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October 26, 201227, 2015
Office of the ChairmanChair of the Board
Dear Shareholder:
You are cordially invited to attend the Annual Shareholders’ Meeting of Flexsteel Industries, Inc. on Monday, December 10, 2012,7, 2015, at 2:00 p.m. We sincerely want you to come, and we welcome thisthe opportunity to meet with those of you who find it convenient to attend.
Time will be provided for shareholder questions regarding the affairs of the Company and for discussion of the business to be considered at the meeting as explained in the notice and proxy statement which follow. Directors and other Company executives expect to be available to talk individually with shareholders after the meeting. No admission tickets or other credentials are currently required for attendance at the meeting, but we may request to see some identification to establish that you are a shareholder of the Company.
The formal noticeWe have elected to take advantage of the meeting“notice and access” rules of the Securities and Exchange Commission to furnish most of our shareholders with proxy statement follow. I hope that after reading themmaterials over the Internet. These rules allow us to provide you will sign, datewith the information you need, while reducing printing and maildelivery costs.
Your vote on the proxy card, whether you plan to attend in personproposals is important. Whether or not you attend the meeting, we encourage you to assure thatvote your shares will be represented.in order to make certain that you are represented at the meeting. You may vote over the Internet, as well as by telephone or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card.
Sincerely,
Lynn J. Davis
Chair of the Board
| Record Date: | October 9, 2015 | |
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Date of Meeting: | December | |
| Time: | 2:00 p.m. | |
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| 385 Bell St. | ||
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| Dubuque, IA 52001 |
IMPORTANT
IMPORTANT
Whether you own one share or many, each shareholder is urged to vote by Internet or telephone, or, if you received paper copies of our proxy materials, you can also mark, date, sign and returnpromptly mail the accompanying proxy card in the enclosed proxy inenvelope so that your shares will be represented at the envelope provided which requires no postage if mailed in the United States.meeting.
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FLEXSTEEL INDUSTRIES, INC.
P.O. Box 877
Dubuque, Iowa 52004-0877
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 10, 20127, 2015
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Flexsteel Industries, Inc. will be held at the Hilton Minneapolis, 1001 Marquette Avenue, Minneapolis, Minnesota 55403,Flexsteel Global Headquarters, 385 Bell St, Dubuque, Iowa 52001, on Monday, December 10, 20127, 2015 at 2:00 p.m. for the following purposes:
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| To transact such other business as may properly come before the meeting or any adjournments or postponements of the meeting. |
October 19, 20129, 2015 has been fixed as the record date for the determination of common shareholders entitled to notice of, and to vote at, the meeting. Only holders of record at the close of business on that date will be entitled to vote at the meeting or any adjournments or postponements of the meeting.
Whether or not you plan to attend the meeting, please vote by Internet or telephone, or, if you received paper copies of our proxy materials, you can also mark, date, sign and signpromptly mail the accompanying proxy and return it promptlycard in the enclosed envelope which requires no additional postageso that your shares will be represented at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Timothy E. Hall
Secretary
October 27, 2015
IMPORTANT
Please vote by Internet or telephone, or, if mailedyou received paper copies of our proxy materials, you can also mark, date, sign and promptly mail the accompanying proxy card in the United States. If you attend the meeting, you may voteenclosed envelope so that your shares in person even though you have previously signed and returned your proxy. Voting by ballotwill be represented at the meeting cancels any proxy previously returned.meeting.
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FLEXSTEEL INDUSTRIES, INC.
P.O. Box 877
Dubuque, Iowa 52004-0877
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PROXY STATEMENT
Annual Meeting of Shareholders to be Held
December 10, 20127, 2015
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
This proxy statement and the accompanying proxy isare solicited on behalf of the Board of Directors, referred to as theBoard “Board”, of Flexsteel Industries, Inc., referred to as theCompany orFlexsteel, to be used at the Annual Meeting of Shareholders to be held on Monday, December 10, 2012,7, 2015, and any adjournments or postponements of the meeting, for the purposes set forth in the notice of meeting accompanying this proxy statement. The Company will pay the cost of the solicitation of proxies.
The mailing address of the corporate office and principal executive office of the Company is P.O. Box 877, Dubuque, IA 52004-0877. The approximate date on which this proxy statement and accompanying proxy card are first being mailedavailable to shareholders is October 26, 2012.
PROXIES AND VOTING27, 2015.
Each shareholder who signs
Meeting Purposes
At the meeting, shareholders will elect two (2) Class II directors, Mary C. Bottie and returns a proxyEric S. Rangen, for three-year terms expiring at the shareholders meeting in 2018. We do not expect that any other business, except for routine or procedural matters, will be addressed at the meeting. If any other business is properly brought up at the meeting, the persons named in the form enclosed withproxy will have authority to vote on these matters at their discretion.
Proxy Materials Available on Internet
In an effort to reduce the cost of delivering the proxy materials to our shareholders, we are making the materials available to our shareholders on the Internet. On October 27, 2015, we sent shareholders a one-page “Notice of Internet Availability of Proxy Materials,” which included instructions on how to access our proxy materials on the Internet. The proxy materials, consisting of this proxy statement hasand our fiscal 2015 annual report to shareholders, are available atwww.proxyvote.com. The Notice of Internet Availability of Proxy Materials also provides instructions on how to vote your shares. By making the unconditional rightmaterials available through the Internet, we expect to revokereduce our costs, conserve natural resources, and expedite the delivery of the proxy at any time priormaterials. However, if you prefer to its usereceive hard copies of the proxy materials, please follow the instructions included on the Notice of Internet Availability of Proxy Materials.
Voting
Only shareholders of record at the meeting. A shareholder can change his or her proxy orclose of business on October 9, 2015, the record date, will be eligible to vote. There is only one class of stock entitled to vote in one of three ways:
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If a shareholder chooses either of the first two methods, the shareholder must take the described action no later than the beginning of the meeting. Once voting on a particular matter is completed at the meeting, our common stock, $1.00 par value, of which there were 7,556,871 shares outstanding on the record date. A quorum, which is a shareholdermajority of the outstanding shares, is needed to conduct a meeting. Each share is entitled to one vote for each director position; cumulative voting is not available. We encourage you to vote by telephone or on the Internet. If your shares are held in your name, you can vote by telephone or on the Internet by following the instructions on the proxy card or as explained in the Notice of Internet Availability of Proxy Materials. If you are a beneficial holder with your shares held in the name of your broker, bank, or other financial institution, you will notreceive telephone or Internet voting instructions from the institution. If you received a paper copy of the proxy materials, you may vote your shares by signing and dating each proxy card you received and returning the cards in the enclosed envelope. The proxies will be voted according to your directions on the proxy card. If you return a signed card without specifying your vote, your shares will be voted:
| · | FORthe election of Mary C. Bottie and Eric S. Rangen as Class II Directors (Proposal I). |
If you sign and return your proxy card, your shares will be voted on any other business that properly comes before the meeting as determined by the persons named in the proxy. We urge you to sign, date, and return your proxy card promptly, or vote by telephone or on the Internet, even if you plan to attend the meeting in person. If you do attend in person, you will be able to revoke his or her proxy or to change his or her vote as to that matter. Unless a shareholder’s proxy is so revoked or changed, theyour shares of common stock represented by each proxy received by the Company will be voted at the meeting and at any
adjournmentseven if you previously signed a proxy card or postponements ofvoted by telephone or on the meeting. If a shareholder’sInternet. However, if you hold your shares of common stock are held in street name you must request a legal proxy from your broker or nominee to vote in person at the Annual Meeting.
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Shares Held by Broker
If you hold your shares through a broker, bank, or other financial institution, such shareholderyou will receive your proxy materials and voting instructions from the institution. Under New York Stock Exchange rules, your broker, bank, or financial institution will not vote your shares in director elections without your specific instructions. To ensure your vote is counted, you must provide directions to your broker, bank, or financial institution by following its instructions.
Changing Your Vote
If you wish to change your vote, you may do so by submitting a new vote by proxy, telephone, Internet, or in person at the meeting. A later vote will cancel an earlier vote. For example, if you vote by Internet and later vote by telephone, the telephone vote will count, and the Internet vote will be canceled. If you wish to change your vote by mail, internet or telephone and must contact such organization to change his or her vote. Execution of theyou should request a new proxy will in no way affect a shareholder’s right to attend the meeting andcard from our Secretary at P.O. Box 877, Dubuque, Iowa 52004-0877. Your last vote in person. If a shareholder specifies how the proxy is to be voted on any business to comereceived before the meeting it will be votedthe only one counted. You may also change your vote by voting in accordance with such specification. If no specification is made, it will be voted FORperson at the election of Mary C. Bottie, Patrick M. Crahan, Robert E. Deignan and James R. Richardson as Class II Directors (Proposal I). All nominees have been previously elected by the shareholders.
As of the close of business on October 19, 2012, the record date for determining shareholders entitled to notice of, and tomeeting. Your vote at the meeting the Company had 7,006,920 outstanding shares of common stock, par value $1.00 per share, which is the only class of the Company’s capital stock entitled to vote at the meeting. Each share of common stock issuedwill count and outstanding as of the record date is entitled to one vote upon each matter to be presented at the meeting, and cumulative voting for directors is not permitted. A quorum, consisting of a majority of the outstanding shares of common stock entitled to vote at the meeting, must be present in person or represented by proxy before action may be taken at the meeting.cancel any previous vote.
Vote Required
Votes cast by proxy or in person will be counted by the inspector of election appointed for the meeting who will be present at the meeting. The affirmative vote of a plurality of the shares of common stock present in person or represented by proxy at the meeting and entitled to vote is required for the election of the director nominees named in this proxy statement. For Proposal No. I, the election of Class II Directors, the four nominees that receive the highest number of “FOR” votes will be elected. AIn determining a quorum, a “WITHHELD” vote will be counted, for purposes of determining whether there is a quorum, but will not be voted in favor of the nominee with respect to whom authority has been withheld. A broker non-vote is treated as present for purposesThe two nominees that receive the highest number of determining a quorum, but“FOR” votes will not be counted as shares entitled to vote and will have no effect on the result of the vote.elected.
While the Board knows of no other matter to be presented at the meeting or any adjournment or postponement of the meeting, all proxies returned to the Company will be voted on any such matter in accordance with the judgment of the proxies.
EXPENSE OF SOLICITATIONNumber of Copies Sent to Household
The costFor two or more shareholders sharing the same address, that do not participate in the electronic delivery of proxy materials, we only send your household a single copy of our annual report and proxy statement unless you previously withheld your consent to “householding” or instruct us otherwise. Householding saves us the expense of mailing duplicate documents to your home and conserves our natural resources, and we hope that receiving one copy rather than multiple copies is more convenient for you.
However, we will promptly provide additional copies of our fiscal 2015 annual report or this proxy statement to the other shareholders in your household if you send a written request to: Office of the solicitation of proxies on behalfSecretary, Flexsteel Industries, Inc., P.O. Box 877, Dubuque, Iowa 52004-0877, or you may call us at 563-585-8392 to request additional copies. Copies of the Board will be paidannual report, proxy statement, and other reports we file with the SEC are also available on our website athttp://www.flexsteel.com/about-us/investor-relations or through the SEC’s website atwww.sec.gov.
