HOOKER FURNITURE CORP
10-Ks and 10-Qs
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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
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Filed by a party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to (S)240.14a-12
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HOOKER FURNITURE CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
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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.
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Amount Previously Paid:
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Date Filed:
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Hooker Furniture Corporation
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Hooker Furniture Corporation (the “Company”) will be held at the Company’s Corporate Office at 440 East Commonwealth Boulevard, Martinsville, Virginia, on Tuesday, June 5, 2018, at 1:00 p.m., for the following purposes:
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To transact such other business as may properly be brought before the meeting or any adjournment of the meeting.
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The shareholders of record of the Company’s Common Stock at the close of business on April 6, 2018 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.
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By Order of the Board of Directors,
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Robert W. Sherwood
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Secretary
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Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Shareholders to be Held on June 5, 2018
Annual Meeting of Shareholders to be Held on June 5, 2018
The proxy statement and annual report to shareholders are available at:
http://www.astproxyportal.com/ast/25490
Hooker Furniture Corporation
The enclosed proxy is solicited by and on behalf of the Board of Directors of Hooker Furniture Corporation (the “Company”) for use at the Annual Meeting of Shareholders to be held on Tuesday, June 5, 2018, at 1:00 p.m., at the Company’s Corporate Office at 440 East Commonwealth Boulevard, Martinsville, Virginia, 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 4, 2018 to all holders of record on April 6, 2018 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:
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delivering a written notice to the Secretary of the Company;
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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. 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.
On April 6, 2018, the record date for the Annual Meeting, there were
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762,409 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.
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 eight 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.
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Actions on all other matters to come before the meeting, including ratification of the selection of the Company’s independent registered public accounting firm and the advisory vote 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 her choice, the shares will be voted
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“FOR” the election of the eight director nominees listed on the proxy card;
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The Company proposes the election of
Paul B. Toms, Jr., W. Christopher Beeler, Jr., Paulette Garafalo, John L. Gregory, III, Tonya H. Jackson, E. Larry Ryder, 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 nine directors whose terms expire at the time of the 2018 Annual Meeting upon election of their successors. David G. Sweet, a director since 2006, is not standing for election. Mr. Sweet’s decision not to stand for re-election was not a result of any disagreement with other Board members or with management. Consequently, as of immediately prior to the 2018 Annual Meeting, the Company’s board has fixed the number of directors at eight (8) directors.
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 her 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.
Paul B. Toms, Jr.
, 63, has been a director since 1993. Mr. Toms has been Chairman and Chief Executive Officer of the Company since December 2000 and also served 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.
W. Christopher Beeler, Jr.
, 66, has been a director since 1993 and served as lead director until June 2016. He has been a director of both Virginia Mirror Company, Inc. and Virginia Glass Products Corporation, both of which manufacture and fabricate architectural glass products, since 1986 and Chairman of both since 2000. 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 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 Compensation Committee and the Nominating and Corporate Governance Committee.
Mr. Beeler’s executive
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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 well qualifies him to serve as a director.
Paulette Garafalo,
61, has been director since 2017. She has been Chief Executive Officer and President of Paul Stuart, a men’s and women’s classic apparel retailer and wholly owned subsidiary of Mitsui, Inc., since 2016. She served as President of Brooks Brothers, a men’s and women’s apparel retailer, from 2000 to 2016. Ms. Garafalo serves as a member of the Compensation Committee, Nominating and Corporate Governance Committee and the Audit Committee. Mrs. 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 Ms. Garafalo has gained as CEO of Paul Stuart further broadens her experience qualifications to serve as a director.
John L. Gregory, III
, 70, has been a director since 1988. He is a shareholder, officer and director of the law firm of Young, Haskins, Mann, Gregory, McGarry & Wall, P.C. Mr. Gregory serves as chair of the Compensation Committee, and as a member of the Nominating and Corporate Governance Committee and the Audit Committee. The knowledge and experience Mr. Gregory has gained from his 30 years of experience as a director with the Company and his 41 years of experience as an attorney more than well qualify him to serve as a director of the Company.
Tonya H. Jackson
, 54, has been a director since 2017. She has served as Senior Vice-President and Chief Supply Chain Officer for Lexmark, a global provider of printing and imaging products and services, since 2016. In her role, she is responsible for worldwide supply chain operations, including demand/supply planning, global sourcing, hardware and supplies manufacturing, and distribution and logistics. She served as 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 Compensation Committee, Nominating and Corporate Governance Committee and the Audit Committee. Ms. Jackson’s senior executive experience at a large, global corporation and her extensive experience in operations and supply chain management well qualify her to serve as a director.
E. Larry Ryder
, 70, has been a director since February 1, 2011. Mr. Ryder retired as Executive Vice President – Finance and Administration and Chief Financial Officer of the Company in January 2011, with 34 years of experience in that and other senior management roles with the Company. Mr. Ryder serves on the Audit Committee and the Nominating and Corporate Governance Committee. 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 him to serve as a director of the Company.
Ellen C. Taaffe
, 56, has been a director since July 2015. In 2016, she joined the Clinical Faculty of Leadership at Northwestern University’s Kellogg School of Management, where she is also Director of Women’s Leadership Programming. She has been a Marketing Strategy Consultant and Executive Leadership Coach since 2015. Ms. Taaffe serves as chair of the Nominating and Corporate Governance Committee and a member of the Audit Committee and the Compensation Committee. Prior to founding her consulting business, she was President of Smith-Dahmer Associates LLC, a research and brand strategy consulting firm from 2010-2015. Prior to that, Ms. Taaffe served in various senior management positions at Whirlpool Corporation, Royal Caribbean Cruises Ltd., and PepsiCo. Earlier in her career, she held numerous positions in brand management, trade marketing, and sales at the Quaker Oats Company from 1984 - 2001. Ms. Taaffe has served on the board of directors of John B. Sanfilippo & Son Inc., a Chicago-based baking and snack nut processor, distributor and marketer, since 2011, where she is a member of the Compensation Committee, Governance Committee, and Audit Committee. Her executive experience at various public companies, her current service on a public-company board of directors and expertise in and knowledge of traditional and digital marketing best practices in high-ticket consumer durables, well qualify her to serve as a director of the Company.
Henry G. Williamson, Jr.
, 70, has been a director since 2004 and lead director since June 2016. He is the retired Chief Operating Officer of BB&T Corporation and Branch Banking and Trust Company of North Carolina, South Carolina and Virginia. He held that position from 1989 until his retirement in June
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2004. Mr. Williamson is a member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Mr. Williamson’s executive management experience at a large publicly traded company, including his financial oversight responsibilities complement Mr. Toms’ experience and coupled with Mr. Williamson’s extensive knowledge of finance and banking, well qualify him to serve as a director and lead director of the Company.
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The Board has established a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee.
The Nominating and Corporate Governance Committee regularly reviews the appropriateness of the combined position of Chairman of the Board and the Company’s Chief Executive Officer. The Committee believes that it 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.
Beginning in 2011 the Board, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that it is in the best interests of the Company and its shareholders to designate a lead director. Mr. Beeler served as lead director from 2011-2016. Mr. Williamson was designated lead director in 2016 and currently serves in that role. The Board believes having an independent lead director, among other things, allows Mr. Toms to focus on the Company’s strategy, business and operations, while preserving the benefits of having a single focal point for Company leadership in his current combined role of Chairman and Chief Executive Officer. The lead director’s duties include presiding over executive sessions of the Company’s independent directors, facilitating information flow and communication among the directors, serving as a point of contact between the independent directors and the Chairman and Chief Executive Officer and performing other duties as requested by the Board.
The Board of Directors typically holds five to six meetings per year. In fiscal 2018, it held eight meetings, including two special meetings in the consideration of the Company’s acquisition of the business of Shenandoah Furniture. During fiscal 2018, the Nominating and Corporate Governance Committee met seven times, the Compensation Committee met seven times and the Audit Committee met four times. Each incumbent director attended at least 75% of the total fiscal 2018 Board meetings and committee meetings held during the period that he or she was a member of the Board or those committees. The Nominating and Corporate Governance Committee and the Board of Directors have each determined that each of the following directors is independent as defined by applicable NASDAQ listing standards: W. Christopher Beeler, Jr., Paulette Garafalo, John L. Gregory, III, Tonya H. Jackson, E. Larry Ryder, David G. Sweet, 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. All of the Company’s directors who were directors at the time of the annual shareholders meeting attended the 2017 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 was more efficient,
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since all independent directors have input into committee actions and that the need for committees reporting at Board meetings would be greatly reduced. The Board has expanded since 2011; however, it believes the Committees of the Whole approach is still the most efficient structure, given its modest size and the speed at which new directors can be oriented and mature in their roles. However, Mr. Ryder, a former executive officer of the Company who retired in 2011, does not serve on the Compensation Committee.
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. A copy of the Corporate Governance Guidelines is available on the Company’s website at investors.hookerfurniture.com.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of all of the Board’s independent directors. Ms. Taaffe currently serves as its Chair. The Committee:
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evaluates and makes recommendations to the Board regarding the size and composition of the Board;
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develops and recommends criteria for the selection of individuals to be considered as candidates for election to the Board; and
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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 website at
investors.hookerfurniture.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:
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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 her term as director and whether his or her skills are still relevant to the needs of the Board in deciding whether to re-nominate the director. The Committee also considers future Board needs in light of the mandatory retirement age for outside directors of 75.
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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.
During the summer of 2017, the Board expanded its size to nine directors. This decision was based on the Board’s desire to facilitate orderly transitions for future Board retirements and to add and refresh pertinent skill sets. Upon this expansion, the board elected Mses. Garafalo and Jackson on the recommendation of the Nominating and Corporate Governance Committee, based on that Committee’s director search process during the spring and summer of 2017.
The Committee’s search process consisted of:
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identifying desired director skills and qualifications from the Board’s annual self-assessment;
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reviewing resumes from a variety of sources including:
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names submitted by current directors;
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resumes from the Board’s 2015 director search supplied to the Company by the National Association of Corporate Directors;
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resumes from director education databases from both the University of North Carolina School of Law and Northwestern University’s Kellogg School of Management; and
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resumes submitted to the Company by individuals seeking directorship positions.
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interviewing individuals whose skills and qualifications matched those identified in the Board’s annual self-assessment.
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Based on its extensive search process, the Committee ultimately selected Mses. Garafalo and Jackson for nomination to the Board. The Committee received Mses. Garafalo’s and Jackson’s names from a Kellogg School of Management director education database which used search criteria that matched the skills and qualifications the Committee desired in a potential director. In selecting Ms. Garafalo from among the other candidates it interviewed, the Committee focused on Ms. Garafalo’s diversified experience in executive management and merchandising at retail and consumer luxury brands companies. In selecting Ms. Jackson from among other candidates it interviewed, the Nominating and Corporate Governance Committee focused on Ms. Jackson’s extensive experience in operations and supply chain management and her experience in executive management of a public-company, including her corporate acquisition experience.
