DEF 14A 1 d291992ddef14a.htm DEF 14A DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  þ                            Filed by a Party other than the Registrant  ¨

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¨   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-12
Furniture Brands International, Inc.
(Name of registrant as specified in its charter)
(Name of person(s) Filing proxy Statement, if other than the registrant)
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LOGO

 

March 23, 2012

Dear Fellow Stockholder:

You are cordially invited to attend the 2012 Annual Meeting of Stockholders. It will be held on Thursday, May 3, 2012, at 9:00 a.m. CDT at Furniture Brands International, Inc., 1 North Brentwood Boulevard, 15th Floor, St. Louis, Missouri 63105.

At the Annual Meeting, the agenda includes the following items:

 

Agenda Item:

   Board Recommendation
Election of Directors    FOR

Ratification of KPMG LLP as our independent registered public accounting firm

   FOR
Advisory Vote on Executive Compensation    FOR

As owners of Furniture Brands, your vote is important. Whether or not you are able to attend the Annual Meeting of Stockholders in person, it is important that your shares be represented. Please vote as soon as possible.

On behalf of our Board of Directors, thank you for your participation in this important annual process. I look forward to seeing you at the 2012 Annual Meeting.

 

Sincerely,
LOGO
Ralph P. Scozzafava

Chairman of the Board of Directors and

Chief Executive Officer


LOGO

 

 

NOTICE OF 2012 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 3, 2012

 

 

 

Date:

   May 3, 2012

Time:

   9:00 a.m. CDT

Place:

  

Furniture Brands International, Inc.

1 North Brentwood Boulevard, 15th Floor

St. Louis, Missouri 63105

Purpose:

  

1.      To elect the eight director nominees named in this Proxy Statement to the Board of Directors to serve until the next Annual Meeting and until their successors have been elected and qualified;

 

2.      To ratify the selection of KPMG LLP as our independent registered public accounting firm for 2012;

 

3.      To approve the company’s executive compensation; and

 

4.      To transact such other business as may properly come before the meeting.

Record Date:

   Holders of record of our common stock at the close of business on March 9, 2012, are entitled to receive this notice and to vote at the meeting.

We are pleased to take advantage of the U.S. Securities and Exchange Commission (SEC) rule that allows issuers to furnish proxy materials to their stockholders on the Internet. This Proxy Statement, the proxy card and our 2011 Annual Report to our stockholders may be accessed at www.proxyvote.com.

As owners of Furniture Brands, your vote is important. Whether or not you are able to attend the Annual Meeting in person, it is important that your shares be represented. Please vote as soon as possible. We appreciate your cooperation.

 

By Order of the Board of Directors,
         LOGO
Jon D. Botsford
Senior Vice President, General Counsel and Corporate Secretary

March 23, 2012

St. Louis, Missouri


PROXY SUMMARY

This summary highlights information contained in this Proxy Statement. The summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

Annual Meeting of Stockholders

 

Date and Time:    May 3, 2012 at 9:00 am CDT
Place:    Furniture Brands International, Inc., 1 North Brentwood Blvd., 15th Floor, St. Louis, Missouri 63105
Record Date:    March 9, 2012

Meeting Agenda and Board Recommendation

 

Agenda Item:

   Board Recommendation    Page Reference
(for more  detail)

Election of Eight Directors

   FOR    5

Ratification of KPMG LLP as our independent registered public accounting firm for 2012

   FOR    14

Advisory Vote on Executive Compensation

   FOR    16

Board Nominees (Proposal 1):    The following table provides summary information about each director nominee.

 

                         Committee Membership

Nominee:

  Age     Director
Since
   

Occupation

  Independent   Audit   GNC*   Human
Resources

Kent J. Hussey

    65        —        Retired, Former Chairman and CEO of Spectrum Brands, Inc. (a publicly traded manufacturer of consumer products)   ü      

Ira D. Kaplan

    53        2008      Former CFO of Claire’s Stores Inc.   ü   Chair    

Ann S. Lieff

    60        2010      President of The Lieff Company, and former President and CEO of Spec’s Music, Inc.   ü   ü    

Maureen A. McGuire

    60        2008      Chief Marketing Officer of Bloomberg LP   ü     ü   ü

Aubrey B. Patterson

    69        2004      Chairman and CEO of BancorpSouth, Inc.   ü     Chair   ü

George E. Ross, Ph.D.

    60        2010      President of Central Michigan University   ü   ü    

Ralph P. Scozzafava

    53        2007      Chairman and CEO of Furniture Brands        

James M. Zimmerman

    68        2010      Retired, Former Chairman and CEO of Federated Department Stores, Inc.   ü       Chair

 

* GNC- Governance and Nominating Committee

 

 

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Ratification of KPMG LLP (Proposal 2):    We are asking our stockholders to ratify the Audit Committee’s selection of KPMG LLP as our independent registered public accounting firm for the 2012 fiscal year.

Advisory Vote on Executive Compensation (Proposal 3):    We are asking our stockholders to approve on an advisory basis our named executive officer compensation. The Board recommends a vote “FOR” the compensation of our named executive officers because it believes that our executive compensation was designed appropriately to retain, attract and motivate executives who create long-term value for our stockholders.

2011 Compensation Decisions:    The following decisions were made in 2011 with respect to executive compensation:

 

   

Froze base salaries and the value of target short-term incentive compensation for executive officers.

 

   

Reduced the full value of each executive’s target long-term incentive compensation by 18% to bring target total compensation for each executive closer to the median of the company’s new peer group.

 

   

Approved a redesigned short-term incentive plan that pays on the achievement of corporate net earnings, corporate net sales goals and individual objectives, which individual goals were included for the first time in the short-term incentive plan to give the Committee the flexibility to recognize that an executive’s performance may not always be linked directly to the company’s achievement of corporate financial goals.

 

   

Approved a mix of long-term performance-based cash and service-based equity awards to alleviate retention concerns associated with the reduction in the value of executive long-term incentive compensation.

 

   

Approved new executive stock ownership guidelines which require executive officers to own an increased number of shares of our common stock equal to a specified multiple of their annual base salary.

By establishing these performance-based incentive plans, 67% of our Chief Executive Officer’s total 2011 target compensation was at-risk and 50 to 55% of total target compensation for all other named executive officers in 2011 was at-risk.

 

 

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FURNITURE BRANDS INTERNATIONAL, INC.

1 North Brentwood Boulevard, 15th Floor

St. Louis, Missouri 63105

Phone: (314) 863-1100

 

 

PROXY STATEMENT

 

 

Why am I receiving these materials?

You were provided these materials in connection with our solicitation of proxies for use at the Annual Meeting of Stockholders, to be held on Thursday, May 3, 2012, at 9:00 a.m. CDT, and at any postponement(s) or adjournment(s) thereof. These materials were first sent or given to stockholders on March 23, 2012. You are invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement. The Annual Meeting will be held at our principal executive offices located at the address shown above.

What items will be voted on at the Annual Meeting?

Stockholders will vote on three items at the Annual Meeting:

 

   

the election to the Board of the eight director nominees named in this Proxy Statement (Proposal 1);

 

   

the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2012 (Proposal 2); and

 

   

an advisory vote on executive compensation (Proposal 3).

What is the Board’s voting recommendations?

The Board recommends that you vote your shares:

 

   

“FOR” each of the nominees to the Board (Proposal 1);

 

   

“FOR” ratification of the appointment of KPMG LLP as our independent registered public accounting firm (Proposal 2); and

 

   

“FOR” the proposal regarding the advisory vote on executive compensation (Proposal 3).

Who May Vote?

If you held any shares of our voting stock at the close of business on March 9, 2012, then you may attend and vote at the meeting. On that date, we had 56,369,220 shares of common stock outstanding. Each share of our common stock that you hold entitles you to one vote on all matters that come before the Annual Meeting or any adjournment thereof.

Why did I receive a notice in the mail regarding the availability of proxy materials this year instead of a full set of proxy materials?

Pursuant to rules adopted by the SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a notice regarding the availability of proxy materials to our stockholders of record and our beneficial owners. All stockholders will have the ability to access the proxy materials on the website referred to in the notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the notice. We encourage you to take advantage of the availability of the proxy materials on the Internet in order to help reduce the environmental impact of the Annual Meeting.

 


How can I get electronic access to the proxy materials?

The notice will provide you with instructions regarding how to receive a copy of the proxy materials via email. In addition, you may instruct us to send future proxy materials to you electronically by email by accessing the website in the notice. Choosing to receive future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. Your election to receive proxy materials by email will remain in effect until you terminate it.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

Most of our stockholders hold their shares through a broker or other nominee (in “street name”) rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.

 

   

Stockholder of Record — If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, to be the stockholder of record. As the stockholder of record, you have the right to grant your voting proxy directly to us or to a third party, or to vote in person at the meeting.

 

   

Beneficial Owner — If your shares are held in a brokerage account, by a broker or by another nominee, you are considered the beneficial owner of those shares. As the beneficial owner of those shares, you have the right to direct your broker or nominee how to vote and you also are invited to attend the Annual Meeting. However, because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a legal proxy from the broker or nominee that holds your shares, giving you the right to vote the shares at the meeting.

If I am a stockholder of record, how do I vote?

There are four ways to vote:

 

   

In Person. If you are a stockholder of record, you may vote in person at the Annual Meeting. We will give you a ballot when you arrive.

 

   

Via the Internet. You may vote by proxy via the Internet by following the instructions provided in the notice.

 

   

By Telephone. You may vote by proxy by telephone by visiting www.proxyvote.com to view the proxy materials as described in the notice and to obtain the toll free number to call.

 

   

By Mail. If you request printed copies of the proxy materials by mail, you may vote by proxy by filling out the proxy card and sending it back in the envelope provided.

If I am a beneficial owner of shares held in street name, how do I vote?

There are four ways to vote:

 

   

In Person. If you are a beneficial owner of shares held in street name and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy from the organization that holds your shares.

 

   

Via the Internet. You may vote by proxy via the Internet by following the instructions in the notice provided by your broker.

 

   

By Telephone. You may vote by proxy by telephone by visiting www.proxyvote.com to view the proxy materials as described in the notice provided by your broker and to obtain the toll free number to call.

 

   

By Mail. If you request printed copies of the proxy materials by mail, you may vote by proxy by filling out the vote instruction form provided by your broker and sending it back in the envelope provided.

 

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What constitutes a quorum?

The presence, in person or by proxy, of the holders of a majority of the votes represented by our outstanding shares of common stock is necessary to constitute a quorum. We will count shares of voting stock present at the meeting that abstain from voting or that are the subject of broker non-votes as present for purposes of determining a quorum.

What if a quorum is not represented at the Annual Meeting?

In the event that a quorum does not exist, the chairman of the meeting or the holders of a majority of the votes entitled to be cast by the stockholders who are present in person or by proxy may adjourn the meeting. At such reconvened meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called.

How are proxies voted?

All valid proxies received prior to the Annual Meeting will be voted, and where a stockholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the stockholder’s instructions.

What happens if I do not give specific voting instructions?

If you are a stockholder of record and you indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting. If you hold your shares through a broker, bank or other nominee, you will receive separate instructions from the nominee describing the circumstances under which your shares may be voted if you do not give specific voting instructions.

What is a broker non-vote?

Broker non-votes occur when nominees, such as banks and brokers holding shares on behalf of beneficial owners, do not receive voting instructions from the beneficial holders at least ten days before the meeting. If that happens, the nominees may vote those shares only on matters deemed “routine” by the New York Stock Exchange. On non-routine matters, nominees cannot vote without instructions from the beneficial owner, resulting in a so-called “broker non-vote.” Broker non-votes are counted for purposes of determining whether a quorum is present and have no effect on the outcome of the voting on any of the proposals.

The ratification of the selection of KPMG LLP as our independent registered public accounting firm (Proposal 2) is a matter considered routine by the New York Stock Exchange. The election of directors (Proposal 1) and the advisory vote on executive compensation (Proposal 3) are matters considered non-routine by the New York Stock Exchange, and therefore, there may be broker non-votes on these proposals.

What happens if additional matters are presented at the Annual Meeting?

Other than the three items of business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Ralph P. Scozzafava and Jon D. Botsford, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of our nominees for director is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.