You may revoke your consent to householding at any time by the Company. Solicitation of proxies will be principallycontacting Broadridge Financial Solutions, Inc., either by mail. In addition, the officers or employees of the Company and others may solicit proxies, either personally, by telephone, by special letter,calling toll-free 800-542-1061, or by other forms of communication. The Company will also make arrangements with banks, brokerage houses and other custodians, nominees and fiduciarieswriting to send proxies andBroadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
More Information about Voting Your Shares
Information regarding the proxy material to their principals and will reimburse them for reasonable expenses in so doing. Officers and employees ofprocess is available from the Company will not receive additional compensation in connection with the solicitation of proxies.SEC on its website athttp://www.sec.gov/spotlight/proxymatters.html.
PROPOSAL I
ELECTION OF DIRECTORS
Our Amended and Restated Articles of Incorporation permit the election of thirteen Directors. The Board currently consists of twelveten persons divided into three classes. At each Annual Meeting the terms of one class of Directors expire and persons are elected to that class for terms of three years or until their respective successors are duly qualified and elected or until their earlier resignation, removal or termination. The Nominating and CompensationGovernance Committee believes that, as a group, the nominees below bring a diverse range of backgrounds, experiences and perspectives to the Board’s deliberations.
Set forth below is information with respect to all Board members, including the nominees, their recent employment or principal occupation, a summary of their specific experience, qualifications, attributes or skills that led to the conclusion that they are qualified to serve as a director, the names of other public companies for which they currently serve as a director or have served as a director within the past five years, their period of service as a Flexsteel director and their age as of August 14, 2012.September 30, 2015.
The Board of Directors believes that the directors listed below come from a wide variety of business backgrounds, possess highly ethical standards, uncompromising integrity, operate in the best interest of the shareholders and the majority are independent as defined by the NASDAQ Stock Market listing standards.
The Board has determined that the Board shall consist of 8 members and has nominated, based on the recommendation of the Nominating and Governance Committee, Mary C. Bottie and Eric S. Rangen for election as Class II Directors of the Company. Two (2) of our previous Class II directors, Robert E. Deignan and James R. Richardson, will not stand for re-election at the Annual Meeting. Pursuant to our Bylaws, we have balanced the director classes and are proposing moving director Eric S. Rangen from a Class III director to a Class II director.
All nominees have been previously elected by the shareholders. The Class II Directors’ next term expires at the 2018 Annual Meeting or upon their respective successors being elected and qualified or until their earlier resignation, removal or termination. It is the intention of the proxies named herein to vote FOR these nominees unless otherwise directed in the proxy.
DIRECTORS WHOSE TERMS EXPIRE AT THE 2012 ANNUAL MEETING,
NOMINATED FOR RE-ELECTION, CLASS II
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Mary C. Bottie Age Director since 2003 | Retired Vice President, Motorola, Inc. Marketing and General Management Ms. Bottie brings expertise in general management, operations, marketing, sales and human resources. Ms. Bottie is Chair of the |
DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIREAT THE 2013 ANNUAL MEETING, CLASS III
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Eric S. Rangen Age Director since 2002 | Senior Vice President, August 2015 to present, Senior Vice President and Chief Accounting Officer, 2006 to | |
Mr. Rangen brings experience in finance, general management, and human resources. | ||
Mr. Rangen is Chair of the Audit and Ethics Committee. The Board has determined that he is an “audit committee financial expert” as defined by SEC rules. Mr. Rangen has served on the |
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DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE AT THE
2016 ANNUAL MEETING, CLASS III
Jeffrey T. Bertsch Age 60 Director since 1997 | Senior Vice President Corporate Services, 2004 to present, Vice President Corporate Services, 1989 to 2004, Flexsteel Industries, Inc.; Director, American Trust and Savings Bank (an Iowa bank). Mr. Bertsch brings knowledge of Flexsteel culture and provides insight and perspective on operations, finance, supply-chain management and information technology. | |
Lynn J. Davis Age 68 Director since 1999 | Retired President and Chief Operating Officer, 2005 to 2006, August Technology (a public supplier of inspection equipment for microelectronic industry); Partner, 2002 to 2005, Tate Capital Partners (private investment firm); Corporate President and Chief Operating Officer, 2001, ADC Telecommunications, Inc. (a public supplier of network infrastructure products and services); President of Broadband Connectivity Group, 1992 to 2000, ADC Telecommunications, Inc., Director, Automated Quality Technologies, Inc. (manufacturer of non-contact measurement equipment); Director and Chair of Compensation Committee, Superconductor Technologies, Inc. (a public manufacturer of high temperature superconducting materials). Mr. Davis brings a wide range of experience through his service in various management roles and as an independent director. Mr. Davis brings experience in finance, general management, human resources, marketing, sales and manufacturing. Mr. Davis is the Chair of the Board of Directors. Mr. Davis has served on the Compensation Committee and the Audit and Ethics Committee. | |
Nancy E. Uridil Age Director since 2010 | Retired Senior Vice President, 2005 to | |
Ms. Uridil brings experience in strategic planning, building global brands, general management, operational expertise in | ||
Ms. Uridil is |
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DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE AT THE
2017 ANNUAL MEETING, CLASS I
Karel K. Czanderna Age 59 Director since 2012
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Thomas M. Levine Age Director since 2010 | Independent Management Advisor, 1995 to present; Executive Vice President, 1982 to 1999, Fostin Capital Corp (a venture capital investment management company); Vice President, 1982 to 1994, Foster Industries, Inc. (a private investment company); Partner, 1980 to 1982, Associate, 1974 to 1979, Berkman Ruslander Pohl Lieber & Engel (a corporate law firm). | |
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Mr. Levine brings experience in general management, business and legal matters. | ||
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Mr. Levine is a member of the Nominating and Governance and Audit and Ethics | ||
Robert J. Maricich Age Director since 2010 | Chief Executive Officer, May 2011 to present, International Market Centers, L. P. (the world’s largest owner and operator of markets and showrooms for the furniture, home décor and gift industries in High Point, NC and Las Vegas, NV); President and Chief Executive Officer, 2008 to 2011, of the predecessor company, World Market Center Ventures LLC; President and Chief Executive Officer, 2000 to 2007 and Senior Vice President, 1996 to 1999, Century Furniture Industries, Inc. (a furniture manufacturer); President, 1990 to 1996 of two operating companies of LADD Furniture Co., Inc. | |
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Mr. Maricich brings experience in engineering, manufacturing, product development, sales and marketing and general management. | ||
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The Board has determined that the Board shall consist of 12 members and has nominated, based on the recommendation of the Nominating and Compensation Committee, Mary C. Bottie, Patrick M. Crahan, Robert E. Deignan and James R. Richardson for election as Class II Directors of the Company. All nominees have been previously elected by the shareholders. The Class II Directors’ next term expires at the 2015 Annual Meeting or upon their respective successors being elected and qualified or until their earlier resignation, removal or termination. It is the intention of the proxies named herein to voteFOR these nominees unless otherwise directed in the proxy.
All nominees named above have consented to serve as Directors if elected. In the event that any of the nominees should fail to stand for election, the persons named as proxy in the enclosed form of proxy intend to vote for substitute nominees as may be selected by the Board. The proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.
The Board recommends a vote for its Director nominees named in this proxy statement. Proxies solicited by the Board will be so voted unless shareholders specify otherwise in their proxies.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis explains the material elements of the compensation of the Company’s named executive officers and describes the objectives and principles underlying the Company’s executive compensation program and decisions made for fiscal 2015. The Compensation Committee of the Board of Directors, referred to as the “Committee”, is responsible for establishing the policies and programs for compensating the named executive officers. The Committee is comprised of independent directors as defined in The NASDAQ Stock Market listing standards. The Committee also has oversight responsibility of our cash incentive compensation plan, stock plans, long-term incentive plan and other benefit plans for our named executive officers.
Compensation Philosophy and Objectives. We believe it is in our shareholders’ interests to attract, motivate and retain highly qualified individuals in critical positions by providing competitive compensation opportunities. Our guiding compensation principles endeavor to align executive compensation with our strategic objectives and financial performance. We believe that our compensation programs are aligned with our strategic objectives and address evolving concerns in a rapidly changing market. Most importantly, we believe that our executive compensation programs appropriately link pay to performance and are well aligned with the long-term interests of our shareholders. We further believe that our executive compensation principles have resulted in executive compensation decisions that have appropriately recognized executive performance which have benefited the Company and our shareholders and are expected to drive long-term shareholder value. The following list provides the guiding principles of our compensation programs:
| · | Attract and retain highly competitive leaders; |
| · | Link pay to performance; |
| · | Incent executives to grow the business and increase shareholder value; |
| · | Reward team and individual results; |
| · | Make a significant level of total target compensation “at risk”; |
| · | Compete with our peer group; |
| · | On aggregate, high performers base salary will be higher than the peer set; and |
| · | Our compensation plans will be easy to understand. |
Key compensation decisions made by the Committee include:
| · | Salary and incentives in our executive officer compensation programs are set to the median of our peer group, for commensurate performance; |
| · | Annual cash incentive and long-term incentives are based on performance, requiring the achievement of pre-determined individual financial and non-financial goals, which drive shareholder value; |
| · | A limited number of perquisites are offered. |
At the 2013 shareholder’s meeting our shareholders approved an advisory (non-binding) proposal concerning our fiscal 2013 executive compensation program with approximately 97% of the votes cast in favor of the proposal. Although the Committee interprets this vote as an affirmation of the Company’s executive compensation program, the Committee will continue to explore ways to further align executive compensation with the interests of shareholders. Our shareholders also approved our recommendation to perform a say-on-pay vote every three years.
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Competitive Positioning and Compensation Consultant. The Committee regularly reviews executive compensation levels to ensure we will be able to attract and retain the caliber of executives needed to run our business and that pay for executives is reasonable and appropriate relative to market practice. The Committee periodically completes an in-depth analysis of the Company’s compensation philosophy and structure, including the level of various compensation components, such as salary, annual incentive, and long-term incentive opportunities among peer group companies assisted by an independent compensation consulting firm. The most recent survey was completed for the Committee in early 2013 with the assistance of the independent consulting firm of Meridian Compensation Partners, LLC, referred to as “Meridian”. Based on this review, the Committee recommended to our Board of Directors that it adopt new forms of short and long-term management incentive plans, including the Cash Incentive Compensation Plan, Long-Term Incentive Compensation Plan and the Omnibus Stock Plan. While the compensation of an individual executive may vary, our policy is to target aggregate compensation for executive officers at median competitive levels, provided there is commensurate performance by the executive. Meridian identified and the Committee approved 13 peer companies for use in executive compensation reviews as follows:
| · | American Woodmark Corporation | · | Kimball International, Inc. | |||
| · | Bassett Furniture Industries, Inc. | · | Knoll, Inc. | |||
| · | Dixie Group, Inc. | · | La-Z-Boy Incorporated | |||
| · | Ethan Allen Interiors Inc. | · | Lifetime Brands, Inc. | |||
| · | Hooker Furniture Corporation | · | Patrick Industries, Inc. | |||
| · | iRobot Corporation | · | Select Comfort Corporation | |||
| · | Johnson Outdoors Inc. |
Role of Executives in Establishing Compensation. Our Chief Executive Officer plays an integral role in recommending compensation for executive officers (including base salary and performance-based annual and long-term cash and equity compensation). Our Chief Executive Officer participates in Committee meetings to provide background information on our business, financial and operational objectives, and annually reviews the performance of each executive officer based on their contributions to achieving our business, financial and operational objectives and recommends compensation for our executive officers. Committee members also develop their own opinions on the annual performance of our executive officers based on their interactions with them. As required by the listing standards of The NASDAQ Stock Market LLC, our Chief Executive Officer does not participate in deliberations concerning, or vote on, the compensation arrangements for herself. The Committee approves the compensation for all executive officers.
