UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
☒ | Definitive Proxy Statement | |||
☐ | Definitive Additional Materials | |||
☐ | Soliciting Material Pursuant to (S)240.14a-12 | |||
HOOKER FURNISHINGS CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. | |||
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11. | |||
(1) | ||||
Title of each class of securities to which transaction applies: | ||||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
☐ | Fee paid previously with preliminary materials. | |||
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: | |||
Hooker FurnitureFurnishings Corporation
440 East Commonwealth Boulevard
Martinsville, Virginia 24112
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held June 7, 20166, 2023
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Hooker FurnitureFurnishings Corporation (the “Company”) will be held at the Company’s Corporate Office at 440 East Commonwealth Boulevard, Martinsville, Virginia, on Tuesday, June 7, 2016,6, 2023, at 1:00 p.m., for the following purposes:
■ | To elect as directors the seven nominees named in the attached proxy statement to serve a one-year term on the Company’s Board of Directors; |
■ | To ratify the selection of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending January |
■ | To cast an advisory vote to approve the compensation of |
■ | To cast an advisory vote on how frequently the Company should hold advisory votes on compensation of the Company’s named executive officers; and |
■ | To transact such other business as may properly be brought before the meeting or any adjournment of the meeting. |
The shareholders of record of the Company’s Common Stock at the close of business on April 1, 201610, 2023 are entitled to notice of and to vote at this Annual Meeting or any adjournment of the meeting.
Even if you plan to attend the meeting in person, we request that you mark, date, sign and return your proxy in the enclosed self-addressed envelope as soon as possible so that you may be certain that your shares are represented and voted at the meeting. Any proxy given by a shareholder may be revoked by that shareholder at any time before the voting of the proxy.
By Order of the Board of Directors, | |
  | |
C. Earl Armstrong III | |
Secretary |
May 5, 2016
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Shareholders to be Held on June 6, 2023
The proxy statement and annual report to shareholders are available at: http://www.astproxyportal.com/ast/25490
Hooker FurnitureFurnishings Corporation
440 East Commonwealth Boulevard
Martinsville, Virginia 24112
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 7, 2016
The enclosed proxy is solicited by and on behalf of the Board of Directors (the “Board”) of Hooker FurnitureFurnishings Corporation (the “Company”) for use at the Annual Meeting of Shareholders to be held on Tuesday, June 7, 2016,6, 2023, at 1:00 p.m., at the Company’s Corporate Office at 440 East Commonwealth Boulevard, Martinsville, Virginia, 24112 and any adjournment of the meeting. The matters to be considered and acted upon at the meeting are described in the notice of the meeting and this proxy statement. This proxy statement and the related form of proxy are being mailed on or about May 5, 20162023 to all holders of record on April 1, 201610, 2023 of the Company’s common stock, no par value (the “Common Stock”). Shares of the Common Stock represented in person or by proxy will be voted as described in this proxy statement or as otherwise specified by the shareholder. Any proxy given by a shareholder may be revoked by that shareholder at any time before the voting of the proxy by:
■ | delivering a written notice to the Secretary of the Company; |
■ | executing and delivering a later-dated proxy; or |
■ | attending the meeting and voting in person. |
The cost of preparing, assembling and mailing the proxy, this proxy statement, and any other material enclosed, and all clerical and other
expenses of solicitations will be borne by the Company. In addition to the solicitation of proxies by use of the mails, directors, officers, and employees of the Company may solicit proxies by telephone or personal interview. These people will receive no additional compensation for these services but will be reimbursed for any expenses incurred by them in connection with these services. The Company also will request brokerage houses and other custodians, nominees, and fiduciaries to forward soliciting material to the beneficial owners of Common Stock held of record by those parties and will reimburse those parties for their expenses in forwarding soliciting material.Voting Rights
On April 1, 2016,10, 2023, the record date for the Annual Meeting, there were 11,535,25111,053,397 shares of Common Stock outstanding and entitled to vote. Each share of Common Stock entitles the holder of that share to one vote on each matter presented.
Voting Procedures
Votes will be tabulated by one or more Inspectors of Elections. A majority of the total votes entitled to be cast on matters to be considered at the Annual Meeting constitutes a quorum. Once a share is represented for any purpose at the Annual Meeting, it is deemed to be present for quorum purposes for the remainder of the meeting. Abstentions and shares held of record by a broker or its nominee (“broker shares”) that are voted on any matter are included in determining the number of votes present or represented at the Annual Meeting. However, broker shares that are not voted on any matter at the Annual Meeting will not be included in determining whether a quorum is present at the meeting.
In the election of directors, the seven nominees receiving the greatest number of votes cast in the election of directors will be elected. Votes that are withheld and broker shares that are not voted in the election of directors are not considered votes cast on the election of directors and, therefore, will have no effect on the election of directors.
Actions on all other matters to come before the meeting, including ratification of the selection of the Company’s independent registered public accounting firm, the advisory vote on executive compensation and the advisory vote on the frequency of advisory votes on executive compensation will be approved if the votes cast in favor of the action exceed the votes cast against it. Abstentions and broker shares that are not voted on a matter are not considered cast either for or against that matter and, therefore, will have no effect on the outcome of that matter.
The shares represented by proxies will be voted as specified by the shareholder. If the shareholder does not specify his or hertheir choice, the shares will be voted
■ | “FOR” the election of the seven director nominees listed on the proxy card; |
■ | “FOR” the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending January |
■ | “FOR” the approval, on an advisory basis, of the compensation of certain of the Company’s named executive officers as disclosed in this proxy statement; |
■ | For “ONE YEAR” for the frequency of the advisory vote on the compensation of the Company’s named executive officers; and |
■ | In the discretion of the persons named in the proxies upon any other matter(s) that may properly come before the meeting or any adjournment of the meeting. |
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company proposes the election of Paul B. Toms, Jr., W. Christopher Beeler, Jr., JohnMaria C. Duey, Paulette Garafalo, Christopher L. Gregory, III, E. Larry Ryder, David G. Sweet,Henson, Jeremy R. Hoff, Tonya H. Jackson, and Ellen C. Taaffe and Henry G. Williamson, Jr. to hold office until the next Annual Meeting of Shareholders is held and their successors are elected. Each director nominee has consented to being named as a nominee for election at the Annual Meeting. The Board of Directors of the Company presently consists of seveneight directors whose terms expire at the time of the 20162023 Annual Meeting upon election of their successors.
The shares represented by proxies will be voted as specified by the shareholder. If the shareholder returns a properly executed proxy card but does not specify his or hertheir choice, the shares will be voted in favor of the election of the nominees listed on the proxy card. If any nominee should not continue to be available for election, the shares represented by those proxies will be voted for the election of such other person as the Board of Directors may recommend. As of the date of this proxy statement, the Board of Directors has no reason to believe that any of the nominees named below will be unable or unwilling to serve. Information regarding each nominee follows.
Board Matrix
The matrix below summarizes as President from November 2006 until August 2011. Mr. Toms was President and Chief Operating Officer from December 1999 to December 2000, Executive Vice President-Marketing from 1994 to December 1999, Senior Vice President-Sales & Marketing from 1993 to 1994, and Vice President-Sales from 1987 to 1993. Mr. Toms joined the Company in 1983. His long tenure with the Company in senior and executive management roles and his position as the Company’s Chief Executive Officer uniquely qualify him to serve as a director of the Company.date of this proxy statement certain of the key experiences, qualifications, skills, and attributes that our directors proposed for election bring to the Board to enable effective oversight. This matrix is intended to provide a summary of our directors’ qualifications and is not a complete list of each director’s strengths or contributions to the Board. Additional details on each director’s experiences, qualifications, skills, and attributes are set forth in their biographies that follow. In addition, none of our directors self-identified LGBTQ+ status or any additional racial or ethnic demographic background other than the backgrounds shown in the matrix below.
Board Matrix For Directors Proposed for Election | |||||||
Beeler | Duey | Garafalo | Henson | Hoff | Jackson | Taaffe | |
Knowledge, Skills and Experience | |||||||
Industry Experience | Manufacturing | Home Durables | Fashion/ Apparel/ Retail | Finance | Home Durables | Technology / Manufacturing | Home Durables |
Public Company Executive Experience | ● | ● | ● | ● | ● | ● | |
Corporate Governance | ● | ● | ● | ● | ● | ● | ● |
Financial / Accounting | ● | ● | ● | ||||
Marketing / Product Development | ● | ● | ● | ||||
Mergers and Acquisitions | ● | ● | ● | ● | ● | ||
Operations | ● | ● | ● | ||||
Retail / Consumer | ● | ● | ● | ● | |||
Risk Management | ● | ● | ● | ||||
Strategic Planning / Oversight | ● | ● | ● | ● | ● | ● | ● |
Technology / Digital / Cybersecurity | ● | ||||||
Demographics * | |||||||
Race/Ethnicity | |||||||
African American | ● | ||||||
White / Caucasian | ● | ● | ● | ● | ● | ● | |
Gender | |||||||
Female | ● | ● | ● | ● | |||
Male | ● | ● | ● | ||||
Board Tenure | |||||||
1 - 5 years | ● | ● | ● | ||||
6 - 10 years | ● | ● | ● | ||||
> 10 years | ● | ||||||
* The Demographic disclosures are based on self-identified reporting by each director. | |||||||
W. Christopher Beeler, Jr., 64,71, has been a director since 1993 and has served as lead director since April 2011.until June 2016. He has beenwas a director since 1986 of Virginia Mirror Company, Inc. and Virginia Glass Products Corporation, both of which manufacture and fabricate architectural glass products, since 1986 and was Chairman since 2000.of both from 2000 until their sale in late 2022. Although most of the companies’ assets were sold December 2022, he still remains chairman and director of the remnant companies. He also served as President of those companies from 1988 until August 2011 and as CEO of those companies from 1997 until August 2011. In addition, he served on the board of directors and as a member of the audit committee of BB&T of Virginia (a wholly owned subsidiary of Truist Financial Corporation, formerly BB&T Corporation) from 1999-2006 and is a certified public accountant licensed in the Commonwealth of Virginia. Mr. Beeler serves as chair of the Audit Committee and is a member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Mr. Beeler’s executive experience, which encompasses traditional corporate management functions such as accounting, treasury and cash management, sales, information technology, manufacturing, distribution and human resources, as well as short-range and long-range planning complements Mr. Toms’ experience and well qualifies him to serve as a directordirector.
Maria C. Duey, 60, joined the board in March 2021. Since 2018, Ms. Duey has served as Chief Executive Officer of Leonine Advisory and Support Services, a consulting firm specializing in strategic planning and mergers and acquisitions serving private equity firms, family offices and small businesses. From 2015-2017, Ms. Duey served as lead directorVice-President of Corporate Development and Investor Relations at Horizon Global, a manufacturer of towing and trailering products serving the automotive aftermarket, retail and original equipment (OE) channels. From 1996-2014, she was employed by Masco Corporation, one of the Company.leading manufacturers of branded home improvement and building products, serving as Vice-President-Investor Relations and Corporate Communications from 2005-2014. Ms. Duey serves as a member of the Compensation Committee, the Nominating and Corporate Governance Committee and the Audit Committee. The knowledge and experience that Ms. Duey has in the areas of mergers and acquisitions, strategic planning, investor relations and corporate communications, as well as her executive experience, well qualifies her to serve as a director.
Paulette Garafalo, 66, has been a director since 1988. He is2017. She has been Executive Chairman of Paul Stuart, a shareholder, officermen’s and directorwomen’s classic apparel retailer and wholly owned subsidiary of the law firmMitsui, Inc., since July 2022. She served as Chief Executive Officer and President of Young, Haskins, Mann, Gregory, McGarry & Wall, P.C. Mr. GregoryPaul Stuart from 2016 to July 2022. She served as President of Brooks Brothers, a men’s and women’s apparel retailer, from 2000 to 2016. Ms. Garafalo serves as chair of the Compensation Committee, and a member of the Nominating and Corporate Governance Committee and the Audit Committee. Ms. Garafalo’s executive experience, which encompasses traditional corporate management functions, and her extensive experience in retail and luxury consumer brands well qualifies her to serve as a director. The knowledge and experience Mr. GregoryMs. Garafalo has gained from his 25 yearsas CEO of Paul Stuart further broadens her experience and qualifications to serve as a director withdirector.
Christopher L. Henson, 61, joined the Companyboard in October 2022. Mr. Henson served as the Head of Banking and Insurance of Truist Bank from 2019 until his 40 yearsretirement in September 2021. He joined Truist Financial Corporation’s predecessor BB&T’s executive management team in 2004 and served various executive positions including City Executive, Regional President, State President, Chief Financial Officer, and Chief Operating Officer before being promoted to President and Chief Operating Officer from 2016 to 2019. He also serves as Chair of the Board of Trustees of High Point University. Mr. Henson serves as a member of the Compensation Committee, the Nominating and Corporate Governance Committee and the Audit Committee. Mr. Henson’s extensive knowledge of finance and banking as well as experience as an attorneyin a wide variety of leadership roles well qualify him to serve as a director.
Jeremy R. Hoff, 49,has been a director and Chief Executive Officer since February 1, 2021. He was President of Hooker Legacy Brands from February 2020 through January 2021 and served as President of the Company.
Tonya H. Jackson, 68,59, has been a director since February 1, 2011. Mr. Ryder retired2017. She has served as ExecutiveSenior Vice President – Finance and Administration and Chief FinancialProduct Delivery Officer for Lexmark, a global provider of printing and imaging products and services, since 2020. In this role, she is responsible for hardware and supplies research and development, global supply chain, manufacturing operations, service delivery and sustainability. She served as Senior Vice President and Chief Supply Chain Officer from 2016 until 2020, Vice-President of Supply Chain Operations at Lexmark from 2015 until 2016 and Vice-President of Worldwide Supplies Operations from 2013 until 2015. Ms. Jackson serves as a member of the Company in January 2011, with 34 years ofCompensation Committee, Nominating and Governance Committee and the Audit Committee. Ms. Jackson’s senior executive experience at a large, global corporation and her extensive experience in thatoperations and other seniorsupply chain management roles with the Company. Mr. Ryder does not serve on any of the Board’s committees. His familiarity with the Company’s strategy, operations, personnel and prior Board deliberations, along with his extensive knowledge of the home furnishings industry and the investment community, well qualify himqualifies her to serve as a directordirector. In 2021, Ms. Jackson was named a Certified Corporate Director with the National Association of Corporate Directors (NACD). In 2022, Ms. Jackson earned the Company.CERT Certificate in Cybersecurity Oversight from Carnegie Mellon University.