 

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How many votes are required to approve a proposal?

To be elected in uncontested elections, directors must receive a majority of the votes cast (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). Abstentions and broker non-votes shall not be counted as votes cast either “for” or “against” the election of a director. In contested elections, the vote standard is a plurality of votes cast.

In an uncontested election, any nominee for director is required to submit his or her resignation to the Board contingent on not receiving a majority of votes cast “for” his or her election and the Board’s acceptance of the resignation. If such director does not receive a majority of votes “for” his or her election, the Governance and Nominating Committee is required to make recommendations to the Board with respect to any such resignation. The Board is required to take action with respect to this recommendation and to publicly disclose its decision-making process.

The vote of the majority of the shares of common stock present in person or represented by proxy at the Annual Meeting is required to ratify the appointment of KPMG LLP as our independent registered public accounting firm (Proposal 2) and to approve the advisory vote on executive compensation (Proposal 3). Abstentions will have the effect of a vote against these proposals and broker non-votes will have no effect.

How often will I vote on executive compensation?

Consistent with our stockholders’ vote on the matter last year, our Board has decided to hold the advisory vote on executive compensation annually until the next required vote on the frequency of such advisory vote.

Can I change my vote after I have voted?

You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. You may vote again on a later date via the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted), by signing and returning a new proxy card or vote instruction form with a later date, or by attending the Annual Meeting and voting by ballot at the Annual Meeting.

Where can I find the voting results of the Annual Meeting?

The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of election and filed with the SEC in a Form 8-K within four business days following the Annual Meeting.

I share an address with another stockholder, and we received only one copy of the proxy materials. How may I obtain an additional copy of the proxy materials?

We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the notice and, if applicable, this Proxy Statement and the Annual Report to multiple stockholders who share the same address unless we have received contrary instructions from one or more of the stockholders. This procedure reduces our printing costs, mailing costs and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will deliver promptly a separate copy of the notice and, if applicable, this Proxy Statement and the Annual Report to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the notice and, if applicable, this Proxy Statement or the Annual Report, stockholders may write or call Investor Relations at the following address and telephone number:

Investor Relations

1 North Brentwood Blvd., 15th Floor

St. Louis, Missouri 63105

Phone: (866) 873-3667

 

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Stockholders who hold shares in “street name” (as described above) may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.

Who is paying for the cost of this proxy solicitation?

We are paying the costs of the solicitation of proxies. We have retained Morrow & Co., LLC to assist in obtaining proxies by mail, facsimile or email from brokers, bank nominees and other institutions for the Annual Meeting. The estimated cost of such services is $7,500 plus out-of-pocket expenses.

We must also pay brokerage firms and other persons representing beneficial owners of shares held in street name certain fees associated with forwarding the notice to beneficial owners, printed proxy materials by mail to beneficial owners and obtaining beneficial owners’ voting instructions.

In addition to soliciting proxies by mail, certain of our directors, officers and other employees, without additional compensation, may solicit proxies personally or by telephone, facsimile or email on our behalf.

Where are our principal executive offices located and what is our main telephone number?

Our principal executive offices are located at 1 North Brentwood Boulevard, 15th Floor, St. Louis, Missouri 63105. Our main telephone number is (314) 863-1100.

How can I attend the Annual Meeting?

Attendance at the Annual Meeting is limited to stockholders. Seating is limited and admission to the Annual Meeting will be on a first-come, first-served basis. Each stockholder may be asked to present valid picture identification such as a driver’s license or passport and proof of stock ownership as of the record date. You may request directions to the Annual Meeting by calling Investor Relations at (866) 873-3667.

ELECTION OF DIRECTORS

(Proposal 1)

Our business is managed under the direction of our Board of Directors. Our Bylaws provide that our Board determines the number of directors, which is currently set at eight. Our Board of Directors is presently composed of eight members of whom seven are standing for re-election. In keeping with the Board’s policy on retirement of directors, Alan G. Schwartz will not stand for re-election, and the Board of Directors has nominated Kent J. Hussey to fill the vacancy. Each director serves a one-year term, as described below, with all directors subject to annual election.

If any director nominee is unable or unwilling to serve as a nominee at the time of the Annual Meeting, the proxy holder may vote either: (1) for a substitute nominee designated by the present Board to fill the vacancy; or (2) for the balance of the nominees, leaving a vacancy. Alternatively, the Board may choose to reduce the size of the Board, as permitted by our Bylaws. As of the date of this Proxy Statement, our Board of Directors is not aware of any nominee who is unable or will decline to serve as a director.

 

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Nominees For Director

The nominees for director are set forth below. The Board of Directors recommends a vote “FOR” each of the nominees listed below.

 

Nominee

   Age      Director Since  

Kent J. Hussey

     65           

Ira D. Kaplan

     53         2008   

Ann S. Lieff

     60         2010   

Maureen A. McGuire

     60         2008   

Aubrey B. Patterson

     69         2004   

George E. Ross, Ph.D.

     60         2010   

Ralph P. Scozzafava

     53         2007   

James M. Zimmerman

     68         2010   

Set forth below is a brief description of the principal occupation and business experience of each of our nominees for director. Members of our Board of Directors are elected each year at our Annual Meeting of Stockholders, and serve until the next annual meeting of stockholders and until their respective successors have been elected and qualified. No director or executive officer is an adverse party or has an interest adverse to our company or any of its subsidiaries in any material pending legal proceeding.

Kent J. Hussey was nominated by the Board of Directors for election to our Board on February 8, 2012, based on the recommendation of our Governance and Nominating Committee. Mr. Hussey retired from Spectrum Brands, Inc. (a publicly traded manufacturer of consumer products) in 2010, where he served as Chief Executive Officer from May 2007 to May 2010; Chairman of the Board from August 2009 to June 2010; Vice Chairman from January 2007 to May 2007; President and Chief Operating Officer from August 2002 to December 2006; and Director from October 1996 to June 2010. Spectrum Brands, Inc. emerged from bankruptcy protection in August 2009. Mr. Hussey also serves on the Board of Directors of American Woodmark Corp. Mr. Hussey is qualified to serve on our Board because of his executive leadership expertise and extensive career in the consumer products industry. Mr. Hussey brings to our Board extensive experience in corporate finance, international operations and strategic planning.

Ira D. Kaplan has served as a director of our company since May 2008. Mr. Kaplan joined Claire’s Stores Inc. in 1987 and served as its Chief Financial Officer from 1990 to April 2008 and served as a member of the Board of Directors of Claire’s Stores until it was acquired in May 2007. In addition, while at Claire’s Stores, Mr. Kaplan was a member of the company’s Strategic Planning Committee responsible for the formulation of short and long-term strategies to drive its internal growth and its domestic and international expansion. From 1982 to 1987, Mr. Kaplan practiced at Peat Marwick (now KPMG). Through his roles and responsibilities at each of his former employers, Mr. Kaplan has gained extensive experience in corporate finance and accounting, retail store operations and strategic planning.

Ann S. Lieff has served as a director of our company since May 2010. Ms. Lieff is the founder of The Lieff Company, a business consulting firm, and has been its President since 1998. Prior to this, Ms. Lieff was President and Chief Executive Officer of Spec’s Music, Inc. Ms. Lieff also serves on the Board of Directors of Herzfeld Caribbean Basin Fund, Inc. and Hastings Entertainment, Inc., and previously served on the Board of Claire’s Stores, Inc. and Birks & Mayors Inc. Ms. Lieff is qualified to serve on our Board because of her executive leadership expertise and her business skills in marketing, real estate and multi-unit retail operations. These skills and experience are the result of her serving as the President and Chief Executive Officer of a publicly-traded company and her service on other public company boards and committees.

Maureen A. McGuire has served as a director of our company since December 2008. Since July 2009, Ms. McGuire has served as the Chief Marketing Officer of Bloomberg LP. From August 2008 to June 2009, Ms. McGuire was an independent consultant. Prior to this, Ms. McGuire served as Executive Vice President and Chief Marketing Officer of Sears Holding Corporation from October 2005 to August 2008. Prior to joining Sears,

 

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Ms. McGuire spent more than thirty years at International Business Machines Corporation, most recently as Vice President, Worldwide Strategy and Marketing, IBM Systems and Technology Group. Ms. McGuire brings to our board extensive experience in sales and marketing in consumer related industries as well as a strong background in international operations, which are the result of her long and successful career in several executive leadership roles in marketing.

Aubrey B. Patterson has served as a director of our company since April 2004. Since 1990, Mr. Patterson has been Chairman and Chief Executive Officer of BancorpSouth, Inc., and prior to this, was President and Chief Operating Officer of BancorpSouth. Mr. Patterson also serves on the Board of Directors of BancorpSouth and previously on the Board of Directors of Mississippi Power Company. As Chairman and Chief Executive Officer of BancorpSouth, Inc., Mr. Patterson has extensive executive experience in leading and managing a public company, with a strong knowledge and understanding of strategic planning and public company executive compensation.

George E. Ross, Ph.D. has served as a director of our company since September 2010. Dr. Ross has been the President of Central Michigan University since March 2010. Prior to this, Dr. Ross served as President of Alcorn State University from January 2008 to February 2010 and Vice-President Finance and Administrative Services at Central Michigan University from December 2002 to January 2008. Dr. Ross has also served in various finance and administrative roles at universities across the country since he started his career over twenty-five years ago. Dr. Ross is qualified to serve on our Board because of his executive leadership skills and his extensive experience in finance, accounting and strategic planning, which were acquired through his several leadership roles in higher education and through his work experience in various finance and accounting roles.

Ralph P. Scozzafava has served as Chairman of the Board since May 2008 and as a director since June 2007. Since January 2008, Mr. Scozzafava has also served as Chief Executive Officer of our company, and from June 2007 to January 2008, he served as Vice Chairman and Chief Executive Officer — designate. Prior to joining our company, Mr. Scozzafava was employed at Wm. Wrigley Jr. Company since 2001, where he held several positions, most recently, serving as Vice President — Worldwide Commercial Operations from March 2006 to June 2007, and as Vice President & Managing Director — North America/Pacific from January 2004 to March 2006. Mr. Scozzafava also serves on the Board of Directors of Stage Stores, Inc. Through these various executive leadership roles, Mr. Scozzafava has gained a strong executive background in operations and consumer goods, with extensive experience in international operations and strategic planning.

James M. Zimmerman has served as a director of our company since May 2010. Mr. Zimmerman retired from Federated Department Stores, Inc. in 2004, where he served as Chairman of the Board from February 2003 until January 2004, Chairman and Chief Executive Officer from May 1997 to February 2003, and as President and Chief Operating Officer from March 1988 to May 1997. He began his career with Federated in 1965 after graduating from Rice University in Houston. Mr. Zimmerman is a director of The Chubb Corporation and Fossil, Inc. Mr. Zimmerman brings to our Board extensive executive experience in leading a large retail company and strong skills in corporate finance and accounting, international operations, strategic planning and public company executive compensation.

Corporate Governance

Board of Directors

The Board of Directors oversees, counsels, and directs management in the long-term interests of the company and our stockholders. Directors are expected to devote sufficient time to carrying out their duties and responsibilities effectively.

Our Board of Directors currently consists of eight directors. Ralph P. Scozzafava, our Chief Executive Officer, serves as Chairman of the Board. Under our Bylaws, the Chairman presides over all meetings of the stockholders and the Board when he is present. In addition, the Board has an independent director, currently Aubrey B. Patterson, designated as the Lead Director.

 

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Our Board of Directors and its Committees meet throughout the year on a set schedule, hold special meetings, and act by written consent from time to time as appropriate. The Board holds regularly scheduled sessions for non-management directors to meet without management present, and the Board’s Lead Director leads those sessions. The Board of Directors met eight times during 2011, four of which were regularly scheduled meetings. In 2011, the non-management directors, who are all independent, met four times in executive session. All directors attended at least 75% of the meetings of the Board of Directors and the meetings of the Committees on which they served held during the period that they served on the Board of Directors or such Committees. In furtherance of the Board’s role, directors are expected to attend all meetings of stockholders. All of the directors who were elected to the Board at the 2011 Annual Meeting of Stockholders were in attendance.