The Committee also facilitates the Board’s annual self-assessment and is responsible for recommending director compensation to the Board of Directors. The Committee annually reviews Board compensation of the Company’s peer group and periodically engages outside consultants to independently assess Board compensation.
The Committee will consider a director candidate recommended by a shareholder of record for election at the 2019 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 4, 2019. 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:
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The Nominating and Corporate Governance Committee may refuse to consider the recommendation of any person not made in compliance with this procedure.
The Compensation Committee consists of all of the Board’s independent directors, except Mr. Ryder who is not a member of the Committee. Mr. Gregory currently serves as its Chair. The Committee reviews and makes determinations with regard to 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 website at
investors.hookerfurniture.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. Although the Internal Revenue Code was modified with respect to 162(m) to eliminate the performance-based exception to deducible compensation in excess of $1 million, it is anticipated that going forward the Compensation Committee will continue to include only “outside directors” to administer its 162(m) “grandfathered” plans.
The Report of the Compensation Committee can be found on page 14. 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 2015 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.) Inc. as its external compensation consultant. Mercer reports to and receives direction directly from the Committee, and a representative of Mercer is available to attend meetings of the Compensation Committee as its advisor when requested by the Compensation Committee. In prior fiscal years, most recently in 2016, Mercer has provided the Compensation Committee with third-party survey information for use in setting short- and long-term compensation levels, perspective on emerging compensation issues and trends, and expertise in incentive compensation structure, terms and design. In addition, Mercer provides record keeping and actuarial services in connection with the Company’s Supplemental Retirement Income Plan, but does not advise the Company on the design or operation of that plan. In considering whether to continue to engage Mercer as the Compensation Committee’s compensation advisor, the Compensation Committee annually evaluates Mercer’s independence from Company management and whether it has any conflicts of interest, including the fact that Mercer provides certain record keeping and consulting services to the
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Company. In fiscal 2018, the Compensation Committee evaluated the fees paid by the Company to Mercer as a percentage of Mercer’s total revenue and Mercer’s policies and procedures to prevent conflicts of interest, and Mercer’s confirmation that it has no business or personal relationship with a member of the Compensation Committee, does not own any stock of the Company, and has no business or personal relationship with any executive officer of the Company. The Compensation Committee concluded that Mercer was independent of the Compensation Committee and of Company management and had no conflicts of interest in its performance of services to the Committee.
The Compensation Committee typically meets four times each year. During the 2018 fiscal year, it met seven times. The additional meetings were held primarily to consider incorporating the recently acquired Home Meridian segment into the Company’s annual incentive compensation plan and Mr. Toms’ and Revington’s compensation considering Mr. Revington’s promotion to Chief Operating Officer of the Corporation. 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 for 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 Compensation Committee annually reviews the Chief Executive Officer’s compensation.
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 2018, management provided the Compensation Committee with recommendations regarding executive officer compensation, as discussed further in Compensation Discussion and Analysis on page 14.
The Audit Committee consists of all of the Board’s independent directors. Mr. Beeler serves as its Chair. The Audit Committee:
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reviews and approves the scope, purpose and type of audit and non-audit services to be performed by the independent registered public accounting firm;
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approves the appointment of the Company’s internal audit service provider, RSM, LLP; and
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The Audit Committee receives updates from the auditor and management at its quarterly Audit Committee meetings. During fiscal 2018, the auditor and management made presentations to the Committee on specific topics of interest, including:
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management’s critical accounting policies;
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the auditor’s fiscal 2018 integrated audit plan and updates on the completion of the plan;
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the status of management’s purchase price allocation work related to the acquisition of the business of Shenandoah Furniture;
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related post-acquisition integration efforts;
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compliance with the internal controls required under Section 404 of the Sarbanes-Oxley Act; and
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the Company’s cybersecurity practices.
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The Board of Directors has adopted a written charter for the Audit Committee, a current copy of which is available on the Company’s website at
investors.hookerfurniture.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 each of Messrs. Williamson, Ryder 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 13.
Appointment and Evaluation of the Independent Auditor
On an annual basis, the Audit Committee reviews the audit firm’s performance as part of its consideration of whether to reappoint the firm as the Company’s independent auditor. As part of this review, the Audit Committee considers, among other things:
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the continued independence of the audit firm;
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the audit firm’s experience and fresh perspective occasioned by mandatory audit partner rotation and the rotation of other audit management;
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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;
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§
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the appropriateness of the audit firm’s fees;
|
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§
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evaluations of the audit firm by management;
|
|
§
|
the audit firm’s effectiveness of communications and working relationships with the audit committee and management; and
|
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§
|
the quality and depth of the audit firm and the audit team’s expertise and experience in the Company’s industry and related industries in light of the breadth, complexity and global reach of the Company’s business.
|
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” fitting this definition in fiscal 2018.
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 SVP Finance and Accounting, 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 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 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.
10
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
investors.hookerfurniture.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 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:
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§
|
|
§
|
reviewing management and internal audit reports regarding the Company’s internal control over financial reporting; and
|
|
§
|
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 advisors and experts when needed.
In his combined role as Chairman and Chief Executive Officer, Mr. Toms’ membership on the Board gives the Board valuable insight into the Company’s operations and risks. His unique depth of knowledge, experience and expertise give the Board a more complete and holistic view of the risks the Company faces. The Board committees (which consist of only independent 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 has met these guidelines.
The Nominating and Corporate Governance 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.”
Non-Employee Director Compensation for the 2017-2018 Service Year
For the 2017-2018 service year non-employee directors received an annual board retainer of $48,000. The Lead Director and Audit Committee Chair each received an additional stipend of $8,000. The Chairs of the Compensation and Nominating and Corporate Governance committees received additional stipends of $5,000 each. These fees were paid to directors in June 2017, except for Mses. Garafalo and Jackson who were elected to the Board in late August 2017 and were paid pro-rated amounts at that time.
For the 2017-2018 year, all non-employee directors also received annual grants of restricted stock under the Company’s 2015 Stock Incentive Plan. The number of shares of restricted stock awarded
11
to each non-employee director was equal to fifty percent of the total cash fees payable to that director for a service year. As required by the plan, the restricted stock awards were determined by dividing fifty percent of the total cash fees payable to each non-employee director by the fair market value (as defined in the 2015 Stock Incentive Plan) of the Company’s Common Stock on the award date and rounding to the nearest whole share. The restricted stock will become fully vested, and the restrictions applicable to the restricted stock will lapse, on:
|
§
|
|
§
|
In September of 2017, the Board of Directors amended the 2015 Stock Incentive Plan to permit directors to defer the receipt of their annual grant of restricted stock to the date they terminate their service with the Company. This amendment, while adopted in 2017, will first apply to annual grants of restricted stock award to directors for service related to the 2018-2019 year.
Directors are prohibited from engaging in certain types of transactions related to the Company’s Common Stock, including transactions in derivative securities, hedging transactions, using margin accounts and pledging shares as collateral.
Directors are reimbursed for reasonable expenses incurred in connection with attending Board and committee meetings or performing their duties as directors, as well as Board-related professional education. Mr. Toms receives no compensation or other payments for serving on the Board of Directors or for attending Board or committee meetings other than reimbursement for expenses. Mr. Toms’ compensation for services rendered to the Company in his capacity of Chairman and Chief Executive Officer is reported in the Summary Compensation Table following the Compensation Discussion and Analysis on page 30.
The following table sets forth non-employee director compensation paid for fiscal year 2018.
Non-Employee Director Compensation
|
Name
|
Cash Fees (1)
|
Stock Awards(2)(3)
|
Total
|
|||||||||
|
W. Christopher Beeler, Jr.
|
$
|
56,000
|
$
|
28,000
|
$
|
84,000
|
||||||
|
Paulette Garafalo (3)
|
36,000
|
18,000
|
54,000
|
|||||||||
|
John L. Gregory, III
|
53,000
|
26,500
|
79,500
|
|||||||||
|
Tonya H. Jackson (3)
|
36,000
|
18,000
|
54,000
|
|||||||||
|
E. Larry Ryder
|
48,000
|
24,000
|
72,000
|
|||||||||
|
David G. Sweet
|
48,000
|
24,000
|
72,000
|
|||||||||
|
Ellen C. Taaffe
|
53,000
|
26,500
|
79,500
|
|||||||||
|
Henry G. Williamson, Jr.
|
56,000
|
28,000
|
84,000
|
|||||||||
| (1) |
Includes annual retainer fee, committee chair fees and lead director fee paid to each director in June 2017 or August 2017, as described in greater detail above.
|
| (2) |
These amounts are the aggregate grant date fair value of shares of restricted stock awarded to each non-employee director on June 6, 2017 (August 29, 2017 in the case of Mses. Garafalo and Jackson)
|
12
|
under the Company’s 2015 Stock Incentive Plan. Fair value is determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For a discussion of assumptions used in calculating award values, refer to note 12 of the Company’s consolidated financial statements included in the Company’s 2018 Annual Report on Form 10-K.
|
| (3) |
Mses. Garafalo and Jackson were elected to the Board of Directors in August 2017. Consequently, the annual retainers paid to them were pro-rated to reflect their shortened terms of service.
|
| (4) |
As of January 28, 2018, each non-employee director had the following unvested stock awards outstanding:
|
|
Name
|
Restricted
Stock(#)
|
|||
|
W. Christopher Beeler, Jr.
|
671
|
|||
|
Paulette Garafalo
|
461
|
|||
|
John L. Gregory, III
|
635
|
|||
|
Tonya H. Jackson
|
461
|
|||
|
E. Larry Ryder
|
576
|
|||
|
David G. Sweet
|
576
|
|||
|
Ellen C. Taaffe
|
635
|
|||
|
Henry G. Williamson
|
671
|
|||
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 28, 2018 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 received 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 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 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.
13
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 28, 2018 for filing with the SEC.
Paulette Garafalo
John L. Gregory III
John L. Gregory III
Tonya H. Jackson
E. Larry Ryder
David G. Sweet
David G. Sweet
Ellen C. Taaffe
Henry G. Williamson, Jr.
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
Tonya H. Jackson
David G. Sweet
David G. Sweet
Ellen C. Taaffe
Henry G. Williamson, Jr.
Henry G. Williamson, Jr.
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 28.
Executive Summary
The Compensation Committee of the Board oversees the Company’s executive compensation program. More information concerning the composition of the Committee and its authority and responsibilities can be found under Compensation Committee on page 8. The Company’s compensation program is designed to attract and retain highly qualified executives, to maintain a stable executive management team, and to reward those senior leaders who contribute significantly to the Company’s continued financial growth and profitability in the face of rapidly changing market and global economic forces affecting the Company’s business.