Ellen C. Taaffe, 69,61, has been a director since 2006. He is the retired Vice President of The North Face, a designer and marketer of outdoor apparel and a division of VF Corporation. He held that position from 2002 until his retirement in December 2004. He served as Vice President of VF Outdoor – Europe from 2000 to 2002. Before 2000, Mr. Sweet held various management positions during his career with VF Corporation. Mr. SweetJuly 2015. Ms. Taaffe serves as chair of the Nominating and Corporate Governance Committee and a member of the Audit Committee and the Compensation Committee. His 26 yearsShe currently is a Clinical Professor of senior management experienceManagement and Organizations at VF Corporation, including his operations experience in supply chain management, product sourcing and distribution, well qualifies him to serve as a directorNorthwestern University's Kellogg School of Management, where she is also Director of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES.
CORPORATE GOVERNANCE
The Board of Directors is currently comprised of:
■ | the |
■ | the Company’s Chief Executive |
■ | six other independent directors, as determined by the Board of Directors upon the recommendation of the Nominating and Corporate Governance Committee; and |
■ | a Nominating and Corporate Governance Committee, |
The following table shows the Company’s current Board has established a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee.
Current Composition of the Board of Directors | |||||||
Beeler | Duey | Garafalo | Henson | Jackson | Taaffe | Williamson | |
Independent Director | ● | ● | ● | ● | ● | ● | Independent Board Chair |
Audit Committee | Chair | ● | ● | ● | ● | ● | ● |
Compensation Committee | ● | ● | Chair | ● | ● | ● | ● |
NCG Committee | ● | ● | ● | ● | ● | Chair | ● |
Note: Mr. Williamson will not stand for re-election, but will continue to serve through the remainder of his current term. He is currently deemed independent and serves as the Board Chair through the end of his current term. | |||||||
The CommitteeBoard believes that itthis leadership structure provides an effective balance between the Board Chair, independent directors and the Chief Executive Officer. Consequently, the Board of Directors believes the current leadership structure is in the best interests of the Company and its shareholders for the Board to continue to combine the roles of Chairman and Chief Executive Officer due to the depth of knowledge, experience and expertise of the Company’s current Chairman and Chief Executive Officer. The Committee believes combining these two roles creates a single focal point for Company leadership and projects a clear sense of direction to shareholders and employees within an industry that is in the midst of rapid change. The Committee will continue to regularly review the appropriateness of this combined role.
The Board of Directors typically holds five to six meetings per year; however, it held fourteen meetings duringyear. In the fiscal year endedbeginning January 31, 20162022 through January 29, 2023 (“fiscal 2016”2023”). Ten of these meetings were, it held in part, to consider acquisition or acquisition related issues, involvingfive meetings. During fiscal 2023, the acquisition of the assets of Home Meridian International, which the Company acquired on February 1, 2016. The Nominating and Corporate Governance Committee met six times and the Compensation Committee both met five times and the Audit Committee each met four times in fiscal 2016.times. Each incumbent director attended at least 75% of the total fiscal 20162023 Board meetings and committee meetings held during the period that he or she wasthey were a member of the Board and/or those committees. The Nominating and Corporate Governance Committee and the Board of Directors hashave each determined that each of the following directors is independent as defined by applicable NASDAQ listing standards: W. Christopher Beeler, Jr., John L. Gregory, III, E. Larry Ryder, David G. Sweet,Maria C. Duey, Paulette Garafalo, Christopher L, Henson, Tonya H. Jackson, Ellen C. Taaffe and Henry G. Williamson, Jr. At each Board meeting the independent directors conduct a part of the meeting in executive session, at which only independent directors are present. It is the Company’s policy that each of the directors is expected to attend the Company’s Annual Meetings.Meeting. All directors, who were directors on the date of the Company’s directorslast year’s annual meeting of shareholders, attended the 2015 Annual Meeting, except for Ms. Taaffe who was elected to the board subsequent to the 2015last year’s annual meeting.
Also in 2011, upon the recommendation of the Nominating and Corporate Governance Committee, the Board determined that it was in the best interests of the Company and its shareholders that all independent directors serve on all committees of the Board. The Board believed, based on the relatively small size of the Board in 2011 this “Committees of the Whole” approach iswas more efficient, since all independent directors have input into committee actions and that the need for committees reporting at Board meetings would be greatly reduced.
Corporate Governance Guidelines
The Board of Directors has adopted Corporate Governance Guidelines, which set forth its policies with respect to certain governance issues and, together with the Company’s articles and bylaws, provide a framework for the effective governance of the Company and are intended to support the Board in overseeing the business and affairs of the Company on behalf of the Company’s shareholders. A copy of the Corporate Governance Guidelines is available on the Company’s website at investors.hookerfurnishings.com.
Environmental, Corporate Social Responsibility and Governance (“ESG”) Initiatives
The Board of Directors has adopted a set of policies and practices addressing environmental stewardship, sustainability, corporate social responsibility, and ethics and governance that it believes create long-term value for shareholders, while investing in employees and communities and positively impacting the environment. The Board of Directors exercises oversight over these matters and discusses them at least quarterly with management. An ESG-focused committee called CARE (Community Action & Responsibility for our Environment) was formed to refine the Company’s ESG initiatives by reviewing current best practices, shareholder expectations and regulatory developments and meets at least monthly to discuss the development and updates the Board at least quarterly on those initiatives throughout the Company. As of the date of this proxy statement, the following summarizes the current state of our ESG efforts:
■ | Environment: The Company has put in place several initiatives focused on promoting sustainability and preserving natural resources. It has focused on: |
o | reducing its energy usage to lower its carbon footprint through optimizing its facilities. |
■ | a multi-year project with the goal of switching to LED lighting and cleaner-operating electric forklifts in many locations including our new distribution center in Georgia, which is outfitted with energy-efficient lighting and electric vehicle charging stations. |
o | implementing ways in which it can conserve resources, promote sustainability, and orient sourcing and production around environmental preservation. |
■ | By the end of 2022, all divisions were EFEC (“Enhancing Furniture’s Environmental Culture”) certified, except for the recently acquired division Sunset West; uses FSC (Forest Stewardship Council) compliant paper products and replaced Styrofoam packing with recyclable material for repacking in all distribution centers. |
■ | The Company provides monetary support to the Sustainable Furnishings Council, the Arbor Day Foundation, the Eco-Council of the Dan River basin, and Foothills Conservancy to support various projects including reforestation in Florida and clean-up efforts in local counties. |
■ | The Company recycles, reuses, or repurposes substantially all pallets; repurposes wood chips and sawdust from our Bradington-Young and the Shenandoah’s Valdese and Mount Airy facilities for use in the farming industry; repurposes leather for use in belts and boots, and disposes of substantially all eWaste using an Environmental Protection Agency compliant eWaste recycling firm in all divisions. |
■ | The Company joined as a founding member of the Eco Ambassador Council in the Dan River Basin area and supported the Eco Ambassador Council by offering volunteer hours via employees as well as financial assistance. In April 2022, the Mayo River State Park in Henry County, Virginia officially opened for public use. Hooker employees were heavily involved in each stage of the development including the park’s cultivation over the course of the year leading up to the opening day. |
■ | The Company reached the following certifications for all wood products used within our Shenandoah production facilities: AHMI (Appalachian Hardwood Manufacturers, Inc.), CPA Certified (Composite Panel Association), ECO-Certified (Sustainable Use of Wood Fiber), FSC (Forest Stewardship Council), Rainforest Alliance Certified, and SFI (Sustainable Forestry Initiative). |
■ | Diversity, Equity and Inclusion: The Company recognizes that its business is stronger and more successful if supported by a diverse workforce. Its goal is to maintain and promote diversity among its employees and foster an inclusive environment where differences are celebrated. The Company strives to provide a productive workplace that promotes the health and safety of all employees and one that is free from all forms of harassment, discrimination, and inequality. Along those lines, the Company: |
o | has a Diversity, Equity, and Inclusion (“DEI”) leadership team with over 15 senior executives representing all divisions of the Company meeting on a regular basis to guide both short- and long-term goals in addition to creating the overall strategic direction of DEI at the Company. |
o | formed an employee-led diversity council AIDE (Advancement of Inclusion, Diversity, and Equity) consisting of a diverse group of employees that meets monthly with the goal of increasing institutional awareness of issues relating to inclusivity and equality for a more diverse and welcoming workplace. The AIDE Council initiatives include: |
■ | DEI training for managers, new employee on-boarding, and all employees; |
■ | monthly recruiting meetings between HR and AIDE liaison to work on attracting and sourcing more diverse candidates, assist in making the interview process welcoming to all, and create metrics to measure organizational progress; |
■ | the addition of two company-wide floating holidays allowing employees to have time-off for holidays of their choosing; |
■ | the creation of campaigns to educate employees on diverse holidays and heritage months; and |
■ | a DEI-focused section added to annual performance review for all employees and the Company’s Corporate Social Responsibility report. |
■ | Talent management, employee compensation and benefits: The Company: |
o | compensates employees competitively relative to the industry and local labor markets, and in accordance with all applicable federal, state, and local wage, work hour, overtime and benefits laws; |
o | provides affordable and comprehensive health benefits to employees focused on financial, emotional, and physical health and well-being, including a standardized process of reporting worker’s compensation claims which it believes promotes health and safety of its employees; and |
o | provides training and educational opportunities for all employees, including educational stipends or renewable college scholarships to children and spouses of all employees, excluding family members of current and former officers and board directors of the Company. |
■ | Corporate Social Responsibility: The Company has a long history of direct charitable giving and/or gifts-in-kind regularly supports the Boys & Girls Club, the United Way, the SPCA, Piedmont Arts, the Virginia Museum of Natural History, including its “Museums for All” program, the American Cancer Society Relay for Life, the Salvation Army, the Alzheimer’s Association and organizations dedicated to reducing food insecurity. The Company does not use its funds for political purposes. In 2022, |
o | The Hooker Furniture division and Susan G. Komen for the Cure, one of the leading breast cancer organizations in the world, joined forces on a licensed collection of accent furniture designed to raise funds and promote breast cancer awareness; |
o | The Company partnered with Florida-based retailers and donated over 1,200 beds to victims of Hurricane Ian; and |
o | The Company conducts its annual summer furniture sale and donates the proceeds to local organizations. Last year, the Company raised $87,000 after expenses and donated the funds to nine charities in the communities in which it has facilities. |
In addition to the ESG initiatives listed above, the Company has a formal Vendor Code of Conduct that requires vendors to conduct business in a fair and ethical manner.
Contacting the Board of Directors
Shareholders and other interested parties who desire to contact the Company’s Board of Directors or any individual director may do so by writing to: Board of Directors, c/o C. Earl Armstrong III, Secretary, Hooker Furnishings Corporation, P.O. Box 4708, Martinsville, VA 24115. The Board has instructed the Secretary to promptly forward all such communication to the specified addressees thereof.
Shareholders and other interested parties also may direct communications solely to the independent directors of the Company, as a group, by addressing such communications to the Independent Directors, c/o Secretary, at the address set forth above.
In addition, the Board of Directors maintains special procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and for the submission by employees of the Company, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters. Such communications may be made by writing to the Audit Committee of the Board of Directors, c/o Secretary, at the address set forth above. Any such communication marked “confidential” will be forwarded by the Secretary, unopened, to the Chair of the Audit Committee.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee has determined that each member of the Board is independent as defined by applicable NASDAQ listing standards. However, Mr. Ryder, a former executive officer of the Company who retired in 2011, has been considered by certain proxy advisors to be an “affiliated outsider” due to the fact he has served on the Board within five years of last serving as an executive officer of the Company. Because Mr. Ryder served on our committees previously, he received unfavorable recommendations in the election as a director by those proxy advisors in 2015. Consequently, in June of 2015 the Nominating and Corporate Governance Committee recommended that Mr. Ryder not serve on any of the Board’s committees and the Board unanimously approved that recommendation. As a result, Mr. Ryder has not served on any of the Board committees since the Company’s 2015 Annual Meeting on June 4, 2015. The Company continues to use the “Committees of the Whole” approach with this one exception.
■ | identifies, |
■ |
assists the Board with respect to corporate governance matters applicable to the Company; |
■ | evaluates and makes recommendations to the Board regarding the size and composition of the Board and makes recommendations about the chairs of all standing Board committees; |
■ | develops and recommends criteria for the selection of individuals to be considered as candidates for election to the Board; and |
■ | assists the Board in senior management succession planning. |
The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee, a current copy of which is available on the Company’s Web sitewebsite at www.hookerfurniture.com.investors.hookerfurnishings.com. The Board of Directors has determined that each member of the Committee is independent as defined by applicable NASDAQ listing standards.
Candidates for director nominees will be assessed in the context of the current composition of the Board, the operating requirements of the Company and the long-term interests of shareholders. The Committee has not established a set of specific, minimum qualifications for director candidates, but in conducting its assessment, the Committee will consider such factors as it deems appropriate given the current needs of the Board and the Company. In general, the Committee seeks candidates who:
■ | possess a reputation for adhering to the highest ethical standards and have demonstrated competence, integrity and respect for others; |
■ | have demonstrated excellence in leadership, judgment and character; |
■ | have diverse business backgrounds, with a wide range of relevant education, skills and professional experience that will complement and enhance the Company’s business and strategy; and |
■ | have the time to devote to Board and Committee service and are free of potential conflicts of interest. |
While the Board has no formal policy regarding diversity, the Committee considers the diversity of the Board when identifying nominees for director. Such diversity may include a variety of different personal, business and professional experiences, as well as a variety of opinions, perspectives, backgrounds and other characteristics.
In the case of incumbent directors, the Committee reviews each director’s overall service to the Company during his or hertheir term as director and whether their skills are still relevant to the needs of the Board in deciding whether to re-nominate the director.
The Board does not believe that it is appropriate or necessary to limit the number of terms a director may serve. However, any outside director must retire upon reaching the age of 75, with such retirement being effective and occurring upon the completion of the term in which the director turns 75.
The Board continues to facilitate orderly transitions for future Board retirements and to add and refresh pertinent skill sets. Given the anticipated future retirement of Mr. Williamson, the board elected Mr. Henson on the recommendation of the Nominating and Corporate Governance Committee, based on that Committee’s director search process during 2022.