Committees and Charters

The Board delegates various responsibilities and authority to different Committees of the Board. Committees regularly report on their activities and actions to the full Board. Our Board of Directors has established three standing Committees — the Audit Committee, the Governance and Nominating Committee and the Human Resources Committee. Each of the Committees has a written charter approved by our Board, and each Committee conducts an annual evaluation of the Committee’s performance. We post each Committee charter on our web site at www.furniturebrands.com. The following table identifies the current Committee members.

 

Name

   Audit    Governance and
Nominating
   Human Resources

Ira D. Kaplan

   Chair      

Ann S. Lieff

   ü      

Maureen A. McGuire

      ü    ü

Aubrey B. Patterson

      Chair    ü

George E. Ross, Ph.D.

   ü      

Alan G. Schwartz

      ü   

James M. Zimmerman

         Chair

Number of Committee Meetings Held in 2011

   5    4    6

Audit Committee.    Our Audit Committee assists the Board in its general oversight of our financial reporting, internal controls, and audit functions, and is responsible for the appointment, retention, compensation, and oversight of the work of our independent registered public accounting firm. The Board has determined that Messrs. Kaplan and Ross each qualify as an “Audit Committee Financial Expert” in accordance with the rules issued by the SEC. The responsibilities and activities of our Audit Committee are described in detail in the Committee’s report in this Proxy Statement and the Audit Committee’s charter.

Governance and Nominating Committee.    Our Governance and Nominating Committee is responsible for identifying and evaluating director nominees for the Board and the development and review of our Corporate Governance Guidelines. The Committee also oversees the annual self-evaluations of the Board and its Committees and makes recommendations to the Board concerning the structure and membership of the Board Committees. In addition, the Governance and Nominating Committee recommends the compensation for non-employee directors and pursuant to its charter, has the authority to retain consultants to assist in the Committee’s evaluation of director compensation. The responsibilities and activities of our Governance and Nominating Committee are described in detail in the Committee’s charter.

Human Resources Committee.    Our Human Resources Committee has authority for reviewing and determining salaries, performance-based incentives, and other matters related to the compensation of our executive officers; administering our equity incentive plans, including reviewing and granting stock options and other equity awards to our executive officers; as well as responsibility for succession planning for executive officers, including our chief executive officer. Our Human Resources Committee also reviews and determines various other compensation policies and matters, including matters related to broad-based employee incentive and benefit plans.

 

8


Under its charter, the Human Resources Committee may also form, and delegate authority to, subcommittees, as appropriate. Pursuant to such authority, the Human Resources Committee has delegated the authority to our Chief Executive Officer to grant equity awards for hiring incentive grants and promotions for any employees that are not executive officers. The purpose of this delegation of authority is to enhance the flexibility of equity administration within the company and to facilitate the timely grant of equity awards to new or recently promoted employees that are not executive officers. The Chief Executive Officer’s authority is limited to granting no more than 100,000 shares of common stock per calendar year, and all grants made pursuant to this delegated authority are reported to the Committee at its next regularly scheduled meeting.

Additional information on the Human Resources Committee’s processes and procedures for consideration of executive compensation are addressed in the Compensation Discussion and Analysis in this Proxy Statement.

Compensation Consultants

Our Human Resources Committee has the authority to retain compensation consultants to assist in the Committee’s evaluation of executive compensation, including the authority to approve the consultant’s fees and other retention terms. During 2011, our Human Resources Committee engaged an outside independent executive compensation consultant, Frederic W. Cook & Co., Inc. (“F.W. Cook”), to advise and counsel the Committee. F.W. Cook reports directly to the Human Resources Committee and has not, and will not, perform any other service for the company other than matters for which the Human Resources Committee or another Board committee is responsible.

At the request of the Committee, F.W. Cook performed the following assignments for the Committee in 2011:

 

   

provided regulatory updates on rulemaking which impacts executive compensation;

   

provided information regarding market executive compensation, practices and trends, and assisted the Committee in the review and evaluation of such information; and

   

based on market information, advised the Committee on the company’s 2011 executive compensation, including the design of the company’s 2011 cash and equity incentive plans and the design of the company’s revised executive stock ownership guidelines.

In performing these services, F.W. Cook worked with our Senior Vice President- Human Resources and supporting personnel to obtain background information and related support in preparing its reports for the Committees.

Board Oversight of Risk

Our Board of Directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance stockholder value. As part of this oversight process, our Board has delegated to the Audit Committee the primary responsibility of performing an annual enterprise risk assessment and reporting the results of the assessment back to the Board. The annual risk assessment is a company-wide initiative that involves the Board, members of the Audit Committee, and management in an integrated effort to identify, assess and manage risks that may affect our company’s ability to execute on its corporate strategy and fulfill its business objectives. The assessment includes identification, prioritization and assessment of a broad range of risks including financial, operational, business, governance and managerial risks, and the formulation of plans to mitigate their effects. A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the company. The involvement of the full Board in setting our business strategy is a key part of its determination of what constitutes an appropriate level of risk for our company.

 

9


In addition, the Board has delegated to the Human Resources Committee the responsibility of annually reviewing the company’s compensation program, including the executive compensation program, to confirm that it does not encourage a level of risk-taking behavior that is inconsistent with our business strategy, and the Committee has concluded that our compensation program does not. The majority of executive compensation is performance-based and tied to increases in stock price or the achievement of financial performance metrics to ensure that executives are focused on the creation of long-term stockholder value. In addition, the Committee may exercise discretion to reduce (and not increase) cash incentive payments. With respect to our compensation program for employees generally, bonus opportunities are capped and the Committee has the discretion to reduce these payments. In addition, long-term incentive compensation for employees is delivered in the form of equity awards, primarily stock options, which encourages the creation of long-term stockholder value. Furthermore, we have adopted policies to mitigate compensation-related risk including a recoupment policy applicable to all employee incentive compensation and executive stock ownership guidelines.

Board Leadership Structure

Our Board of Directors has combined the role of Chief Executive Officer and Chairman of the Board and has designated an independent director as Lead Director. The Board has combined the Chief Executive Officer and Chairman role because it feels it is important for a single executive to be responsible for and to guide our company’s strategic direction particularly given the company’s turnaround situation. Combining these roles also makes it clear that the person serving in these roles has primary responsibility for managing the company’s business, subject to the oversight and review of the Board. In addition, the Board believes that the designation of an independent director as Lead Director ensures that strong, independent directors continue to effectively oversee our management and provide vigorous oversight of key issues relating to strategy, risk and integrity without the need to split the roles of Chief Executive Officer and Chairman. As described in our Corporate Governance Guidelines, the Lead Director has the responsibility for: (i) acting as a liaison between the Board and the Chief Executive Officer; (ii) assisting the Chairman of the Board in setting the Board agenda; (iii) acting as chair at executive sessions held outside the presence of the management directors, the Chief Executive Officer, and other company personnel; (iv) communicating Board member feedback to the Chief Executive Officer; and (v) performing other responsibilities that the independent directors as a whole may designate from time to time. We believe that this structure recognizes the importance of one person leading our company and the Board, but also that an independent Lead Director with substantial authority helps ensure effective oversight by an independent board.

Board Membership Criteria

Our Governance and Nominating Committee works with the Board on a regular basis to determine the appropriate skills and characteristics for the Board as a whole and for its individual members. The Committee also regularly assesses the appropriate size of the Board, whether there are any specific Board needs and whether any vacancies on the Board of Directors are expected. In the event that vacancies are anticipated, or otherwise arise, our Governance and Nominating Committee will consider various potential candidates for director. In identifying director nominees, the Governance and Nominating Committee solicits recommendations for possible candidates from a number of sources including members of the Board of Directors and executive officers. In addition, the Governance and Nominating Committee may from time to time use its authority under its charter to retain at our expense one or more search firms to identify candidates. If the Governance and Nominating Committee retains a search firm, the firm may be asked to identify possible candidates who meet the desired qualifications expressed by our Governance and Nominating Committee and in our Corporate Governance Guidelines and may be asked to interview and screen such candidates.

Our Governance and Nominating Committee evaluates director candidates based on a number of qualifications, including their independence, integrity, leadership ability, and expertise in the industry. The Committee also considers the diversity of a candidate’s background and experience when evaluating a nominee, as well as the diversity of a candidate’s perspectives, which may result from diversity in age, gender, ethnicity or

 

10


national origin. While the Committee considers diversity in its evaluation process, the Committee does not have a formal policy with regard to the consideration of diversity in identifying director nominees as this is only one factor that the Committee considers in its process. The Committee believes that it is important to evaluate director candidates based on an assessment of the qualifications and experiences required of Board members in the context of the needs of the Board at a given point in time considering all of these factors in the aggregate rather than an evaluation of any one particular factor.

On February 8, 2012, based on the recommendation of our Governance and Nominating Committee, the Board of Directors nominated Kent Hussey for election to our Board. Mr. Hussey was identified by a third party search firm retained by our Governance and Nominating Committee in 2011.

Director Nominees Recommended by Stockholders

Our Governance and Nominating Committee has a policy of considering director candidates recommended by stockholders provided that a stockholder submission of a nominee for director is received by our Corporate Secretary not less than 90 days and no earlier than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided however, in the event that the date of the meeting is more than 30 days before or more than 60 days after such anniversary date, notice must be received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of the meeting is first made. The submission must include biographical information including, but not limited to, the proposed candidate’s name, age, business address, residence address, principal occupation or employment for the previous five years and the number of shares of our common stock owned beneficially or of record. Stockholders who wish to recommend candidates for the Board should send such recommendations to our Corporate Secretary at 1 North Brentwood Boulevard, 15th Floor, St. Louis, Missouri 63105. Candidates recommended by stockholders that comply with these procedures will receive the same consideration that candidates recommended by directors and management receive. The Governance and Nominating Committee has full discretion in considering nominations to the Board.

Director Independence

Our Board of Directors has affirmatively determined that all of our current directors other than Ralph P. Scozzafava are “independent” under the listing standards of the New York Stock Exchange. In addition, the Board of Directors has determined that Kent J. Hussey, a nominee for director at the Annual Meeting, satisfies the applicable independence requirements of the New York Stock Exchange. Therefore, the majority of our directors, as well as all of the members of each of the Board’s three standing committees, are independent as defined under the rules of the New York Stock Exchange, and, in the case of all members of the Audit Committee, the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act. In order to assist the Board in making this determination, the Board has adopted standards of independence, substantially similar to the New York Stock Exchange requirements, as part of our Corporate Governance Guidelines. Our Corporate Governance Guidelines and our independence standards can be found on our website at www.furniturebrands.com.

Corporate Governance Guidelines and Code of Conduct

Our Board of Directors has developed corporate governance practices to help it fulfill its responsibilities to stockholders in providing general direction and oversight of management of our company. These practices are set forth in our Corporate Governance Guidelines. We also have a Code of Conduct applicable to all of our employees, officers and directors, including the Chief Executive Officer, the Chief Financial Officer and other senior financial officers. These documents, as well as any waiver of a provision of the Code of Conduct granted to any senior officer or director or material amendment to the Code of Conduct, if any, may be found on our website at www.furniturebrands.com.

 

11


Communications with Board of Directors

The Board of Directors provides a process for interested parties, including stockholders, to send communications to the Board as a whole, the non-management directors as a group or to any of the directors individually. Interested parties may send written communications c/o Chair of the Governance and Nominating Committee, Furniture Brands International, Inc., 1 North Brentwood Boulevard, 15th Floor, St. Louis, Missouri 63105. We will forward all appropriate correspondence to the Chair of the Governance and Nominating Committee. We will not forward sales or marketing materials or correspondence not clearly identified as stockholder correspondence, and we will not forward any communication determined in good faith to be frivolous, irrelevant, offensive, outside the scope of Board matters, or duplicative of other communications previously forwarded to the Board.