14
The Compensation Discussion and Analysis discusses the compensation program and the compensation decisions made for fiscal year 2018 (which ended January 28, 2018) with respect to the following named executive officers:
| Name | Title | |
|
Paul B. Toms, Jr.
|
Chairman and Chief Executive Officer
|
|
|
Paul A. Huckfeldt
|
Chief Financial Officer
|
|
|
George Revington
|
Chief Operating Officer (COO); President & COO Home Meridian Segment
|
|
|
Anne M. Jacobsen
|
Senior Vice-President, Administration
|
|
|
Michael W. Delgatti, Jr
|
President-Hooker Brands
|
COMPENSATION HIGHLIGHTS FOR FISCAL 2018
|
No increases in Base Salary
|
The Compensation Committee reviewed the base salaries of our named executive officers and authorized no increases from 2017 rates.
|
|
Increased Annual Incentive Compensation Targets
|
The Compensation Committee approved increases for two of our named executive officer’s target annual incentive opportunity to reflect competitive data, increased responsibilities and to reflect a focus on performance-based compensation.
|
|
Authorized Payment of Annual Incentive
|
The Compensation Committee approved the payout of annual incentive awards contingent upon the company’s satisfactory achievement of pre-determined performance goals relating to Consolidated Net Income, where the Company achieved 98% of its consolidated target.
|
|
Authorized Increased Threshold under Annual Incentive
|
The Compensation Committee increased the threshold performance level required for a payout so that no payment will be made unless actual performance against pre-established performance goals exceeds 80% of target.
|
|
Increased Percentage of Performance-Based Compensation
|
The Compensation Committee increased the percentage element of performance-based compensation as compared to two named executive officer’s total compensation opportunities.
|
|
Authorized 2018 long-term compensation awards
|
The Compensation Committee awarded long-term compensation in the form of performance grants tied to pre-established goals relating to earnings per share and also award service-based restricted stock units.
|
|
Authorized payout of fiscal 2016-2018 Performance Grants
|
The Compensation Committee authorized the payment of stock and cash to each of our named executive officers as performance against pre-established Company EPS growth goals was met.
|
15
Executive Compensation Policies and Practices
Our commitment to strong corporate governance practices extends to the compensation 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 severance agreements
|
|
|
a
|
Assessment of compensation risk
|
|||
|
a
|
Engagement with shareholders
|
|||
|
a
|
Dual trigger CIC for performance grants
|
|||
|
·
|
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;
|
|
·
|
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.
|
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. The Company may enter into an employment agreement with an executive officer under specific circumstances, as discussed further below. These elements are structured to compensate executives over three separate timeframes:
16
|
|
executive position based on a number of factors, including competitive market data, executive responsibilities, individual performance and the Committee members’ business judgment.
|
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 allow the Company to maintain a stable management team.
Fiscal Year 2018 Financial Highlights
The Shenandoah acquisition closed during the Company’s fiscal 2018 third quarter, which ended on October 29, 2017. Consequently, Shenandoah’s results prior to September 29, 2017 (the closing date of the acquisition) are not included in the results discussed below.
The Company delivered a year of solid performance in fiscal year 2018. The following are selected highlights of the Company’s results for fiscal year 2018 compared to fiscal year 2017:
|
§
|
Consolidated net income increased by 11.7% or $3.0 million to $28.3 million, which was net of:
|
|
o
|
$2.1 million of intangible asset amortization expense on acquisition-related intangibles; and
|
|
o
|
$1.8 million in increased tax expense due to the effects of revaluing of our deferred tax assets and liabilities as a result of the enactment Tax Cuts and Jobs Act of 2017 in January 2018.
|
|
§
|
Diluted earnings per share increased by $0.24 to $2.42 per share.
|
|
§
|
Achieved 98% of its Net Income Growth target.
|
|
§
|
Achieved 10% average annual Company EPS growth for the Performance Grants that paid out in 2018 relating to a prior performance period.
|
These improvements were due to the increased sales and operating income in the Company’s Hooker Branded and Home Meridian segments and in All Other. Home Meridian segment sales increased primarily due to growth in emerging channels such as e-commerce and wholesale clubs. Hooker Branded segment net sales increased due to sales growth at Hooker Upholstery and increased Hooker Casegoods net sales in the fiscal 2018 fourth quarter. All Other sales increased primarily due to the inclusion of Shenandoah’s net sales for the last four months of the Company’s fiscal year and, to a lesser extent, increased sales at Bradington-Young.
17
|
§
|
due to his promotion to Chief Operating Officer of Hooker Furniture Corporation, the Committee did not increase his base salary as it was close to the median for our peer group.
|
|
§
|
Long-Term Incentive Awards
– The Company awarded time-based restricted stock units and performance grants to the named executive officers for the 2018 fiscal year in April 2017. These awards will be earned based on satisfaction of performance conditions measured for a performance period that includes the 2018-2020 fiscal years. Additionally, performance measurements were met for performance awards granted for the three-year performance period beginning in fiscal 2016 and each named executive officer who was an officer in fiscal 2016 received a payout in the form of shares of company stock and cash in April 2018.
|
Mix of Total Compensation.
The following charts illustrate the percentage of total compensation for our CEO and our other named executive officers on average, respectively, represented by each element of compensation for the 2018 fiscal year.
18
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.
The Compensation Committee engaged Mercer in 2016 year to update the Company’s peer group based on the Company’s changed profile following its purchase of the business of Home Meridian International. Mercer was also asked by the Committee to summarize peer compensation data and conduct a review of the Company’s executive compensation programs. Mercer recommended a peer group consisting of companies similar to the Company in terms of industry (companies in the furniture/household durables/consumer discretionary markets) and size (companies with annual revenue of approximately 60% to 265% of the Company’s annual revenue). Mercer recommended this group because its members shared various financial and operational attributes with the Company, while not being limited to furniture companies. The peer group represents companies of a similar size and similar operational complexity as the Company, and also represents the type of companies against which the Company competes for management talent. The peer group consists of the following companies:
|
§
|
Bassett Furniture Industries, Inc.
|
|
§
|
Cavco Industries, Inc.
|
|
§
|
Culp, Inc.
|
19
|
§
|
Dixie Group, Inc.
|
|
§
|
Ethan Allen Interiors, Inc.
|
|
§
|
Haverty Furniture Companies, Inc.
|
|
§
|
La-Z-Boy, Inc.
|
|
§
|
Lifetime Brands, Inc.
|
|
§
|
Nautilus, 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 2018). The Committee compared total compensation as well as the individual compensation elements for each executive officer to the peer group in fiscal year 2018. 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.
Other factors considered in setting fiscal year 2018 executive compensation were inflation, regional cost-of-living factors and whether there were material changes in executives’ duties.
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 term incentives typically have been linked to achievement of a different set of performance measures, such as earnings per share for performance grants. Historically, the Committee has awarded long-term performance grants tied to growth in the Company’s earnings per share (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 that Committee considers in establishing the applicable measures and performance levels for incentive compensation. The other factors the Committee considers include the annual operating budget which is approved by the Board. The Board’s approval of the annual budget includes its review of industry and macroeconomic trends, industry sales growth, cost containment and expected capital expenditures.
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
20
compensation to performance-based incentives, the Committee may elect not to increase certain executives’ base salaries on an annual basis, instead using potential annual and longer-term incentive based payments to compensate 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.
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 does believe that some portion of a named executive officer’s compensation should be performance-based.
At the 2018 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 98% 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 program. Therefore, the Committee did not make any significant changes in the structure of the Company’s executive compensation program during fiscal 2018 in response to the 2017 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.
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 2017 Annual Meeting. Accordingly, at the 2018 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) at the 2018 Annual Meeting. For more information, see “PROPOSAL THREE — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION” on page 42 in this proxy statement.
For the 2018 fiscal year, the primary elements of compensation for the named executive officers were:
|
§
|
long-term equity-based incentives for each named executive officer,
|
21
After reviewing Mercer’s executive compensation study prepared in a prior year, the Committee established base salaries for each named executive officer during the first quarter of fiscal 2018 to be effective for the 2017 calendar year. Although the study data was over a year old, it was deemed satisfactory by the Committee, since the information was used only as a guideline, not a benchmark.
The Committee’s process for setting base salary and other compensation included an annual review of individual performance and such other relevant factors 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. The Committee does not automatically increase base pay annually, but instead bases salary increases on the preceding factors.
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 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 provide an effective tool for measuring senior management performance over the course of a fiscal year. However, since Mr. Delgatti’s responsibilities were primarily related to the Hooker Brands, the Committee believed it was in the best interest of the Company and its shareholders to set Mr. Delgatti’s performance metric based on the operating income of his area of responsibility.
During fiscal 2018, the Committee analyzed the structure of the Company’s annual incentive plan. Based on its analysis, the Committee concluded that:
|
·
|
The 70% starting point was low compared with the Company’s peers;
|
|
·
|
Achieving 85% to 99% of budget would pay 75% of the potential bonus; therefore, missing the profit target by only a small amount would have an inordinately large impact on bonus recipients; and
|
|
·
|
Rewards for exceeding budgeted targets were somewhat out of reach at 125% and 150% of target.
|
Based on its analysis and conclusions, the Committee approved modifications to the structure of the annual incentive plan which included:
|
·
|
Increasing the threshold target from 70% to 80% to better align the plan’s threshold with that of the Company’s peers;
|
|
·
|
Allowing interpolation between target percentages such that each 1% increase in income between the target levels results in additional bonus earned. The Committee believed this would (i) mitigate the inordinately significant impact of missing targeted profit levels by a small amount and (ii) reduce the risk of results being manipulated to reach thresholds; and
|
|
·
|
Adjusting the targets for exceeding budgeted income to 110% and 125%, which the Committee believed were more motivating and more realizable, but only with exceptional performance.
|
During fiscal 2018, the Committee increased annual cash incentive percentages for Messrs. Toms and Revington to 75% each, due to the Committee’s emphasis on linking a larger percentage of executives’ total compensation to performance-based incentives and due to the increase in Mr. Revington’s duties upon his promotion to Chief Operating Officer of Hooker Furniture Corporation, in addition to his duties as COO and President of the Company’s Home Meridian segment. The Committee
22
utilized the Mercer compensation study data developed in a prior year. Although the study data was over a year old, the Committee deemed it satisfactory since it was used only as a guideline, not a benchmark. The Committee found that Mr. Revington’s short-term incentive was somewhat below the median of the Company’s peer group and therefore, increased his short-term percentage to 75%. Due to the Committee’s emphasis on linking a larger percentage of executives’ total compensation to performance-based incentives and its belief that the Chief Executive Officer’s short-term incentive should be at least as high as other executive officers given his responsibilities, Mr. Toms’ short-term incentive was also increased to 75%.