The Committee’s search process consisted of:
■ | identifying desired director skills and qualifications from the Board’s annual self-assessment; |
■ | reviewing resumes from a variety of sources including: |
o | names submitted by current directors; |
o | past resumes from board of director executive education databases from both the University of North Carolina School of Law and Northwestern University’s Kellogg School of Management; and |
o | resumes submitted to the Company by individuals seeking directorship positions and recruitment firms seeking directorship positions for their clients. |
■ | Interviewing to assess skills and qualifications that matched those identified in the Board’s annual self-assessment. |
Based on this search process, the Committee ultimately selected Mr. Henson for nomination to the Board. The Committee became aware of Mr. Henson from his work in the High Point community and through a current director. In selecting Mr. Henson from among other candidates, the Committee focused on Mr. Henson’s executive leadership and financial expertise, his experience in mergers and acquisitions, and his public-company experience as a CFO, COO, and company President.
The Committee also facilitates the Board’s annual self-assessment and is responsible for recommending director compensation to the Board of Directors.self-assessment.
Procedures for Shareholder Recommendations of Director Nominees
The Committee will consider a director candidate recommended by a shareholder of record for election at the 20172024 Annual Meeting if, in addition to meeting other applicable requirements, the shareholder submits the recommendation in writing to the Secretary of the Company in accordance with the procedures for the nomination of directors in the Company’s bylaws (including Article III, Section 3 of the bylaws) and it is received at the Company’s principal executive offices on or before January 5, 2017.6, 2024. The recommendation must include the candidate’s name and address, a description of the candidate’s qualifications for serving as a director and the following information:
■ | the name and address of the shareholder making the recommendation; |
■ | a representation that the shareholder is a holder of record |
■ | a description of all arrangements or understandings between the shareholder and the nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; |
■ | information regarding the director candidate that would be required to be included in a proxy statement filed under the proxy rules of the United States Securities and Exchange Commission |
■ | information concerning the director candidate’s independence as defined by applicable |
■ | the consent of the director candidate to serve as a director of the Company if nominated and elected. |
The Nominating and Corporate Governance Committee may refuse to consider the recommendation of any person not made in compliance with this procedure.
Compensation Committee
The Compensation Committee consists of all of the Board’s independent directors except Mr. Ryder. Mr. Gregorydirectors. Ms. Garafalo currently serves as its Chair. The Committee reviews and makes determinations with regard toregarding the compensation for the Company’s executives, including the Chief Executive Officer and the Company’s other executive officers.
The Board of Directors has determined that each member of the Compensation Committee is independent as defined by applicable NASDAQ listing standards.
The Board of Directors has adopted a written charter for the Compensation Committee, a current copy of which is available on the Company’s Web sitewebsite at www.hookerfurniture.com.investors.hookerfurnishings.com. The charter delegates to the Committee a number of specific responsibilities for establishing, reviewing, approving, monitoring, and administering executive compensation. In addition, the charter requires that each member of the Compensation Committee be an “outside director” for purposes of Section 162(m) of the Internal Revenue Code and a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that each Committee member meet applicable NASDAQ director independence requirements. The Report of the Compensation Committee can be found on page 12.19. Under the terms of its charter, the Compensation Committee may delegate any of its duties or responsibilities to subcommittees of the Compensation Committee. In addition, the Compensation Committee may delegate to Company officers certain administrative responsibilities relating to the Company’s 20152020 Stock Incentive Plan.
The Compensation Committee has the authority, without any further approval from the Board, to retain advisers, as it deems appropriate, including compensation consultants. In retaining an adviser, the Compensation Committee has sole authority to approve the adviser’s fees and other retention terms and has the sole authority to terminate the adviser.
The Compensation Committee has directly engaged Mercer (U.S.Pearl Meyer & Partners, LLC (“Pearl Meyer”) Inc. as its external compensation consultant. MercerPearl Meyer reports to and receives direction directly from the Committee, and a representative of MercerPearl Meyer is available to attend meetings of the Compensation Committee as its advisoradviser when requested byrequested. Most recently in February 2022, Pearl Meyer provided the Committee. In prior fiscal years, Mercer has provided theCompensation Committee with third-party survey information for use in setting short-Board compensation as well as short and long-term compensation levels for the Chief Executive Officer and the Company’s other named executives, perspective on emerging compensation issues and trends, and expertise in incentive compensation structure, terms, and design. The Committee did not
In considering whether to engage Mercer to provide such services for fiscal year 2016, but the Committee did consider compensation comparability data for companies in the peer group that Mercer helped the Committee select in a prior fiscal year. In early fiscal 2017, the Committee engaged Mercer to advise it regarding executive compensation (including peer group selection for purposes of comparability analysis). The Committee also engaged Mercer on behalf of the Nominating and Corporate Governance Committee to provide advice to that committee regarding director compensation matters.
The Compensation Committee typically meets threefive to foursix times each year. During the 20162023 fiscal year, it met fourfive times. The Compensation Committee invites the Chief Executive Officer and the Chief Financial Officer to attend meetings when the Compensation Committee considers their input relevant or necessary whenfor evaluating compensation proposals. A portion of each meeting is generally held in executive session, as the Compensation Committee deems appropriate. All Compensation Committee votes are conducted in executive session. The Chief Executive Officer and the Chief Financial Officer do not attend these executive sessions. The Chairman of theCompensation Committee annually reviews the Chief Executive Officer’s compensation with the Board in executive session of independent directors only, except for Mr. Ryder.
The Chief Executive Officer makes recommendations to the Compensation Committee concerning compensation for the other executive officers of the Company. Decisions regarding compensation for employees other than the executive officers are made by the Chief Executive Officer in consultation with other members of senior management. Management assists the Compensation Committee in administering various elements of the Company’s executive compensation program. The Compensation Committee has unrestricted access to management and may request the participation of management in any discussion of a particular subject at any meeting. During fiscal 2016,2023, management provided the Compensation Committee with recommendations regarding executive officerofficers’ compensation, as discussed further in Compensation Discussion and Analysisthe executive compensation discussion that begins on page 13.
Audit Committee
The Audit Committee consists of all of the Board’s independent directors, exceptdirectors. Mr. Ryder, and Mr. WilliamsonBeeler serves as its Chairman.Chair. The Audit Committee:
■ | approves the appointment of an independent registered public accounting firm to audit the Company’s financial statements and internal control over financial reporting; |
■ | negotiates fees for audit, audit-related and tax services with the Company’s independent registered public accounting firm; |
■ | reviews and approves the scope, purpose and type of audit and non-audit services to be performed by the independent registered public accounting firm; |
■ | reviews and discusses with management and the |
■ | monitors compliance with the Company’s Code of Business Conduct and Ethics, including the Company’s ethics and compliance portal / hotline; |
■ | oversees the Company’s internal audit |
■ | oversees the accounting and financial reporting processes of the Company and the integrated audit of the Company’s annual financial statements and internal control over financial reporting. |
The Audit Committee receives updates from the auditor and management at its quarterly Audit Committee meetings. During fiscal 2023, the auditor and management made presentations to the Committee on specific topics of interest, including:
■ | the auditor’s assessment of its independence; |
■ | significant audit matters; |
■ | managements’ implementation of new accounting standards; |
■ | management’s critical accounting policies and practices; |
■ | the auditor’s fiscal 2023 integrated audit plan and updates on the completion of the plan; |
■ | regulatory developments on the environmental, corporate social responsibility and governance front; |
■ | compliance with the internal controls required under Section 404 of the Sarbanes-Oxley Act; and |
■ | the Company’s cybersecurity practices. |
The Board of Directors has adopted a written charter for the Audit Committee, a current copy of which is available on the Company’s Web sitewebsite at www.hookerfurniture.com.investors.hookerfurnishings.com. The Board of Directors has determined that each member of the Audit Committee is independent as defined by applicable SEC rules and NASDAQ listing standards. The Company’s Board of Directors has determined that Ms. Duey and each of Messrs. Williamson, Henson and Beeler is an “audit committee financial expert” for purposes of the SEC’s rules. The Report of the Audit Committee can be found on page 11.18.
Appointment and Evaluation of the Independent Auditor
On an officer or director, the proposed relationship or transaction must be (i) reported to the Chairman ofannual basis, the Audit Committee if a director or senior Company officer is involved, (ii) reportedreviews the audit firm’s performance as part of its consideration of whether to reappoint the SVP Finance and Accounting, orfirm as the Chief Executive Officer, for transactions involving other officersCompany’s independent auditor. As part of the Company, and (iii) reviewed and approved by the Audit Committee. While we do not have a standalone written policy or procedures for thethis review, approval or ratification of other transactions with related persons, it is our practice that potential related person transactions are first screened by our SVP – Finance and Accounting for materiality and then sent to the Audit Committee for review. In determining whether to approve or reject a related person transaction, the Audit Committee takes into account,considers, among other factors it deems appropriate, whether the proposed transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, as well as the extent of the related person’s economic interest in the transaction.
■ | the continued independence of the audit firm; |
■ | the audit firm’s experience and fresh perspective occasioned by mandatory audit partner rotation and the rotation of other audit management; |
■ | the length of time the audit firm has served as the Company’s independent auditors, including the benefits of having a long-tenured auditor and controls and processes that help safeguard the audit firm’s independence; |
■ | whether the audit firm should be rotated and considers the advisability and potential of selecting a different audit firm; |
■ | the appropriateness of the audit firm’s fees; |
■ | evaluations of the audit firm by management; |
■ | the audit firm’s effectiveness of communications and working relationships with the audit committee and management; and |
■ | the quality and depth of the audit firm and the audit team’s expertise and experience in the Company’s industry and related industries considering the breadth, complexity and global reach of the Company’s business. |
Related Party Transactions
The Company’s Audit Committee is responsible under its charter for reviewing and approving any related party transactions. For this purpose, a “related party transaction” includes any transaction, arrangement or relationship involving the Company in which an executive officer, director, director nominee or 5% shareholder of the Company, or their immediate family members, has a direct or indirect material interest that would be required to be disclosed in the Company’s proxy statement under applicable rules of the SEC. There were no related party transactions in fiscal 2023.
For relationships or transactions involving a related-party which involve an officer or director, the proposed relationship or transaction must be (i) reported to the Chair of the Audit Committee, if a director or senior Company officer (including the named executive officers) is involved, (ii) reported to the Chief Financial Officer or the Chief Executive Officer, for transactions involving other officers of the Company, and (iii) reviewed and approved by the Audit Committee. While we do not have a standalone written policy or procedure for the review, approval, or ratification of other transactions with related persons, it is the Company’s practice that potential related person transactions are first screened by the Chief Financial Officer and then sent to the Audit Committee for review. In determining whether to approve or reject a related person transaction, the Audit Committee considers, among other factors it deems appropriate, whether the proposed transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, as well as the extent of the related person’s economic interest in the transaction.
Code of Business Conduct and Ethics
The Board of Directors has adopted a Code of Business Conduct and Ethics, which applies to all of the Company’s employees and directors, including the principal executive officer, principal financial officer and principal accounting officer. A copy of the Code of Business Conduct and Ethics is available on the Company’s website at www.hookerfurniture.com.investors.hookerfurnishings.com. Amendments of and waivers from the Company’s Code of Business Conduct and Ethics will be posted to the website when permitted by applicable SEC and NASDAQ rules and regulations.
The Role of the Board of Directors in Risk Oversight
The Board of Directors, or an appropriate committee of the Board of Directors, provides oversight for Company-wide risk management and performs the Board’s oversight role in many different ways, including by:
■ | and approving the Company’s annual operating and capital budgets; |
■ | the Company’s quarterly and year-to-date operating results and discussing those results with senior management; |
■ | management’s quarterly |
■ | management |
■ | reports regarding the Company’s internal control over financial reporting from its independent registered public accounting firm. |
The Audit Committee meets in executive session with the Company’s independent auditors to discuss topics related to the Company’s financial reporting and internal control. Additionally, the Nominating and Corporate Governance Committee and the Compensation Committee meet periodically to address governance and compensation issues, including compensation-related risks. The committees have the authority to utilize outside advisorsadvisers and experts when needed. In his combined role as Chairman and Chief Executive Officer, Mr. Toms’ membership on theThe Board gives the Board valuable insight into the Company’s operations and risks. His unique depthcommittees (which consist of knowledge, experience and expertise give the Board a more complete and holistic view of the risks the Company faces. Theonly independent members of the Board, except for Mr. Ryder,members) also engage in discussions regarding risk management in executive session, without the participation of the Chairman and Chief Executive Officer.
Director Share Ownership Guidelines
In a prior year, the Board adopted a policy under which non-employee directors are required to hold shares with a value equal to three times their annual cash compensation. Each director is allowed six years to accumulate the required holding level. Each director that has been a director at least six years as of the end of the Company’s most recently completed fiscal year met these guidelines as of such date.
Director Compensation
The Nominating and Corporate GovernanceCompensation Committee is responsible for recommending director compensation to the Board of Directors. Non-employee directors are compensated based on their term of service, which typically begins with the election of directors at the Company’s Annual Meeting, and which is referred to as a “service year.”
In 2015,February 2022, the NominatingCompensation Committee engaged Pearl Meyer to review the Company’s compensation structure and Corporate Governancepositioning relative to the 16-company peer group developed for the executive total renumeration review, with a secondary review against All-Industry benchmarks. Pearl Meyer recommended a peer group similar to the Company’s previous 13-company peer group, consisting of companies similar to the Company in terms of industry, size and operational complexity. Pearl Meyer recommended this group because its members shared various financial and operational attributes with the Company, while not being limited to furniture companies. The Committee decideddetermined it was appropriate for Pearl Meyer to discontinueuse the practicesame peer group developed for its executive compensation review for its analysis of paying separate committee service fees to directors for servingBoard compensation.
Pearl Meyer’s independent analysis of the Company's non-employee director pay program showed that:
■ | the $48,000 cash compensation was positioned at approximately the market 25th percentile; |
■ | the $60,000 equity compensation was positioned below the peers 25th percentile and approximately at the All-Industry 25th percentile; |
■ | total director compensation was positioned approximately at the 25th percentile; and |
■ | the allocation of cash and equity compensation was comparable to peers and All-Industry practices. |
Based on eachPearl Meyer’s independent study, the Committee found that the Company’s director compensation was in the lower quartile of the Company’s peer group. As a result, the Committee recommended that effective as of the beginning of the Board’s separate committees. However, fees paid to each2022-2023 term of service beginning in June 2022:
■ | the annual board retainer fee be increased from $48,000 to $55,000; |
■ | stipend for the Board chair be increased from $20,000 to $30,000; |
■ | stipend for the Audit Committee chair be increased from $10,000 to $15,000, while stipends for the chairs of the Compensation and Nominating and Corporate Governance Committees be increased from $5,000 to $10,000; and |
■ | the equity award be increased from $60,000 to $70,000 to better align total director compensation and the ratio of cash to equity compensation with the Company’s peer group. |
The Committee believes these modest increases are in the best interest of the Chairs of committees were retained in order to recognize the additional timeCompany and effort required to lead the Board’s committees.