Director Compensation

The Board determines the form and amount of director compensation after its review of recommendations made by the Governance and Nominating Committee. Non-employee members of our Board of Directors receive a mix of cash and equity-based compensation. We do not pay management directors for Board service in addition to their regular employee compensation. In 2011, non-employee director compensation consisted of the following elements:

 

   

annual cash retainer of $45,000

   

Audit Committee chair annual fee of $25,000

   

Governance and Nominating Committee chair annual fee of $10,000

   

Human Resources Committee chair annual fee of $15,000

   

Lead Director annual fee of $15,000

   

annual restricted stock award grant with a market value of $75,000 on the date of the grant, which vests at our next annual meeting of stockholders

   

one-time initial restricted stock award grant for newly elected non-employee directors with a market value of $50,000 on the date of the grant which vests equally over five years

We also reimburse our directors for their reasonable expenses in connection with attending board meetings and pay the premiums on a $100,000 term life insurance policy pursuant to our company’s group term life program.

The following table provides director compensation information for 2011 for each non-employee member of our Board of Directors.

 

Name

   Fees
Earned
or Paid in
Cash(1)
     Stock
Awards(2)
     Option
Awards
     All Other
Compensation(3)
     Total  

Ira D. Kaplan

   $ 61,330       $ 75,002               $ 140       $ 136,472   

Ann S. Lieff

     45,000         75,002                 140         120,142   

Maureen A. McGuire

     45,000         75,002                 140         120,142   

Aubrey B. Patterson

     70,000         75,002                 140         145,142   

George E. Ross, Ph.D.

     45,000         75,002                 140         120,142   

Alan G. Schwartz

     45,000         75,002                         120,002   

James M. Zimmerman

     60,000         75,002                 140         135,142   

 

(1) For 2011, each of our non-employee directors was entitled to receive a $45,000 annual retainer; our Lead Director, Mr. Patterson, was entitled to receive a $15,000 annual fee, and each Board committee chair received the following annual fees: $25,000 to the Audit Committee chair, $15,000 to the Human Resources Committee chair and $10,000 to the Governance and Nominating Committee chair. All cash fees are pro-rated for the amount of time the director held such position.

 

12


(2) This column represents the aggregate grant date fair value of restricted stock awards granted in 2011 in accordance with FASB ASC Topic 718. In 2011, the company granted 16,779 restricted stock awards to each of the non-employee directors with a grant date fair value of $75,002. No restricted stock units or stock options were granted to any of the directors in 2011. The directors held restricted stock awards and restricted stock units as of December 31, 2011, as follows: Mr. Kaplan, 20,355 restricted stock awards and 5,157 restricted stock units; Ms. Lieff, 23,304 restricted stock awards; Ms. McGuire, 26,710 restricted stock awards; Mr. Patterson, 18,445 restricted stock awards and 19,085 restricted stock units; Dr. Ross, 24,638 restricted stock awards; Mr. Schwartz, 20,355 restricted stock awards and 5,157 restricted stock units; and Mr. Zimmerman, 21,803 restricted stock awards.
(3) This column represents company paid life insurance premiums.

2012 Equity Compensation

Our 2010 Omnibus Incentive Plan limits the number of service-based restricted stock awards which may be granted if the awards vest in less than three years. As indicated previously, the Board’s practice in 2011 was to grant to each non-employee director a restricted stock award annually with a market value of $75,000, which award vests at our next annual meeting of stockholders. Due to the decline in our stock price and the limited number of service-based restricted shares available for grant under the 2010 Omnibus Incentive Plan, the Board in 2012, with the assistance of Frederic W. Cook & Co., Inc., reviewed its practice of awarding this annual grant; and in lieu of the annual grant of $75,000 of restricted stock, the Board approved a one-time reduction in the value of the award to $60,000 and changed the form of the award from a stock award to a cash award. As a result, each non-employee director elected at the 2012 Annual Meeting of Stockholders will be granted the right to receive a cash payment of $60,000 if the director remains in service through the date of the 2013 Annual Meeting of Stockholders.

Director Stock Ownership Guidelines

Our Board of Directors has established stock ownership guidelines for non-employee directors which have been in place for several years. Under these guidelines, within four years of joining the Board, each director was required to own at least 10,000 shares of our common stock and unvested equity grants counted towards satisfying the requirement.

After a review of these stock ownership guidelines in February 2011, the Board of Directors revised the guidelines to require that each non-employee director own shares of our common stock with a market price equal to three times their annual cash retainer. Shares held directly by directors and vested shares of equity subject to deferred compensation count towards satisfying the requirement. Directors are required to hold 50% of the shares of common stock received from the company through equity compensation grants until they have attained the applicable level of stock ownership.

 

13


AUDIT COMMITTEE REPORT

In accordance with its written charter adopted by the Board of Directors, the Audit Committee of the Board assists the Board in fulfilling its responsibility for oversight of the quality and integrity of our financial statements and our internal controls. The Audit Committee, in its oversight role, has reviewed and discussed our audited financials for the year ended December 31, 2011, with our management. The Audit Committee has discussed with our internal auditors and KPMG LLP, our independent registered public accounting firm during fiscal year 2011, separately and together, the matters required to be discussed by Public Accounting Oversight Board (PCAOB) Section 380, as currently in effect. The Audit Committee has received the written disclosures and the letter from KPMG LLP required by applicable requirements of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence and has discussed with KPMG LLP its independence. Based on the review and discussions described above, the Audit Committee recommended to the Board of Directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Submitted by the Audit Committee,

Ira D. Kaplan (Chairman)

Ann S. Lieff

George E. Ross, Ph.D.

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

(Proposal 2)

The Audit Committee of the Board of Directors has appointed the firm of KPMG LLP to serve as our independent registered public accounting firm for the 2012 fiscal year, subject to ratification of this appointment by our stockholders. KPMG LLP audited our financial statements and the effectiveness of our internal control over financial reporting as of, and for the years ended, December 31, 2011 and 2010. KPMG LLP has advised us that neither it nor any of its members has any direct or material indirect financial interest in our company.

For the fiscal years ended December 31, 2011 and 2010, we paid (or will pay) the following fees to KPMG LLP for services rendered during the year or for the audit in respect of those years:

 

     Year ended
December 31
 

($ in thousands)

   2011      2010  

Audit Fees(1)

   $ 1,295       $ 1,407   

Audit-Related Fees(2)

             22   
  

 

 

    

 

 

 

Total Audit and Audit-Related Fees

     1,295         1,429   

Tax Fees(3)

     24         47   

All Other Fees

               
  

 

 

    

 

 

 

Total Fees

   $ 1,319       $ 1,476   
  

 

 

    

 

 

 

 

(1) Audit fees represent fees for professional services rendered in connection with the engagement to audit the annual consolidated financial statements, including the audit of our internal controls over financial reporting, review of our quarterly consolidated financial statements, and to perform statutory audits required for certain subsidiaries.
(2) Audit-related fees consisted primarily of fees related to the filing of registrations statements.
(3) Includes fees for tax compliance services.

The Audit Committee pre-approves all audit, audit-related and non-audit services provided by KPMG LLP. The Chairman of the Audit Committee has also been delegated the authority to pre-approve services to

 

14


KPMG LLP. All of the services in 2011 in the table above were pre-approved by the Audit Committee or the Chairman of the Audit Committee. One or more representatives of KPMG will be present at the Annual Meeting of Stockholders, will have an opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions.

The Board of Directors recommends a vote “FOR” ratification of the appointment of KPMG LLP for 2012.

 

15


EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides an explanation of our company’s executive compensation program as it relates to our named executive officers whose compensation information is presented in the tables following this discussion. This Compensation Discussion and Analysis has been organized into five sections:

 

   

Executive Summary.    This section provides a brief overview of the executive compensation program, including our pay for performance philosophy, the compensation decisions that were made in 2011 and early 2012 and the reasons why such decisions were made.

   

Overview of Executive Compensation.    This section provides a broad overview of the executive compensation program and its components.

   

Setting Executive Compensation.    This section details the roles and responsibilities of the parties involved in the decision-making processes, and how we use benchmarking in the decision-making process.

   

Individual Components of Our Executive Compensation Program.    This section provides a detailed review of the components of our executive compensation program, including what compensation programs are offered and how they work and a description of each named executive officer’s compensation.

   

Additional Information on Our Executive Compensation Program.    This section provides general information on executive compensation including a description of termination based compensation, benefits and perquisites, our policy on hedging, our incentive compensation Recoupment Policy and our stock ownership guidelines.

 

I. Executive Summary

The ultimate objective of our executive compensation program is to retain, attract and motivate leaders who create long-term value for our stockholders. We approach this objective through three key components: base salary, short-term (annual) cash incentive and a long-term cash or equity incentive. In recent years, we have made a number of substantive changes to our executive compensation program to ensure we achieve this objective and reward executives for sustained long-term financial and operating performance and align the executives’ long-term interests with those of our stockholders. These changes include:

 

   

Double-trigger change in control agreements.

   

Prohibition on trading in derivative securities, short sales and hedging transactions.

   

Amended severance agreements to reduce severance benefits and to eliminate tax gross-ups on health, vision and dental benefits.

   

Amended change in control agreements to phase-out all excise tax gross-ups on change in control benefits by December 31, 2011.

   

Retention of an independent compensation consultant in 2010 that has not, and will not, perform any other service for the company other than matters for which the Human Resources Committee or another Board committee is responsible.

   

Adoption of a recoupment policy applicable to all executives that allows the Human Resources Committee to require repayment of cash and equity incentive awards under certain circumstances if our company restates its financial statements.

   

Adoption of new stock ownership guidelines which require the Chief Executive Officer to own shares of our common stock equal to three times his base salary and all other executives to own shares equal to either two or one times the executive’s base salary depending on their role.

   

Adoption of stock holding requirements which require executives to hold 50% of the shares of common stock received through equity compensation grants until their stock ownership requirements are met.

 

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Pay for Performance Philosophy

As stated above, the ultimate objective of our executive compensation program is to retain, attract and motivate leaders who create long-term value for our stockholders. Underlying this objective is our goal to pay for performance such that an executive’s total compensation reflects our company’s performance. This pay for performance philosophy must be balanced however, with the need to retain qualified executives; and in recent years, the Committee has placed an emphasis on retention due to the ongoing uncertainty in the U.S. economy which has negatively impacted consumers’ discretionary spending on furniture, our financial results, and ultimately, our executive officers’ total realized compensation.

For over the past three years, executive base salaries have been frozen, the company’s short-term (annual) incentive plan has not paid out and the company’s performance-based long-term incentive compensation has not paid out due to the failure to achieve financial performance goals established by the Committee. The following table sets forth a summary of each short-term and long-term incentive plan that could have paid out to executives from the period January 1, 2009 to December 31, 2011, the performance measures established by the Committee and the reason why the plan did not payout:

 

Plan

 

Performance Measures

 

Payout

 

Performance Results

2009 Short-Term Incentive Plan

  Net Earnings and Net Sales Goals   Payout Only if Target Net Earnings Achieved   Target Net Earnings Not Achieved and No Payout

2008-2010 Long-Term Incentive Plan

  Three Year Free Cash Flow, ROIC & Improvement in Market Share   Payout of a Portion if Any Measure Achieved   None of the Measures were Achieved and No Payout

2010 Short-Term Incentive Plan

  Net Earnings and Net Sales Goals   Payout Only if Target Net Earnings Achieved   Target Net Earnings Not Achieved and No Payout

2011 Short-Term Incentive Plan

  Net Earnings Goals, Net Sales Goals and Individual Objectives  

•     Payout of Financial Portion if Threshold Net Earnings Achieved

 

•     Payout of Individual Portion if Individual Objectives Achieved

 

•     Threshold Net Earnings Not Achieved and No Payout

 

•     No Payout Due to Overall Company Performance

As a result of the non-payment of these incentive plans, the only incentive amounts actually realized by executives in the past three years were the payout of the 2008 restricted stock units in 2010 and vesting of service-based equity awards. As disclosed in last year’s Proxy Statement, the 2008 restricted stock unit award was a special award granted in 2008 outside the normal annual award cycle by the Human Resources Committee then in place to address increased concerns regarding the retention of executive officers and the desire to further align the interests of our stockholders with executives by motivating and rewarding executives for increases in the company’s stock price. Our Human Resources Committee has committed that it has no plans at this time of making an award similar to the 2008 restricted stock units outside the normal annual award cycle again and will only make such award if extraordinary circumstances arise which cause the Human Resources Committee to determine that such an award is necessary given the circumstances for the retention and motivation of our executives.