The Committee approved an annual cash incentive for the 2018 fiscal year. Each named executive officer had the opportunity to receive a payment, expressed as a percentage of his calendar year 2017 base salary, if the Company obtained 80% or more of its fiscal year 2018 consolidated net income target (80% of Hooker Brands’ operating income target in the case of Mr. Delgatti). No cash bonus would be payable unless the Company reached at least 80% of the consolidated net income target (80% of the Hooker Brands’ operating income target in the case of Mr. Delgatti) and the bonus opportunity was capped at a maximum amount if the Company reached 125% or more of its consolidated net income target for fiscal year 2018 (125% of Hooker Brands’ operating income target in the case of Mr. Delgatti). For net income achieved at levels between the target percentages shown in the table below, a bonus percentage is interpolated such that each 1% increase in net income (Hooker Brands’ operating income in the case of Mr. Delgatti) between the target levels results in additional bonus earned.
Annual cash incentive targets are established based on budgeted net income. Budgeted net income is established by management in its annual operating budget, which is approved by the Board.
|
§
|
Historical target payouts for each executive;
|
|
§
|
data contained in a Mercer compensation study from a prior fiscal year;
|
|
§
|
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 Mercer 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, Mr. Toms, the most senior executive was awarded a larger potential incentive award than were other senior executives due to his senior standing within the Company and his larger share of responsibilities. The incentive opportunities were structured such that if consolidated net income did 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 80% of the target level was attained.
The award opportunities for each executive were as follows (expressed as a percentage of 2017 calendar year base salary):
23
|
If the Company Attains the following Percentages of Targeted Net Income*:
|
||||||||||||||||||||||||
|
<80%
|
80%
|
90%
|
100%
|
110%
|
125%
|
|||||||||||||||||||
|
Paul B. Toms, Jr.
|
0
|
%
|
37.5
|
%
|
67.5
|
%
|
75
|
%
|
93.8
|
%
|
123.8
|
%
|
||||||||||||
|
Paul A. Huckfeldt
|
0
|
%
|
22.5
|
%
|
40.5
|
%
|
45
|
%
|
56.25
|
%
|
74.25
|
%
|
||||||||||||
|
Michael W. Delgatti, Jr.
|
0
|
%
|
22.5
|
%
|
40.5
|
%
|
45
|
%
|
56.25
|
%
|
74.25
|
%
|
||||||||||||
|
Anne M. Jacobsen
|
0
|
%
|
22.5
|
%
|
40.5
|
%
|
45
|
%
|
56.25
|
%
|
74.25
|
%
|
||||||||||||
|
George Revington
|
0
|
%
|
37.5
|
%
|
67.5
|
%
|
75
|
%
|
93.8
|
%
|
123.8
|
%
|
||||||||||||
Each additional percentage of net income realized between the percentages shown above is interpolated, 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
|
%
|
2.5
|
%
|
2.67
|
%
|
||||||||
The net income target for the 2018 fiscal year was set at $30.7 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 201
8.
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 approximately 98% of its consolidated net income target set by the Committee for fiscal 2018. Hooker Brands achieved approximately 97% of the combined target set by the Committee in fiscal 2018. This results in payments at each of the percentages indicated. As a result, the named executive officers received annual cash incentive payments as follows:
|
Name
|
Fiscal 2018 Annual Cash Incentive Earned
|
|||
|
Paul B. Toms, Jr.
|
$
|
305,025
|
||
|
Paul A. Huckfeldt
|
110,250
|
|||
|
George Revington
|
294,000
|
|||
|
Anne M. Jacobsen
|
88,200
|
|||
|
Michael W. Delgatti, Jr.
|
130,950
|
|||
Long-Term Incentives
During fiscal 2018, 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 for the performance period beginning in fiscal year 2018. The awards were designed to directly link a significant portion of a named executive’s compensation to growth in value of the Company
24
and to further enhance existing retention incentives under the Company’s executive compensation program.
The first of the two types of awards was a performance grant and the second type of award was a service-based restricted stock unit. The second type is discussed on page 26 below.
Performance Grants
A performance grant entitles the executive to receive a payment at the end of a three-year performance period based on certain earnings per share (“EPS”) targets. 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 19. The executive officer also must remain continuously employed with the Company through the end of the three-year performance period 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.
|
$
|
31,125
|
$
|
93,375
|
$
|
124,500
|
$
|
155,625
|
$
|
186,750
|
||||||||||
|
Paul A. Huckfeldt
|
15,000
|
45,000
|
60,000
|
75,000
|
90,000
|
|||||||||||||||
|
George Revington
|
20,004
|
60,012
|
80,016
|
100,020
|
120,024
|
|||||||||||||||
|
Anne M. Jacobsen.
|
12,000
|
36,000
|
48,000
|
60,000
|
72,000
|
|||||||||||||||
|
Michael W. Delgatti, Jr.
|
15,003
|
45,009
|
60,012
|
75,015
|
90,018
|
|||||||||||||||
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 50th percentile.
|
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
|
$
|
124,500
|
$
|
186,750
|
||||||
|
Paul A. Huckfeldt
|
0
|
60,000
|
90,000
|
|||||||||
|
George Revington
|
0
|
79,992
|
119,988
|
|||||||||
|
Anne M. Jacobsen
|
0
|
48,000
|
72,000
|
|||||||||
|
Michael W. Delgatti, Jr.
|
0
|
59,994
|
89,991
|
|||||||||
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
25
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
As mentioned above, the Committee also awarded to each named executive officer (other than Mr. Toms) restricted stock units 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 13, 2020. The awards may be paid in shares of company 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 |
|||
|
Paul B. Toms, Jr.
|
0
|
|||
|
Paul A. Huckfeldt
|
968
|
|||
|
George Revington
|
2,580
|
|||
|
Anne M. Jacobsen
|
774
|
|||
|
Michael W. Delgatti, Jr
|
1,935
|
|||
The Committee did not award restricted stock to Mr. Toms because it determined that the Supplemental Retirement Income Plan and executive life insurance program provide sufficient retention incentives for him.
Supplemental Retirement and Life Insurance Benefits
Messrs. Toms and Huckfeldt, Ms. Jacobsen and certain other officers and managers, participate in the Company’s Supplemental Retirement Income Plan (“SRIP”). The SRIP is a non-qualified, unfunded supplemental retirement plan that provides a monthly benefit equal to a specified percentage of the participant’s base salary plus annual bonus for the 60-consecutive month period preceding his termination of employment (referred to as his “Final Average Earnings”). Messrs. Toms and Huckfeldt and Ms. Jacobsen are each eligible to receive a monthly benefit equal to 50%, 25% and 25%, respectively, of their Final Average Earnings. The benefit is paid for 15 years following the participant’s retirement. As a general matter, a participant is not entitled to receive any benefit under the SRIP unless they remain continuously employed with the Company to age 60. At age 60, the participant becomes vested in 75% of their SRIP benefit and in 5% increments each following year until becoming 100% vested at age 65, assuming the participant remains continuously employed to those dates.
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 reasons discussed at page 28.
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
26
the SRIP and additional information concerning the SRIP can be found in the Pension Benefits table on page 35 and Potential Payments upon Termination or Change in Control on page 36.
Messrs. Revington and Delgatti do not participate in the SRIP. They have been provided other retention incentives under their employment agreements that are tailored to their specific employment circumstances.
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 60
th
birthday but on or before his 65
th
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.
Generally, the Company has not entered into employment agreements with its executives, except as set forth below. The Committee recognizes that in certain circumstances employment agreements may help the Company achieve the objectives of its compensation program and its other business goals. Therefore, the Committee assesses on a case-by-case basis whether it may be appropriate to enter into employment or separation agreements with executive officers.
The Company has entered into an employment agreement with Mr. Delgatti. At the time the agreement was entered, Mr. Delgatti was a seasoned and well-respected furniture executive and had been identified as a key executive in the Company’s near- and medium-term sales and operations plans. With this in mind, the Committee determined that an employment agreement, which includes a non-compete agreement, offered to secure an employment commitment from Mr. Delgatti, was appropriate.
Upon its acquisition of the assets of Home Meridian International (HMI) effective February 1, 2016, the Company entered into an employment agreement with George Revington, who served as HMI’s Chief Executive Officer since its founding in 2006. Mr. Revington currently leads the Company’s Home Meridian segment as its President and Chief Operating Officer and was named Chief Operating Officer of Hooker Furniture Corporation in January 2017. Mr. Revington was viewed as a key executive in the near-to-medium term success of that segment’s sales and operations. With this in mind, the Committee determined that an employment agreement, which includes a non-compete agreement, offered to secure an employment commitment from Mr. Revington, was appropriate.
For information regarding the terms of these employment agreements, see “Employment Agreements and Other Employment Terms” on page 31.
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. The Company’s other benefit plans include health care, dental and vision insurance, group life insurance, disability insurance and tuition assistance. The named executive officers participate in these plans on the same basis as other eligible employees.
Section 162(m) was recently amended to disallow a tax deduction to public companies for compensation over $1 million paid for any fiscal year to the company’s chief executive officer and up to three other executive officers (other than the chief financial officer) whose compensation must be included in this Proxy Statement because they are our most highly compensated officers. Section 162(m) exempts qualifying performance-based compensation with respect to taxable years beginning on or
27
before December 31, 2017 and payable pursuant to a binding written agreement in effect on November 2, 2017. Thus, only performance-based awards that are deductible in our current fiscal year and performance-based awards outstanding on that date or awarded thereafter pursuant to a binding written agreement may be exempt from the deduction limit if applicable requirements are met. Our Compensation Committee believes that stockholder interests are best served if their discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expenses. Therefore, in light of the repeal of the performance-based compensation exception to 162(m), our Committee reserves the right to approve compensation that is not deductible for income tax purposes. However, our Compensation Committee does not anticipate a shift away from variable or performance-based compensation payable to our executive officers in the future, nor do we anticipate applying less rigor in the process by which we establish performance goals or evaluate performance against such pre-established goals, with respect to compensation paid to our NEOs. In addition, accounting considerations are one of many factors that our Compensation Committee considers in determining compensation mix and amount.
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 for an accounting restatement, a material error in a compensation measure or fraudulent or intentional misconduct.
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 to 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:
|
§
|
|
§
|
an accounting restatement;
|
|
§
|
a material error in a compensation measure; and/or
|
|
§
|
fraudulent or intentional misconduct.
|
|
§
|
the Committee has the unlimited authority to reduce long-term performance grant awards or pay no award at all;
|
|
§
|
|
§
|
|
§
|
28
|
§
|
|
§
|
|
§
|
|
§
|
|
§
|
|
§
|
|
§
|
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.