Non-Employee Director Compensation for the 2022-2023 Service Year
For the 2015-20162022-2023 service year, non-employee directors received an annual board cash retainer of $55,000, the followingBoard Chair received an additional cash stipend of $30,000, the Audit Committee Chair received an additional cash stipend of $15,000 and the Chairs of the Compensation and Nominating and Corporate Governance committees received additional cash stipends of $10,000 each. The annual board cash retainer for serving as a non-employee director was prorated for Mr. Henson since he became a director on October 12, 2022. Except for Mr. Henson, these fees were paid to directors in June 2015:2022. Prorated fees of $34,375 were paid to Mr. Henson in October 2022.
For the 2022-2023 service year, all non-employee directors also receivereceived annual grants of restricted stock under the Company’s 20152020 Stock Incentive Plan. Each non-employee director received a $70,000 stock grant. The number of shares of restricted stock awarded to each non-employee director isawards were determined by dividing fifty percent of the total cash fees payable to that director for a service year$70,000 by the fair market value (as defined in the 20152020 Stock Incentive Plan) of the Company’s Common Stock onthree business days after the award date and rounding to the nearest whole share. Mr. Henson received a prorated stock grant of $43,750 for the remainder of the 2022-2023 service year based on the date he became a non-employee director. The restricted stock becomeswill become fully vested, and the restrictions applicable to the restricted stock will lapse, on:
■ | the |
■ | if earlier, when the director dies or is disabled |
Under the terms of the 2020 Stock Incentive Plan, as amended, directors may defer receipt of their annual restricted stock award beyond the vesting date (generally the next annual meeting date following the grant date) to June 2015 were subjecta specified date in the future, attainment of a specified age, or to 3-year vesting requirementsthe director’s termination of service as a director with the Company. Any such restricted stock award that is deferred will ultimately be delivered in shares of the Company’s Common Stock shortly after the deferral date. During the deferral period, the Company’s commitment to the director to deliver the shares remains an unsecured liability of the Company.
The Company’s anti-hedging policy applies to persons it has deemed to be “key insiders.” Key insiders include the Company’s directors, its executive officers and shares remain outstanding under these grants.
Directors are reimbursed for reasonable expenses incurred in connection with attending Board and committee meetings or performing their duties as directors.directors, as well as Board-related professional education. Mr. Toms receivesHoff, who was named CEO, received no additional compensation for serving on the Board of Directors orhis role as a director. Mr. Hoff’s compensation for attending Board or committee meetings other than reimbursement for expenses. Ms. Taaffe was electedservices rendered to the BoardCompany in July 2015. Consequently, she received a pro-rated annual retainer.
The following table sets forth non-employee director compensation paid forin fiscal year 2016.
2023 for the 2022-2023 Board service year.
Non-Employee Director Compensation | ||||||||||||
Name | Cash Fees(1) | Stock Awards(2)(3)(4) | Total | |||||||||
W. Christopher Beeler, Jr. | $ | 70,000 | $ | 70,000 | $ | 140,000 | ||||||
Maria C. Duey | 55,000 | 70,000 | $ | 125,000 | ||||||||
Paulette Garafalo | 65,000 | 70,000 | $ | 135,000 | ||||||||
Christopher L. Henson | 34,375 | 43,750 | $ | 78,125 | ||||||||
Tonya H. Jackson | 55,000 | 70,000 | $ | 125,000 | ||||||||
Ellen C. Taaffe | 65,000 | 70,000 | $ | 135,000 | ||||||||
Henry G. Williamson, Jr. | 85,000 | 70,000 | $ | 155,000 | ||||||||
| Name | Cash Fees (1) | Stock Awards(2) | Total | |||||||||
| W. Christopher Beeler, Jr. | $ | 46,500 | $ | 23,250 | $ | 69,750 | ||||||
| John L. Gregory, III | 45,500 | 22,750 | 68,250 | |||||||||
| E. Larry Ryder | 41,500 | 20,750 | 62,250 | |||||||||
| David G. Sweet | 44,500 | 22,250 | 66,750 | |||||||||
| Ellen C. Taaffe (3) | 35,699 | 17,850 | 53,549 | |||||||||
| Henry G. Williamson, Jr. | 46,500 | 23,250 | 69,750 | |||||||||
(1) | Includes annual retainer fee, committee chair fees and |
(2) | These amounts are the aggregate grant date fair value of shares of restricted stock awarded to each non-employee director on June |
(3) | As of January 29, 2023 each non-employee director had the following unvested stock awards outstanding: |
Name | Restricted Stock(#) | |||
W. Christopher Beeler, Jr. | 4,204 | |||
Maria C. Duey | 4,204 | |||
Paulette Garafalo | 4,204 | |||
Christopher L. Henson | 3,262 | |||
Tonya H. Jackson | 4,204 | |||
Ellen C. Taaffe | 4,204 | |||
Henry G. Williamson, Jr. | 4,204 | |||
(4) | Ms. Jackson deferred the receipt of 50% of her 2022 annual restricted stock award until such time as she leaves the Board. |
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the Company’s financial statements and the reporting process, including internal control over financial reporting. In fulfilling its oversight responsibilities, the Committee reviewed and discussed the audited financial statements for the fiscal year ended January 31, 201629, 2023 with management, including a discussion of the quality and acceptability of accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Committee discussed with the Company’s independent registered public accounting firm, who is responsible for expressing an opinion on conformity of those audited financial statements with U.S. generally accepted accounting principles, the firm’s judgment as to the quality and acceptability of the Company’s accounting principles and such other matters as are required to be discussed with the independent registered public accounting firm under the standards of the Public Company Accounting Oversight Board. In addition, the Committee has discussed with the independent registered public accounting firm the firm’s independence from management and the Company, including the matters inreceived the written disclosures and letter from the independent registered public accounting firm to the Committee required by Public Company Accounting Oversight Board Auditing Standard 16. 16 regarding the independent registered accounting firms’ communications with the Audit Committee concerning independence and has discussed with the independent registered accounting firms its independence from the Company.The Committee has also considered whether the non-audit relatednon-audit-related services provided by the independent registered public accounting firm are compatible with maintaining the firm’s independence and found them to be acceptable.
The Committee met with the Company’s independent registered public accounting firm, with and without management present, and discussed the overall scope and results of their audits, their evaluation of the Company’s internal control over financial reporting and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 201629, 2023 for filing with the SEC.
W. Christopher Beeler, Jr., Chair
Maria C. Duey
Paulette Garafalo
Christopher L. Henson
Tonya H. Jackson
Ellen C. Taaffe
Henry G. Williamson, Jr., Chairman
REPORT OF THE COMPENSATION COMMITTEE
The Committee has reviewed, and discussed with management, the Compensation Discussion and Analysis that appears below. Based on that review, and the Committee’s discussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Paulette Garafalo, Chair
W. Christopher Beeler, Jr.
Maria C. Duey
Christopher L. Henson
Tonya H. Jackson
Ellen C. Taaffe
Henry G. Williamson, Jr.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised entirely of the independent directors and none of our executive officers served on the compensation committee or board of any company that employed any member of the Compensation Committee or the Board of Directors as an executive officer.
Compensation Risk Assessment
As part of its oversight responsibilities, the Compensation Committee, with assistance from management, annually reviews the Company's compensation policies and practices for all employees to determine whether they are reasonably likely to present a material adverse risk to the Company. Their review includes, among other things, a consideration of the incentives that the Company’s compensation policies and practices create and factors that may affect the likelihood of excessive risk taking. Based on its most recent review, the Committee concluded that the Company’s employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. For additional information concerning this review, see Management of Executive Compensation-Related Risk on page 24.
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION
Executive Summary
The Compensation Committee of the Board oversees the Company’s executive compensation program. The Committee makes decisions regarding the compensation of the Company’s “named executive officers.” The named executive officers as of the last day of fiscal year 2016 (which ended January 31, 2016) are listed in the Summary Compensation Table on page 27. No other persons served as an executive officer of the Company in fiscal year 2016. With the acquisition of the assets of Home Meridian International in early fiscal 2017, George Revington was named an additional executive officer, but since he was not an employee of the Company during fiscal 2016, disclosure regarding him is not disclosed in the Summary Compensation Table on page 27. More information concerning the composition of the Committee and its authority and responsibilities can be found under Compensation Committee on page 7.
The Compensation Discussion and Analysis discusses the compensation program and the compensation decisions made for fiscal 2023 (which ended January 29, 2023) with respect to the following named executive officers. These officers were the only individuals who served as the industry adapts to changing consumer preferences, sourcing and distribution options and broader market factors such as the overall performancean executive officer of the U.S. economyCompany during fiscal 2023.
Name | Title | |
Jeremy R. Hoff | Chief Executive Officer and Director | |
Paul A. Huckfeldt | Chief Financial Officer and Senior Vice President - Finance and Accounting | |
Anne J. Smith | Chief Administrative Officer and President - Domestic Upholstery | |
Tod R. Phelps | Chief Information Officer and Senior Vice President - Operations |
COMPENSATION HIGHLIGHTS FOR FISCAL 2023
Pay Element | Fiscal 2023 Actions | |
Base Salary | Pearl Meyer's independent study in early 2022 found that the base salaries for the Company's named executive officers were below the 25th percentile of the Company's peer group. The Compensation Committee authorized increases from calendar 2022 rates for each of the named executive officers to better align with competitive data and to attract and retain highly qualified executives. | |
Annual Cash Incentive | The Compensation Committee authorized increases of target annual cash incentive opportunity as a percentage of base salary from 75% to 100% for Mr. Hoff, and from 50% to 60% for Ms. Smith and Mr. Phelps. | |
Long-term equity-based incentives | The Compensation Committee authorized an increase of target long-term incentive value as a percentage of base salary from 75% to 100% for Mr. Hoff, whose target long-term compensation was below the peer 25th percentile. Long-term incentives for all named executive officers are granted in the form of performance stock units tied to pre-established goals relating to earnings per share and service-based restricted stock units expected to be delivered in the form of shares of the Company’s common stock to support executive retention. |
In 2022, the Company entered into employment agreements with each named executive officer. These employment agreements, which are described in more detail on page 32, incorporate the actions described above relating to base salaries, annual cash incentives and long-term equity-based incentives.
Executive Compensation Policies and Practices
Our commitment to strong corporate governance practices extends to the relative strengthcompensation philosophy, programs, and policies established by the Compensation Committee, which include the following governance practices and policies:
What we do | What we don't do | |||
a | Rigorous goal setting for annual and long-term performance-based compensation | r | No excessive perquisites | |
a | Pay for performance | r | No income tax gross ups | |
a | Anti-hedging/pledging policy | r | No discretionary bonuses | |
a | Claw-back policy | r | No adjustments to pre-established bonus targets after Board approval | |
a | Assessment of compensation risk | |||
a | Engagement with shareholders | |||
a | Dual trigger CIC for performance grants and Restricted Stock Unit Awards | |||
a | Executive Stock Ownership Guidelines | |||
Compensation Philosophy of housing and home furnishings related activity.
The Company’s compensation philosophy is guided by the following objectives:
● | Attract and retain highly qualified executives who will contribute significantly to the success and financial growth of the Company and enhance value for shareholders; |
● | Motivate and appropriately reward executives when they achieve the Company’s financial and business goals and meet their individual performance objectives; and |
● | Maintain a stable executive management team to ensure the Company’s profitability objectives adapt to: |
o | changing consumer preferences; |
o | evolving sourcing and distribution options; and |
o | broader market factors such as the overall performance of the U.S. economy and the relative strength of housing and home furnishings related activity. |
Compensation Program
The Company’s executive compensation program employs several elements of compensation to achieve the objectives of its compensation philosophy. The primary elements of the program are base salary, an annual cash incentive, long-term incentives and supplemental retirement and life insurance benefits. TheAs discussed on page 32, most of these elements are incorporated into the employment agreements the Company may enterentered into an employment agreement with anits named executive officer under specific circumstances, as discussed further below.officers. These elements are structured to compensate executives over three separate timeframes:
■ | Base salary and short-term incentives. Base salaries are typically set for each calendar year and the annual cash incentive is set for each fiscal year. The annual cash incentive is determined based on the Company’s financial performance during the current fiscal year. The Compensation Committee sets base salaries and potential annual cash incentive amounts for each executive position based on a number of factors, including competitive market data, executive responsibilities, |
■ | Longer-term compensation. Long-term incentives are designed to reward executives if the Company achieves specific performance goals or growth in shareholder value over multi-year periods. The amounts payable to executives under performance incentives vary based on the extent to which the specified goals are achieved or surpassed. |
■ | Full career and time-specific compensation. Supplemental retirement |
The Committee believes the objectives of the Company’s executive compensation program can best be attained by structuring the program to provide compensation over these separate timeframes. For example, the Committee views annual and longer-term performance-based compensation as essential to encouraging executives to appropriately balance both the short-term and long-term interests of the Company and its shareholders. In addition, the Committee believes compensation tied to service over a full career or a specific period helps to promote executive retention and thereby allowallows the Company to maintain a stable management team.
Mix of Total Compensation.
Mr. Huckfeldt and Ms. Smith participate in the SRIP plan. In fiscal 2023, the change in pension value was -$141,096 for Mr. Huckfeldt and -$53,784 for Ms. Smith.
Process for Determining Executive Compensation
The Committee sets base salaries, determines the amount and terms of annual cash incentive opportunities, and determines long-term incentive compensation and other benefits for the Company’s executive officers. The Committee follows the processes and considers the information discussed below in setting executive compensation.