Total Realized Compensation

When making compensation decisions each year, the Committee reviews each executive’s total realized compensation as well as each executive’s total target compensation since total realized compensation is a core component to retaining executives as this reflects the actual amounts received by executives. The following table presents the compensation actually realized (paid) to each of our executive officers in 2009, 2010 and 2011.

 

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Values for non-equity compensation in this table are the same as in the Summary Compensation Table on page 31. For this table however, equity compensation is valued using the actual number of shares of stock delivered to an executive on vesting multiplied by the stock price on the vesting date and stock options are only valued if the options are in the money as of December 31, 2011.

Compensation Actually Paid to Executives

 

Name and Principal Position

  Year     Salary     Bonus     Stock
Awards
Valued  on
Vesting

Date
    Value of in
the Money
Stock
Options at

12/31/11
    Non-Equity
Incentive Plan
Compensation(3)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(4)
    All Other
Compensation
    Total  

Ralph P. Scozzafava

    2011      $ 750,000      $      $      $      $      $      $ 77,638      $ 827,638   

Chairman & Chief Executive Officer

    2010        750,000               43,424               4,000,015        1,619        83,444        4,878,502   
    2009        750,000               23,467                             92,544        866,011   

Steven G. Rolls

    2011        475,000               40,090                             164,494        679,584   

Chief Financial Officer

    2010        475,000               60,414               750,011        362        62,147        1,347,934   
    2009        475,000               11,200                             169,110        655,310   

Jon D. Botsford

    2011        350,000               17,668                             11,025        378,693   

Senior Vice President, General Counsel & Secretary

    2010        350,000               19,564               499,986               10,863        880,413   
    2009        350,000                                           65,223        415,223   
                 

Raymond J. Johnson

    2011        415,000               23,225                             11,025        449,250   

Senior Vice President — Global Supply Chain

    2010        415,000               26,000               212,392               10,731        664,123   
    2009        383,077        150,000                                    11,025        544,102   

Edward D. Teplitz

    2011        390,000               1,324                             53,941        445,265   

President — Thomasville & Drexel Heritage

    2010        390,000               3,815               499,986               52,707        946,508   
    2009        390,000                                           40,722        430,722   

Excluding the payment of the 2008 restricted stock unit award in 2010, each executive’s actual compensation is well below the target median of our peer group and has remained relatively flat each year. In addition, during 2011, the company concluded that the performance targets established in connection with the 2010-2012 long-term incentive compensation were unlikely to be achieved and that it is no longer probable that payouts will be made under the plan. Accordingly, the Committee anticipates that each executive’s total realized compensation may be below target again in 2012.

In making its compensation decisions for 2011 and 2012, the Committee took into account these factors. Specifically, given each executive’s total realized compensation and the state of the company at the time the compensation decisions were made, the Committee determined, as described more fully below, that it must award a certain percentage of service-based compensation to executives in order to retain those executives despite the Committee’s strong preference to pay incentive compensation only upon the achievement of financial performance results.

2011 Compensation Decisions.    In early 2011, the Human Resources Committee completed its annual review of executive compensation. Following this review, the Committee made the following decisions:

 

   

Target Total Compensation.    The Committee continued its suspension of annual merit increases to base salaries for executive officers, no adjustments were made to the value of executive target short-term incentive compensation, and the Committee reduced the full value of each executive’s target long-term incentive compensation by 18% to bring target total compensation for each executive closer to the median of the company’s new peer group.

 

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2011 Short-Term Incentive Plan.    The Committee established the 2011 Short-Term Incentive Plan with the objective of rewarding executives for the achievement of annual net earnings and net sales goals. The company’s short-term incentive plans have not paid out in five years however, and due to retention concerns arising from the continued non-payment of the short-term incentive and in order to balance these retention concerns with the company’s pay for performance philosophy, the 2011 Short-Term Incentive Plan was redesigned to include:

 

   

a 25% individual performance component which gives the Human Resources Committee the flexibility to recognize that an executive’s performance may not always be linked directly to the company’s achievement of net earnings and net sales goals and that the achievement of other objectives such as productivity and cost control may also need to be rewarded; and

   

a threshold level of net earnings, which is in addition to the target and maximum net earnings levels in the prior short-term incentive plans. This addition of a threshold level of net earnings allows for a minimum payout of 25% of the short-term incentive if threshold net earnings is achieved rather than requiring target net earnings be achieved prior to any payout of an award. By including this threshold goal in the plan, the plan is more in line with market practices and gives the Human Resources Committee the ability to reward employees for achieving goals close to target.

Since the threshold corporate net earnings goal for 2011 was not met, executives did not receive any payments under the 2011 plan for achievement of financial goals. In addition, due to the company’s overall financial performance, the Committee exercised its discretion under the plan and did not make any payments to executives for the achievement of their individual performance objectives.

 

   

2011 Long-Term Incentive Awards.    In addition to reducing the value of the long-term incentive by 18%, the mix of long-term cash and equity was changed in 2011 and each executive received their target 2011 long-term incentive compensation in the following form:

 

   

40% of the value was received in stock options which vests equally over three years;

   

40% of the value will be paid out to executives in cash if the company achieves certain three year return on invested capital targets; and

   

20% of the value was received in restricted stock which vests on the third anniversary of the grant date.

The reason for increasing the stock options and adding time-based restricted stock was to alleviate retention concerns associated with the reduction in the value of executive long-term incentive compensation by giving executives some value even if the performance measures are not attained or if the stock price declines over the three-year period. In addition, the Human Resources Committee designed the awards to ensure that the majority of each executive’s total target compensation would continue to be at-risk in 2011, and the Committee also considered the impact on stockholder dilution and chose restricted stock due to the lower impact on stockholder dilution.

By establishing these performance-based incentive plans, 67% of our Chief Executive Officer’s total 2011 target compensation was at-risk and 50 to 55% of total target compensation for all other named executive officers in 2011 was at-risk.

2012 Compensation Decisions.    The Committee made the following compensation decisions in early 2012:

 

   

Target Total Compensation.    The Committee maintained executive base salaries and did not make any changes to executive target short-term incentive and long-term incentive compensation in 2012.

 

   

2012 Short-Term Incentive Plan.    The Committee maintained the same terms for the 2012 Short-Term Incentive Plan that they established for the 2011 Short-Term Incentive Plan with the performance goals being the achievement of annual net earnings, annual net sales goals and individual objectives.

 

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2012 Long-Term Incentive Awards.    Due to the company’s low share price and the lack of shares available to be awarded under any stockholder approved plan, the Committee redesigned the executive 2012 long-term incentive compensation and each executive received their target 2012 long-term incentive compensation in the following form:

 

   

25% of the value was received in restricted stock which vests equally over three years; and

   

75% of the value will be paid out to executives in cash if the company achieves certain return on invested capital targets.

In addition, unlike the company’s previous long-term incentive plans, the performance cash component of the award will be based on three separate, annual return on invested capital targets established by the Committee at the beginning of each year. If the annual return on invested capital goal is achieved, 50% of the cash award will be paid at the end of the applicable year and the remaining 50% will be paid at the end of the three-year period. The Committee changed the payout of the cash component to alleviate retention concerns associated with low incentive payouts while balancing these concerns against the need to encourage executives to focus on the company’s long-term business objectives.

 

II. Overview of our Executive Compensation Program

Our Board of Directors delegates to the Human Resources Committee responsibility for establishing compensation policies and programs for our executive officers, including our named executive officers. The Committee’s objectives for compensation programs for our executive officers are to:

 

   

Attract and motivate highly capable and performance-focused executives;

   

Pay for performance such that total compensation reflects our performance;

   

Link executive earnings directly to both our short- and long-term financial results and stockholder returns;

   

Promote a culture of executive owners who share a common financial interest with our stockholders; and

   

Efficiently manage the potential dilution, cash flow, tax and reported earnings implications of executive compensation consistent with the other objectives of the program.

We approach these objectives through three key components that the Human Resources Committee reviews annually:

 

   

a base salary component;

   

a short-term (annual) cash incentive payable upon the achievement of corporate financial and individual performance objectives; and

   

a long-term incentive component that provides cash or equity awards payable upon the achievement of corporate financial results and periodic annual grants of long-term equity compensation, in the form of stock options, restricted stock awards, and performance-based shares.

Executives also receive retirement and health and welfare benefits under our U.S. broad-based plans and may receive severance and change in control benefits on termination of employment.

 

III. Setting Executive Compensation

Role of Human Resources Committee and Executives Officers

The Human Resources Committee’s primary duties and responsibilities are to establish and implement our compensation policies and programs for all employees, including our executive officers. The Human Resources Committee’s charter, which can be found on our website at www.furniturebrands.com, lists the specific responsibilities of the Committee.

Under its charter, the Human Resources Committee reviews and specifically approves all compensation decisions for all of our Chief Executive Officer’s direct reports, which we refer to as our executive officers. The

 

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compensation of our Chief Executive Officer is set by the full Board of Directors, excluding our Chief Executive Officer, based on the Human Resources Committee’s review and recommendation. In performing its duties, the Committee relies on Mr. Scozzafava, our Chief Executive Officer, and Ms. Sweetman, our Senior Vice President — Human Resources, to provide information regarding the executive officers, the executive officers’ roles and responsibilities, and the general performance of our company, the executive officers and the various business units that they manage. Mr. Scozzafava and Ms. Sweetman take directions from and bring suggestions to the Human Resources Committee. Mr. Scozzafava also makes compensation recommendations for the other named executive officers and those executives reporting directly to him, and the Human Resources Committee solicits the views of Mr. Scozzafava on compensation matters, especially as they relate to the compensation of the other named executive officers and those executives reporting directly to him.

Role of Compensation Consultants

The Human Resources Committee has engaged Frederic W. Cook & Co., Inc. (“F.W. Cook”), an outside independent executive compensation consultant, to advise and counsel the Committee with respect to all aspects of executive compensation, including executive compensation philosophy, peer group design, and cash and equity incentive plan design. F.W. Cook reports directly to the Human Resources Committee and has not, and will not, perform any other service for the company other than matters for which the Human Resources Committee or other Board committee is responsible.

Benchmarking and Peer Groups

The Committee annually reviews market compensation levels for executive officers to ensure that pay opportunities being delivered to our executive officers are competitive with the labor markets in which we compete for talent. The Committee’s review includes an evaluation of base salary, target annual incentive opportunities, target long-term incentive opportunities and total annual compensation for each of the executive officer positions relative to similar positions in the market.

With the assistance of F.W. Cook, the Committee identified a peer group of companies in late 2010 for evaluating the compensation for our executive officers in 2011. In selecting the peer group, the Committee assessed the company’s current revenues, market capitalization, and other qualitative factors such as business mix. Based on this review, the Committee selected the following companies as our peer group of companies for 2011:

 

Aaron’s Inc.

   La-Z-Boy Inc.

American Woodmark

   Pier 1 Imports

Armstrong World Industries

   Sealy Corp.

Basset Furniture Industries

   Steelcase Inc.

Ethan Allen Interiors Inc.

   Tempur-Pedic International Inc.

Herman Miller Inc.

   Williams-Sonoma Inc.

Interface

  

Methodology

The Committee’s independent compensation consultant summarizes and provides the Committee with the market data from our peer group and compensation data compiled from executive compensation surveys. The Committee uses this historical data to compare the compensation of our executive officers to our peer group, targeting the 50th percentile for total compensation. While the Committee targets compensation at the 50th percentile, this review is only one factor considered by the Committee in determining each individual named executive officer’s actual compensation. The actual target total compensation for each individual executive may be higher or lower than the targeted market position based on individual skills, experience, contribution, performance, or other factors including specific needs of the company that the Committee may take into account

 

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that are relevant to a particular individual executive. In addition, actual target total compensation may be higher or lower than market due to changes to our peer group prior to 2011 caused by decreases in the company’s revenue size and market capitalization in recent years.

Role of the Stockholders

As required by Section 14A of the Securities Exchange Act of 1934, we submitted to our stockholders a resolution to approve, in an advisory vote, the compensation of our executive officers at our 2011 Annual Meeting of Stockholders. At this meeting, a substantial majority (over 70%) of the votes cast at the meeting on the proposal voted in favor of the proposal. Excluding abstentions, over 90% of the votes voted in favor of the proposal. The Committee believes this affirms our stockholders’ support of our executive compensation, and as a result, the Committee did not make any substantive changes to its compensation program in 2012 based on this vote.