The Committee has not adopted stock ownership requirements or guidelines because executives traditionally had a substantial portion of their retirement benefits invested in Company stock through the Company’s former Employee Stock Ownership Plan (ESOP). Prior to fiscal 2012, the Committee had not awarded stock-based compensation outside of the ESOP, and, through fiscal 2014, the Company’s long-term incentive awards did not result 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.
Executive officers are prohibited from engaging in certain types of transactions related to our Common Stock, including transactions in derivative securities, hedging transactions, using margin accounts and pledging shares as collateral.
29
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 28, 2018 of the persons who were the Company’s named executive officers that year.
|
Name and
Principal Position
|
Year
|
Salary
($)(2) |
Bonus
($) |
Stock Awards
($)(3) |
Non-Equity Incentive Plan Compensation
($)(4) |
Change in Pension Value and Non- Qualified Deferred Compensation Earnings
($)(5) |
All Other Compensation
($)(6) |
Total
($) |
|||||||||||||||||||||||
|
Paul B. Toms, Jr.,
Chairman and CEO
|
2018
2017
2016
|
$
|
415,000
407,500
370,000
|
$
|
249,000
249,000
222,000
|
$
|
305,025
186,750
185,000
|
$
|
555,184
475,265
259,246
|
$
|
39,435
41,244
41,139
|
$
|
1,563,644
1,359,759
1,077,385
|
||||||||||||||||||
|
Paul A. Huckfeldt,
CFO and Sr. VP Fin. and Acctg.
|
2018
2017
2016
|
250,000
244,023
214,500
|
149,069
148,603
127,068
|
110,250
84,375
85,800
|
116,799
100,405
47,880
|
9,920
9,530
9,865
|
636,038
586,936
485,113
|
||||||||||||||||||||||||
|
George Revington,
COO Hooker Furniture Corp., President & COO Home Meridian segment (1)
|
2018
2017
|
400,000
396,923
|
237,485
236,257
|
294,000
180,000
|
-
-
|
9,967
13,083
|
941,452
826,263
|
||||||||||||||||||||||||
|
Anne M. Jacobsen,
Senior Vice President- Administration
|
2018
2017
2016
|
200,000
200,000
177,083
|
119,243
118,877
86,381
|
88,200
67,500
70,000
|
58,138
55,065
25,257
|
9,775
10,127
9,163
|
475,356
451,569
367,884
|
||||||||||||||||||||||||
|
Michael W. Delgatti, Jr.,
President-Hooker Brands
|
2018
2017
2016
|
300,000
300,000
300,000
|
188,115
177,187
176,193
|
130,950
101,250
135,000
|
-
-
-
|
9,248
9,284
9,865
|
628,313
587,721
621,058
|
||||||||||||||||||||||||
|
(1)
|
Mr. Revington’s employment began on February 1, 2016, the first day of the Company’s 2017 fiscal year, concurrent with the acquisition of the business of Home Meridian International, Inc.
|
|
(2)
|
Amounts shown represent base salary paid during the fiscal year before any deductions into the Company’s 401(k) plan. Annual base salary adjustments generally become effective at the beginning of each calendar year and do not coincide with the beginning of a fiscal year.
|
30
|
|
Awards table on page 32 and to the Outstanding Equity Awards at Fiscal Year-End table on page 34. For more information regarding the calculation of restricted stock unit and performance grant values, refer to note 12 of the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2018 (the “2018 Form 10-K”), as filed with the SEC.
|
|
(4)
|
This column shows amounts earned under the annual cash incentive program. For more information regarding the terms of the annual cash incentives for fiscal year 2018, see Compensation Discussion and Analysis at page 14.
|
|
Name
|
ELIP
|
Disability Income Insurance Premium
Reimbursement
|
401(k)
Match
|
Total
|
||||||||||||
|
Paul B. Toms, Jr.
|
$
|
29,643
|
$
|
517
|
$
|
9,275
|
$
|
39,435
|
||||||||
|
Paul A. Huckfeldt
|
-
|
470
|
9,450
|
9,920
|
||||||||||||
|
George Revington
|
-
|
517
|
9,450
|
9,967
|
||||||||||||
|
Anne M. Jacobsen
|
-
|
413
|
9,362
|
9,775
|
||||||||||||
|
Michael W. Delgatti, Jr.
|
-
|
517
|
8,731
|
9,248
|
||||||||||||
Employment Agreements and Other Employment Terms
The Company entered into an employment agreement with George Revington upon its acquisition of the assets of Home Meridian International (HMI) effective February 1, 2016. The Committee approved an employment agreement with Mr. Revington under which he would be employed for a term of three years at an annual base salary of $400,000 (as may be adjusted by the Committee from time to time). In addition, the employment agreement provides that Mr. Revington would be eligible to receive a target annual incentive bonus equal to 45% (subsequently increased to 75% in fiscal 2018) of his base salary (including a pro-rated annual bonus for the Company’s 2017 fiscal year based on the portion of such year he was employed by the Company. He would also be eligible to receive long-term incentive awards with an aggregate target value equal to 60% of his base salary and with terms and conditions similar to those awarded to other management employees of the Company having similar salary and level of responsibility, including a pro-rated long-term incentive award for the Company’s 2017 fiscal year based on the portion of such year during which he was employed by the Company. Payout of the target annual bonus will be subject to achievement of 100% of the budgeted operating income goal for the Home Meridian division, as determined by the Committee in its sole discretion. Mr. Revington would receive such other benefits, payments, or items of compensation as are provided under the Company’s employee benefit plans or as are made available from time to time under compensation policies set by Company for management employees having similar salary and level of responsibility as Mr. Revington. If Mr.
31
Revington’s employment is terminated by the Company without cause, he will receive an annual bonus for the year in which his employment terminates if an annual bonus is otherwise payable for that year, which shall be prorated for the period ending on the date his employment terminates.
The Company entered into an employment agreement with Mr. Delgatti during fiscal 2012 when he became President-Hooker Upholstery. The agreement 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 Committee 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-disparagement of the Company, non-competition with the Company and non-solicitation of customers, vendors, suppliers and employees 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 36.
Grants of Plan-Based Awards
The following table sets forth information concerning individual grants of awards made under the Stock Incentive Plans during fiscal 2018:
|
Estimated Future Payouts Under Equity
Incentive Plan Awards (2)
|
||||||||||||||||||||||||||||||||||||
|
Estimated Possible Payouts Under Non-
Equity Incentive Plan Awards(1)
|
||||||||||||||||||||||||||||||||||||
|
Name
|
Award
Type
|
Grant Date for Equity Incentive Plan and Stock
Awards
|
Threshold ($)
|
Target($)
|
Maximum ($)
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
All Other Stock Awards: Number of Units
(3)
|
Grant Date Fair Value of Stock Awards
($)
|
||||||||||||||||||||||||||
|
Paul B. Toms, Jr.
|
Annual Cash
Incentive
|
$
|
155,625
|
$
|
311,250
|
$
|
513,563
|
|||||||||||||||||||||||||||||
|
Performance Grant
|
4/5/17
|
$
|
31,125
|
$
|
249,000
|
$
|
373,500
|
$
|
249,000
|
(4)
|
||||||||||||||||||||||||||
|
Paul A. Huckfeldt
|
Annual Cash
Incentive
|
56,250
|
112,500
|
185,625
|
||||||||||||||||||||||||||||||||
|
|
Performance Grant
|
4/5/17
|
15,000
|
120,000
|
180,000
|
120,000
|
(4)
|
|||||||||||||||||||||||||||||
|
|
RSU Grant
|
4/5/17
|
968
|
29,069
|
(5)
|
|||||||||||||||||||||||||||||||
|
George Revington
|
Annual Cash
Incentive
|
150,000
|
300,000
|
495,000
|
||||||||||||||||||||||||||||||||
|
Performance Grant
|
4/5/17
|
20,004
|
160,008
|
240,012
|
160,008
|
(4)
|
||||||||||||||||||||||||||||||
|
RSU Grant
|
4/5/17
|
2,580
|
77,477
|
(5)
|
||||||||||||||||||||||||||||||||
|
Anne M. Jacobsen
|
Annual Cash
Incentive
|
45,000
|
90,000
|
148,500
|
||||||||||||||||||||||||||||||||
|
|
Performance Grant
|
4/5/17
|
12,000
|
96,000
|
144,000
|
96,000
|
(4)
|
|||||||||||||||||||||||||||||
|
RSU Grant
|
4/5/17
|
774
|
23,243
|
(5)
|
||||||||||||||||||||||||||||||||
|
Michael W. Delgatti, Jr.
|
Annual Cash
Incentive
|
67,500
|
135,000
|
222,750
|
||||||||||||||||||||||||||||||||
|
Performance Grant
|
4/5/17
|
16,253
|
130,007
|
195,010
|
130,007
|
(4)
|
||||||||||||||||||||||||||||||
|
RSU Grant
|
4/5/17
|
1,935
|
58,108
|
(5)
|
||||||||||||||||||||||||||||||||
32
|
(1)
|
Represents the estimated payouts under annual cash incentive program for the 2018 fiscal year, as of the time those incentives were granted to the named executive officers. For additional discussion regarding annual cash incentives and the actual amounts paid to the named officers for fiscal 2018, refer to the Compensation Discussion and Analysis which begins on page 14, including Annual Cash Incentive on page 22 and the Summary Compensation table on page 30.
|
|
(2)
|
Represents the estimated future payouts under the performance grants awarded to the named executive officers in fiscal 2018. For additional discussion regarding these performance grants, refer to Compensation Discussion and Analysis, which begins on page 14, including Long-Term Performance Incentive on page 24 and the Summary Compensation Table on page 30.
|
|
(3)
|
This is the number of service-based RSUs granted to the named executive officer. Each RSU entitles the named executive to receive one share of the Company’s common stock (or, at the discretion of the Committee cash based on the fair market value of a share of the Company’s common stock on the date payment is made or both) if he remains continuously employed with the Company through the end of three-year service periods that end April 5, 2020. In addition to the service-based vesting requirement, 100% of an executive officer’s RSUs will vest upon a change of control of the Company and a prorated number of the RSUs will vest upon the death, disability or retirement of the executive officer.
|
|
(4)
|
Represents the three-year performance grants that were awarded to the named executive officers in fiscal 2018. The three-year performance grants shown were computed assuming that the probable level of performance would be achieved (15% EPS growth and relative EPS growth at the 50th percentile for the performance period) and excluded the impact of estimated forfeitures related to service-based vesting conditions. The maximum amount payable under these awards would occur if the Company achieved 25% or more EPS growth and relative EPS growth at the 75
th
percentile or greater for the performance period. Payouts under the maximum this payout scenario would be: Toms $373,500; Huckfeldt $180,000; Revington $240,012; Jacobsen $144,000; and Delgatti $195,010.
|
33
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning outstanding equity awards, which consist of performance grants and restricted stock units, held by the named executive officers at the end of fiscal 2018. There were no stock options outstanding as of the end of fiscal 2018.