Competitive Pay Data
In February 2022, the Compensation Committee retained Mercer in a prior fiscal yearengaged Pearl Meyer to review the Company’s executive compensation programsstructure and positioning and to recommend a peer group to be used for the purposes of evaluating and setting executive compensation. Mercer recommended a peer group consisting of companies similar to Hooker Furniture in terms of industry (companies in the furniture/household durables/consumer discretionary markets) and size (companies with annual revenue and market capitalization of approximately 50% to 200% ofupdate the Company’s annual revenue and market capitalization). Mercerpeer group. Pearl Meyer recommended this group because its members shared various financial and operational attributes with the Company, while not being limited to furniturehome furnishings companies. The peer group represents companies in related industries (e.g., office furniture, household/housewares, home building); of a similar size, with annual revenues ranging from 60% to 350% of the Company’s annual revenue; and similar operational complexity as the Company, and also representscomplexity. The Board believes these companies represent the type of companies against which the Company competes for management talent. The peer group after taking into account companies that ceased being SEC registrants since the group was first developed, consists of the following companies:
■ | American Woodmark Corporation |
■ | Bassett Furniture Industries, Inc. |
■ | Cavco Industries, Inc. |
■ | Culp, Inc. |
■ | Dixie Group, Inc. |
■ | Ethan Allen Interiors, Inc. |
■ | Flexsteel Industries, Inc. |
■ | Hamilton Beach Brands Holding Company |
■ | Haverty Furniture Companies, Inc. |
■ | Kimball International, Inc. |
■ | Kirkland’s, Inc. |
■ | La-Z-Boy, Inc. |
■ | Lifetime Brands, Inc. |
■ | Lovesac Company |
■ | Nautilus, Inc. |
■ | PGT Innovations, Inc. |
The Compensation Committee has used this peer group as one of several factors in making compensation decisions and to establish a baseline from which to set executive compensation (including during fiscal year 2016)2023). The Committee compared total compensation as well as the individual compensation elements for each executive officer to the peer group in fiscal year 2011 and has used this study as one of the factors for compensation decisions in the subsequent years. In early fiscal year 2017, the Committee engaged Mercer to update the peer group based on the Company’s post-acquisition characteristics, update peer compensation data and conduct a review of the Company’s executive compensation programs.2023. The Committee will refresh the peer group and compensation study in the future, as needed. The Committee does not tie compensation for its executive officers to any particular level or target based on this comparable compensation data. Instead, the Committee considers this pay comparability data as one of many factors when determining the appropriateness of individual elements of compensation, as well as the total compensation, payable to the Company’s executive officers.
Company Performance
Each year the Committee considers which financial performance measures to use in setting annual and longer-term incentive compensation for the executive officers. The Committee has, at various times, linked annual cash incentives to the Company’s attainment of specific levels of operating income, pretax income and net income. Longer termLonger-term incentives typically have been linked to the achievement of a different set of performance measures, such as earnings per share (EPS) for performance grants. Historically, the Committee has awarded long-term performance grants tied to growth in the Company’s earnings per share (EPS),EPS, both in absolute terms and relative to EPS growth for the peer group companies. The Committee believes that EPS and EPS growth are currently the most appropriate performance measures for long-term compensation incentives because these metrics lend themselves, in a simple and objective manner, to year-over-year comparisons and to comparison with the financial performance of peer companies. In most cases, other performance measures have been found to behave in a manner consistent with EPS-related measures. Therefore, the Committee does not believe additional criteria would provide a different or an enhanced perspective on the Company’s performance.
The Committee generally selects performance measures for annual incentive compensation that correspond to financial measures used by management in making day-to-day operating decisions and in setting strategic goals. In addition, these types of measures are used by the Board in evaluating Company performance. The Committee generally consults with the Chief Executive Officer and other senior executives before setting performance levels for annual and longer-term incentive compensation. The input provided by management is one of many factors thatthe Committee considers in establishing the applicable measures and performance levels for incentive compensation.
Individual Performance
The Committee annually assesses the individual performance of each executive officer and considers it when setting an executive officer’s base salary. However, given the modest increases in cost of living in recent years and the Company’s emphasis on linking a larger percentage of executives’ total compensation to performance-based incentives, theThe Committee may elect not to increase certain executives’ base salaries on an annual basis (e.g., due to modest increases in cost of living and/or to increase an emphasis on linking total compensation to performance-based incentives), instead using potential annual and longer-term incentive basedincentive-based payments to offer the potential for increased earnings bycompensate individual executives. The Committee reserves the right to adjust base salaries as it determines to be appropriate; however, the Committee does not have a practice of automatically providing for annual increases in base salaries and therefore a decision not to increase an executive’s base salary is not based on an assessment of an executive’s performance. Each executive’s performance is measured against specific personal objectives that were established early in the prior year. The Chief Executive Officer’s annual personal objectives are established in consultation with the Committee. Other executive officers establish their individual objectives in consultation with the Chief Executive Officer. These objectives may include both subjective and quantifiable individual and departmental performance and developmental initiatives that are within each officer’s area of operation and are consistent with the Company’s strategic plans.
The Committee’s assessment of each executive officer’s performance with respect to these objectives is conducted primarily through conversations with the Chief Executive Officer and a review of Company performance. The Committee believes that consideration of individual performance objectives is important because it creates incentives for executive officers to make specific contributions to the Company’s financial growth based on their individual areas of responsibility, and because it allows the Company to reward those specific contributions.
Allocating Between Compensation Elements
The Committee does not have a fixed standard for determining how an executive officer’s total compensation is allocated among the various elements of the Company’s compensation program. Instead, the Committee uses a flexible approach so that it can structure the compensation elements in a manner that will, in its judgment, best achieve the specific objectives of the Company’s compensation program.
However, the Committee believes that a meaningful portion of a named executive officer’s compensation should be performance-based.Shareholder Say-on-Pay Vote
At the 20152022 Annual Meeting, shareholders had the opportunity to approve, in a non-binding advisory vote, the compensation of the Company’s named executive officers. This is referred to as a “say-on-pay” proposal. Approximately 99.5%Over 92% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Committee believes this vote result reflects general approval of the Company’s overall approach to structuring the Company’s executive compensation.compensation program. Therefore, the Committee did not make any significant changes in the structure of the Company’s executive compensation program during fiscal 20162023 in response to the 20152022 say-on-pay vote. The Compensation Committee will continue to consider the vote results for say-on-pay proposals in future years when making compensation decisions for the Company’s named executive officers.
Shareholder Say-on-Frequency Vote
The Board of Directors has determined that the Company’s shareholders should vote on a say-on-pay proposal each year, consistent with the preference expressed by the Company’s shareholders at the 20112017 Annual Meeting. Accordingly, at the 20162023 Annual Meeting, shareholders will again have the opportunity to indicate their views on the compensation of the Company’s named executive officers by an advisory say-on-pay vote.
The Board recommends that you vote FOR the say-on-pay proposal (Proposal Three) and FOR “ONE YEAR” for the frequency of the advisory vote on the compensation of the Company’s named executive officers (Proposal Four) at the 20162023 Annual Meeting. For more information, see “PROPOSAL THREE — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION” on page 3852 in this proxy statement.
Fiscal Year 2023 Financial Results
■ | Consolidated net sales for fiscal 2023 were $583.1 million, a decrease of $10.5 million, or 1.8%, compared to the prior year, driven by a $62.6 million or 22.4% net sales decline in the Home Meridian segment, partially offset by a $49.9 million or 46.7% higher net sales in the Domestic Upholstery segment, marking the second consecutive year of double-digit sales gains at Bradington-Young, Sam Moore and Shenandoah. The addition of Sunset West results for the full year also significantly contributed to the annual sales growth in this segment. Hooker Branded net sales were essentially flat compared to the record sales achieved last year in the segment. |
■ | Consolidated gross profit and margin decreased by $8.4 million and 110 bps, respectively, primarily due to the gross loss in the Home Meridian segment resulting from the $24 million write down of Accentrics Homes (“ACH”) and other excess inventories, and to a lesser extent, a decrease in gross profit and margin in the Hooker Branded segment. These decreases were partially offset by increased profitability in the Domestic Upholstery segment due to higher year-over-year sales. |
■ | The ACH business unit contributed about 13% of Home Meridian’s overall revenue but accounted for over 50% of the operating loss in this segment, primary due to the write-down of its inventories to market. The unit’s business model required significant investment in inventory and high handling costs to meet quick shipping demands. Additionally, these lower-priced and lower-margin ACH inventories carried historically high freight costs from the prior year. Given the inventory levels, industry discounting and current low demand, continuing to sell ACH inventory at or near cost would not reach breakeven but incur additional warehouse labor, lease, and other costs. As a result, management decided to exit the ACH business now. The Company believes the effort of restructuring and repositioning the Home Meridian business will reduce working capital requirement, improve the cash flow return on investment and lowering overhead, and achieve profitability at Home Meridian next year. |
■ | As a result of the $24 million exit charge, the Company reported a consolidated operating loss of $6.0 million or (1.0%) operating margin, as compared to an operating income of $14.8 million in the previous fiscal year. Consolidated net loss was $4.3 million or ($0.37) per diluted share, as compared to net income of $11.7 million or $0.97 per diluted share in the prior year period. |
Executive Compensation Decisions for Fiscal Year 20162023
For the 20162023 fiscal year, the primary elements of compensation for the named executive officers were:
■ | base salary (set on a calendar year basis), |
■ | an annual cash incentive opportunity (based on the Company’s fiscal year financial performance), |
■ | long-term equity-based incentives for each named executive officer, and |
■ | supplemental retirement benefits for |
■ | In 2022, the Company entered into employment agreements with each named executive officer. These employment agreements, which are described in more detail on page 32, incorporate the elements described above relating to base salaries, annual cash incentives and long-term equity-based incentives. |
The Committee reviewed and approvedtable below reflects calendar 2022 base salaries and fiscal 2023 annual incentive targets and long-term incentive award targets for our named executive officers approved by the Compensation Committee:
Executive Officer | Base Salary | Annual Incentive at Target | Long-term Incentive at Target | |||||||||
Jeremy R. Hoff | $ | 600,000 | $ | 600,000 | $ | 600,000 | ||||||
Paul A. Huckfeldt | 375,000 | 225,000 | 225,000 | |||||||||
Anne J. Smith | 330,000 | 198,000 | 198,000 | |||||||||
Tod R. Phelps | 300,000 | 180,000 | 180,000 | |||||||||
Pearl Meyer’s independent analysis of the Company's executive officers’ compensation showed that:
■ | Mr. Hoff’s total direct compensation was positioned 45% below the peer group 25th percentile; |
■ | The non-CEO executive officers’ total direct compensations were positioned 18% below the peer group 25th percentile. |
After reviewing Pearl Meyer’s executive compensation study and adopting the updated peer group recommendations, the Committee determined that it was appropriate to increase the compensation for each of the named executive officer during the first quarter of fiscal 2016 toofficers, which will be effective for the 2015 calendar year, consistent with its approach of building on baseline compensation comparability data containeddiscussed in a Mercer compensation study in a prior year. detail below.
Base Salary
The Committee’s process for setting base salary and other compensation includesincluded an annual review of individual performance and such other relevant factors. The Committee does not automatically increase base pay annually. Instead, salary increases generally are based onfactors as accomplishments in the executive’s current role, changes in responsibilities, job performance and the Committee’s assessment of the market rate for these positions.
Pearl Meyer’s independent analysis of the Company’sCompany's executive officers’ compensation showed that:
■ | Mr. Hoff’s base salary was positioned 29% below the peer group 25th percentile; |
■ | The non-CEO executive officers’ base salaries were positioned 17% below the peer group 25th percentile. |
After reviewing Pearl Meyer’s executive compensation study and adopting the updated customer care functions, her executive oversite ofpeer group recommendations, the H Contract division and her contributions as a member ofCommittee approved increases in the Company’s executive committee. The Committee also reviewed the performance, responsibilities and current base salaries of the other executive officers and elected not to increase base salaries for Mr. Hoff, Mr. Huckfeldt, Ms. Smith, and Mr. Phelps to $600,000, $375,000, $330,000, and $300,000, respectively. The Committee believes the others.
Annual Cash Incentive
The Committee believes it is in the best interests of the Company and its shareholders to base the annual cash incentive directly on achievement of an objective performance metric. The Committee generally considers consolidated net income to be the appropriate performance metric for the annual cash incentive for senior management. The Committeemanagement because it believes that items included in net income, such as consolidated income tax expense, discontinued operations, interest expense and other income and expense, reflect upon the appropriateness of management decision-making and therefore are appropriate basesprovide an effective tool for measuring senior management performance over the course of a fiscal year.
The Committee approved an annual cash incentive for the 20162023 fiscal year. Each named executive officer had the opportunity to receiveearn a payment, expressed as a percentage of histheir calendar year 20162022 base salary, if the Company obtained 70%achieved 80% or more of its fiscal year 20162023 consolidated net income target. No cash bonus would be payable unless the Company reached at least 70%80% of the consolidated net income target and thewas met. The bonus opportunity was capped at a maximum amount if the Company reached 150%125% or more of its consolidated net income target for fiscal year 2016.
Annual cash incentive targets aretarget is established based on budgeted net income. Budgeted net income is established by management in its annual operating budget, which is approved by the Board.
Target payouts for each named executive officer were established based on a number of factors including:
■ | data contained in |
■ | general business knowledge and experience of the Committee’s members; |
■ | other general compensation information available to the Committee, such as perceived contribution to the Company’s success, including areas outside the executive’s core functions; and |
■ | the short-to-medium term total realizable compensation for each executive. |
As discussed above, the MercerPearl Meyer study reflected total compensation for similar positions at similarly situated companies with which the Company would expect to compete for executive talent. The Committee evaluated each executive’s total compensation, with an emphasis on shifting a greater share of the executive’s total compensation to incentive-based pay and also considered the executives’ specific roles, responsibilities and experience, as well as other elements of each executive’s compensation arrangement and considered the mix of short- and long-term elements in each executive’s overall compensation plan. Generally, the greater an executive’s responsibilities, the larger the potential award. For example, Messrs. Toms and Delgatti,Mr. Hoff, the first and second most senior executives, respectively, wereexecutive, was awarded a larger potential incentive awardsaward than were Mr. Huckfeldt and Ms. Jacobsen,other senior executives due to theirhis senior standing within the Company and theirhis larger share of responsibilities. The incentive opportunities were structured such that if consolidated net income diddoes not meet the target, the named executive officers would receive a reduced payment or no payment, but if consolidated net income exceeded the target, incentive payments would increase at a rate greater than the increase in net income. This was designed to recognize exemplary consolidated net income achievement. In no event would an incentive payment be earned if less than 70%80% of the target level was attained.