 

IV. Individual Components of Our Executive Compensation Program

Base Salary

The base salary of an executive takes into account the executive’s performance, responsibilities and experience. Base salaries are the foundation for executive compensation, since the value of other elements such as short-term (annual) incentives and long-term incentives are determined as a percent of base salary. The base salary for an executive officer is benchmarked at the 50th percentile of our peer group. In administering executive salaries, the Human Resources Committee does not consider a base salary within 10% of the target amount as deviating materially from the target salary and regards any salary within that range as being competitive with comparable positions within our peer group.

Following its annual review in 2011, the Committee determined that the base salaries for our named executive officers were at the 50th percentile of our peer group or higher. As a result, the Committee did not make any adjustments to the named executive officers’ base salaries in 2011.

Short-Term Incentives

Our short-term (annual) incentive program is meant to reward executives for achievement of corporate financial and individual performance goals relating to a specific fiscal year. When establishing the financial performance goals, the Human Resources Committee reviews and discusses with both executives and the full Board of Directors our business plan and its key underlying assumptions and then establishes the financial performance goals for the year. The Human Resources Committee believes that the annual incentive program is an important component of executive compensation because it rewards the named executive officer for achieving the company’s annual performance goals. The value of the short-term incentive paid to each executive is based upon percentage incentive targets established by the Human Resources Committee.

All named executive officers are eligible for annual performance-based cash incentives in target amounts ranging from 50% to 100% of their base salaries. As part of the Human Resources Committee’s annual review of executive compensation, the Human Resources Committee also reviews the percentage incentive target for each executive. The short-term incentive is targeted at the 50th percentile range of our peer group, and the Committee may adjust an executive’s percentage target in order to bring an executive’s annual incentive within this range.

Following its annual compensation review in 2011, the Committee determined that the target short term incentive target for our named executive officers was between the 50th and 75th percentile of our peer group. As a result, the Committee did not make any adjustments to the value of executive target short-term incentive.

2011 Short-Term Incentive Plan

The Human Resources Committee established the 2011 Short-Term Incentive Plan with the objective of rewarding achievement of annual net earnings and net sales goals and the achievement of individual performance

 

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objectives aligned with one or more of our corporate strategic initiatives. Prior to 2011, our short-term incentive program was based solely on the achievement of financial performance measures established by the Committee. To recognize performance on other key objectives and to address retention concerns, the Committee redesigned the 2011 Short-Term Incentive Plan to include:

 

   

a 25% individual performance component which gives the Human Resources Committee the flexibility to recognize that an executive’s performance may not always be linked directly to the company’s achievement of net earnings and net sales goals and that the achievement of other objectives such as productivity and cost control may also need to be rewarded; and

   

a threshold level of net earnings, which is in addition to the target and maximum net earnings levels in the prior short-term incentive plans. This addition of a threshold level of net earnings allows for a minimum payout of 25% of the short-term incentive if threshold net earnings is achieved rather than requiring target net earnings be achieved prior to any payout of an award. By including this threshold goal in the plan, the plan is more in line with market practices and gives the Committee the ability to reward employees for achieving goals close to target.

As a result of these design changes, for each corporate named executive officer (Messrs. Scozzafava, Rolls, Botsford and Johnson), 40% of their award opportunity is based on achievement of corporate net earnings goals, 35% is based on achievement of corporate net sales goals and 25% is based on the achievement of individual performance objectives. Corporate net earnings and net sales were selected as the primary measures for the plan because they are significantly influenced by the performance of the named executive officers, and these align the executive’s annual incentive opportunity with corporate growth objectives. The Committee chose to weight these goals nearly equal as both net earnings and net sales are equally important to ensuring the company’s financial strength and increasing stockholder value. For Mr. Teplitz, President of our Thomasville and Drexel Heritage brands, the Committee included Thomasville and Drexel Heritage brand net earnings as a component of his total award amount along with the corporate net earnings and corporate net sales goals, because of the significant influence he has over these brands’ earnings. As a result, corporate net earnings, corporate net sales, brand net earnings and individual performance are all weighted equally and represent 25% of the award opportunity for Mr. Teplitz.

Under the 2011 plan, other than the potential payout for achieving individual performance goals, no other payments would be made unless the threshold corporate net earnings goal was achieved. For 2011, our threshold corporate net earnings goal was a net loss of not more than $9.0 million and our threshold corporate net sales goal was $1.0 billion. Our company’s actual performance in 2011 was a net loss of $43.7 million and net sales of $1.11 billion. As a result, the threshold corporate net earnings goal was not met and no payments for the achievement of the financial goals were made to executives.

In addition to the corporate financial goals, executives may be paid 25% of their award opportunity for the achievement of individual performance objectives. Attainment of the individual goals is subjectively assessed by the Committee and for each of the Chief Executive Officer’s direct reports, by our Chief Executive Officer. In 2011, due to the company’s overall financial performance, the Committee exercised its discretion under the plan and did not make any payments to executives for the achievement of their individual performance objectives.

 

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2012 Short-Term Incentive Plan

The design of our 2012 short-term incentive plan is the same as our 2011 short-term incentive plan with the goals established again being net earnings and net sales and the achievement of individual performance objectives aligned with one or more of our corporate strategic initiatives. The weighting of each goal remains unchanged from 2011, and again other than the potential payout for achieving the individual performance objectives, no payments will be made under the plan unless the threshold corporate net earnings goal is achieved. If the corporate threshold net earnings goal is achieved, the plan establishes a payout range to the extent the performance goals are met or are exceeded. The threshold, target and maximum short-term incentive plan payments that may be paid to the named executive officers under the 2012 Short-Term Incentive Plan also remain the same as 2011 and are as follows:

 

Name

   Base
Salary
     Percentage
Incentive Target
    Threshold      Target      Maximum  

Ralph P. Scozzafava

   $ 750,000         100   $ 140,625       $ 750,000       $ 1,500,000   

Steven G. Rolls

     475,000         60     53,438         285,000         570,000   

Jon D. Botsford

     350,000         50     32,813         175,000         350,000   

Raymond J. Johnson

     415,000         50     38,906         207,500         415,000   

Edward D. Teplitz

     390,000         60     43,875         234,000         468,000   

Even if the goals established under the plan are achieved, the Human Resources Committee may, in its discretion, reduce (but not increase) the amount of any individual award.

Long-Term Incentives

Our long-term incentive program is designed to motivate our executive officers to focus on long-term company performance through cash or common stock awards and to reinforce accountability by linking executive compensation to aggressive performance goals. We believe granting awards with long vesting periods creates a substantial retention incentive and also encourages the named executive officers to focus on the company’s long-term business objectives and long-term stock price.

All named executive officers were eligible for long-term incentives in 2011. The Human Resources Committee sets target awards under our long-term incentive programs as a percentage of base salary based primarily upon a review of market competitors, as well as an evaluation of the importance and impact of the position within our organization. The long-term incentive opportunity for each executive is targeted at the 50th percentile range of our peer group.

Based on its annual review of compensation in early 2011, the value of the named executives officers target long-term incentive compensation was reduced 18% to bring target total compensation for each executive closer to the median of the company’s new peer group. As a result, the target long-term incentive for each named executive officer in 2011 is as follows:

 

Name

   Base
Salary
     Percentage
Incentive Target
    Target
Dollar Value
 

Ralph P. Scozzafava

   $ 750,000         245.3   $ 1,839,600   

Steven G. Rolls

     475,000         106.3     504,868   

Jon D. Botsford

     350,000         81.8     286,160   

Raymond J. Johnson

     415,000         49.1     203,583   

Edward D. Teplitz

     390,000         81.8     318,864   

Executives receive, and have received awards of long-term incentives annually except in 2009 when the Human Resources Committee temporarily suspended awards of long-term incentive compensation due to the Company’s past performance and the uncertain economic environment. In addition, the Committee has the flexibility to make special additional awards of cash and equity incentives to executives outside the normal annual award cycle, and the Committee has exercised such discretion in limited, special instances.

 

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In particular, in May 2011, the Committee awarded Raymond Johnson an additional award of 35,000 shares of restricted stock outside the normal, annual award cycle to remedy retention concerns and internal pay inequities. The shares vest in two equal annual installments on the second and third anniversary of the grant date.

The following is a description of the long-term incentive awards which were outstanding as of December 31, 2011, and the long-term incentive award approved by the Human Resources Committee in early 2012:

2008 Restricted Stock Units

In 2008, the Human Resources Committee made a special award of restricted stock units outside the normal annual award cycle to certain executive officers. The Committee exercised its discretion to make awards outside the usual award cycle due to increased concerns regarding the retention of executive officers and the desire to further align the interests of our stockholders with executives by motivating and rewarding executives for increases in the company’s stock price. Due to a lack of shares available for grant under any stockholder approved plan at the time of the award, the restricted stock units are payable only in cash and cannot be settled for stock. Payment is contingent on share price appreciation objectives and the achievement of service-based retention periods. 50% of the restricted stock units vested and were paid to executives in 2010 due to the achievement of the share price appreciation objective (the trailing 10 day average of our common stock reached $6.26 per share) and the two-year service-based retention period. The remaining 50% of the units will vest if the trailing 10 day average of our common stock reaches $9.39 per share. If the remaining units had vested prior to December 19, 2011, the executive would have been entitled to receive a cash payment of $9.39 per vested unit on December 19, 2011. Since the vesting did not occur, the executive is entitled to receive a cash payment of $9.39 per vested unit on the vesting date if the units vest prior to the expiration of the awards on December 19, 2013.

2010-2012 Long-Term Incentive Compensation

In 2010, the Human Resources Committee reinstated long-term incentive compensation after suspending its award during 2009. The Committee with the assistance of its independent compensation consultant reviewed current trends in executive compensation and the company’s business strategy of being a branded consumer products company. Based on the information presented, the Committee redesigned the company’s long-term incentive compensation for 2010. The 2010 long-term incentive compensation plan includes a mix of cash and equity. The purpose of the mix of compensation is to focus the executives on increasing long-term organizational value, to provide retention benefits and value to the named executive officers by awarding a portion of the grant in service-based stock options, and to further align the interests of the executives with those of our stockholders by granting a significant amount of the award in equity so that the value of the award will be dependent on the value of the company’s stock price.

The total value of the named executive officer’s award is based on the percentage long-term incentive target set by the Committee, which ranged from 60% to 300% of the named executive officer’s base salary in 2010. Under the 2010 plan, named executives officers received 25% of their long-term incentive target compensation in the form of service-based stock options that vest equally over three years and 75% of their long-term incentive target compensation under the 2010-2012 Performance Share Plan. The 2010-2012 Performance Share Plan provides for a payout range of a combination of performance shares and cash to the extent the company meets or exceeds certain three-year return on invested capital targets. Payouts range from 50% of target value if threshold return on invested capital goals are achieved to up to 200% of target value if our performance meets or exceeds the maximum return on invested capital goals.

Return on invested capital under the plan is defined as net operating profit after taxes divided by invested capital and may be adjusted by the Committee for unusual or infrequent items, including acquisitions or divestitures, tax valuation allowance reversals, impairment expense, environmental expense and expense related to the restricted stock units awarded in December 2008. The target levels for the awards were set by the Human Resources Committee and were based on our company’s 2010 budget approved by our Board of Directors and

 

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our company’s 2011 and 2012 projections. The Committee chose return on invested capital as the performance metric because it believes this is an accurate measure of the overall financial performance of the company. Whether the target funding can be attained is a function of the degree of difficulty associated with the company’s long-term strategic plan. Based on the Human Resources Committee’s consideration and assessment of our performance history and the economy at the time of the grant, the Committee determined that the long-term strategic plan had a significant degree of difficulty and would not reward executives without an increase in stockholder value. The Committee has discretion to reduce (but not increase) the performance-based payouts under the plan.

During 2011, the company concluded that the performance targets established in connection with the 2010-2012 Performance Share Plan were unlikely to be achieved and that it is no longer probable that payouts will be made under the plan. Accordingly, the company ceased recording expense and reversed all expenses accrued in connection with such awards.