|
Name
|
Grant Date
|
Number of Shares or
Units of Stock That
Have Not Vested(#) |
Market Value of Shares
or Units of Stock That Have Not Vested ($) |
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares, Units
or Other Rights That
Have Not Vested ($)(3)
|
||||||||||
|
Paul B. Toms, Jr.
|
4/6/15(1)
4/13/16(1)
4/5/17(1)
|
-
-
-
|
-
-
-
|
83,250
62,250
72,625
|
||||||||||
|
Paul A. Huckfeldt
|
4/6/15(1)
4/6/15(2)
4/13/16(1)
4/13/16(2)
4/5/17(1)
4/5/17(2)
|
-
1,376
-
1,179
-
968
|
-
54,421
-
46,629
38,284
|
38,610
-
30,000
-
43,750
-
|
||||||||||
|
George Revington(4)
|
4/13/16(1)
4/13/16(2)
4/5/17(1)
4/5/17(2)
|
-
3,143
-
2,580
|
-
124,306
-
102,039
|
40,002
-
70,000
|
||||||||||
|
Anne M. Jacobsen
|
4/6/15(1)
4/6/15(2)
4/13/16(1)
4/13/16(2)
4/5/17(1)
4/5/17(2)
|
-
935
-
943
-
774
|
-
36,979
-
37,296
-
30,612
|
26,250
-
24,000
-
35,000
-
|
||||||||||
|
Michael W. Delgatti, Jr.
|
4/6/15(1)
4/6/15(2)
4/13/16(1)
4/13/16(2)
4/5/17(1)
4/5/17(2)
|
-
3,207
-
2,357
-
1,935
|
-
126,837
-
93,219
-
76,529
|
45,002
-
30,002
-
52,500
-
|
||||||||||
|
(1)
|
Performance grant awards outstanding as of January 28, 2018. Performance grants are denominated as a percentage of the named executive officer’s base salary as of January 1, 2015 for the grants awarded on April 6, 2015, base salary as of January 1, 2016 for the grants awarded on April 13, 2016 and base salary as of January 1, 2017 for grants awarded on April 5, 2017. Performance grants are not expressed as a number of shares, units or other rights. Each performance grant entitles the executive officer to receive a payment based on the achievement of two specified performance conditions. The payout will be the sum of two amounts, based on the Company’s absolute and relative EPS growth over a three-year performance period that began February 2, 2015 and ends January 29, 2018 for the awards granted on April 6, 2015, over a three-year performance period that began February 1, 2016 and ends January 28, 2019 and over a three-year performance period that began January 30, 2017 and ends on January 29, 2020. At the discretion of the Committee, the payout can be made in cash, shares of the Company’s common stock (based on the fair market value of a share of common stock on the date payment is made), or both. The executive officer also must remain continuously employed with the Company through the end of the performance period to be eligible for a payment, with prorated payments made due to retirement, death or disability. The performance grants provide for a lump sum cash payment to the executive officer if the Company undergoes a change of control. For additional discussion regarding the performance grants, refer to the Compensation Discussion and Analysis at page 14.
|
34
|
(2)
|
Restricted stock units (“RSU”) award outstanding at the end of the last completed fiscal year. Market value is based on the closing market price of the Company’s common stock on January 26, 2018, the last trading day of the Company’s 2018 fiscal year. Each RSU entitles the executive officer to receive one share of common stock if he remains continuously employed with the Company through the end of a three-year service period (i.e., April 6, 2018 for the April 6, 2015 award, April 13, 2019 for the April 13, 2016 award and April 5, 2020 for the April 5, 2017 award). At the discretion of the Committee, the RSUs may be paid in shares of the Company’s common stock, cash (based on the fair market value of a share of common stock on the date payment is made), or both. In addition to the service-based vesting requirement, 100% of the RSUs will vest upon a change of control of the Company and a prorated number of the RSUs will vest upon the death, disability or retirement of the executive officer.
|
|
(3)
|
The amount reported for the 2016 performance grant award is based on the actual level of absolute and relative EPS growth achieved as of the end of the 2018 fiscal year, which was the end of the award’s three-year performance period. The amount reported for the 2019 and 2020 performance grant awards is based on the level of performance achieved as of the end of the 2018 fiscal year, even though actual performance will not be measured under each of those awards until the end of their respective three-year performance periods. If the interim performance exceeded the threshold for the award, the reported value of the award was based on assumed achievement of the next higher performance measure that exceeds the actual interim measure of performance (which was the maximum performance level for both absolute and relative EPS growth). Any payments under the 2017 and 2018 performance grant awards will be determined based on actual performance through 2020 and 2021, respectively, and not on any interim measure of performance.
|
|
(4)
|
Mr. Revington’s employment began on February 1, 2016, the first day of the Company’s 2017 fiscal year, concurrent with the acquisition of Home Meridian International, Inc.
|
Supplemental Retirement Benefits
The following table sets forth information concerning benefits provided for Messrs. Toms and Huckfeldt and Ms. Jacobsen under the Company’s Supplemental Retirement Income Plan (“SRIP”). Messrs. Revington and Delgatti do not participate in the SRIP:
|
Name
|
Plan
Name |
Plan
Years
of
Service
|
Present Value of
Accumulated Benefit ($)(1) |
|||||||
|
Paul B. Toms, Jr.
|
SRIP
|
14
|
$
|
2,769,819
|
||||||
|
Paul A. Huckfeldt
|
SRIP
|
12
|
518,580
|
|||||||
|
Anne M. Jacobsen
|
SRIP
|
10
|
253,247
|
|||||||
The SRIP provides a monthly supplemental
retirement benefit equal to a specified percentage of the executive’s final average monthly compensation (50% for Mr. Toms and 25% for both Mr. Huckfeldt and Ms. Jacobsen), payable for a 15-year period following the executive’s termination of employment. Final average monthly compensation means the average monthly base salary and any annual incentive awards paid to the executive during the five-year period before his termination of employment with the Company.
An executive becomes vested in 75% of the monthly supplemental benefit if the executive remains continuously employed with the Company until reaching age 60, and is vested in additional 5% increments for each subsequent year that the executive remains continuously employed with the Company. Executives who remain continuously employed to age 65 become fully vested in their monthly supplemental benefit. The monthly retirement benefit for each participant in the plan, regardless of age, will become fully vested and the present value of all plan benefits will be paid to participants in a lump sum upon a change in control of the Company (as discussed under Potential Payments upon Termination or Change in Control, below). Additional information regarding the SRIP can be found under Compensation Discussion and Analysis beginning on page 14.
35
Upon a change in control of the Company each SRIP participant, regardless of age, will become fully vested and receive the present value of his entire plan benefit in a lump sum payment. A “change in control” includes, subject to certain exceptions:
|
§
|
|
§
|
The following table provides the estimated lump sum payment each participating named executive officer would have received under the SRIP if a change in control had occurred on the last day of fiscal 2018.
|
Name
|
Change in Control – SRIP (1)
|
|||
|
Paul B. Toms, Jr.
|
$
|
3,245,558
|
||
|
Paul A. Huckfeldt
|
788,164
|
|||
|
Anne M. Jacobsen
|
537,593
|
|||
|
(1)
Calculated based on historical average salary and bonus amounts for the five-year period ended January 31, 2018 and assuming a discount rate equal to 120% of the short-term (2.0%), mid-term (2.6%) or long-term (3.08%) applicable federal rate for the month of January 2018 depending on the number of years remaining to the participant’s retirement at age 65.
|
||||
If a SRIP participant were to die while employed by the Company and before payment of his vested benefit begins, his beneficiary will receive a death benefit equal to the participant’s vested benefit, which would be paid in 180 equal monthly payments.
Outstanding performance grants awarded to the named executive officers provide for a lump sum cash payment to the executive officer if the Company undergoes a “change of control.” The payment would be made on the date of the change of control and would assume that the named executive officer remained continuously employed through the end of the applicable performance period and that the specified target levels defined in the grant agreement had been attained for the applicable performance period. A change of control includes, subject to certain exceptions:
|
§
|
acquisition, other than from the Company, of more than 50% of the combined voting power of the Company’s Common Stock; or
|
|
§
|
a majority of the members of the Board is replaced during a twelve-consecutive-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; and
|
|
§
|
on or after the occurrence of the change of control, the participant’s employment is terminated involuntarily or constructively terminated without cause.
|
The 2015 Stock Incentive Plan generally provides that where the successor or acquirer agrees in writing prior to the occurrence of a change of control to assume or continue the Company’s outstanding awards, no accelerated vesting, exercisability and/or payment of an outstanding award (or substitute award) shall occur, unless on or after the occurrence of the change of control, the participant’s employment is terminated involuntarily or constructively terminated without cause.
36
The performance grants also provide for a pro-rated lump sum payment to be made in connection with the death, disability or retirement (as defined in the 2015 Stock Incentive Plan) of the named executive officer. The payment would be made upon the completion of the applicable performance period based on the performance levels actually achieved for the applicable performance period.
The following table provides the estimated aggregate payments to which each named executive officer would have been entitled under his respective performance grants if a change of control, or the executive’s death, disability or retirement, had occurred on the last day of fiscal 2018 (subject to certain assumptions, as specified below).
|
Payout under Performance Grants ($)(1)
|
||||||||
|
Name
|
Change of Control
|
Death, Disability or Retirement
|
||||||
|
Paul B. Toms, Jr.
|
$
|
720,000
|
$
|
470,751
|
||||
|
Paul A. Huckfeldt
|
342,960
|
222,840
|
||||||
|
George Revington
|
320,016
|
159,848
|
||||||
|
Anne M. Jacobsen
|
296,007
|
177,228
|
||||||
|
Michael W. Delgatti, Jr.
|
336,012
|
231,898
|
||||||
|
(1)
|
These amounts include the amounts payable under three-year performance grants awarded April 6, 2015, April 13, 2016 and April 5, 2017 which are described in the Outstanding Equity Awards at Fiscal Year-End table on page 34. The payout amounts in connection with an executive’s death, disability or retirement assume that the probable level of performance is achieved for the applicable performance periods.
|
Restricted Stock Units
Outstanding restricted stock units (RSUs) awarded to the named executive officers will vest 100% upon a change of control of the Company and a pro-rated amount will vest upon the executive’s death, disability or retirement (as defined in the 2015 Stock Incentive Plan). A “change of control” of the Company for purposes of the RSUs has the same meaning as for the performance grants described above. The RSU payment would be a lump sum paid on the date of the change of control or as soon as administratively practicable after the vesting date upon the executive’s death, disability or retirement. The following table provides an estimate of the aggregate payments that each named executive officer would have received under the executive’s RSUs if a change of control, or the executive’s death, disability or retirement, had occurred on the last day of fiscal 2018.
|
Payout under Restricted Stock Units Upon ($)(1)
|
||||||||
|
Name
|
Change of Control
|
Death, Disability or Retirement
|
||||||
|
Paul B. Toms, Jr.
|
$
|
-
|
$
|
-
|
||||
|
Paul A. Huckfeldt
|
139,335
|
97,830
|
||||||
|
George Revington
|
226,345
|
115,715
|
||||||
|
Anne M. Jacobsen
|
104,887
|
71,696
|
||||||
|
Michael W. Delgatti, Jr.
|
296,585
|
213,616
|
||||||
37
Under the Company’s executive life insurance program, a death benefit of $2.0 million is payable to Mr. Toms’ designated beneficiary if he dies after his 60
th
birthday but on or before his 65
th
birthday and Mr. Toms remains employed with the Company through the date of his death. Mr. Toms’ beneficiary would have received a lump sum payment of $2.0 million had Mr. Toms died on the last day of fiscal 2018. Messrs. Huckfeldt, Revington and Delgatti and Ms. Jacobsen do not participate in the executive life insurance program.