Components of Executive Compensation. The principal components of our executive compensation program include base salary, annual cash incentive compensation and longer-term incentives using our common stock and benefit programs.
Base Salary. An individual executive’s base salary is based upon the executive’s level of responsibility, cumulative knowledge and experience, past individual performance,contributions to past corporate performance, and competitive rates of pay. The Committee reviews each executive officer’s salary annually and makes adjustments, as appropriate,based on the Chief Executive Officer’s recommendation including any change in the executive’s responsibilities, the executive’s past performance and changes in competitive salary levels provided by the compensation consultants retained by the Committee.
The base salary of Karel K. Czanderna, our Chief Executive Officer, remained the same in fiscal 2015 as compared to fiscal 2014. The base salary of Timothy E. Hall, our Senior Vice President-Finance, Chief Financial Officer, Treasurer, and Secretary, increased in fiscal 2015 as compared to fiscal 2014 from $300,000 to $315,000 based on changes in competitive salary levels and performance. The base salary of Julia K. Bizzis, SVP Strategic Growth, increased in fiscal 2015 as compared to fiscal 2014 from $250,000 to $285,000 based on changes in competitive salary levels and expanded job responsibilities. The base salary for James R. Richardson remained the same in fiscal 2015 as compared to fiscal 2014. The Committee’s action not to increase the base salaries of the named executive officers, other than Mr. Hall and Ms. Bizzis, is consistent with the Committee’s philosophy to shift more of these named executive officers’ total compensation to incentive based compensation. The Committee believes the base salaries of the named executive officers for fiscal 2015 were at acceptable market rates.
Cash Incentive Compensation. Based upon the recommendation of the Compensation Committee, our Board of Directors adopted, and our shareholders approved at the 2013 Annual Meeting of Shareholders, the Flexsteel Industries, Inc. Cash Incentive Compensation Plan, referred to as the “CIP”. The purpose of our CIP is to align incentive compensation with performance measures that drive the Company’s market value. The CIP is also designed to promote the accomplishment of corporate objectives as reflected in the Company’s annual operating plan and objectives established by management, and to recognize achievement through the payment of incentive compensation. After the completion of the year, the Committee ratifies cash incentives based principally on the extent to which objectives have been achieved. If threshold performance levels are not met, no award is made. The incentive award levels are expressed as a percentage of the executive officer’s base salary ranging from 50% to 115% based on the individual’s responsibility level and total compensation. The objectives for fiscal year 2015 for each of the named executive officers, including weighting for each objective, were (i) Ms. Czanderna, Mr. Hall and Mr. Bertsch: 50% diluted earnings per share, 10% net sales, 30% free cash flow, and 10% leadership and effectiveness; (ii) Mr. Richardson: 10% diluted earnings per share, 10% free cash flow, 10% leadership and effectiveness and 70% related to individual goals in his area of responsibility; (iii) Ms. Bizzis: 40% diluted earnings per share, 20% net sales, 20% free cash flow, and 20% leadership and effectiveness.
The performance objectives under the cash incentive compensation plan for fiscal 2015 were as follows:
| · | Target: diluted earnings per share: $2.63, net sales: $476.3 million, free cash flow: $16.3 million. |
| · | Threshold: diluted earnings per share: $2.20, net sales: $450.0 million, free cash flow: $13.9 million. |
| · | Maximum: diluted earnings per share: $3.33, net sales: $520.0 million, free cash flow: $20.3 million. |
Cash incentive compensation made to named executive officers for fiscal 2015 for achievement of corporateperformance objectives are reflected in the column titled “Non-Equity Incentive Plan Compensation” of the Summary Compensation Table.
Long-Term Incentives. Based upon the recommendation of the Committee, our Board of Directors adopted, and our shareholders approved at the 2013 Annual Meeting of Shareholders, the Flexsteel Industries, Inc. Long-Term Incentive Compensation Plan, referred to as the “LTIP”, and the Flexsteel Industries, Inc. Omnibus Stock Plan, referred to as the “Stock Plan”. The purpose of the LTIP and Stock Plan is to promote the interests of the Company and its shareholders by providing key personnel of the Company with an opportunity to acquire a proprietary interest in the Company and reward them for achieving a high level of corporate performance, and thereby develop a stronger incentive to put forth maximum effort for the continued success and growth of the Company. In addition, the opportunity to acquire a proprietary interest in the Company will aid in attracting and retaining key personnel of outstanding ability. The level of award opportunities, as combined under both plans, are intended to be consistent with comparable companies and reflect an individual’s level of responsibility and performance.
Long-Term Incentive Compensation Plan. Under the LTIP, it is generally intended that the established performance goal or goals will be measured over a three-year period. The LTIP lists 31 potential corporate performance objectives. The Committee will also establish the weighting of each corporate performance objective for purposes of the performance calculations in advance of each performance period. The Committee selected fully-diluted earnings per share for the three-year performance period beginning on July 1, 2014 and ending on June 30, 2017. The performance objective was selected as the best reflection of our corporate performance as most relevant to our shareholders, at this time. The specific performance targets are expressed in an aggregate amount for the three-year period. The Committee endeavors to set the targets at levels that challenge our executive officers to improve operating results and enhance shareholder value.
At the start of each three-year performance period, the Committee establishes a target number of shares of our common stock that each executive can earn subject to our achievement over the three-year performance period of threshold, target and maximum levels of each corporate performance objective. Threshold and maximum levels will be expressed as a multiple of the target level. The target number of shares will differ for each executive based on the executive’s base salary at the beginning of the performance period. The beginning of each fiscal year triggers the start of another three-year performance period. This plan structure results in three active performance periods being in place at any given time. The number of shares for which the named executive officers are eligible for the three-year period ending June 30, 2017 are set forth in the Grants of Plan Based Awards table.
Omnibus Stock Plan. Under the Stock Plan, while the Committee may grant awards to participants in the form of restricted stock, restricted stock units, stock options, stock appreciation rights or performance units, the Company has only granted stock options to executive officers under the Stock Plan. Stock options awarded under shareholder approved plans, give executives the opportunity to purchase our common stock for a term not to exceed ten years and at a price of no less than the closing sale price of our common stock on the date of grant. Executives benefit from stock options only to the extent stock price appreciates after the grant of the option. The Committee recognizes that each executive officer, rather than the Committee, decides whether or not to exercise an option at any given time. For this reason, the Committee’s decision to grant a stock option to an executive officer does not take into account any gains realized by the executive officer due to a decision to exercise a pre-existing option in any given year. Historically, stock options are immediately exercisable. The Committee has not repriced stock options or replaced stock options that are underwater in the past and does not intend to engage in either practice in the future. Stock options are granted at the Committee’s regularly scheduled meeting, based on recommendations from the Chief Executive Officer. Most Committee meetings are scheduled a year in advance. Scheduling decisions for Committee meetings are made without regard to anticipated earnings or other major announcements by us. The Committee will consider granting various types of equity to newly hired executives on a case-by-case basis.
The number of option shares granted in fiscal 2015 to each of the named executive officers is set forth in the Grants of Plan Based Awards table.
Severance Benefits. Karel Czanderna, our President and Chief Executive Officer, has post-termination benefits under her employment letter dated June 29, 2012 which are described under “Executive Compensation – Potential Payments Upon Termination or Change-In-Control” below. Our notification of awards under our Incentive Compensation Plans provides that the employment requirement is satisfied in the event that the participant is terminated in connection with a change in control. Other than those agreements, we do not provide any special termination or change-in-control benefits to our other named executive officers.
Retirement Benefits. The Company makes available to Mr. Bertsch, Mr. Hall and Mr. Richardson benefits under our Senior Officers Supplemental Retirement Plan, referred to as the “Supplemental Plan”. Mr. Bertsch and Mr. Richardson are eligible to participate in the Voluntary Deferred Compensation Plan, referred to as the “Voluntary Plan”. No other executive officers are eligible to participate in these retirement benefits. These plans are discussed after the Summary Compensation table.
Other Compensation and Benefits. We may provide the following perquisites to our executive officers:
| · | country club dues; |
| · | tax planning services; |
| · | supplemental health insurance; |
| · | furniture program; and |
| · | use of a company-provided car. |
These perquisites are provided to retain executives for key positions, to assist in their business development efforts and to remain competitive in the marketplace. The value of the perquisites provided to our named executive officers is set forth in the column titled “All other compensation” of the Summary Compensation Table.
Other Policies. The Company’s cash and long-term incentive plans provide for the right to require a participant to pay back any amount received under the plan to the extent provided by law or any “clawback” policy adopted by the Company. The Company does not have formal stock ownership guidelines, but all Board members and executive officers are encouraged to own Company stock. The Company does not have a formal policy on hedging of its stock.
Tax Implications. As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct certain compensation of more than $1,000,000 that is paid to named executive officers. Performance-based stock awards, option grants and cash incentives awarded pursuant to the compensation plans adopted at the 2013 Annual Shareholders’ Meeting all qualify as performance-based compensation exempt from the tax deduction limit so long as the performance goal requirements of Section 162(m) have been met. In certain situations, the Committee has approved and in the future may approve compensation that will not meet the 162(m) requirements in order to ensure competitive levels of total compensation for our executive officers.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management. Based on the review and discussions with management with respect to the Compensation Discussion and Analysis, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
The foregoing report is provided by the following directors, who constitute the Compensation Committee.
COMPENSATION COMMITTEE
| Mary C. Bottie | Robert J. Maricich | Nancy E. Uridil | ||
| Chair |
| 9 |
Summary Compensation Table
The following table sets forth the cash and non-cash compensation, for the last two fiscal years so indicated awarded to or earned by (i) the individual that served as our principal executive officer (“Chiefreferred to as “Chief Executive Officer”), during our fiscal year ended June 30, 2012,2015, referred to as “fiscal 2015”; (ii) the individual that served as our principal financial officer referred to as “Chief Financial Officer”, during fiscal 20122015; and (ii)(iii) our twothree most highly compensated individuals who served as executive officers of Flexsteel other than our Chief Executive Officer and Chief Financial Officer at the end of fiscal 2012.2015. The Chief Executive Officer, the Chief Financial Officer and the twothree executive officers named below are collectively referred to in this proxy statement as thenamed executive officers.officers.