Pearl Meyer’s independent analysis of the Company's executive officers’ compensation showed that:
■ | Mr. Hoff’s short-term cash incentive was positioned at the peer group 25th percentile; |
■ | The non-CEO executive officers’ short-term incentives were positioned between the peer group 25th and 50th percentile. |
After reviewing Pearl Meyer’s executive compensation study evaluating the total remuneration packages for the named executive officers, the Committee approved increases in annual cash incentives for Messrs. Hoff and Phelps, and Ms. Smith. The award opportunities for each executive were as follows (expressed as a percentage of 20152022 calendar year base salary):
If the Company Attains the following Percentages of Performance Target: | ||||||||||||
Executive Officer | <80% | 80% | 90% | 100% | 110% | 125% | ||||||
Jeremy R. Hoff | 0% | 50% | 90% | 100% | 125% | 165% | ||||||
Paul A. Huckfeldt | 0% | 30% | 54% | 60% | 75% | 99% | ||||||
Anne J. Smith | 0% | 30% | 54% | 60% | 75% | 99% | ||||||
Tod R. Phelps | 0% | 30% | 54% | 60% | 75% | 99% | ||||||
| If the Company Attained: | ||||||||||||||||||||||||
0-69% of Target Net Income | 70-84% of Target Net Income | 85-99% of Target Net Income | 100-124% of Target Net Income | 125-149% of Target Net Income | 150%+ of Target Net Income | |||||||||||||||||||
| Paul B. Toms, Jr. | 0 | % | 25.0 | % | 37.5 | % | 50.0 | % | 66.5 | % | 83.5 | % | ||||||||||||
| Paul A. Huckfeldt | 0 | % | 20.0 | % | 30.0 | % | 40.0 | % | 53.2 | % | 66.8 | % | ||||||||||||
| Michael W. Delgatti, Jr. | 0 | % | 22.5 | % | 33.8 | % | 45.0 | % | 59.9 | % | 75.2 | % | ||||||||||||
| Anne M. Jacobsen | 0 | % | 20.0 | % | 30.0 | % | 40.0 | % | 53.2 | % | 66.8 | % | ||||||||||||
Each additional percentage of net income realized between the percentages shown above is interpolated and multiplied by the officer’s bonus base, such that each additional percentage of net income realized between the threshold amounts shown above results in a larger bonus payout, as shown in the table below:
Interpolation per 1% of increased earnings: | ||||||||
Between 80-89% of Target Net Income | Between 90-99% of Target Net Income | Between 100-109% of Target Net Income | Between 110-125% of Target Net Income | |||||
All executive officers | 4% | 1% | 2.50% | 2.67% | ||||
The net income target for the 20162023 fiscal year was set at $14.7$22.2 million on a consolidated basis. The net income target had previously been approved by the Board in consultation with management, and after considering the Company’s profit potential, the impact of national and international economic conditions on the Company and the home furnishings industry as a whole. Based on these factors, the Committee concluded that the target and threshold levels were appropriate to motivate and appropriately reward executive officers to attain the desired level of performance for fiscal 2016.2023.
The 80% threshold performance level for our annual cash incentive was believed to be an achievable goal. The 100-124% target performance level was believed to be aggressive, but attainable. Performance at or above the 125% level was believed to be realizable, but only with exceptional performance.
The Company achieved over 100%did not achieve at least the threshold level of its fiscal year 2023 consolidated net income target set by the Committee for fiscal 2016.income. As a result, theno named executive officersofficer received the annual cash incentive payments as follows:incentive.
| Name | Fiscal 2016 Annual Cash Incentive Earned | |||
| Paul B. Toms, Jr. | $ | 185,000 | ||
| Paul A. Huckfeldt | 85,800 | |||
| Michael W. Delgatti, Jr. | 135,000 | |||
| Anne M. Jacobsen | 70,000 | |||
Executive Officer | Fiscal 2023 Annual Cash Incentive Earned | |||
Jeremy R. Hoff | $ | - | ||
Paul A. Huckfeldt | - | |||
Anne J. Smith | - | |||
Tod R. Phelps | - | |||
Long-Term Incentives
During fiscal 2016,2023, consistent with the Committee’s objective of giving greater weight to the performance-based element of total compensation, the Committee granted two types of long-term incentive awards, performance stock units and time-based restricted stock units to the named executive officers in April 2022 for the performance period beginning in fiscal year 2016.2023 through fiscal year 2025. The awards were designed to directly link a significant portion of a named executive’sexecutive officer’s compensation to the growth in value of the Company and to further enhance existing retention incentives under the Company’s executive compensation program.
Pearl Meyer’s independent analysis of the two typesCompany's executive officers’ compensation showed that:
■ | Mr. Hoff’s long-term incentive in dollar value was positioned 50% below the peer group 25th percentile; his long-term incentive as a percentage of base salary was positioned 15% below the peer group 25th percentile; |
■ | The non-CEO executive officers’ long-term incentives were positioned between the peer group 25th and 50th percentile. |
Based on Pearl Meyer’s independent study, the Committee found that Mr. Hoff’s long-term incentive was in the lower quartile of awards wasthe Company’s peer group. As a performance grant thatresult, the Committee authorized an increase of target long-term incentive value as a percentage of base salary from 75% to 100% for Mr. Hoff. The Committee believes it is the best interest of the Company and its shareholders to better align Mr. Hoff’s compensation with the Company’s peers, and by increasing the equity-based compensation to further align the Company's CEO and shareholders.
Performance-based Restricted Stock Unit
Each PSU entitles the executive officer to receive a payment atone share of the Company’s common stock based on the achievement of two specified performance conditions if the executive officer remains continuously employed by the Company through the end of athe three-year performance period based on certain earnings per share (“EPS”) targets.(subject to limited exceptions). One target is based on annual average growth in the Company’s EPS over the performance period and the other target is based on EPS growth over the performance period compared to that of the peer companies described at page 16.24. The executive officer also must remain continuously employed withPSUs vest subject to the Company throughCompany’s attainment of pre-established financial goals related to the endsum of two amounts, (1) the Company’s absolute EPS Growth and (2) relative EPS growth, over a three-year performance period that began January 31, 2022 and ends February 2, 2025, as approved by the Committee. The payout or settlement of the PSUs shall be made in shares of the Company’s common stock (based on the fair market value of the shares of the Company’s common stock on the date of settlement or payment). The PSUs do not convey any voting rights or dividend or dividend equivalent rights to be eligible for a payment (subject to limited exceptions).
The amount set forth in the table below is based on the average annual growth of the Company’s fully diluted EPS from continuing operations over the performance period. The Company’s EPS growth must average at least 5% annually over the performance period for a payment to be made.
Payout Amount Based on EPS Growth (%) for Performance Period | ||||||||||||||||||||
| Executive Officer | 5% | 10% | 15% | 20% | 25% | |||||||||||||||
| Paul B. Toms, Jr. | $ | 27,750 | $ | 83,250 | $ | 111,000 | $ | 138,750 | $ | 166,500 | ||||||||||
| Paul A. Huckfeldt | 12,870 | 38,610 | 51,480 | 64,350 | 77,200 | |||||||||||||||
| Michael W. Delgatti, Jr | 15,003 | 45,009 | 60,012 | 75,015 | 90,018 | |||||||||||||||
| Anne M. Jacobsen | 8,750 | 26,250 | 35,000 | 43,750 | 52,500 | |||||||||||||||
Payout in Shares of Company Stock Based on EPS Growth (%) for Performance Period | ||||||||||||||||||||
Threshold | Target | Maximum | ||||||||||||||||||
Executive Officer | 5% | 10% | 15% | 20% | 25% | |||||||||||||||
Jeremy R. Hoff | 3,614 | 10,843 | 14,458 | 18,073 | 21,687 | |||||||||||||||
Paul A. Huckfeldt | 1,643 | 4,929 | 6,572 | 8,215 | 9,858 | |||||||||||||||
Anne J. Smith | 1,446 | 4,337 | 5,783 | 7,229 | 8,675 | |||||||||||||||
Tod R. Phelps | 1,084 | 3,253 | 4,337 | 5,422 | 6,506 | |||||||||||||||
The amount set forth in the table below is based on the average annual growth of the Company’s EPS over the performance period relative to a group of specified peer companies. However, if the Company’s EPS growth is not positive for the performance period, this payment will be capped at the amount for the 50th50th percentile.
Payout in Shares of Company Stock Based on Relative EPS Growth for Performance Period | ||||||||||||||||
Threshold | Target | Maximum | ||||||||||||||
Executive Officer | Less than 50th percentile | 50th percentile, but less than 60th percentile | 60th percentile, but less than 80th percentile | Equal to or greater than 80th percentile | ||||||||||||
Jeremy R. Hoff | - | 8,133 | 10,843 | 16,265 | ||||||||||||
Paul A. Huckfeldt | - | 3,697 | 4,929 | 7,393 | ||||||||||||
Anne J. Smith | - | 3,253 | 4,337 | 6,506 | ||||||||||||
Tod R. Phelps | - | 2,440 | 3,253 | 4,880 | ||||||||||||
Payout Amount Based on Relative EPS Growth for Performance Period | ||||||||||||
| Executive Officer | Less than 50th percentile | 50th percentile, but less than 75th percentile | Equal to or greater than 75th percentile | |||||||||
| Paul B. Toms, Jr. | $ | 0 | $ | 111,000 | $ | 166,500 | ||||||
| Paul A. Huckfeldt | 0 | 51,480 | 77,200 | |||||||||
| Michael W. Delgatti, Jr. | 0 | 59,994 | 89,991 | |||||||||
| Anne M. Jacobsen | 0 | 35,000 | 52,500 | |||||||||
The Committee selected EPS as the measure for the performance targets because EPS, and especially changes in EPS, directly reflect changes in the value of the Company over time, which the Committee believes best reflects the long-term interests of the shareholders. Using a simple, well-defined performance measure for these awards reduces the risk of manipulating that measure for short-term gain and reduces the risk of unintended consequences that could result from paying bonuses based on factors other than earnings, such as sales growth or non-financial measures which could misalign shareholder and management objectives. For example, a focus on sales growth or a non-financial metric such as customer satisfaction could provide an incentive to increase sales through greater discounting or create excessively generous return and allowance policies at the expense of overall profitability.
Restricted Stock Units
The Committee also awarded to each named executive officer (other than Mr. Toms) restricted stock unitsofficers RSUs that will vest if the executive remains continuously employed with the Company (subject to limited exceptions) until the three-year anniversary date of each grant which is April 6, 2018.11, 2025. The awards may be paid in shares of companyCompany stock, cash or a combination of both, as determined by the Committee in its discretion. They are designed to encourage retention and to provide an incentive for increasing shareholder value. The number of RSUs awarded to each executive officer is set forth in the table below:
Executive Officer | Number of RSUs | |||
Jeremy R. Hoff | ||||
Paul A. Huckfeldt | ||||
Anne J. Smith | ||||
Tod R. Phelps | ||||
Supplemental Retirement Income PlanBenefits
Mr. Huckfeldt and executive life insurance program provide sufficient retention incentives for him.
The objective of the SRIP is to create incentives for covered employees to remain employed with the Company over the balance of their careers, reward extended service with the Company and to balance short-term and long-term decision making, thereby enhancing the stability of the management team and allowing for predictability in succession planning. In addition, the Committee has determined that the SRIP helps mitigate compensation-related risk for the reasonsas discussed aton page 24.
Each participant’s benefit in the SRIP will become fully vested, regardless of age, and the present value of those benefits will be paid in a lump sum upon a change in control of the Company. The Committee believes that this provision further enhances retention by providing assurance to employees that the benefits promised under the SRIP will be paid if the Company comes under new ownership or control. The amounts to which participating named executive officers would be entitled to receive under the SRIP and additional information concerning the SRIP can be found in the Pension Benefits table on page 3244 and Potential Payments upon Termination or Change in Control on page 33.
Messrs. Hoff and Phelps do not participate in the SRIP. He hasThey have been provided other retention incentives under histheir employment agreement that areagreements tailored to histheir specific employment circumstances.
Employment Agreements and Other Employment Terms
The Company also maintains an executive life insurance program for certain officers, including Mr. Toms. Like the SRIP, the life insurance program is designed to retain executives through their careers and reward extended service with the Company by providing life insurance coverage until they reach age 65, allowing for stability in management and predictability in succession planning. The death benefit is $2 million if Mr. Toms dies after his 60th birthday but on or before his 65th birthday. Participating executives may designate the beneficiary to whom the death benefit would be paid. This coverage terminates immediately once the executive reaches age 65 or if the executive leaves the Company for any reason, other than death, before reaching age 65. Other than upon the death of the executive before age 65, the Company is the beneficiary of the policy. None of the other named executive officers participates in the executive life insurance program. Instead, the Committee believes that successive annual long-term incentives, such as time-based restricted stock units and performance grants, will provide incentives for these executives to remain employed with the Company.
Other Benefits
The Company maintains a tax-qualified 401(k) savings plan for all of its eligible employees, including the named executive officers. The plan provides for Company matching contributions, which are fully vested upon contribution.after two years of continuous service. The Company’s other benefit plans include health care, dental and vision insurance, group life insurance and disability insurance and tuition assistance.insurance. The named executive officers participate in these plans on the same basis as other eligible employees.
Tax and Accounting Implications of Executive Compensation
Our Compensation Committee believes that shareholder interests are best served if their discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in excess of $1 million paid to the Company’s Chief Executive Officer and to each of the next three highest paid executive officers (not including the Company’s principal financial officer). Base salaries,non-deductible compensation expenses. However, our Compensation Committee does not anticipate a shift away from variable cashor performance-based compensation payable under the annual incentive plan, bonus payments, and stock and stock-based compensation payable other than solely based on corporate performance conditions are generally subject to the $1 million limit on tax deductible compensation. Compensation attributable to performance grants may qualify for deductibility under Section 162(m) because of their performance-based nature. Changes in tax laws (and interpretations of those laws), as well as other factors beyond the Company’s control, also affect the deductibility ofour executive compensation. In addition, the Committee may determine that corporate objectives justify the cost of being unable to deduct certain compensation. For these and other reasons, the Company will not necessarily in all circumstances limit executive compensation to the amount which is permitted to be deductible as an expense of the Company under Section 162(m) of the Internal Revenue Code. The Committee will consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with the Company’s other compensation objectives.
Incentive Compensation Recoupment Policy
The Board of Directors has previously adopted a “clawback” policy called the Incentive Compensation Recoupment Policy, in which the Board has the authority to pursue recovery of incentive compensation forin the following reasons:
● | an accounting |
● | a material error in |
● | fraudulent or intentional |
This policy does not limit the legal remedies the Company may seek against any employee for fraudulent or illegal activity. Further, this policy was not adopted in response to any particular concerns, but rather to align the Company’s compensation practices with observed best practices.