Under his employment agreement, Mr. Revington may receive a payment under the Company’s annual cash incentive plan if his employment is terminated by the Company without cause. Such a payment will be made only if annual cash incentive payments are otherwise payable by the Company for the fiscal year in which his employment was terminated. The payment would be prorated for the portion of the fiscal year ending on the date his employment terminated and would be paid by no later than April 15 of the calendar year in which such fiscal year ends.
For Mr. Revington’s employment agreement, “cause” means:
|
·
|
fraud, theft or embezzlement against the Company or any of its affiliates;
|
|
·
|
misconduct in the performance of his duties injurious to the business or reputation of the Company or any of its affiliates;
|
|
·
|
conviction of, or entry of a plea of guilty or nolo contendere to, a crime that constitutes a felony or other crime involving dishonesty or moral turpitude;
|
|
·
|
his breach of any restrictions imposed on him under the agreement, violation of any policy, code or standard of ethics generally applicable to employees of the Company, or material breach of fiduciary duties owed to the Company; or
|
|
·
|
his refusal to perform or gross neglect of the duties assigned to him.
|
Delgatti Employment Agreement
Mr. Delgatti would receive payments under his employment agreement in connection with his death and upon termination of his employment by the Company without cause. If Mr. Delgatti were to die during the term of his agreement, his estate would receive his salary and annual bonus, prorated through the date of his death. If Mr. Delgatti’s employment is terminated by the Company without cause during the term of his agreement,
he would receive his annual bonus, prorated through the date of his termination
.
|
§
|
fraud, dishonesty, theft, embezzlement or misconduct injurious to the Company or any of its affiliates;
|
|
§
|
conviction of, or entry of a plea of guilty or
nolo contendere
to, a crime that constitutes a felony or other crime involving moral turpitude;
|
|
§
|
competition with the Company or any of its affiliates;
|
|
§
|
unauthorized use of any trade secrets of the Company or any of its affiliates or confidential information (as defined in the agreement);
|
|
§
|
violation of any policy, code or standard of ethics generally applicable to the Company’s employees;
|
|
§
|
a material breach of fiduciary duties owed to the Company;
|
|
§
|
excessive and unexcused absenteeism unrelated to a disability; or
|
|
§
|
after written notice and a reasonable opportunity to cure, gross neglect of assigned duties.
|
38
If Mr. Delgatti’s employment is terminated by the Company for cause, he will not receive any post-termination payments (including earned but unpaid annual bonus with respect to any performance year or portion thereof preceding the termination date), other than the salary he had earned through the date his employment terminated.
In accordance with Item 402(u) of Regulation S-K, promulgated by the Dodd-Frank Wall Street Reform Act and Consumer Protection Act of 2010, we determined the
ratio of the annual total compensation of Mr. Toms, our Chairman and Chief Executive Officer, relative to the annual total compensation of our median employee.
To identify the median compensated employee, we used 2017 W-2 wages for U.S. employees or its equivalent for non-US employees, excluding approximately 326 employees of Shenandoah Furniture, the business acquired by the Company on September 29, 2017. While two employees were initially identified as the median employee, the Company selected a single employee as the median employee, as required by SEC rules, choosing the employee whose income types most closely resembled that of our Chairman and Chief Executive Officer.
We then determined total compensation for the median employee in the same manner as the “Total Compensation” column shown for Mr. Toms in the Summary Compensation Table on page 30.
Pay elements that were included to determine total annual compensation for the median employee were:
|
·
|
Base salary, including overtime, vacation and holiday pay;
|
|
·
|
Annual cash incentive; and
|
|
·
|
401(k) matching contribution
|
We determined that the 2017 annual total compensation of the median employee was $39,698. Mr. Toms’ 2017 annual total compensation was $1,563,644 and the ratio of these amounts was 1-to-39.
As of December 31, 2017, our total population consisted of 1,183 employees, of which 927 were in the United States and 256 were in Asia.
We believe this pay ratio is a reasonable estimate calculated in a manner consistent with the Pay Ratio Securities and Exchange Commission (SEC) rules under SEC rules based on our payroll and employment records and the methodology described above.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information about the Company’s equity compensation plans as of January 28, 2018:
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted-average exercise price of outstanding options,
warrants and rights
|
Approximate
number of securities
remaining available for future issuance under equity
compensation plans(1)
|
|||||||||
|
Equity compensation plans approved by security holders
|
0
|
N/A
|
535,000
|
|||||||||
|
Equity compensation plans not approved by security holders
|
None
|
None
|
None
|
|||||||||
|
Total
|
0
|
N/A
|
535,000
|
|||||||||
39
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Exchange Act requires the Company’s executive officers and directors, and any persons owning more than 10% of the Common Stock, to file reports of ownership and changes in ownership with the SEC. Based solely on its review of Forms 3, 4 and 5 filed during or with respect to the fiscal year ended January 28, 2018, and written representations from the Company’s directors and executive officers and certain other reporting persons that no Forms 5 were required to be filed by those persons for that fiscal year, the Company believes that all executive officers, directors and 10% shareholders complied with those filing requirements and there were no late reports.
The following table sets forth information with respect to the beneficial ownership of the Company’s Common Stock as of April 6, 2018 (unless noted otherwise below) by:
|
§
|
each shareholder known by the Company to be the beneficial owner of more than 5% of its outstanding Common Stock;
|
|
§
|
each director and director nominee;
|
|
§
|
each named executive officer; and
|
|
§
|
all directors and executive officers as a group.
|
|
Name
|
Amount and Nature Of
Beneficial Ownership
|
Percent
Of Class |
||||||
|
Royce & Associates, LLC (1)
|
1,645,500
|
(1)
|
14.0
|
%
|
||||
|
NWQ Investment Management Company, LLC (2)
|
1,362,567
|
(2)
|
11.6
|
|||||
|
Dimensional Fund Advisors LP (3)
|
973,228
|
(3)
|
8.3
|
|||||
|
BlackRock, Inc. (4)
|
722,712
|
(4)
|
6.1
|
|||||
|
Paul B. Toms, Jr.
|
125,682
|
(5)
|
1.1
|
|||||
|
George Revington
|
25,251
|
(6)
|
*
|
|||||
|
W. Christopher Beeler, Jr.
|
31,331
|
(7)
|
*
|
|||||
|
Henry G. Williamson, Jr.
|
29,765
|
(8)
|
*
|
|||||
|
Michael W. Delgatti, Jr.
|
14,166
|
(9)
|
*
|
|||||
|
E. Larry Ryder
|
15,722
|
(10)
|
*
|
|||||
|
John L. Gregory, III
|
17,240
|
(11)
|
*
|
|||||
|
Paul A. Huckfeldt
|
17,432
|
(12)
|
*
|
|||||
|
David G. Sweet
|
9,863
|
(13)
|
*
|
|||||
|
Anne M. Jacobsen
|
5,887
|
(14)
|
*
|
|||||
|
Ellen C. Taaffe
|
2,322
|
(15)
|
*
|
|||||
|
Paulette Garafolo
|
461
|
(16)
|
*
|
|||||
|
Tonya H. Jackson
|
461
|
(17)
|
*
|
|||||
|
All directors and executive officers as a group (13 persons)
|
295,583
|
2.5
|
||||||
*
Less than one percent.
40
|
(1)
|
The beneficial ownership information for Royce & Associates, LLC is based upon a Schedule 13G/A field with the SEC on January 22, 2018. The Schedule 13G/A indicates that Royce & Associates, LLC has sole disposition power and sole voting power with respect to all 1,645,500 shares. The principal business address of Royce & Associates, LLC is 745 Fifth Avenue, New York, New York 10151.
|
|
(2)
|
The beneficial ownership information for NWQ Investment Management Company, LLC is based upon a Schedule 13G/A filed with the SEC on February 13, 2018. The Schedule 13G/A indicates that NWQ Investment Management Company, LLC, a registered investment adviser, has sole disposition power and sole voting power with respect to all 1,362,567 shares. The principal business address of NWQ Investment Management Company is 2049 Century Park East, 16
th
Floor, Los Angeles, California 90067.
|
|
(3)
|
The beneficial ownership information for Dimensional Fund Advisors LP is based upon a Schedule 13G/A filed with the SEC on February 9, 2018. The Schedule 13G/A indicates that Dimensional Fund Advisors LP, a registered investment adviser that furnishes investment advice to four registered investment companies and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”), reported holdings of the Company’s Common Stock beneficially owned by the Funds such that the reporting person had voting power over 942,506 shares and dispositive power over 973,228 shares. Dimensional Fund Advisors LP reported that either it or its subsidiaries may possess voting and/or investment power over the Company’s Common Stock owned by the Funds, but disclaimed beneficial ownership of such Company Common Stock. The principal business address of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
|
|
(4)
|
The beneficial ownership information for BlackRock, Inc. is based upon a Schedule 13G/A filed with the SEC on January 25, 2018. The Schedule 13G/A indicates that BlackRock, Inc. has sole voting power with respect to 701,128 shares and sole dispositive power with respect to all 722,712 shares. The principal business address of BlackRock, Inc. is 55 East 52
nd
Street, New York, New York 10055.
|
|
(5)
|
Mr. Toms has sole voting and disposition power with respect to 94,138 shares and shared voting and disposition power with respect to 31,544 shares.
|
|
(6)
|
Mr. Revington has sole voting and disposition power with respect to all 25,251 shares.
|
|
(7)
|
Mr. Beeler has sole voting power with respect to 31,331 shares and sole disposition power with respect to 30,660 shares.
|
|
(8)
|
Mr. Williamson has sole voting power with respect to 26,265 shares, sole disposition power with respect to 25,594 shares and shared voting and disposition power with respect to 3,500 shares.