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Name and |
| Year |
| Salary |
| Stock |
| Option |
| Non-Equity |
| All |
| Total ($) |
| |||||||
Ronald J. Klosterman |
| 2012 |
|
| 525,000 |
|
| 239,540 |
|
| 23,400 |
|
| 686,483 |
|
| 224,431 | (4) |
| 1,698,854 |
|
|
President and Chief Executive Officer |
| 2011 |
|
| 500,100 |
|
| 180,060 |
|
| 36,300 |
|
| 417,144 |
|
| 215,638 | (4) |
| 1,349,242 |
|
|
Donald D. Dreher |
| 2012 |
|
| 402,000 |
|
| — |
|
| 15,600 |
|
| 218,950 |
|
| 37,492 | (5) |
| 674,042 |
|
|
Senior Vice President and President and Chief Executive Officer of DMI Furniture, Inc. |
| 2011 |
|
| 391,200 |
|
| — |
|
| 24,200 |
|
| 263,200 |
|
| 37,344 | (5) |
| 715,944 |
|
|
James R. Richardson |
| 2012 |
|
| 315,600 |
|
| 73,290 |
|
| 15,600 |
|
| 288,792 |
|
| 71,163 | (4) |
| 764,445 |
|
|
Senior Vice President Marketing |
| 2011 |
|
| 306,000 |
|
| 55,080 |
|
| 24,200 |
|
| 172,739 |
|
| 69,671 | (4) |
| 627,690 |
|
|
| Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($) | Total ($) |
President and Chief Executive Officer | 2015 2014 2013 | 600,000 600,000 600,000 | – 60,000 600,000 | 480,000 480,000 420,998 | 22,112 27,720 149,150 | 966,280 1,017,319 44,632 | 33,169 (5) 33,128 (5) 853,184 (5) | 2,101,561 2,218,167 2,667,964 |
| Timothy E. Hall Chief Financial Officer, Senior Vice President – Finance, Treasurer and Secretary | 2015 2014 | 315,000 300,000 | – – | 173,250 135,000 | 14,511 18,480 | 248,424 306,094 | 124,473 (5) 102,495 (5) | 875,658 862,069 |
| James R. Richardson Senior Vice President, Sales and Marketing | 2015 2014 2013 | 333,600 333,600 333,600 | – – – | 55,600 166,800 60,048 | – 18,480 16,599 | 251,793 305,306 293,288 | 80,875 (6) 68,966 (6) 74,197 (6) | 721,868 893,152 777,732 |
| Jeffrey T. Bertsch Senior Vice President, Corporate Services | 2015 2014 2013 | 285,000 291,000 291,000 | – – – | 99,750 95,550 49,140 | 6,910 18,480 16,599 | 192,892 247,955 237,036 | 73,914 (5) 83,947 (5) 77,778 (5) | 658,466 736,932 671,553 |
| Julia K. Bizzis Senior Vice President, Strategic Growth | 2015 2014 | 285,000 250,000 | – 50,000 | 128,250 100,000 | 14,511 18,480 | 280,303 235,189 | 20,676 (5) 63,528 (5) | 728,740 717,197 |
| (1) | The amounts shown for Ms. Czanderna for 2014 represent a bonus for the transformational work accomplished during fiscal year ended June 30, 2014 that resulted in shareholder value and for 2013 represent a target award under the Company's annual incentive program of 100% of her base salary guaranteed for fiscal year 2013 as part of her signing on with the Company. The amount shown for Ms. Bizzis for 2014 represent a bonus as part of her signing on with the Company. |
| (2) | The amounts shown represent |
be issued for | |
| The amounts shown represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the stock option award amount may be found in Note 8 to the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, |
| The amounts shown represent the cash |
| Includes amounts paid or accrued for the following perquisites and personal benefits: |
| Includes |
Annual Incentive Program.The plan is structured as an annual cash payment tied to the achievement of Company objectives during the fiscal year. The incentive award levels are expressed as a percentage of the named executive officer’s salary ranging from 40% to 75% based on the individual’s responsibility level and total compensation. The objectives for fiscal year 2012 for each of the named executive officers, including weighting for each objective, were (i) Mr. Klosterman – 60% diluted earnings per share, 20% net sales, and 20% free cash flow; (ii) Mr. Dreher – 20% diluted earnings per share, 10% net sales and 70% related to individual goals; and (iii) Mr. Richardson – 30% diluted earnings per share, 10% net sales, 10% free cash flow, and 50% related to individual goals.
2007 Long-Term Management Incentive Compensation Plan.Plan
The plan provides for shares of common stock and cash to be awarded to certain officers (excluding Mr. Dreher) and key employees based on performance targets set by the Nominating and Compensation Committee of the Board. The Company’s shareholders approved 500,000 shares to be issued under the plan. As of June 30, 2012, 38,9442015, 215,082 shares have been issued under this Plan. During September 2012,2015, an additional 83,97725,243 shares were issued based on the results achieved for the performance period July 1, 20092012 to June 30, 2012.2015. The committee has selected consolidated operating results for organic net sales (weighted 20%) and fully-diluted earnings per share (weighted 80%) for each three-year performance period. For the prior three-year performance periods ended on June 30, 2015, 2014 and 2013, named executive officers realized rewards under the LTIP at a weighted average rate of 115%, 124% and 108% of the organic net sales and fully-diluted earnings per share levels, respectively. The Committee has also specified that payouts, if any, for awards earned will be 60% Company common stock and 40% cash. No additional grants will be made under this plan after June 30, 2015.
Senior Officer Supplemental Retirement Savings Plans.Plan
We maintain the Flexsteel Industries, Inc. Salaried Employees Retirement and 401(k) Plan,supplemental retirement plans, collectively referred to as the Retirement Plan, a qualified plan available generally to all salaried employees. The Retirement Plan provides that we can make discretionary contributions, on a non-discriminatory basis, under the Retirement Plan. There was no discretionary
contribution during fiscal years 2012 and 2011. The Retirement Plan also“Supplemental Plan”, which provides for each participantadditional annual defined contributions toward retirement benefits to make elective contributions up to 50%three of base salaryour executive officers, including Mr. Hall, Mr. Bertsch and annual cash bonus, subject to Internal Revenue Code limits, whichMr. Richardson. The additional contribution is stipulated in the executive’s individual agreements or in the document governing the arrangements. Earnings are matched by us at 25% of the first 4% of pay contributed by the participant. In addition, the Retirement Plan requires that we contribute 4% of pay upcredited to the Social Security base and 6%accumulated contributions based on the investment return of pay in excess of the Social Security base on behalf of each participant in the plan.assets we designate for this obligation. The amount of these matching contributions and other required company contributionsthe contribution for each named executive officer is shownreported in the Summary Compensation Table in the column titled “All Other Compensation” above.. Distributions begin six months after separation of service when the executive retires or in some cases when the executive terminates employment. Distributions are paid in installments or lump sums as elected by the executive. Under the Supplemental Plan Messrs. Hall and Bertsch are entitled to monthly payments of $5,000 until they reach or would have reached age 65 upon termination of employment due to death or disability.
Voluntary Deferred Compensation.Compensation
We maintain the Flexsteel Industries, Inc. Voluntary Deferred Compensation Plan, referred to as the Voluntary Plan,“Voluntary Plan”, which allows our executive officers (excluding Mr. Dreher)Bertsch and Mr. Richardson the opportunity to voluntarily defer, based on annual elections, 10% to 30% of their base salary, 10% to 100% of annual incentive compensation and 33% to 100% of their long-term incentive compensation. We offer this opportunity to our executive officers to assist them in income tax and estate planning purposes. The executive officerThey may elect an earnings credit based on the prime interest rate effective on January 1 of each calendar year, the annual return of the S&P 500 Index as of the end of the calendar year, or a combination of the two. Distributions are made upon the earliest of the participant’s death, disability, or the date which is six months after the date of the executive’stheir separation of service from the Company. The Voluntary Plan does not permit uscontributions from the Company.
| 11 |
Grants of Plan-Based Award
The following table sets forth certain information relating to make contributions.
Senior Officer Supplemental Retirement Plan.We maintain supplemental retirement plans, collectively referrednon-equity and equity incentive plan awards granted to as theSupplemental Plan, which provides for additional annual defined contributions toward retirement benefits to our senior executive officers (excluding Mr. Dreher). The additional contribution is stipulated in the executive’s individual agreements or in the document governing the arrangements. Earnings are credited to the accumulated contributions based on the investment return of assets we designate for this obligation. The amount of the contribution for each named executive officer is reported in the Summary Compensation Table in the column titled “All Other Compensation”. Distributions begin when the executive attains age 65 and retires or in some cases when the executive terminates employment. Distributions are paid in installments or lump sums as elected by the executive. Under the Supplemental Plan our named executive officers are entitledduring fiscal 2015.
| All Other | ||||||||||||||||||||||||||||||||||||||
| Option | ||||||||||||||||||||||||||||||||||||||
| Awards: | Exercise | Grant Date | ||||||||||||||||||||||||||||||||||||
| Estimated Future Payouts | Estimated Future Payouts | Number of | or Base | Fair Value | ||||||||||||||||||||||||||||||||||
| Under Non-Equity | Under Equity | Securities | Price of | of Stock | ||||||||||||||||||||||||||||||||||
| Incentive Plan Awards (1) | Incentive Plan Awards (2) | Underlying | Option | and Option | ||||||||||||||||||||||||||||||||||
| Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Options (3) | Awards | Awards (4) | |||||||||||||||||||||||||||||
| Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | ($/Sh) | ($) | ||||||||||||||||||||||||||||
| Karel K. Czanderna | 12/08/14 | 3,200 | 31.06 | 22,112 | ||||||||||||||||||||||||||||||||||
| 07/01/14 | 276,000 | 690,000 | 1,380,000 | |||||||||||||||||||||||||||||||||||
| 07/01/14 | 5,757 | 14,393 | 28,786 | 480,000 | ||||||||||||||||||||||||||||||||||
| Timothy E. Hall | 12/08/14 | 2,100 | 31.06 | 14,511 | ||||||||||||||||||||||||||||||||||
| 07/01/14 | 63,000 | 157,500 | 315,000 | |||||||||||||||||||||||||||||||||||
| 07/01/14 | 2,078 | 5,195 | 10,390 | 173,250 | ||||||||||||||||||||||||||||||||||
| James R. Richardson | 07/01/14 | 66,720 | 166,800 | 333,600 | ||||||||||||||||||||||||||||||||||
| 07/01/14 | 667 | 1,667 | 3,334 | 55,600 | ||||||||||||||||||||||||||||||||||
| Jeffrey T. Bertsch | 12/08/14 | 1,000 | 31.06 | 6,910 | ||||||||||||||||||||||||||||||||||
| 07/01/14 | 57,000 | 142,500 | 285,000 | |||||||||||||||||||||||||||||||||||
| 07/01/14 | 1,196 | 2,991 | 5,982 | 99,750 | ||||||||||||||||||||||||||||||||||
| Julia K. Bizzis | 12/08/14 | 2,100 | 31.06 | 14,511 | ||||||||||||||||||||||||||||||||||
| 07/01/14 | 57,000 | 142,500 | 285,000 | |||||||||||||||||||||||||||||||||||
| 07/01/14 | 1,538 | 3,846 | 7,691 | 128,250 | ||||||||||||||||||||||||||||||||||
| (1) | These columns show the potential range of payouts for fiscal 2015 performance under our cash incentive program described in the section titled “Cash Incentive Compensation” in the “Compensation Discussion and Analysis” above. The cash incentive payments for 2015 performance are shown in the column “Non-equity Incentive Plan Compensation” of the Summary Compensation Table above. |
| (2) | These columns show the potential range of payouts of three-year performance stock awards granted under the Long-Term Management Incentive Plan during fiscal 2015. The 2015 three-year performance period is July 1, 2014 – June 30, 2017. |
| (3) | The amounts represent stock options granted on December 8, 2014 in accordance with our Omnibus Stock Plan described in the “Compensation Discussion and Analysis” above. The options are fully vested at the time of grant and they expire on December 8, 2024. |
| (4) | The amounts shown represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the stock option award amount may be found in Note 8 to the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015. |
| 12 |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information relating to monthly paymentsequity awards outstanding at June 30, 2015 for each of $5,000 until they reach or would have reached age 65 upon terminationour named executive officers.