Management of Executive Compensation-Related Risk
The Company’s executive compensation program is designed to create incentives for its executives to achieve its annual and longer-term business objectives. The Committee considers how the individual elements of executive compensation, and the executive compensation program as a whole, could potentially encourage executives, either individually or as a group, to make excessively risky business decisions at the expense of long-term shareholder value. In order toTo address this potential risk, the Committee annually reviews the risk characteristics of the Company’s executive compensation programs generally and considers methods for mitigating such risk. The Committee considers the following characteristics of the Company’s executive compensation program as factors that help mitigate such risk:
■ | the Committee has authority under the Company’s Incentive Compensation Recoupment, or “clawback”, policy |
■ |
the Committee has the unlimited authority to reduce long-term performance grant awards or pay no award at all; |
■ | long-term performance grants |
■ | overall compensation is balanced between fixed and variable pay, and variable pay is linked to annual performance |
■ | the fixed compensation provided under our SRIP to certain executive officers helps avoid the potential for excess leverage and allows for longer service conditions than typical variable pay arrangements, thereby enhancing retention and management continuity; |
■ | the multi-year cliff-vesting feature of restricted stock units promotes long-term retention, helps to mitigate inappropriate short-term risk taking and helps to align management and shareholder interests; |
■ | profitability goals, which serve as inputs for variable annual cash incentive compensation and long-term performance grants, are |
■ | the long-term performance grants have been based on cumulative absolute and relative EPS growth over multi-year periods, which helps reduce the potential for short-term focus at the expense of longer-term growth; |
■ | a consistent compensation philosophy has been applied year-over-year and does not change significantly with short-term changes in business conditions; |
■ | open dialogue among management, the Committee and the Board regarding executive compensation policies and practices and the appropriate incentives to use in achieving short-term and long-term performance targets; and |
■ | other general risk mitigating factors, including: |
■ | quarterly reviews of the Company’s results of operations and financial condition; |
■ | quarterly review of management’s |
■ | annual review of management’s compensation risk |
■ | executive sessions at all committee meetings, including executive session with the Company’s independent auditor; and |
■ | a fairly flat organizational structure, which promotes knowledge sharing and risk awareness by members of senior management. |
Other Policies and Practices
Cash Incentives. The Committee has adopted certain guidelines for administering annual cash incentive compensation. Generally, an executive must remain employed to the last day of a fiscal year to be eligible to receive an annual cash incentive payment for that fiscal year. However, executives who terminate employment during the last quarter of a fiscal year due to death or disability, or who retire after they have attained age 55 and completed 10 years of service, are entitled to receive the same payment that they would have received had they remained employed to the end of the fiscal year. Executives who meet either of these requirements and who terminate employment in the second or third quarter of a fiscal year are entitled to receive 50% or 75%, respectively, of the payment they would have received had they remained employed to the end of the fiscal year. The guidelines establish procedures for the Committee to review and approve annual cash incentive determinations after the Chief Executive Officer and Chief Financial Officer confirm whether the performance conditions for the fiscal year have been achieved and whether any other applicable conditions have been met for that fiscal year.
Stock Ownership Guidelines. The Committee has not adopted stock ownership requirements or guidelines because executives traditionally had a substantial portion of their retirement benefits investedin April 2019 such that the CEO is required to hold at least three-times his base salary in Company stock throughand each other executive officer is required to hold two-times their base salary, as measured by the Company’s former Employee Stock Ownership Plan (ESOP). Prior to fiscal 2012, the Committee had not awarded stock-based compensation outsideclosing stock price as of the ESOP,end of the most recently completed fiscal year. Each executive officer is allowed six years to accumulate the required number of shares.
Hedging Policy. Executive officers, along with directors and through fiscal 2014, the Company’s long-term incentive awards have not resulted in shares of Company stock being issued to its executive officers. Since the 2013 fiscal year, the Committee has approved restricted share units and performance grants for executive officers, which may be paid in shares of Common Stock, cash or both if the applicable service and performance requirements are met. The Committee may consider adopting a stock ownership policy in the future.
Summary Compensation Table
The following table sets forth the compensation for services in all capacities to the Company for the three fiscal years ended January 31, 201629, 2023 of the persons who were the Company’s named executive officers that year.
Name and Principal Position | Year | Salary | Bonus | Stock Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Non- Qualified Deferred Compensation Earnings | All Other Compensation | Total | ||||||||||||||||||||||
($)(1) | ($) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($) | ||||||||||||||||||||||||
Jeremy R. Hoff, CEO and Director (6) | 2023 | 575,000 | - | 600,000 | - | - | 11,994 | 1,186,994 | ||||||||||||||||||||||
2022 | 450,000 | - | 337,500 | - | - | 10,669 | 798,169 | |||||||||||||||||||||||
2021 | 285,511 | - | 180,000 | 93,000 | - | 10,356 | 568,867 | |||||||||||||||||||||||
Paul A. Huckfeldt, CFO and Sr. VP Fin. and Acctg. | 2023 | 362,500 | - | 225,000 | - | - | 11,556 | 599,056 | ||||||||||||||||||||||
2022 | 295,833 | - | 246,000 | - | - | 10,554 | 552,387 | |||||||||||||||||||||||
2021 | 257,292 | - | 165,000 | - | 118,498 | 9,511 | 550,301 | |||||||||||||||||||||||
Anne J. Smith, CAO, Sr. VP Administration, President-Domestic Upholstery | 2023 | 325,000 | - | 198,000 | - | - | 11,406 | 534,406 | ||||||||||||||||||||||
2022 | 295,833 | - | 235,000 | - | - | 10,554 | 541,387 | |||||||||||||||||||||||
2021 | 261,560 | - | 165,000 | - | 114,444 | 9,661 | 550,665 | |||||||||||||||||||||||
Tod R. Phelps, Chief Information Officer and Sr. VP - Operations | 2023 | 291,667 | - | 180,000 | - | - | 10,797 | 482,464 | ||||||||||||||||||||||
2022 | 250,000 | - | 150,000 | 78,125 | - | 9,256 | 487,381 | |||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||
| Paul B. Toms, Jr., | 2016 | $ | 370,000 | - | $ | 222,000 | (2) | $ | 185,000 | $ | 259,246 | $ | 41,139 | $ | 1,077,385 | |||||||||||||||
| Chairman and CEO | 2015 | 370,000 | - | 222,000 | 185,000 | 420,501 | 46,960 | 1,244,461 | ||||||||||||||||||||||
| 2014 | 370,082 | - | - | 138,750 | 101,226 | 54,861 | 664,919 | |||||||||||||||||||||||
| Paul A. Huckfeldt, | 2016 | 214,500 | - | 127,068 | (2) | 85,800 | 47,880 | 9,865 | 485,113 | |||||||||||||||||||||
| Sr. VP Fin. and Acctg. | 2015 | 214,500 | - | 126,528 | 85,800 | 95,158 | 9,116 | 531,102 | ||||||||||||||||||||||
| and CFO | 2014 | 203,125 | - | - | 64,350 | 40,200 | 9,062 | 316,737 | ||||||||||||||||||||||
| Michael W. Delgatti, Jr., | 2016 | 300,000 | - | 176,193 | (2) | 135,000 | - | 9,865 | 621,058 | |||||||||||||||||||||
| President-Hooker | 2015 | 300,000 | - | 174,937 | 135,000 | - | 9,162 | 619,099 | ||||||||||||||||||||||
| Furniture | 2014 | 264,991 | - | - | 69,560 | - | 8,761 | 343,312 | ||||||||||||||||||||||
| Anne M. Jacobsen, | 2016 | 177,083 | - | 86,381 | (2) | 70,000 | 25,257 | 9,163 | 367,884 | |||||||||||||||||||||
Senior Vice President- Administration (6) | 2015 | 175,000 | - | 86,023 | 70,000 | 47,140 | 7,946 | 386,109 | ||||||||||||||||||||||
(1) | Amounts shown represent base salary paid during the fiscal |
(2) | For each named executive officer, this amount is the sum of the grant date fair value |
(3) | This column shows amounts earned under the annual cash |
(4) | This column shows the change in the present value of the named executive officer’s accumulated benefit under the Supplemental Retirement Income Plan (“SRIP”) at the earliest full benefit retirement age. These changes in present value are not directly in relation to final payout potential and can vary significantly year-over-year based on (i) promotions and corresponding changes in salary;(ii) other one-time adjustments to salary or other reasons; (iii) actual age versus predicted age at retirement; (iv) the discount rate used to determine present value of benefit; and (v) other relevant factors. A decrease in the discount rate results in an increase in the present value of the accumulated benefit without any increase in the benefits payable to the NEO at retirement and an increase in the discount rate has the opposite effect. The numbers reported are pension accounting values and were not realized by the named executive officers during the relevant fiscal year. None of the named executive officers received above-market or preferential earnings on compensation that was deferred on a non-tax-qualified basis. In fiscal 2023, the change in pension value was -$141,096 for Mr. |
(5) | All Other Compensation for fiscal year |
Name | Disability Income Insurance Premium Reimbursement | 401(k) Match | Total | |||||||||
Jeremy R. Hoff | $ | 506 | $ | 11,488 | $ | 11,994 | ||||||
Paul A. Huckfeldt | 506 | 11,050 | 11,556 | |||||||||
Anne J. Smith | 506 | 10,900 | 11,406 | |||||||||
Tod R. Phelps | 464 | 10,333 | 10,797 | |||||||||
(6) | Mr. Hoff became Chief Executive Officer on the first day of the Company’s 2022 fiscal year. Mr. Hoff was the president of Hooker Legacy Brands in 2021 fiscal year. |
| Name | ELIP | Disability Income Insurance Premium Reimbursement | 401(k) Match | Total | ||||||||||||
| Paul B. Toms, Jr. | $ | 31,274 | $ | 590 | $ | 9,275 | $ | 41,139 | ||||||||
| Paul A. Huckfeldt | - | 590 | 9,275 | 9,865 | ||||||||||||
| Michael W. Delgatti, Jr. | - | 590 | 9,275 | 9,865 | ||||||||||||
| Anne M. Jacobsen | - | 498 | 8,665 | 9,163 | ||||||||||||
Pay versus Performance
The following table shows the past three fiscal years’ total compensation for the named executive officers as set forth in the Summary Compensation Table, the total compensation actually paid (“CAP”) to the named executive officers, the Company’s total shareholder return (“TSR”), peer group’s total shareholder return over the same period, net income, and the EPS as the company-selected performance measure.
Fiscal Year 2023 Pay versus Performance Table
Year | Summary compensation table total for CEO(1) | Compensation actually paid to CEO(3) | Average summary compensation table total for other NEOs(2) | Average compensation actually paid to other NEOs(3) | Total shareholder return(4) | Peer group total shareholder return(4) | Net income | EPS | ||||||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($, in thousands) | ($) | |||||||||||||||||||||||||
2023 | 1,186,994 | 1,067,309 | 538,642 | 462,563 | 102.45 | 79.69 | (4,312 | ) | (0.37 | ) | ||||||||||||||||||||||
2022 | 798,169 | 406,826 | 577,484 | 244,027 | 71.56 | 100.42 | 11,718 | 0.97 | ||||||||||||||||||||||||
2021 | 923,559 | 367,660 | 534,790 | 569,066 | 126.19 | 121.44 | (10,426 | ) | (0.88 | ) | ||||||||||||||||||||||
(1) The amounts in this column reflect the summary compensation table totals for Mr. Hoff for fiscal years 2023 and 2022 and for Paul B. Toms, Jr. for fiscal year 2021. Mr. Hoff became CEO on February 1, 2021, the first day of the Company’s 2022 fiscal year. Mr. Toms retired as CEO on January 31, 2021, the last business day of the Company’s 2021 fiscal year.
(2) The amounts in this column reflect the average summary compensation totals for our non-CEO NEOs. For 2023, this includes Messrs. Huckfeldt and DelgattiPhelps, and Ms. Jacobsen do not participateSmith. For 2022, this includes Messrs. Huckfeldt, Phelps and Boone, and Ms. Smith. For 2021, this includes Messrs. Huckfeldt, Boone, Hoff, Townsend, and Ms. Smith. Mr. Hoff was the president of Hooker Legacy Brand in 2021 fiscal year. Messrs. Douglas Townsend and D. Lee Boone were presidents of Home Meridian segment and separated from the Company in fiscal year 2021 and 2022, respectively.