|
|
(9)
|
Mr. Delgatti has sole voting and disposition power with respect to all 14,166 shares.
|
|
(10)
|
Mr. Ryder has sole voting power with respect to 15,722 shares and sole disposition power with respect to 15,146 shares.
|
|
(11)
|
Mr. Gregory has sole voting power with respect to 17,240 shares and sole disposition power with respect to 16,605 shares.
|
|
(12)
|
Mr. Huckfeldt has sole voting and disposition power with respect to 17,432 shares and has shared voting and disposition power with respect to 500 shares.
|
|
(13)
|
Mr. Sweet has sole voting power with respect to 9,863 shares and sole disposition power with respect to 9,287 shares.
|
|
(14)
|
Ms. Jacobsen has sole voting and disposition power with respect to all 5,887 shares.
|
|
(15)
|
Ms. Taaffe has sole voting power with respect to 2,322 shares and sole disposition power with respect to 1,687 shares.
|
|
(16)
|
Ms. Garafolo has sole voting power with respect to 461 shares.
|
|
(17)
|
Ms. Jackson has sole voting power with respect to 461 shares.
|
PROPOSAL TWO
The Audit Committee of the Board of Directors has selected the firm of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 3, 2019
, subject to ratification by the shareholders. Action by the shareholders is not required by law in the selection of the Company’s independent registered public accounting firm, but the Company submits its selection in order to give shareholders an opportunity to ratify the Audit Committee’s selection of KPMG. If the shareholders do not ratify the selection of KPMG, the Audit Committee will reconsider the selection of the Company’s independent registered public accounting firm. Unless otherwise specified, shares represented by proxies will be voted for the ratification of the selection of KPMG, as the Company’s independent registered public accounting firm for fiscal 2019.
KPMG has served as the Company’s independent registered public accounting firm since fiscal 2003.
Representatives of KPMG are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Principal Accountant Fees and Services
41
|
Fiscal
2018 |
Fiscal
2017 |
|||||||
|
Audit Fees
|
$
|
1,557,000
|
$
|
1,254,000
|
||||
|
Audit-Related Fees
|
None
|
None
|
||||||
|
Tax Fees
|
83,000
|
59,000
|
||||||
|
All Other Fees
|
None
|
None
|
||||||
Audit Fees
include KPMG’s fees for audit services, including the audits of the Company’s annual financial statements and internal control over financial reporting, review of the Company’s quarterly financial statements included in its Forms 10-Q and review of SEC filings. Fiscal 2018 audit fees increased primarily due to the additional fees related to the increased costs of auditing a significantly larger entity, due to the Company’s recent acquisitions.
Audit-Related Fees
include fees billed by KPMG during the periods reported for audit-related services not otherwise reported in Audit Fees.
Tax Fees
include fees billed by KPMG for federal, state and international tax planning and compliance services and advice. For both fiscal 2018 and fiscal 2017, tax matters included consulting in connection with international tax planning and compliance.
The Audit Committee is required to pre-approve all audit and permitted non-audit services provided by KPMG, the Company’s auditing firm. The Audit Committee has authorized the Committee Chair to approve specific tax projects up to $30,000 each or an aggregate of no more than $60,000 and individual audit-related projects up to a maximum of $50,000 between Committee meetings provided that the decision to approve the service is presented at the next scheduled Committee meeting. Less than 1% of aggregate Audit-Related Fees and Tax Fees for each fiscal year presented above was approved by the Committee pursuant to the
de minimis
waiver of the pre-approval requirement set forth in Regulation S-X 2.01(c)(7)(i)(C).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
RATIFICATION OF THE SELECTION OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING FEBRUARY 3, 2019.
PROPOSAL THREE
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that the Company provide its shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement. Consistent with a majority of the advisory votes cast at the 2017 Annual Meeting of Shareholders and the recommendation of the Company’s Board of Directors, the Company holds a shareholder advisory vote to approve the compensation of its named executive officers annually. The Company encourages shareholders to read the disclosures under Executive Compensation, beginning on page 14, which include the Compensation Discussion and Analysis, the compensation tables and the narratives that accompany those tables, for more information concerning the Company’s compensation philosophy, programs and practices, the compensation and governance-related actions taken in fiscal 2017 and the compensation awarded to the named executive officers.
As described under the Compensation Discussion and Analysis, the Company’s executive compensation programs are designed to:
|
§
|
42
|
§
|
The Board believes that the Company’s executive compensation program satisfies these objectives and is worthy of shareholder support. In determining whether to approve this proposal, the Board believes that shareholders should consider the following:
Independent Compensation Committee.
Executive compensation is reviewed and established by a Compensation Committee of the Board consisting solely of independent directors. The Compensation Committee regularly meets in executive session, without executive officers present, in determining annual compensation.
The Compensation Committee, at its sole discretion, may obtain data, analysis and input from an independent compensation consultant
.
Compensation is Tied to Performance.
Key elements of the Company’s compensation program, including annual cash incentives and certain long-term incentive awards, are aligned with financial and operational objectives established in the Board-approved annual operating plan. As a result, a meaningful portion of each executive’s total compensation is “at risk” and is earned only if a threshold level of targeted performance is achieved.
Balanced Compensation Structure.
Total cash compensation is allocated between base salary and an annual incentive opportunity tied directly to objective and quantifiable measures of the Company’s business performance. Long-term incentive awards are balanced between those that are earned only if specific performance measures are met and those that are earned if an executive remains in continuous employment for a sustained period. Retirement and life insurance benefits are only provided if an executive remains employed to a specified age.
This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers described in this proxy statement. This vote is advisory, which means that the vote is not binding on the Company, the Board of Directors or the Compensation Committee. To the extent there is any significant vote against named executive officer compensation as disclosed in this proxy statement, the Compensation Committee will evaluate whether any actions are appropriate to address the concerns of shareholders.
This proposal will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against it.
Accordingly, the Company asks its shareholders to vote on the following resolution at the Annual Meeting:
RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 2018 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.
Management knows of no other business that will be presented for consideration at the Annual Meeting, but should any other matters be brought before the meeting, it is intended that the persons named in the accompanying proxy will vote that proxy at their discretion.
The Company plans to hold the 2019 Annual Meeting on June 6, 2019. The Company’s bylaws (Article II, Section 1) provide that for business to be properly brought before an Annual Meeting by a shareholder of record, the shareholder must, in addition to meeting other applicable requirements, give timely written notice to the Secretary at the principal office of the Company. To submit business at the
43
2019 Annual Meeting, the notice must be received no later than January 4, 2019. The shareholder’s notice must include:
|
§
|
|
§
|
The proxies for the 2019 Annual Meeting will have discretionary authority to vote on any matter that properly comes before the meeting if the shareholder has not provided written notice before March 20, 2019.
A proposal that any shareholder desires to have included in the proxy statement for the 2019 Annual Meeting of shareholders must be received by the Company no later than January 4, 2019 and must comply with the SEC rules regarding shareholder proposals.
Shareholders may send written communications to the Board of Directors c/o Secretary, Hooker Furniture Corporation, P.O. Box 4708, Martinsville, Virginia 24115-4708. Any shareholder communication directed to the Board, a Director or any Board Committee, is forwarded to the Company’s Chief Financial Officer and then to the Board or the appropriate Director(s) or Committee(s).
|
|
By Order of the Board of Directors,
|
|
Robert W. Sherwood
|
|
|
Secretary
|
May 4, 2018
44
ANNUAL MEETING OF SHAREHOLDERS OF
HOOKER FURNITURE CORPORATION
June 5, 2018
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Shareholders to be Held on Tuesday, June 5, 2018
:
The Company’s Proxy Statement and Annual Report to Shareholders are available at
http://www.astproxyportal.com/ast/25490
Please complete, sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
|
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK
AS SHOWN HERE
☒
|
||||||
|
(1) Election of Directors
|
(2)
Ratify the selection of KPMG
LLP as the Company’s
independent registered public
accounting firm for the fiscal
year ending February 3, 2019.
|
FOR
☐
|
AGAINST
☐
|
ABSTAIN
☐
|
||
| ☐ FOR ALL NOMINEES |
NOMINEES
○Paul B. Toms, Jr.
|
(3)
Advisory vote to approve named
executive officer compensation.
|
FOR
☐
|
AGAINST
☐
|
ABSTAIN
☐
|
|
| ○W. Christopher Beeler, Jr. | ||||||
| ☐ WITHHOLD AUTHORITY FOR ALL NOMINEES |
○Paulette Garafalo
○John L. Gregory, III
○Tonya H. Jackson
○E. Larry Ryder
|
(4) In their discretion the proxies are
authorized to vote upon such other
matters as may come before the
meeting or any adjournment thereof.
|
||||
|
☐ FOR ALL EXCEPT
(See instructions below)
|
○Ellen C. Taaffe
○Henry G. Williamson, Jr.
|
|||||
|
All as more particularly described in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on June 5, 2018, receipt of which is hereby acknowledged.
|
||||||
|
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee for whom you wish to
withhold authority to vote
, as shown here: ●
|
||||||
|
|
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED SHAREHOLDER. IF NO CHOICE IS SPECIFIED BY THE SHAREHOLDER, THIS PROXY WILL BE VOTED “FOR” THE 8 DIRECTOR NOMINEES LISTED IN ITEM (1), “FOR” ITEMS (2) AND (3), AND IN THE PROXIES’ DISCRETION ON ANY OTHER MATTERS COMING BEFORE THE MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such stock and hereby ratifies and confirms all that said proxies, their substitutes or any of them may lawfully do by virtue hereof.
Please promptly complete, sign, date and mail this Proxy Card in the enclosed envelope. No postage is required.
Signature of Shareholder ________________________________
Date: _______________
|
|||||
|
To change your address on the account please check the box at right and indicate your new address in the address space above. Please note that the changes to the registered name(s) on the account may not be submitted via this method. ☐
|
||||||
|
Signature of Shareholder_______________________________ Date: _______________
|
||||||
|
Note:
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is partnership, please sign in partnership name by authorized person.
|
||||||
|
|
REVOCABLE PROXY
HOOKER FURNITURE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For the Annual Meeting of Shareholders called for Tuesday, June 5, 2018
The undersigned hereby appoints Paul B. Toms, Jr. and Paul A. Huckfeldt, or either of them, the attorneys, agents and proxies of the undersigned, with full power of substitution, to vote all the shares of common stock of Hooker Furniture Corporation (the “Company”) that the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held at the Company’s Corporate Office at 440 East Commonwealth Boulevard, Martinsville, Virginia, on Tuesday, June 5, 2018 at 1:00 P.M., and all adjournments thereof, with all the powers the undersigned would possess if then and there personally present. Without limiting the general authorization and power hereby given, the above proxies are directed to vote as instructed on the matters on the reverse side:
(Continued and to be completed, dated and signed on reverse side.)
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