| Option Awards (1) | Stock Awards | |||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (2) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | Performance Period | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (5) |
| Karel K. Czanderna | 07/01/2013- 06/30/2016 | 7,424 | 319,900 | |||||
| 07/01/2014- 06/30/2017 | 5,757 | 248,069 | ||||||
| 07/01/2015- 06/30/2018 | 4,734 | 203,988 | ||||||
| 10,000 | 430,900 | |||||||
| 25,000 | 20.50 | 07/02/2022 | ||||||
| 5,000 | 19.77 | 12/10/2022 | ||||||
| 3,600 | 27.57 | 12/09/2023 | ||||||
| 3,200 | 31.06 | 12/08/2024 | ||||||
| Timothy E. Hall | 07/01/2013- 06/30/2016 | 2,088 | 89,972 | |||||
| 07/01/2014- 06/30/2017 | 2,078 | 89,541 | ||||||
| 07/01/2015- 06/30/2018 | 1,900 | 81,871 | ||||||
| 11,880 | 8.42 | 12/07/2019 | ||||||
| 5,000 | 17.23 | 12/06/2020 | ||||||
| 5,000 | 13.90 | 12/12/2021 | ||||||
| 3,300 | 19.77 | 12/10/2022 | ||||||
| 2,400 | 27.57 | 12/09/2023 | ||||||
| 2,100 | 31.06 | 12/08/2024 | ||||||
| James R. Richardson | 07/01/2013- 06/30/2016 | 2,580 | 111,172 | |||||
| 07/01/2014- 06/30/2017 | 667 | 28,741 | ||||||
| 2,400 | 27.57 | 12/09/2023 | ||||||
| Jeffrey T. Bertsch | 07/01/2013- 06/30/2016 | 1,478 | 63,687 | |||||
| 07/01/2014- 06/30/2017 | 1,196 | 51,536 | ||||||
| 07/01/2015- 06/30/2018 | 154 | 6,636 | ||||||
| 10,000 | 12.35 | 12/10/2017 | ||||||
| 20,000 | 6.81 | 12/08/2018 | ||||||
| 15,000 | 8.42 | 12/07/2019 | ||||||
| 5,000 | 17.23 | 12/06/2020 | ||||||
| 5,000 | 13.90 | 12/12/2021 | ||||||
| 3,300 | 19.77 | 12/10/2022 | ||||||
| 2,400 | 27.57 | 12/09/2023 | ||||||
| 1,000 | 31.06 | 12/08/2024 | ||||||
| Julia K. Bizzis | 07/01/2013- 06/30/2016 | 1,547 | 66,660 | |||||
| 07/01/2014- 06/30/2017 | 1,538 | 66,272 | ||||||
| 07/01/2015- 06/30/2018 | 1,369 | 58,990 | ||||||
| 5,618 | 22.82 | 01/02/2023 | ||||||
| 1,200 | 27.57 | 12/09/2023 | ||||||
| 2,100 | 31.06 | 12/08/2024 | ||||||
| (1) | All option awards are fully vested as of the date of grant. |
| (2) | Represents Restricted Stock Units; 6,000 shares that vested on July 2, 2015, 2,000 shares that vest on July 2, 2016 and 2,000 shares that vest on July 2, 2017. |
| (3) | The amount shown reflects the fair value of the Restricted Stock Units based on the June 30, 2015 closing stock price of $43.09 per share. |
| (4) | The amounts shown represent the potential three-year performance stock awards granted under the Long-Term Incentive Plan during each fiscal year. No shares will be issued unless the minimum specific performance goals set by the Compensation Committee are met. Shares earned, if any, will be issued following each respective three-year performance period. |
| (5) | The amounts shown reflect the fair value of the awards based on the June 30, 2015 closing stock price of $43.09 per share, assuming achievement of the minimum performance goals. |
| 13 |
Option Exercises and Stock Vested
The following table sets forth certain information for each of employment dueour named executive officers regarding the exercise of stock options and the payout of performance shares under the 2007 Long-Term Management Incentive Compensation Plan that were earned during the fiscal year ended June 30, 2015.
| Option Awards | Stock Awards | |||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) |
| Karel K. Czanderna | – | – | 12,596 | 542,762 |
| Timothy E. Hall | 8,100 | 193,671 | 3,735 | 160,941 |
| James R. Richardson | – | – | 5,667 | 244,191 |
| Jeffrey T. Bertsch | 20,750 | 471,095 | 2,865 | 123,453 |
| Julia K. Bizzis | 5,582 | 48,818 | – | – |
| (1) | The value realized is calculated by multiplying the number of shares acquired and exercised by the difference between the market price of common stock at exercise and the exercise price. |
| (2) | Includes the payment of performance shares which vested on June 30, 2015, upon subsequent confirmation by the Compensation Committee that performance goals had been achieved. The value realized was determined by multiplying the number of vested shares by the closing market price of the Company’s common stock on June 30, 2015, the shares were distributed in September 2015. |
Nonqualified Deferred Compensation
The following information sets forth certain information relating to death or disability.
Employment Agreementnonqualified deferred compensation as of June 30, 2015 for Donald D. Dreher.On October 1, 2006, we entered into an employment agreement with Donald D. Dreher,our named executive officers. For a Senior Vice President of Flexsteel and Chief Executive Officer and President of DMI Furniture, Inc. and on June 27, 2008, we entered into an amendment to the employment agreement extending the termdescription of the agreement from December 31,
2009 to September 30, 2012. On December 15, 2010, we entered intoSupplemental Plan and Voluntary Plan, see the second amendment todiscussion following the employment agreement extending the term of the agreement to December 31, 2014, unless terminated prior to that time as provided in the employment agreement. We have the right to terminate the employment agreement upon 30 days advance notice without cause and can terminate the employment agreement for cause (as defined in the employment agreement) upon 120 days advance notice. Under the terms of the employment agreement, Mr. Dreher is entitled to a base annual salary of $391,200 and an annual bonus, subject to achieving annual performance levels established by the Nominating andSummary Compensation Committee, of not less than $50,000, unless our subsidiary, DMI Furniture, Inc., reports a financial pre-tax loss (before this bonus) in which case no bonus shall be paid. Mr. Dreher’s employment agreement also provides that we provide him with life insurance; health, disability and travel accident insurance consistent with DMI Furniture, Inc’s coverage; automobile allowance; reimbursement for certain medical care expenses; personal tax and financial planning expense allowance; and country club dues. If the employment agreement is terminated without cause prior to December 31, 2014, Mr. Dreher is entitled to payment in one lump sum of the balance of his base salary through December 31, 2014 so long as he agrees to comply with the noncompete provisions of the employment agreement. The employment agreement also contains a 24-month post-termination noncompete provision and non-solicitation and confidentiality provisions. Assuming Mr. Dreher was terminated without cause effective June 30, 2012, he would have been entitled to an estimated lump sum cash severance payment in the aggregate amount of approximately $603,000. The foregoing amounts are estimates of the amounts that would have been paid out to Mr. Dreher upon his termination of employment. The actual amounts to be paid out can only be determined at the time Mr. Dreher in fact terminates employment with us.Table.
| Name | Executive Contribution in Last FY ($) | Company Contribution in Last FY ($) (2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) (3) |
| Timothy E. Hall | |||||
| Supplemental Plan | N/A | 78,817 | 64,962 | – | 613,043 |
| James R. Richardson | |||||
| Supplemental Plan | N/A | 29,273 | 240,441 | – | 1,914,337 |
| Voluntary Plan | – | N/A | 13,749 | – | 330,450 |
| Jeffrey T. Bertsch | |||||
| Supplemental Plan | N/A | 42,524 | 92,863 | – | 824,385 |
| Voluntary Plan | 212,939 (1) | N/A | 37,935 | – | 640,810 |
| (1) | This amount was included in either the Non-Equity Incentive Plan Compensation or Stock Awards columns of the Summary Compensation Table above. |
| (2) | These amounts are included in the “All Other Compensation” column of the Summary Compensation Table above. |
| (3) | The contributions by the executive and the Company were reported as compensation in the Summary Compensation tables for previous years to the extent the person was a named executive officer. |
Potential Payments Upon Termination or Change-In-Control
Letter Agreement with Karel K. Czanderna.Effective July 1, 2012 the Company named Karel K. Czanderna, President and Chief Executive Officer. In connection with Ms. Czanderna’s appointment, the Company entered into a letter agreement with her, dated June 29, 2012, that provides for an annual salary of $600,000 and sign-on equity grant of 25,000 fully vested stock options with an exercise price equal to the closing price on July 2, 2012, which was $20.50. The options have a term of ten years. Ms. Czanderna was granted 10,000 restricted stock units of the Company’s common stock on July 2, 2012 as an inducement to employment of which 6,000 shares vest on July 2, 2015, 2,000 shares vest on July 2, 2016, and 2,000 shares vest on July 2, 2017. In addition, Ms. Czanderna is eligible for a one-year equity and cash incentive plan for fiscal 2013 under which she may earn 20% of her base salary upon the Company achieving at target performance goals as set by the Nominating and Compensation Committee of the Board. The award is payable 60% in Company stock and 40% in cash.
Ms. Czanderna will participate in the annual executive incentive compensation program and a target award of 100% of her base salary is guaranteed for fiscal year 2013. Ms. Czanderna will also be eligible to participate in the Company’s long-term incentive plan which is established annually by the Nominating and Compensation Committee of the Board.2012.
As part of the letter agreement, if the Company terminates Ms. Czanderna for other than cause during the first seven years of her employment or Ms. Czanderna terminates for good reason, the Company will pay eighteen months of her base salary and one and one-half times the annual incentive bonus for the most recently completed fiscal year in a lump sum.