(3) SEC rules require certain adjustments be made to the Summary Compensation Table totals to determine compensation “actually paid” as reported in the ELIP.Pay versus Performance table. The following table details these adjustments:
Year | Executives | Summary Compensation Table Total | Deduct Reported Change in Actuarial Present Value of Pension Benefits(a) | Add Pension Benefit Adjustments(b) | Deduct Reported Value of Equity Awards(c) | Add Equity Award Adjustments(d) | Compensation Actually Paid | |||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
2023 | CEO | 1,186,994 | - | - | (600,000 | ) | 480,315 | 1,067,309 | ||||||||||||||||||
Other NEOs | 538,642 | - | 38,785 | (201,006 | ) | 86,142 | 462,563 | |||||||||||||||||||
2022 | CEO | 798,169 | - | - | (337,500 | ) | (53,843 | ) | 406,826 | |||||||||||||||||
Other NEOs | 577,484 | - | 30,595 | (225,255 | ) | (138,797 | ) | 244,027 | ||||||||||||||||||
2021 | CEO | 923,559 | (150,823 | ) | - | (337,500 | ) | (67,576 | ) | 367,660 | ||||||||||||||||
Other NEOs | 534,790 | (46,588 | ) | 23,660 | (174,003 | ) | 231,207 | 569,066 | ||||||||||||||||||
(a) | The amounts in this column represent the amounts reported in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column of the Summary Compensation Table for each appliable year. In fiscal 2023, the change in pension value was -$141,096 for Mr. Huckfeldt and -$53,784 for Ms. Smith. In fiscal year 2022, the change in pension value was -$11,090 for Mr. Huckfeldt and -$3,133 for Ms. Smith. |
(b) | The total pension value adjustments for each applicable year include the aggregate of two components: (i) the actuarially determined service cost for services rendered by the executive during the applicable year (the “service cost”); and (ii) the entire cost of benefits granted in a plan amendment (or initiation) during the applicable year that are attributed by the benefit formula to services rendered in periods prior to the plan amendment or initiation (the “prior service cost”), in each case, calculated in accordance with U.S. GAAP. There were no amendments made to the SRIP during fiscal years 2021-2023 which would generate a prior service cost. Messrs. Hoff and Phelps do not participate in the SRIP plan. The amounts deducted or added in calculating the pension value adjustments are as follows: |
Year | Executives | Service Cost (i) | Prior Service Cost (ii) | Total Pension Value Adjustment | ||||||||||
($) | ($) | ($) | ||||||||||||
2023 | CEO | - | - | - | ||||||||||
Other NEOs | 38,785 | - | 38,785 | |||||||||||
| - | ||||||||||||||
2022 | CEO | - | - | - | ||||||||||
Other NEOs | 30,595 | - | 30,595 | |||||||||||
| - | ||||||||||||||
2021 | CEO | - | - | - | ||||||||||
Other NEOs | 23,660 | - | 23,660 | |||||||||||
(c) | The amounts in this column represent the grant date fair value of equity awards as reported in the “Stock Awards” column of the Summary Compensation Table for each applicable year. |
(d) | The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: |
(i) | the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; |
(ii) | the amount of change in fair value as of the end of the applicable year (from the end of the prior fiscal year) of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; |
(iii) | for awards that are granted and vest in the same applicable year, the fair value as of the vesting date; |
(iv) | for awards granted in prior years that vest in the applicable year, the amount equal to the change in fair value as of the vesting date (from the end of the prior fiscal year); |
(v) | for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and |
(vi) | the dollar value of any dividends or other earnings paid on equity awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. |
The amounts deducted or added in calculating the equity award adjustments are as Vice President - Human Resources and Administration.follows:
Year | Executive | Year end fair value of equity awards granted during the year | Year over year change in fair value of outstanding and unvested equity awards | Fair value as of vesting date of equity awards granted and vested in the year | Year over year change in fair value of equity awards granted in prior years that vested in the year | Fair value at the end of the prior year of equity awards that failed to meet vesting conditions in the year | Value of dividends or other earnings paid on stock or option awards not otherwise reflected in fair value or total compensation | Total equity award adjustments | ||||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||
2023 | CEO | 674,246 | (6,959 | ) | - | (5,586 | ) | (181,386 | ) | - | 480,315 | |||||||||||||||||||
Other NEOs | 225,884 | (3,762 | ) | - | (2,965 | ) | (133,015 | ) | - | 86,142 | ||||||||||||||||||||
2022 | CEO | 190,896 | (135,677 | ) | - | 13,025 | (122,087 | ) | - | (53,843 | ) | |||||||||||||||||||
Other NEOs | 89,220 | (110,917 | ) | - | (19,780 | ) | (97,320 | ) | - | (138,797 | ) | |||||||||||||||||||
2021 | CEO | 243,511 | (51,597 | ) | - | (95,880 | ) | (163,610 | ) | - | (67,576 | ) | ||||||||||||||||||
Other NEOs | 298,709 | 17,822 | - | (27,341 | ) | (57,983 | ) | - | 231,207 | |||||||||||||||||||||
(4) Total shareholder return (TSR) is determined based on the value of an initial annualfixed investment of $100 at the beginning of each year. The peer group TSR prepared by Zacks Investment Research, Inc. represents cumulative, weighted TSR of the same peer group under Standard Industrial Classification (SIC) Codes 2510 and 2511, which includes home furnishings companies that are publicly traded in the United States or Canada. For more information regarding the peer group TSR, refer to the performance graph that is included in the 2023 Form 10-K, as filed with the SEC.
Relationship of Pay and Performance Measures
CAP versus the Company’s TSR and peer group’s TSR
As shown in the chart below, the CEO and other NEOs’ CAP alignment with TSR varied each year. This is due in large part to the significant emphasis the Company places on long-term equity incentives, which are sensitive to changes in share price and number of shares granted. Both Mr. Hoff’s base salary of $250,000, and certain other benefits that have been earned and paid to Mr. Delgatti. The agreement also provides for an annual bonus opportunity and long-term incentive awards similar to those awarded to other management employees having similar salaries and levels of responsibility as determined by the Compensation Committeegrant increased in its sole discretion, as well as certain other benefits as provided or made available under the Company’s benefit plans or management compensation policies. In addition to these provisions, as well as provisions addressing payments to be made to Mr. Delgatti upon his death, disability or termination of employment, the agreement also includes customary provisions addressing the treatment of confidential information, non-disparagementfiscal 2023 because of the Company, non-competitionpreviously mentioned compensation study performed by Pearl Meyer. (See pages 27 and 30 for additional information.) For this reason, Mr. Hoff received a larger long-term incentive grant, which coupled with his base salary increase and an increase in fiscal 2023 year-end share price as compared to the Companygrant date share price of those awards, significantly increased his fiscal 2023 CAP. His fiscal 2022 CAP was deflated by a lower year-end share price as compared to the grant date share price of his fiscal 2022 awards and non-solicitation of customers, vendors, suppliers and employeesfiscal 2021 year-end share price. This was the primary driver of the Company. For additional discussion regarding the terms of Mr. Delgatti’s agreement, see Potential Payments upon Termination or Change in Control, which begins on page 32.lower fiscal 2022 CAP.
CAP versus Net Income
As shown in the chart below, the Company’s net income and the CEO and other NEO’s CAP varied significantly each year. This is due in large part to the significant emphasis the Company places on equity incentives, which are sensitive to changes in stock price. For instance, in fiscal 2023, more than 50% of Mr. Hoff’s compensation were equity-based grants, which were comprised of time-based restricted stock unit and performance stock units which are based on achievement of budgeted EPS. Mr. Hoff’s base salary was increased in fiscal 2023 because of the previously mentioned compensation study performed by Pearl Meyer. See page 27 for additional information. The unalignment in fiscal 2023 was due to net loss driven by the $24 million restructuring charges related to the exit of ACH brand and the repositioning of PRI brand. See Fiscal 2023 financial results on page 26 for a discussion of factors leading to the fiscal 2023 net loss.
CAP versus Company-selected Measure (EPS)
As shown in the chart below, the Company’s EPS and the CEO and other NEO’s CAP varied significantly each year. This is due in large part to the significant emphasis the Company places on equity incentives,
which are sensitive to changes in stock price as discussed above. EPS is measured based on the Company’s net income. The unalignment in fiscal 2023 was due to the net loss discussed above.
Company Financial Performance Measures
The items listed below represent the most important metrics we used to determine CAP for fiscal year 2023 as further described in our Compensation Discussion and Analysis on page 20.
Most Important Performance Measures |
Consolidated net income |
Earnings per share ("EPS") |
Absolute EPS growth |
Relative EPS growth |
Grants of Plan-Based Awards
The following table sets forth information concerning individual grants of awards made under the Company’s annual cash incentive plan and 2020 Stock Incentive PlansPlan during fiscal 2016:
| Award | Grant Date for Equity Incentive Plan and Stock | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of | Grant Date Fair Value of Stock Awards | |||||||||||||||||||||||||||||||
| Name | Type | Awards | Threshold ($) | Target($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | Units (3) | ($) | ||||||||||||||||||||||||||
| Paul B. Toms, Jr. | Annual Cash Incentive | $ | 92,500 | $ | 185,000 | $ | 308,950 | |||||||||||||||||||||||||||||
| Performance Grant | 4/6/15 | $ | 27,750 | $ | 222,000 | $ | 333,000 | $ | 222,000 | (4) | ||||||||||||||||||||||||||
| Paul A. Huckfeldt | Annual Cash Incentive | 42,900 | 85,800 | 143,286 | ||||||||||||||||||||||||||||||||
| Performance Grant | 4/6/15 | 12,870 | 102,960 | 154,440 | 102,960 | (4) | ||||||||||||||||||||||||||||||
| RSU Grant | 4/6/15 | 1,376 | 24,108 | (5) | ||||||||||||||||||||||||||||||||
| Michael W. Delgatti, Jr. | Annual Cash Incentive | 67,500 | 135,000 | 225,450 | ||||||||||||||||||||||||||||||||
| Performance Grant | 4/6/15 | 15,003 | 120,006 | 179,928 | 120,006 | (4) | ||||||||||||||||||||||||||||||
| RSU Grant | 4/6/15 | 3,207 | 56,187 | (5) | ||||||||||||||||||||||||||||||||
| Anne M. Jacobsen | Annual Cash Incentive | 35,000 | 70,000 | 116,900 | ||||||||||||||||||||||||||||||||
| Performance Grant | 4/6/15 | 8,750 | 70,000 | 105,000 | 70,000 | (4) | ||||||||||||||||||||||||||||||
| RSU Grant | 4/6/15 | 935 | 16,381 | (5) | ||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non- Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | |||||||||||||||||||||||||||||||||||
Name | Award Type | Grant Date for Equity Incentive Plan and Stock Awards | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Units (#) (3) | Grant Date Fair Value Stock Awards ($) | ||||||||||||||||||||||||||
Jeremy R. Hoff | Annual Cash Incentive | $ | 300,000 | $ | 600,000 | $ | 990,000 | |||||||||||||||||||||||||||||
Performance Grant | 4/11/2022 | 11,747 | 21,686 | 37,952 | $ | 396,000 | (4) | |||||||||||||||||||||||||||||
RSU Grant | 4/11/2022 | 11,172 | 177,188 | (5) | ||||||||||||||||||||||||||||||||
Paul A. Huckfeldt | Annual Cash Incentive | 112,500 | 225,000 | 371,250 | ||||||||||||||||||||||||||||||||
Performance Grant | 4/11/2022 | 5,340 | 9,858 | 17,251 | 180,000 | (4) | ||||||||||||||||||||||||||||||
RSU Grant | 4/11/2022 | 2,464 | 39,079 | (5) | ||||||||||||||||||||||||||||||||
Anne J.Smith | Annual Cash Incentive | 99,000 | 198,000 | 326,700 | ||||||||||||||||||||||||||||||||
Performance Grant | 4/11/2022 | 4,699 | 8,674 | 15,181 | 158,400 | (4) | ||||||||||||||||||||||||||||||
RSU Grant | 4/11/2022 | 2,169 | 34,400 | (5) | ||||||||||||||||||||||||||||||||
Tod R. Phelps | Annual Cash Incentive | 90,000 | 180,000 | 297,000 | ||||||||||||||||||||||||||||||||
Performance Grant | 4/11/2022 | 3,524 | 6,506 | 11,386 | 118,800 | (4) | ||||||||||||||||||||||||||||||
RSU Grant | 4/11/2022 | 3,352 | 53,163 | (5) | ||||||||||||||||||||||||||||||||
(1) | Represents the |
(2) | Represents the estimated future payouts under the performance grants awarded |
(3) | This is the number of |
(4) | Represents the three-year performance grants that were awarded to the named executive officers in fiscal |
(5) | The grant date fair value of each RSU is based on the market price of the Company’s |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning outstanding equity awards, which consist of performance grants and restricted stock units, held by the named executive officers at the end of fiscal 2016.2023. There were no stock options outstanding as of the end of fiscal 2016.
Name | Grant 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 ($) (2) | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |||||||||||||
Jeremy R. Hoff | 4/7/2020 (1) | |||||||||||||||||
4/7/2020 (2) | 4,310 | 88,441 | ||||||||||||||||
4/8/2021 (1) | 6,049 | 124,125 | ||||||||||||||||
4/8/2021 (2) | 3,024 | 62,052 | ||||||||||||||||
4/11/2022 (1) | 21,686 | 444,997 | ||||||||||||||||
4/11/2022 (2) | 11,172 | 229,249 | ||||||||||||||||
Paul A. Huckfeldt | 4/7/2020 (1) | |||||||||||||||||
4/7/2020 (2) | 2,371 | 48,653 | ||||||||||||||||
4/8/2021 (1) | 3,871 | 79,433 | ||||||||||||||||
4/8/2021 (2) | 2,742 | 56,266 | ||||||||||||||||
4/11/2022 (1) | 9,858 | 202,286 | ||||||||||||||||
4/11/2022 (2) | 2,464 | 50,561 | ||||||||||||||||
Anne J. Smith | 4/7/2020 (1) | |||||||||||||||||
4/7/2020 (2) | 2,371 | 48,653 | ||||||||||||||||
4/8/2021 (1) | 3,871 | 79,433 | ||||||||||||||||
4/8/2021 (2) | 2,446 | 50,192 | ||||||||||||||||
4/11/2022 (1) | 8,674 | 177,990 | ||||||||||||||||
4/11/2022 (2) | 2,169 | 44,508 | ||||||||||||||||
Tod R. Phelps | 4/8/2021 (1) | 2,688 | 55,158 | |||||||||||||||
4/8/2021 (2) | 1,344 | 27,579 | ||||||||||||||||
4/11/2022 (1) | 6,506 | 133,503 | ||||||||||||||||
4/11/2022 (2) | 3,352 | 68,783 | ||||||||||||||||
| Name | Grant Date | �� | Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |||||||||
| Paul B. Toms, Jr. | 1/15/13(1) | - | - | 277,500 | ||||||||||
| 4/15/14(1) | - | - | 222,000 | |||||||||||
| 4/6/15(1) | - | - | 148,000 | |||||||||||
| Paul A. Huckfeldt | 1/15/13(1) | - | - | 117,000 | ||||||||||
| 4/15/14(1) | - | - | 102,960 | |||||||||||
| 4/15/14(2) | 1,826 | 52,424 | - | |||||||||||
| 4/6/15(1) | - | - | 68,640 | |||||||||||
| 4/6/15(2) | 1,376 | 39,505 | ||||||||||||
| Michael W. Delgatti, Jr. | 1/15/13(1) | - | - | 110,423 | ||||||||||
| 1/15/13(2) | - | - | 120,006 | |||||||||||
| 4/15/14(1) | 4,255 | 122,161 | - | |||||||||||
| 4/15/14(2) | - | - | 80,004 | |||||||||||
| 4/6/15(1) | 3,207 | 92,073 | ||||||||||||
| 4/6/15(2) | ||||||||||||||
| Anne M. Jacobsen | 1/15/13(1) | - | - | 58,600 | ||||||||||
| 4/15/14(1) | - | - | 70,000 | |||||||||||
| 4/15/14(2) | 1,241 | 35,629 | - | |||||||||||
| 4/6/15(1) | - | - | 46,667 | |||||||||||
| 4/6/15(2) | 935 | 26,844 | ||||||||||||
(1) | Performance grant awards outstanding as of January |
(2) | Restricted stock |
(3) | Performance metrics were not met for the |
Option Exercised and Stock Vested
TableThe following table sets forth information regarding outstandingconcerning equity awards that became vested and payableduring fiscal 2023: