hereafter
called series preferred stock), and Fifty Million (50,000,000) shares
of common stock of the par value of $.30 per share (hereafter called
common stock).
The Board of Directors of the Corporation shall have the
authority to fix by resolution or resolutions the preferences,
limitations and relative rights of the series preferred stock or to
establish series within the class of series preferred stock and
determine the preferences, limitations and relative rights between
such series, as in their discretion they shall determine from time to
time.
Upon filing of this amendment with the office of the Secretary of
State of the State of North Carolina, each share of common stock, $.10
par value, of the Corporation, issued and outstanding at such time
shall, by virtue of this amendment to the Corporation's articles of
incorporation, be changed into one-third ( 1/3) of one share of fully
paid and nonassessable common stock, $.30 par value, of the
Corporation.
In lieu of the issuance of fractional shares that would otherwise
result from the reverse stock split effected by the preceding
paragraph of this Article 4, the Corporation shall issue to any
stockholder that would otherwise receive fractional shares one
additional share.
Following the effectiveness of this amendment, certificates for
the shares of common stock to be outstanding after the reverse stock
split shall be issued pursuant to procedures adopted by the
Corporation's board of directors and communicated to those who are to
receive new certificates.
3. These articles will become effective at 5:00 p.m. on the date of
filing.
This the day of May, 1995.
LADD FURNITURE, INC.
By:
RICHARD R. ALLEN, CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
*******************************************************************************
APPENDIX
LADD FURNITURE, INC.
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Richard R. Allen and Fred L. Schuermann,
Jr., or either of them, as Proxyholders, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of Common Stock of LADD Furniture, Inc.
held of record by the undersigned on April 3, 1995, at the annual
meeting of shareholders to be held on May 12, 1995 at 10:00 a.m. at the
Radisson Hotel, 135 S. Main Street, High Point, N.C. or any adjournment
thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote [ ]
(except as marked to the contrary below) for all nominees listed below
Richard R. Allen, William B. Cash, James H. Corrigan, Jr., O. William
Fenn, Jr., Don A. Hunziker, Thomas F. Keller, and Fred L. Schuermann,
Jr.
(INSTRUCTION - To withhold authority to vote for any individual nominees
write that nominee's name in the space provided below).
2. Approval of Amendment of the Company's Articles of Incorporation and
the concurrent one-for-three reverse stock split.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Ratification of the appointment of KPMG Peat Marwick LLP as the
independent public accountants for the 1995 fiscal year.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the Proxyholders are authorized to vote upon
such other business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS PROXY, IF EXECUTED AND RETURNED, WILL BE
VOTED FOR PROPOSALS 1, 2 and 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officers. If a partnership, please sign in partnership name
by authorized person.
DATED __________________________, 1995
(Be sure to date Proxy)
______________________________________
Signature
______________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
IN THE ENCLOSED ENVELOPE