The Company will pay or reimburse Assuming Ms. Czanderna was terminated on June 30, 2015, she would be paid a lump sum of $1,383,140 and be reimbursed for eighteen months of health insurance payments valued at approximately $36,000, conditioned upon the execution of a mutually agreeable severance agreement that includes an eighteen month non-compete provision.
| 14 |
Incentive Compensation Plans.Under the terms of the Company’s CIP and LTIP, named executive officers are entitled to receive payments as a result of a termination due to death or disability, on or after reaching age 62, or due to an involuntary termination, other than for cause, in the event of a change in control. The amount to be paid to a participant in such events is based on the pro rata number of days worked during the performance period. The awards will be paid in a lump sum after the end of the performance period, except under certain expenses relatedcircumstances as determined by the Compensation Committee. The award agreements for both the CIP and the LTIP provide for the forfeiture of payments in the event the participant competes with the Company within 2 years of termination or improperly uses Company confidential information. Assuming the named executive officers were involuntarily terminated for other than cause as a result of a change in control, such persons would be entitled to her relocation to Dubuque, Iowa.receive shares under the LTIP valued as of June 30, 2015 ($43.09 per share) as follows: Ms. Czanderna: $1,110,700; Mr. Hall: $334,750; Mr. Richardson: $288,390; Mr. Bertsch: $223,520; and Ms. Bizzis: $247,910. See the description of the Senior Officer Supplemental Retirement Plan and Voluntary Deferred Compensation Sections above and the Non-qualified Deferred Compensation Table for a description and amounts payable under the Supplemental Plan and the Voluntary Deferred Compensation Plan.
Outstanding Equity Awards at Fiscal Year-EndDirector Compensation
The following table sets forth certain information relating to equity awards outstanding at June 30, 2012 for each of our named executive officers.
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| Option Awards(1) |
| Stock Awards(2) | ||||||||||||||
Name |
| Option |
| Number of |
| Option |
| Option |
| Performance |
| Equity |
| Equity | ||||
Ronald J. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Klosterman |
| 12/06/2010 |
| 700 |
|
| 17.23 |
|
| 12/06/2020 |
| 7/1/2010- |
|
|
|
|
|
|
|
| 12/07/2009 |
| 25,000 |
|
| 8.42 |
|
| 12/07/2019 |
| 6/30/2013 |
| 5,727 |
|
| $113,280 |
|
|
| 12/10/2007 |
| 15,000 |
|
| 12.35 |
|
| 12/10/2017 |
| 7/1/2011- |
|
|
|
|
|
|
|
| 12/11/2006 |
| 15,000 |
|
| 12.65 |
|
| 12/11/2016 |
| 6/30/2014 |
| 5,885 |
|
| $116,405 |
|
|
| 11/25/2003 |
| 12,000 |
|
| 19.21 |
|
| 11/25/2013 |
|
|
|
|
|
|
|
|
Donald D. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dreher |
| 12/12/2011 |
| 5,000 |
|
| 13.90 |
|
| 12/12/2021 |
|
|
|
|
|
|
|
|
|
| 12/06/2010 |
| 5,000 |
|
| 17.23 |
|
| 12/06/2020 |
|
|
|
|
|
|
|
|
|
| 12/07/2009 |
| 3,120 |
|
| 8.42 |
|
| 12/07/2019 |
|
|
|
|
|
|
|
|
|
| 12/08/2008 |
| 5,320 |
|
| 6.81 |
|
| 12/08/2018 |
|
|
|
|
|
|
|
|
|
| 12/10/2007 |
| 10,000 |
|
| 12.35 |
|
| 12/10/2017 |
|
|
|
|
|
|
|
|
|
| 12/11/2006 |
| 10,000 |
|
| 12.65 |
|
| 12/11/2016 |
|
|
|
|
|
|
|
|
|
| 12/13/2005 |
| 10,750 |
|
| 14.40 |
|
| 12/13/2015 |
|
|
|
|
|
|
|
|
|
| 12/14/2004 |
| 10,000 |
|
| 16.49 |
|
| 12/04/2014 |
|
|
|
|
|
|
|
|
|
| 11/25/2003 |
| 8,000 |
|
| 19.21 |
|
| 11/25/2013 |
|
|
|
|
|
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|
James R. |
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|
|
|
|
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|
|
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|
|
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|
Richardson |
| 12/06/2010 |
| 5,000 |
|
| 17.23 |
|
| 12/06/2020 |
| 7/1/2010- |
|
|
|
|
|
|
|
| 12/14/2004 |
| 10,750 |
|
| 16.49 |
|
| 12/04/2014 |
| 6/30/2013 |
| 1,750 |
|
| $34,615 |
|
|
| 11/25/2003 |
| 10,750 |
|
| 19.21 |
|
| 11/25/2013 |
| 7/1/2011- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6/30/2014 |
| 1,800 |
|
| $35,604 |
|
|
| |
|
| |
DIRECTOR COMPENSATION
The following table sets forth the cash and non-cash compensation for fiscal 20122015 awarded to or earned by each of our directors who is not also a named executive officer.
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|
Name (5) |
| Fees Earned or |
| Option |
| Total | |||
Lynn J. Davis |
| 55,150 |
|
| 7,675 |
|
| 62,825 |
|
Mary C. Bottie |
| 43,200 |
|
| 7,675 |
|
| 50,875 |
|
L. Bruce Boylen(3) |
| 29,300 |
|
| — |
|
| 29,300 |
|
Robert E. Deignan |
| 42,800 |
|
| 7,675 |
|
| 50,475 |
|
Thomas E. Holloran(3),(4) |
| 41,200 |
|
| — |
|
| 41,200 |
|
Thomas M. Levine |
| 45,500 |
|
| 7,675 |
|
| 53,175 |
|
Robert J. Maricich |
| 42,400 |
|
| 7,675 |
|
| 50,075 |
|
Eric S. Rangen |
| 46,700 |
|
| 7,675 |
|
| 54,375 |
|
Nancy E. Uridil |
| 42,400 |
|
| 7,675 |
|
| 50,075 |
|
| Name (1) | Fees Earned or Paid in Cash ($)(2) | Option Awards ($)(3) | Total ($) |
| Lynn J. Davis | 61,500 | 19,635 | 81,135 |
| Mary C. Bottie | 39,000 | 19,635 | 58,635 |
| Robert E. Deignan | 41,750 | 19,635 | 61,385 |
| Ronald J. Klosterman (4) | 16,500 | – | 16,500 |
| Thomas M. Levine | 45,250 | 19,635 | 64,885 |
| Robert J. Maricich | 41,750 | 19,635 | 61,385 |
| Eric S. Rangen | 41,000 | 19,635 | 60,635 |
| Nancy E. Uridil | 44,250 | 19,635 | 63,885 |
| (1) | As of June 30, 2015, each Director who is not an employee had the following stock options outstanding; Mr. Davis, 23,000 options; Ms. Bottie, 20,500 options; Mr. Deignan, 10,500 options; Mr. Klosterman, 25,580 options; Mr. Levine, 8,000 options; Mr. Maricich, 5,500 options; Mr. Rangen, 20,500 options; and Ms. Uridil, 13,000 options. |
| (2) | ||
| Each Director who is not an employee of the Company is paid a retainer at the rate of $16,500 per year. In addition, each is paid a fee of $4,125 for each Board meeting each attends. The | |
| The amounts shown represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the stock option award amount may be found in Note 8 to the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, |
| Mr. | |
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| |
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| 15 |
CORPORATE GOVERNANCE
Board of Directors
Our Board of Directors is currently comprised of the twelve members identified under Proposal 1 (Election of Directors).ten members. During the fiscal year ended June 30, 2012, six2015, four meetings of the Board were held. All of the directors of the Company attended no less than 75%100% of the meetings of the Board and the committees on which they served. The Company does not have a formal policy regarding attendance by Board members at the Company’s annual meetings, but the Board encourages all its members to attend the annual meeting of shareholders. All members of the Board of Directors attended the prior year’s annual meeting.
The Board has determined that the following directors, which constitute a majority of the Board of Directors, are independent directors as defined by The NASDAQ Stock Market listing standards: Mary C. Bottie, Lynn J. Davis, Robert E. Deignan, Thomas M. Levine, Robert J. Maricich, Eric S. Rangen and Nancy E. Uridil. The independent directors meet periodically in executive session as part of a Board meeting without the Chief Executive Officer or other management directors present.
Board Leadership Structure
The Board elected an independent director, Mr. Davis, to serve as ChairmanChair of the Board. Our By-LawsBylaws provide that the ChairmanChair of the Board may be an independent director or the Chief Executive Officer of the Company. In making leadership determinations, the Board considers many factors including the specific needs of the business and what is in the best interest of our shareholders. The Board believes that presently it is in the best interest of the Company that the positions of ChairmanChair of the Board and Chief Executive Officer are separate. The Board believes that this separation is presently appropriate as it allows the Chief Executive Officer to focus primarily on leading our day-to-day operations while the ChairmanChair of the Board can focus on leading the Board.
Ability of Shareholders to Communicate with the Board of Directors
The Board has provided the means by which shareholders may send communications to the Board or to individual members of the Board. Such communications, whether by letter, email or telephone should be directed to the Secretary of the Company who will forward them to the intended recipients. However, unsolicited advertisements or invitations to conferences or promotional material, in the discretion of the Secretary, may not be forwarded to the directors.
Committees of the Board
Subject to our Bylaws, applicable law and regulatory requirements, the Board may establish additional or different committees from time to time. Our Board of Directors has established twothree standing committees: Audit and Ethics Committee, Compensation Committee, and Nominating and Governance Committee. The charters of all three committees are available atwww.flexsteel.com in the Investors section. The principal duties of the Board. The names of thethree committees and the principal duties are as follows:set forth below.
Audit and Ethics Committee– ConfersAppoints and confers with the independent registered public accounting firm on various matters, including the scope and results of the audit; authorizes special reviews or audits; reviews and approves quarterly and annual SEC filings; reviews internal auditing procedures and the adequacy of internal controls; and reviews policies and practices respecting compliance with laws, conflicts of interest and ethical standards of the Company. The Committee held sixfour meetings during the fiscal year ended June 30, 2012.2015. The Committee members are Eric S. Rangen –- Chair, Lynn J. Davis, and Thomas M. Levine. The Board has adopted a written charter for the AuditLevine and Ethics Committee. The Board believes all Audit and Ethics Committee members are independent as defined by The NASDAQ Stock Market listing standards.Robert J. Maricich. The Board has determined that three members of the Audit and Ethics Committee qualify as “audit committee financial experts” within the meaning of the Securities Exchange Act of 1934, as amended, referred to as the1934 Act “1934 Act”, and have designated Eric S. Rangen, Lynn J. Davis and Thomas M. Levine and Robert J. Maricich as audit committee financial experts.
Nominating and CompensationCommittee–Makes recommendations regarding Board compensation; reviews performance, compensation and benefits of all executive officers; determines stock option grants; reviews timely proposed nominations received from any source including nominations by shareholders and makes recommendations to the Board regarding all director nominees; and develops and maintains succession planning policies and criteria for executive officers and Board members.
The Board has adopted a written charter for the Nominating and Compensation Committee. The Board believes all Nominating and Compensation Committee members are independent as defined by The NASDAQ Stock Market listing standards.officers. The Committee held seventhree meetings during the fiscal year ended June 30, 2012.2015. The Committee members are Mary C. Bottie –- Chair, Robert E. Deignan, Robert J. Maricich and Nancy E. Uridil.
Nominating and Governance Committee –Recommends directors and reviews qualifications of director candidates; evaluates Board performance; develops and recommends a succession plan for the Board; reviews and recommends the practices, policies and procedures of the Board; conducts new Board member orientation and ongoing education for Board members; and reviews corporate responsibility, diversity and sustainability. The Committee held three meetings during the fiscal year ended June 30, 2015. The Committee members are Nancy E. Uridil - Chair, Robert E. Deignan, and Thomas M. Levine.
| 16 |
Stock Option Granting Policy–The Nominating and Compensation Committee has formalized its stock option granting practices by adopting a policy for the grant of stock options. The policy reflects the Nominating and Compensation Committee’s long-standing approach to stock option grants described above. In addition, the policy provides, among other things, that all grants of stock options must be approved by the Nominating and Compensation Committee at in person or telephonic meetings generally on an annual basis;its designee; stock options may not be granted to a current director, officer or employee during any quarterly or other blackout period as defined in our insider trading policy; the grant date for each option will be the date of the Nominating and Compensation
Committee meeting at which action was taken to approve the stock option; the exercise price for the stock option will be equal to the last sale price per share of our common stock as reported on The NASDAQ Stock Market on the grant date; specifies procedures for granting stock options to newly hired executives; and that any program, plan or practice to time or select the grant dates of stock options in coordination with the release by us of material non-public information is prohibited.
NominationNominating Matters— –The Nominating and CompensationGovernance Committee of the Board of Directors is responsible for making recommendations to the Board concerning nominees for election as directors and nominees for Board vacancies. When assessing a director candidate’s qualifications, the Nominating and CompensationGovernance Committee considers the candidate’s expertise in finance, general management, human resources, legal, training, marketing, sales, operations, manufacturing, supply-chain, management,company culture, and company culture,their independence, high ethical standards, and uncompromising integrity. In addition, the Nominating and CompensationGovernance Committee looks at the overall composition of the Board and how a candidate would contribute to the overall synergy and collaborative process of the Board. The Nominating and CompensationGovernance Committee has not established specific minimum eligibility requirements for candidates other than high ethical standards, uncompromising integrity, commitment to act in the best interests of the shareholders, requirements relating to age and ensuring that a substantial majority of the board remains independent.
In addition to the considerations described above, our Nominating and CompensationGovernance Committee considers diversity in its evaluation of candidates for Board membership. Although the Company has no formal diversity policy, the Board believes that diversity with respect to factors such as background, experience, skills, race, gender and national origin is an important consideration in board composition. The Nominating and CompensationGovernance Committee discusses diversity considerations in connection with each candidate, as well as on a periodic basis in connection with the composition of the Board as a whole.
If the Nominating and CompensationGovernance Committee approves a candidate for further review following an initial screening, the Nominating and CompensationGovernance Committee will establish an interview process for the candidate. Generally, the candidate will meet with the members of the Nominating and CompensationGovernance Committee, along with our Chief Executive Officer. Contemporaneously with the interview process, the Nominating and CompensationGovernance Committee will conduct a comprehensive conflicts-of-interest assessment of the candidate. The Nominating and CompensationGovernance Committee will consider reports of the interviews and the conflicts-of-interest assessment to determine whether to recommend the candidate to the full Board. The Nominating and CompensationGovernance Committee will also take into consideration the candidate’s personal attributes, including, without limitation, personal integrity, loyalty to us and concern for ourthe success and welfare of the Company and its shareholders, willingness to apply sound and independent business judgment, awareness of a director’s
vital part in good corporate citizenship and image, time available for meetings and consultation on Company matters and willingness to assume broad, fiduciary responsibility.
Recommendations for candidates to be considered for election to the Board at our annual shareholder meetings may be submitted to the Nominating and CompensationGovernance Committee by our shareholders. Candidates recommended by our shareholders will be considered under the same standards as candidates that are identified by the Nominating and CompensationGovernance Committee. Any nominations for director to be made at an annual meeting of shareholders must be made in accordance with the requirements described in the section of this Proxy Statement entitled Proposals Byby Shareholders. To enable the committee to evaluate the candidate’s qualifications, shareholder recommendations must include the following information:
| · | ||
| The name, age, business address and, if known, residence address of each nominee proposed in such notice; |
| · | ||
| The principal occupation or employment of each such nominee; and |
| · | ||
| The number of shares of stock of the Company, which are beneficially owned by each such nominee. |
Committee Charters– Subject to applicable law and regulatory requirements, the Board may establish additional or different committees from time to time. The charters of the Audit and Ethics Committee and Nominating and Compensation Committee are available at www.flexsteel.com.
| 17 |
Audit and Ethics Committee Report
The Audit and Ethics Committee has reviewed and discussed the audited financial statements with management. The Audit and Ethics Committee has discussed with Deloitte & Touche LLP, the Company’s independent registered public accounting firm, the matters required to be discussed by Statements on Auditing Standards (SAS)Standard No. 61 and 90 “Communication16, Communications with Audit Committees”, as amended,Committees, as adopted by the Public Company Accounting Oversight Board, referred to as thePCAOBin Rule 3200T.Board. The Audit and Ethics Committee has received the written disclosures and the letter from Deloitte & Touche LLP required by Independence Standardsapplicable requirements of the Public Company Accounting Oversight Board Standard No. 1, “Independence Discussionsregarding Deloitte & Touche LLP’s communications with the Audit and Ethics Committee” as adopted by the PCAOB in Rule 3200T, as may be modified or supplemented, concerning independence and has discussed with Deloitte & Touche LLP the firm’s independence. Based on the review and discussions referred to above in this report, the Audit and Ethics Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the SEC.
This report has been prepared by members of the Audit and Ethics Committee. Members of this Committee are:
Eric S. Rangen |
| Thomas M. Levine | Robert J. Maricich | |
| Chair |
Risk Oversight
OurThe Board of Directors is responsible for consideration and oversight of risks facing Flexsteel. Together with the Board’s standing committees, the Board is responsible for ensuring that material risks are identified and managed appropriately. The Board and its committees, regularly review strategic, operational, financial, compensation and compliance risks with senior management. The Audit and Ethics Committee performs a central oversight role with respect to financial and compliance risks, and reports on its findings at each regularly scheduled meeting of the full Board. The Audit and Ethics Committee also is responsible for assessing risk related to our capital structure, significant financial exposures, our risk management and major insurance programs and our employee pension plan policies and performance and regularly evaluates financial risk associated with such programs. The Nominating and Compensation Committee considers risk in connection with its design of compensation programs for our executives.
Code of Ethics
The Company has had a written code of ethics titledGuidelines for Business Conduct for many years. The code of ethics applies to the Company’s directors and employees including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. The code of ethics includes guidelines relating to the ethical handling of actual or potential conflicts of interest, compliance with laws, accurate financial reporting, and procedures for promoting compliance with, and reporting violations of, the code of ethics. The code of ethics Guidelines for Business Conduct is available on the Company’s website at www.flexsteel.com.http://www.flexsteel.com/about-us/investor-relations in the Corporate Governance section. The Company intends to post any amendments to or waivers of its code of ethics (to the extent applicable to the Company’s Chief Executive Officer, Chief Financial Officer or Principal Accounting Officer) at this location on its website.
Compensation Committee Interlocks and Insider Participation
The current members of the Company’s Compensation Committee are Mary C. Bottie, Chair, and Nancy E. Uridil, neither of which is, or has been, an officer of the Company. Robert J. Maricich is also a member of the Compensation Committee and served as an officer of the Company from May 1, 1989 to July 12, 1989. No executive officer of the Company served as a director of another entity that had an executive officer serving on the Company’s compensation committee. No executive officer of the Company served as a member of the compensation committee of another entity which had an executive officer who served as a director of the Company.
| 18 |
OWNERSHIP OF STOCK BY
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the shares of the Company’s common stock beneficially owned by the Company’s directors, the named executive officers, and by all directors and executive officers as a group as of September 30, 2012.2015. Unless otherwise indicated, to the best knowledge of the Company, all persons named in the table have sole voting and investment power with respect to the shares shown.
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Name |
| Title |
| Amount of |
| Percent | ||
Jeffrey T. Bertsch |
| Senior Vice President Corporate Services, Director |
| 346,256 | (3)(4) |
| 4.9 | % |
Mary C. Bottie |
| Director |
| 20,100 |
|
| 0.3 | % |
Patrick M. Crahan |
| Senior Vice President Commercial Seating, Director |
| 187,253 | (4) |
| 2.7 | % |
Karel K. Czanderna |
| President and Chief Executive Officer, Director |
| 25,000 |
|
| 0.4 | % |
Lynn J. Davis |
| Chairman of the Board of Directors |
| 30,000 |
|
| 0.4 | % |
Robert E. Deignan |
| Director |
| 30,000 |
|
| 0.4 | % |
Donald D. Dreher |
| Senior Vice President, President and Chief Executive Officer DMI Furniture, Inc. |
| 80,070 |
|
| 1.1 | % |
Ronald J. Klosterman |
| Chief Executive Officer and President, Director |
| 224,139 |
|
| 3.2 | % |
Thomas M. Levine |
| Director |
| 7,000 |
|
| 0.1 | % |
Robert J. Maricich |
| Director |
| 10,892 |
|
| 0.2 | % |
Eric S. Rangen |
| Director |
| 14,000 |
|
| 0.2 | % |
James R. Richardson |
| Senior Vice President Sales and Marketing, Director |
| 328,233 | (4) |
| 4.7 | % |
Nancy E. Uridil |
| Director |
| 5,395 |
|
| 0.1 | % |
All Directors and Executive Officers as a Group (16) |
| 1,688,343 |
|
| 22.3 | % | ||
| Name | Title | Amount of Common Stock Beneficially Owned(1)(2) | Percent of Common Stock Outstanding(5) | |||
| Jeffrey T. Bertsch | Senior Vice President Corporate Services, Director | 312,123 (3)(4) | 4.1% | |||
| Julie K. Bizzis | Senior Vice President, Strategic Growth | 16,008 | 0.2% | |||
| Mary C. Bottie | Director | 24,300 | 0.3% | |||
| Karel K. Czanderna | President and Chief Executive Officer | 70,575 | 0.9% | |||
| Lynn J. Davis | Director | 35,500 | 0.5% | |||
| Robert E. Deignan | Director | 30,500 | 0.4% | |||
| Timothy E. Hall | Senior Vice President Finance, Chief Financial Officer, Treasurer and Secretary | 61,188 | 0.8% | |||
| Thomas M. Levine | Director | 14,790 | 0.2% | |||
| Robert J. Maricich | Director | 19,620 | 0.3% | |||
| Eric S. Rangen | Director | 25,750 | 0.3% | |||
| James R. Richardson | Director | 193,052(4) | 2.6% | |||
| Nancy E. Uridil | Director | 20,150 | 0.3% | |||
| All Directors and Executive Officers as a Group (12) | 823,556 | 10.6% | ||||
| (1) | ||
| Includes the following number of shares which may be acquired by exercise of stock options: J.T. Bertsch – | |
(2) | Includes shares, if any, owned beneficially by their respective spouses. |
(3) | Does not include 111,153 shares held in irrevocable trusts for which trusts American Trust & Savings Bank serves as sole trustee. Under the Terms of Trust, J. T. Bertsch has a possible contingent interest in each trust. J. T. Bertsch disclaims beneficial ownership in the shares held by each such trust. |
(4) | Includes the following number of shares deferred pursuant to election to participate in the Company’s Voluntary Deferred Compensation Plan: J.T. Bertsch – |
(5) | Shares of the Company’s common stock not outstanding but deemed beneficially owned because the respective person or group has the right to acquire the shares as of September 30, |
| 19 |
OWNERSHIP OF STOCK BY
CERTAIN BENEFICIAL OWNERS
To the best knowledge of the Company, no person owns beneficially 5% or more of the outstanding common stock of the Company as of September 30, 20122015 except as is set forth below. Unless otherwise indicated, to the best knowledge of the Company, all persons named in the table have sole voting and investment power with respect to the shares shown.
|
|
|
|
|
|
|
Name and Address of Beneficial Owner |
| Amount of |
| Percent | ||
Dimensional Fund Advisors LP, 6300 Bee Cave Rd., Bldg. One, Austin, TX 78746 |
|
| 563,732 | (3) | 8.0 | % |
AT Bancorp, 895 Main St., Dubuque, IA 52004-0938 |
|
| 444,165 | (4) | 6.3 | % |
Carrie T. Bertsch Bleile, P.O. Box 877, Dubuque, IA 52004 |
|
| 370,379 | (5)(6) | 5.3 | % |
| Name and Address of Beneficial Owner | Amount of Common Stock Beneficially Owned (1) | Percent of Class |
| 600,217(2) | 8.0% |
| AT Bancorp, 895 Main St., Dubuque, IA 52004-0938 | 403,274(3) | 5.4% |
| (1) | To the best knowledge of the Company, no beneficial owner named above has the right to acquire beneficial ownership in additional shares, except as noted below. |
(2) |
| |
| The number of shares beneficially owned is based on information provided in a Schedule | |
| The number of shares beneficially owned is based on information provided in a Schedule 13F filed with the Securities and Exchange Commission on July | |
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP was the Company’s independent registered public accounting firm in fiscal 2012.2015. In addition to performing the audit of the Company’sCompany's consolidated financial statements, Deloitte & Touche LLP provided various audit-related services during fiscal 2012.2015 and 2014.
The Audit and Ethics Committee pre-approves both the type of services to be provided by Deloitte & Touche LLP and the estimated fees related to these services. The Audit and Ethics Committee reviewed professional services and the possible effect on Deloitte & Touche LLP’s independence was considered. The Audit and Ethics Committee has considered and found the provision of services for non-audit services compatible with maintaining Deloitte & Touche LLP’s independence. All services provided by Deloitte & Touche LLP during fiscal 20122015 and 2014 were pre-approved by the Audit and Ethics Committee. It is not expected that a representative of Deloitte & Touche LLP will attend the Annual Meeting of Shareholders.
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(in thousands) |
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| 2012 |
| 2011 |
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Audit Fees(1) |
| $ | 363 |
| $ | 358 |
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Tax Fees(2) |
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| — |
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| 15 |
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| $ | 363 |
| $ | 373 |
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| (in thousands) | 2015 | 2014 | ||||||
| Audit Fees (1) | $ | 510 | $ | 517 | ||||
| (1) | ||
| Professional fees and expenses for the audit of financial statements for fiscal | |
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EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of June 30, 20122015 about the Company’s equity compensation plans, including the Company’s stock option plans and long-term management incentive plan. All of these plans have been approved by shareholders.
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Plan Category |
| (a) |
| (b) |
| (c) |
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Equity compensation plans approved by security holders |
| 818,100 |
| $13.94 |
| 720,929 |
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Equity compensation plans not approved by security holders |
| — |
| — |
| — |
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Total |
| 818,100 |
| $13.94 |
| 720,929 |
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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Management Directors’ Interests in Financial Institutions
Jeffrey T. Bertsch, an executive officer and director of the Company, is a director of American Trust and Savings Bank where the Company’s routine daily banking transactions are processed. In addition, the Company has unfunded deferred compensation plans. Fundsinducement grant of restricted stock units for Karel K. Czanderna was not approved by shareholders.
| Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted- average exercise price of outstanding options, warrants and rights | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Equity compensation plans approved by security holders | 457,067 | $ | 17.02 | 1,318,049 | ||||||||
| Equity compensation plans not approved by security holders – inducement grant restricted shares | 10,000 | $ | 20.50 | — | ||||||||
| Total | 467,067 | $ | 17.09 | 1,318,049 | ||||||||
RELATED PARTY TRANSACTION POLICY
The Audit and Ethics Committee of the deferred compensation plansBoard of Directors has adopted a written policy regarding transactions with related parties. In accordance with the policy, the Audit and Ethics Committee is responsible for the review and approval of all transactions with related persons that are heldrequired to be disclosed under the rules of the Securities and Exchange Commission. Under the policy, a “related person” includes any of the Flexsteel directors or executive officers, certain shareholders and any of their respective immediate family members. The policy applies to transactions in which Flexsteel is a participant, the amount involved exceeds $120,000 and a related person has a direct or indirect material interest. Under the policy, all material information related to any covered transaction is to be disclosed to the Audit and Ethics Committee. The Audit and Ethics Committee may use any process and review any information that it determines is reasonable under the circumstances in order to determine whether the covered transaction is fair and reasonable, on terms no less favorable to Flexsteel than could be obtained in a Rabbi Trust. The Rabbi Trust assets are administered by American Trustcomparable arms-length transaction with an unrelated third party and Savings Bank’s trust department. The Company receives no special services or pricing on the services performed by this bank due to the directorship of Mr. Bertsch. It is expected that the Company’s relationship with this bank will continue in the future.best interests of Flexsteel.
PROPOSALS BY SHAREHOLDERSProposals By Shareholders
Shareholders wishing to have a proposal considered for inclusion in the Company’s proxy statement for the 20132016 annual meeting must submit the proposal in writing and direct it to the Secretary of the Company at the address shown in this proxy statement. The Company must receive it no later than June 30, 2013.2016. The proposal must be in accordance with the provisions of Rule 14a-8 promulgated by the SEC under the 1934 Act. It is suggested the proposal be submitted by certified
mail, return receipt requested. Shareholders who intend to present any other proposal or nominate a person to be elected as a director at the 20132016 annual meeting must provide the Company notice of such proposal no later than September 11, 2013.9, 2016. However, if the 20132016 annual meeting is to be held before November 11, 20138, 2016 or after February 8, 2014,6, 2016, then the proposal or nomination must be received before the later of (i) the close of business on the 10th10th day following the day on which public disclosure of the meeting date is made and (ii) the close of business 90 days before the 20132016 annual meeting. The proposal or nomination must contain the specific information required by our bylaws. You may obtain a copy of our bylaws by writing to our Corporate Secretary. The Company reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
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SECTION 16(a)Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Robert J. Maricich was late in filing 15 reports involving 15 transactions. These transactions were made pursuant to Mr. Maricich’s inadvertent election in his online brokerage account to have his Company dividends reinvested in Company stock.
Based on the Section 16(a) forms furnished to us and other information, we believe that all officers, directors and greater than ten percent shareholders met all applicable filing requirements under Section 16(a) during fiscal 2012.
OTHER MATTERSOther Matters
The percentage total number of the outstanding shares represented at each of the last three years shareholders’ annual meetings was as follows: 20092012 – 92.4%77.0%; 20102013 – 81.9%74.0%; 20112014 – 80.8%70.0%.
A copy of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012,2015, other reports filed or furnished with or to the Securities and Exchange Commission, our Guidelines for Business Conduct, Audit and Ethics Committee Charter, Compensation Committee Charter and Nominating and CompensationGovernance Committee Charter are available, without charge, on the Company’s website atwww.flexsteel.com or by writing to the Office of the Secretary, Flexsteel Industries, Inc., P.O. Box 877, Dubuque, Iowa 52004-0877.
We are sending only one Annual Report and Proxy Statement to eligible shareholders who share a single address unless we received instructions to the contrary from any shareholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. If registered shareholders residing at addresses with other registered shareholders wish to receive separate annual reports and proxy statements in the future, they may contact the Office of the Secretary at the address immediately above. The Board does not know of any other matter which may come before the meeting. However, should any other matter properly come before the meeting, the persons named in the proxy card will vote in accordance with their judgment upon such matters.
Shareholders are urged to vote by Internet or telephone, or if you received paper copies of our Proxy materials, you can also mark, date, sign and returnpromptly mail the proxyaccompanying Proxy card in the enclosed envelope to which no postage need be affixed if mailed in the United States.envelope. Prompt response is helpful and your cooperation will be appreciated.
BY ORDER OF THE BOARD OF DIRECTORS
TIMOTHY E. HALL
Secretary
| Dated: | October 27, 2015 Dubuque, Iowa |
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FLEXSTEEL INDUSTRIES, INC.
P.O. BOX 877
DUBUQUE, IA 52004-0877
VOTE BY INTERNET -www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
M96734-P70070 | KEEP THIS PORTION FOR YOUR RECORDS | |
DETACH AND RETURN THIS PORTION ONLY | ||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | ||
FLEXSTEEL INDUSTRIES, INC. | For | Withhold | For All | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | |||||||||||
All | All | Except | |||||||||||||
The Board of Directors recommends you vote FOR the following: | |||||||||||||||
1. | To elect two (2) Class II Directors to serve until the year 2018 Annual Meeting and until their respective successors have been elected and qualified or until their earlier resignation, removal or termination. | o | o | o | |||||||||||
Nominees: | |||||||||||||||
01) Mary C. Bottie | |||||||||||||||
02) Eric S. Rangen | |||||||||||||||
NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | |||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | |||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | ||||||||||||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
M96735-P70070 |
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 10, 2012.
The Company’s Proxy Statement for the 2012 Annual Meeting of Shareholders and 2012 Annual Report to Shareholders are available atwww.flexsteel.com in the “About Flexsteel” section under “Investor Relations”.
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Notice of 2012Annual MeetingandProxy Statement
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. | ||
Continued and to be signed on reverse side | ||
The undersigned, a shareholder of Flexsteel Industries, Inc., hereby appoints Eric S. Rangen and Lynn J. Davis, and each of them, as proxies, with full power of substitution, to vote on behalf of the undersigned the same number of shares which the undersigned is then entitled to vote at the Annual Meeting of the Shareholders of Flexsteel Industries, Inc., to be held on Monday, December 10, 2012 at 2:00 P.M. at the Hilton Minneapolis, 1001 Marquette Avenue, Minneapolis, Minnesota 55403, and at any adjournments or postponements thereof as follows:
The Board of Directors recommends a vote FOR:
(Important: continued, and to be signed and dated, on the reverse side)
(Continued from other side)
The Undersigned hereby revokes any proxy or proxies to vote such shares heretofore given.
PLEASE VOTE, DATE, SIGN, AND RETURN IN THE ENCLOSED ENVELOPE.
This proxy when properly executed will be voted in the manner directed hereon by the above-signed shareholder. If no direction is given, this proxy will be voted FOR Proposal I and the grant of authority to vote upon such other business as may properly come before the meeting or any adjournments or postponements thereof will not be crossed out.