2011-2013 Long-Term Incentive Compensation

In 2011, the Committee approved the 2011-2013 long-term incentive compensation for each named executive officer. This compensation is similar to the previous year’s long-term incentive compensation except:

 

   

the full value of each executive’s target long-term incentive compensation was reduced 18%; and

   

each executive received their targeted long-term incentive compensation in the following form:

   

40% of the value was received in stock options which vests equally over three years;

   

40% of the value will be paid out to executives in cash if the company achieves certain three-year return on invested capital targets; and

   

20% of the value was received in restricted stock which vests on the third anniversary of the grant date.

The value of target long-term incentive compensation was reduced in order to bring target total compensation for each executive closer to the median of the company’s peer group, and the reason for increasing the stock options and adding time-based restricted stock was to alleviate retention concerns associated with the reduction in the value of executive long-term incentive compensation by giving executives some value even if the performance measures are not attained or if the stock price declines over the three-year period. In addition, the Human Resources Committee also considered the impact on stockholder dilution when redesigning the award and the Committee chose restricted stock due to the lower impact on stockholder dilution.

The Committee again chose return on invested capital as the performance metric for the cash portion of the award for the same reasons it chose the metric under the 2010-2012 plan. In addition, based on the Committee’s consideration and assessment of our performance history, the Committee believes that the return on invested capital targets that it established under the plan have a sufficient degree of difficulty that executives would not receive a payout without an increase in stockholder value. The Committee has discretion to reduce (but not increase) the cash portion of the payouts under the plan.

2012-2014 Long-Term Incentive Compensation

The Committee approved the 2012-2014 long-term incentive compensation for each named executive officer in early 2012. Due to the company’s low share price and the lack of shares available to be awarded under any stockholder approved plan, each executive received their targeted long-term incentive compensation in the following form:

 

   

25% of the value was received in restricted stock which vests equally over three years; and

   

75% of the value will be paid out to executives in cash if the company achieves certain return on invested capital targets.

Unlike the company’s previous long-term incentive plans, the performance cash component of the award will be based on three separate, annual return on invested capital targets established by the Committee at the

 

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beginning of each year. If the annual return on invested capital goal is achieved, 50% of the cash award will be paid at the end of the applicable year and the remaining 50% will be paid at the end of the three-year period. The Committee changed the payout of the cash component to alleviate retention concerns associated with low incentive payouts while balancing these concerns against the need to encourage executives to focus on the company’s long-term business objectives. Each named executive officer’s target percentage long-term incentive remained the same in 2012, and the Committee again chose return on invested capital as the performance metric for the cash portion of the award for the same reasons it chose the metric under the prior long-term incentive plans, and based on an assessment of our performance history, the Committee believes that the return on invested capital targets have a sufficient degree of difficulty that executives would not receive a payout without an increase in stockholder value. The Committee again has discretion to reduce (but not increase) the cash portion of the payouts under the plan.

 

V. Additional Information on our Executive Compensation Program

Termination Based Compensation

Severance

Upon an involuntary termination of employment without cause or a constructive termination of employment, our named executive officers are entitled to receive severance payments under our Executive Severance Plan or in the case of Mr. Scozzafava, under his employment agreement. In 2010, the Human Resources Committee undertook a review of the Executive Severance Plan and Mr. Scozzafava’s employment agreement and approved amendments to these agreements to among other things eliminate tax gross-ups on any health, dental or vision benefits received by executives and to change Mr. Scozzafava’s severance from three times base salary plus the average short-term incentive award over the past three years to two times base salary plus his target award under the company’s short term incentive plan in effect on the termination date. In setting the terms of such severance arrangements, the Human Resources Committee considered certain best practices with the understanding that these highly ranked executives often face challenges securing new employment following termination.

Under the amended Executive Severance Plan, severance for involuntary termination without cause or constructive termination of employment for named executive officers, other than Mr. Scozzafava, is as follows:

 

   

one times base salary plus the executive’s target award under the short-term incentive plan in effect on the termination date;

   

a pro-rated annual bonus under the short-term incentive plan payable as if the executive had remained an employee throughout the period;

   

a pro-rated bonus under the long-term incentive plan in effect on the termination date and based on business performance to the termination date, only if at least 18 months or more of the three year performance period has lapsed;

   

immediate vesting of any unvested equity awards that were outstanding on the date of termination if pursuant to the terms of the awards and our equity plans the executive is entitled to accelerated vesting;

   

12 months of health, dental and vision coverage under the company’s medical plan on an after tax basis; and

   

reimbursement for expenses associated with financial counseling and job search costs up to $40,000 for the 12 months following termination.

Under Mr. Scozzafava’s amended employment agreement, in the event Mr. Scozzafava is involuntarily terminated without cause or his employment is constructively terminated, he is entitled to the same compensation as the other named executive officers set forth above except he is entitled to:

 

   

two years of base salary plus a payment that represents the target annual bonus for the year of termination multiplied by two; and

   

24 months of health, dental and vision coverage under the company’s medical plan on an after tax basis.

 

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In consideration for these severance benefits, all of our named executive officers have agreed not to compete with our company for one year (or in the case of Mr. Scozzafava, two years) following the executive’s termination of employment.

Change in Control

Upon a change in control of our company, each named executive officer is entitled to severance payments similar to those described above and accelerated vesting of certain outstanding unvested equity awards. These change in control provisions are designed to encourage executives to focus on the best interests of stockholders by alleviating their concerns about a possible detrimental impact to their compensation and benefits under a potential change in control and are not designed to provide compensation advantages to executives for executing a transaction. The change in control agreements are “double-trigger” agreements meaning that other than with respect to accelerated equity awards, which are governed by the terms of our equity plans, in order to receive benefits under the agreement within a specified time period following a change in control the executive must be terminated by us or the successor company without cause, or the executive must be constructively terminated, as defined in the agreements. In 2010, the Human Resources Committee amended the terms of all change in control agreements to eliminate excise tax gross-up payments on change in control benefits by December 31, 2011. Additional information regarding change in control payments for the named executive officers under the change in control agreements in effect on December 31, 2011, is provided under the heading “Potential Payments upon Termination or Change in Control.”

Benefits and Perquisites

We provide a 401(k) savings plan to all U.S. employees, including our named executive officers. In 2011, we matched 100% of the pre-tax contributions up to 3% of compensation plus 50% of pre-tax contributions up to the next 3% of compensation. In addition, we have a Deferred Compensation Plan, which is a non-qualified (unfunded) plan offered to select executives, including the named executive officers, who are impacted by the Internal Revenue Code’s statutory limits on company contributions under the 401(k) plan. The Deferred Compensation Plan provides executives, including the named executive officers, with the ability to defer base salary, incentive payments and other eligible compensation. In addition, the plan allows us to provide the same matching contribution, as a percentage of eligible compensation, to impacted employees as would have been available in the absence of statutory limits. Under the plan, executives can defer up to 90% of eligible compensation and contributions immediately vest.

We provide the named executive officers with limited perquisites and other personal benefits that the Human Resources Committee deems reasonable and consistent with our overall compensation program. We do not view perquisites as a significant element of our comprehensive compensation structure, but do believe that they can be used in conjunction with other elements of compensation to attract, motivate and retain individuals in a competitive environment. In 2011, certain named executive officers received relocation and commuting benefits, and Mr. Scozzafava was allowed to use the corporate aircraft up to 35 hours per year for personal travel and he received an executive physical exam.

Policy on Hedging

We prohibit directors and officers from hedging their ownership of or engaging in certain speculative transactions in our common stock, including investing in derivative securities of our common stock and engaging in short sales or other short-position transactions in our common stock.

Recoupment Policy for Incentive Compensation

If the company restates its reported financial results, the Board shall seek the recovery of any award that was paid to an executive found to be involved in fraud or misconduct that required the company to restate its financial results. This policy applies to any restatements that are required within three years of the end of the year for which the incentive payment was paid.

 

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In addition, under the 2008 Incentive Plan and the 2010 Omnibus Incentive Plan, the Board may seek the recovery of any gain realized by a participant from an award made under these plans if the Board determines that the company has been materially harmed by such participant within one year after the gain is realized by the participant.

Tax Implications

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1 million paid for any fiscal year to the company’s chief executive officer and three other most highly compensated executive officers (other than the chief financial officer) as of the end of the fiscal year. However, certain performance-based compensation is not subject to this limitation. We structure our incentive plans with the intention that awards under these plans would qualify for tax deductibility. Although a significant portion of each executive officer’s compensation will satisfy the requirements for deductibility under Section 162(m), the Human Resources Committee retains the ability to evaluate the performance of our executives and to pay appropriate compensation, even if it may result in the non-deductibility of certain compensation under federal tax law.

Stock Ownership Requirements

The Human Resources Committee believes that meaningful executive ownership is integral to aligning executive and stockholder interests. From January 1, 2007 and through the end of 2010, we maintained formal executive stock ownership guidelines, which required our executives to own a fixed number of shares of our stock ranging from 20,000 to 200,000 shares depending upon position.

In early 2011, the Human Resources Committee reviewed best practices in this area and approved new executive stock ownership guidelines which require executive officers to own an increased number of shares of our common stock equal to a specified multiple of their annual base salary. The levels applicable to executive officers range from between one and three times annual base salary as follows:

 

   

Chief Executive Officer- 3 times annual base salary

   

Senior Vice Presidents and Brand Presidents- 2 times annual base salary

   

All Other Executive Officers- 1 times annual base salary

Shares held directly by the executive officer and vested shares subject to deferred compensation count towards satisfying the requirement. In keeping with best practices, unexercised stock options, unvested restricted stock awards and unvested restricted stock units do not count towards satisfying the requirement. Executives are required to hold 50% of shares of common stock received from the company through equity compensation grants until they have attained the applicable level of stock ownership.

Human Resources Committee Report on Executive Compensation for 2011

We have reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on the reviews and discussions referred to above, we recommended to the Board of Directors that the Compensation Discussion and Analysis referred to above be included in our 2012 Proxy Statement and incorporated by reference into our 2011 Annual Report on Form 10-K.

Submitted by the Human Resources Committee,

James M. Zimmerman (Chairman)

Maureen A. McGuire

Aubrey B. Patterson

 

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Compensation Committee Interlocks and Insider Participation

Our Human Resources Committee is currently comprised of James M. Zimmerman, Maureen A. McGuire and Aubrey B. Patterson. Mr. Patterson is Chairman and Chief Executive Officer of BancorpSouth, Inc., and in 2011, we paid the leasing division of BancorpSouth, Inc. approximately $354,000 in connection with truck and equipment leases for one of our subsidiaries.

No member of our Human Resources Committee has served as one of our officers or employees at any time. None of our executive officers serve as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors. None of our executive officers serve as a member of the Board of Directors of any other company that has an executive officer serving as a member of our Human Resources Committee.

 

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SUMMARY COMPENSATION TABLE

The following table summarizes the compensation of the named executive officers for the year ended December 31, 2011, and for those executive officers named in our 2011 or 2010 Proxy Statements, for the years ended December 31, 2010 and 2009. The named executive officers are our Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers.

 

Name and Principal Position

  Year     Salary     Bonus     Stock
Awards(1)
    Option
Awards(2)
    Non-Equity
Incentive Plan
Compensation
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
    All Other
Compensation(3)
    Total  

Ralph P. Scozzafava

    2011      $ 750,000      $      $ 335,736      $ 669,856      $      $      $ 77,638      $ 1,833,230   

Chairman & Chief Executive Officer

    2010        750,000               1,095,638        694,354        4,000,015        1,619        83,444        6,625,070   
    2009        750,000                                           92,544        842,544   

Steven G. Rolls

    2011        475,000               92,140        183,840                      164,494        915,474   

Chief Financial Officer

    2010        475,000               300,936        190,718        750,011        362        62,147        1,779,174   
    2009        475,000                                           169,110        644,110   

Jon D. Botsford

    2011        350,000               52,225        104,200                      11,025        517,450   

Senior Vice President, General Counsel & Secretary

    2010        350,000               170,432        108,013        499,986               10,863        1,139,294   
    2009        350,000                                           65,223        415,223   
                 

Raymond J. Johnson

    2011        415,000               201,306        74,130                      11,025        701,461   

Senior Vice President — Global Supply Chain

    2010        415,000               121,247        76,840        212,396               38,098        863,581   
    2009        383,077        150,000        108,900        70,392                      95,873        808,242   

Edward D. Teplitz

    2011        390,000               58,197        116,105                      53,941        618,243   

President —Thomasville & Drexel Heritage

    2010        390,000               189,910        120,357        499,986               52,707        1,252,960   
    2009        390,000                                           40,722        430,722   

 

(1) This column represents the aggregate grant date fair value for stock awards granted in the fiscal years ended December 31, 2011, December 31, 2010 and December 31, 2009, computed in accordance with FASB ASC Topic 718. For additional information, refer to Note 9 of our audited consolidated financial statements in our Form 10-K for the year ended December 31, 2011, as filed with the SEC. Stock awards for 2011 for Mr. Johnson include an additional grant of restricted stock designed for retention purposes. Stock award values for 2011 reflect an 18% decrease in the value of long-term incentive compensation for each executive. All amounts reflect the fair value of the stock awards on the grant date and do not correspond to the actual value that will be recognized by the named executives. For performance-based awards, the amounts in the column reflect the most probable outcome award value at the date of grant in accordance with FASB ASC Topic 718, which amount assumes that the target level of performance conditions will be achieved. The maximum award value, if paid, for the performance shares granted in 2010 would be: Mr. Scozzafava, $2,191,277; Mr. Rolls, $601,872; Mr. Botsford, $340,863, Mr. Johnson, $242,493; and Mr. Teplitz, $379,819.
(2) This column represents the aggregate grant date fair value for stock options granted in the fiscal years ended December 31, 2011, December 31, 2010 and December 31, 2009, computed in accordance with FASB ASC Topic 718. For additional information, refer to Note 9 of our audited consolidated financial statements in our Form 10-K for the year ended December 31, 2011, as filed with the SEC. Option award values for 2011 reflect an 18% decrease in the value of long-term incentive compensation for each executive. These amounts reflect the fair value of the options on the grant date and do not correspond to the actual value that will be recognized by the named executives.
(3) Detail of the amounts reported in the “All Other Compensation” column for fiscal year 2011 is provided in the table below:

 

Name

  Personal
Use of
Airplane(a)
    Executive
Physical
    401(k) Plan
Match(b)
    Relocation(c)     Commuting
Expenses(d)
    Tax
Payments(e)
    Total  

Ralph P. Scozzafava

  $ 63,457      $ 3,450      $ 10,731      $      $      $      $ 77,638   

Steven G. Rolls

                  10,688        88,515               65,291        164,494   

Jon D. Botsford

                  11,025                             11,025   

Raymond J. Johnson

                  11,025                             11,025   

Edward D. Teplitz

                  11,025               28,990        13,926        53,941   

 

    (a) As required by SEC rules, the amount shown is the aggregate incremental cost to our company of personal use of the company’s airplane that is calculated based on the variable operating costs per mile, which includes fuel costs, maintenance, associated travel costs for the crew and certain office expenses, but does not include the tax on the disallowance (net of W-2 adjustments) of certain aircraft expenses under current Federal income tax law.
  (b) These amounts reflect company matching contributions under the company’s 401(k) Plan.

 

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    (c) This amount reflects reimbursements of closing costs and brokers commissions incurred by Mr. Rolls in connection with the sale of his prior home and his relocation to St. Louis.
    (d) This amount reflects reimbursement for commuting expenses to North Carolina for Mr. Teplitz.
    (e) These amounts reflect tax gross-up payments for the taxable portion of relocation expenses and commuting expenses.

GRANTS OF PLAN-BASED AWARDS TABLE IN 2011

The compensation plans under which the grants in the following table were made are generally described in the Compensation Discussion and Analysis in this Proxy Statement and include the 2011 Short-Term Incentive Plan (“2011 STIP”), the 2011-2013 Long-Term Incentive Compensation (“2011 LTIP”) and the 2010 Omnibus Incentive Plan (the “2010 Plan”).

 

      Plan      Grant
Date
     Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
     All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(2)
     All Other
Option
Awards:
Number of
Securities
Underlying
Options(3)
     Exercise
or Base
Price of
Option
Awards
     Grant
Date Fair
Value of
Stock and
Option
Awards(4)
 

Name and Principal Position

         Threshold      Target      Maximum              

Ralph P. Scozzafava

     2011 STIP          $ 140,625       $ 750,000       $ 1,500,000               

Chairman & Chief

     2011 LTIP            367,920         735,840         1,471,680               
     2011 LTIP         2/2/11                  73,145             $ 335,736   
     2011 LTIP         2/2/11                     238,910       $ 4.59         669,856   

Steven G. Rolls

     2011 STIP            53,438         285,000         570,000               

Chief Financial Officer

     2011 LTIP            100,974         201,947         403,894               
     2011 LTIP         2/2/11                  20,074               92,140   
     2011 LTIP         2/2/11                     65,568       $ 4.59         183,840   

Jon D. Botsford

     2011 STIP            32,813         175,000         350,000               

Senior Vice President,

     2011 LTIP            57,232         114,464         228,928               

General Counsel &

     2011 LTIP         2/2/11                  11,378               52,225   

Secretary

     2011 LTIP         2/2/11                     37,164       $ 4.59         104,200   

Raymond J. Johnson

     2011 STIP            38,906         207,500         415,000               

Senior Vice President —

     2011 LTIP            40,716         81,433         162,866               

Global Supply Chain

     2011 LTIP         2/2/11                  8,095               37,156   
     2011 LTIP         2/2/11                     26,439       $ 4.59         74,130   
     2011 Plan        5/4/11                  35,000               164,150   

Edward D. Teplitz

     2011 STIP            43,875         234,000         468,000               

President —Thomasville

     2011 LTIP            63,773         127,546         255,092               

& Drexel Heritage

     2011 LTIP         2/2/11                  12,679               58,197   
     2011 LTIP         2/2/11                     41,410       $ 4.59         116,105   

 

(1) The amounts in these columns include the threshold, target and maximum amounts for each named executive officer under the 2011 STIP and the 2011 LTIP. The 2011 STIP payments are based on achieving individual objectives and net earnings and net sales goals for our company and the columns reflect payouts at the threshold of 25% of the award, payouts at the target of 100% of the award and payouts at the maximum of 200% of the award. Because we did not achieve the target net earnings specified in the 2011 STIP and due to overall company performance, no payments were made under the 2011 STIP. The 2011 LTIP payments are based on achieving certain return on invested capital objectives for the January 1, 2011 to December 31, 2013 performance period and the columns reflect payouts at the threshold of 50% of the award, payouts at the target of 100% of the award and payouts at the maximum of 200% of the award.
(2) Restricted shares vest based on the schedules described in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End” table in this Proxy Statement. All restricted shares will vest upon a change in control of the company unless the shares are continued or substituted for in connection with a change in control. Participants are paid dividends and have voting rights with respect to their unvested restricted shares.
(3) The exercise price of the stock options is equal to the closing price of our common stock on the grant date. Stock options vest based on the schedules described in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End” table in this Proxy Statement. All stock options will vest immediately upon a change in control of the company unless the options are continued or substituted for in connection with a change in control. Holders of stock options do not receive dividend equivalents or have any voting rights with respect to the shares of common stock underlying the options.
(4) The amounts shown are the grant date fair value of the awards. The assumptions used to determine such values are described in Note 9 of our audited consolidated financial statements in our Form 10-K for the year ended December 31, 2011.

 

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OUTSTANDING EQUITY AWARDS VALUE AT FISCAL YEAR-END TABLE

The following table provides information on the holdings of stock options and restricted stock awards by our named executive officers outstanding as of December 31, 2011. The market value of stock awards is based on the closing price of our stock on December 31, 2011, which was $1.23.

 

    Option Awards     Stock Awards  

Name and Principal Position

  Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
    Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
    Option
Exercise
Price
    Option
Expiration
Date
    Number of
Shares of
Stock or
Units that
Have Not
Vested
    Market Value
of Shares of
Stock or Units
of Stock that
Have Not
Vested
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights that
Have Not
Vested
    Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
 

Ralph P. Scozzafava

    217,292 (1)           $ 14.92        06/18/2017            68,822 (4)    $ 84,651   

Chairman & Chief

    187,500 (1)      62,500 (1)      10.48        02/01/2018        73,145 (5)    $ 89,968       

Executive Officer

    45,189 (2)      90,374 (2)      7.96        05/06/2020           
           238,910 (2)      4.59        02/02/2021           

Steven G. Rolls

    12,413 (2)      24,822 (2)      7.96        05/06/2020        3,334 (6)      4,101       

Chief Financial Officer

           65,568 (2)      4.59        02/02/2021        20,074 (5)      24,691       
                18,903 (4)      23,251   

Jon D. Botsford

    7,030 (2)      14,058 (2)      7.96        05/06/2020        4,166 (6)      5,124       

Senior Vice President,

           37,164 (2)      4.59        02/02/2021        11,378 (5)      13,995       

General Counsel & Secretary

                10,706 (4)      13,168   

Raymond J. Johnson

    20,000 (3)      10,000 (3)      3.63        05/06/2016        5,000 (6)      6,150       

Senior Vice President —

    5,002 (2)      10,000 (2)      7.96        05/06/2020        8,095 (5)      9,957       

Global Supply Chain

           26,439 (2)      4.59        02/02/2021        35,000 (7)      43,050       
                15,000 (8)      18,450   
                7,616 (4)      9,368   

Edward D. Teplitz

    7,834 (2)      15,664 (2)      7.96        05/06/2020        666 (6)      819       

President —Thomasville

           41,410 (2)      4.59        02/02/2021        12,679 (5)      15,595       

& Drexel Heritage

                11,929 (4)      14,673   

 

(1) Each of the stock options were granted ten years prior to the expiration date and vest in four equal annual installments on the anniversary of the grant date.
(2) Each of the stock options were granted ten years prior to the expiration date and vest in three equal annual installments on the anniversary of the grant date.
(3) Each of the stock options were granted seven years prior to the expiration date and vest in three equal annual installments on the anniversary of the grant date.
(4) Amounts represent the threshold level of payout of performance shares underlying outstanding awards. Performance shares vest in full upon the attainment of three year return on invested capital during the January 1, 2011 to December 31, 2013 performance period.
(5) Shares of restricted stock vest on the third anniversary of the grant date.
(6) Shares of restricted stock vest in three equal annual installments commencing on the following dates: Mr. Rolls — April 8, 2010; Mr. Botsford — February 11, 2010; Mr. Johnson — February 2, 2010, and Mr. Teplitz — October 10, 2010.
(7) Shares of restricted stock vest in two equal installments on May 4, 2013 and May 4, 2014.
(8) Amount represents the threshold level of payout of performance shares underlying outstanding awards. Performance shares vest in full upon the attainment of three year return on invested capital during the January 1, 2009 to December 31, 2011 performance period. Performance goals were not met and the shares were forfeited following year-end.

OPTION EXERCISES AND STOCK VESTED IN 2011

The following table provides information on stock option exercises and the vesting of restricted stock awards for the named executive officers during 2011.

 

     Option Awards      Stock Awards  

Name

   Number of Shares
Acquired on Exercise
     Value Realized on
Exercise
     Number of Shares
Acquired on Vesting
     Value Realized on
Vesting(1)
 

Ralph P. Scozzafava

           $               $   

Steven G. Rolls

                     8,333         40,090   

Jon D. Botsford

                     4,167         17,668   

Raymond J. Johnson

                     5,000         23,225   

Edward D. Teplitz

                     667         1,324   

 

(1) Represents the amount realized based on the fair market value of our common stock on the vesting date. The fair market value was determined using the high and low value of our common stock on the vesting date.

 

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NONQUALIFIED DEFERRED COMPENSATION

The table below provides information on the nonqualified deferred compensation of the named executives in 2011, under our Deferred Compensation Plan. Our Deferred Compensation Plan is a nonqualified, unfunded defined contribution plan. The plan in effect on December 31, 2011, allows highly compensated employees, including executive officers, to defer up to 90% of salary and other eligible compensation. Company matching contributions are made at the same rate as provided in our qualified 401(k) plan on earnings in excess of the tax code limit of $245,000 in 2011 and are immediately vested. All contributions to the Deferred Compensation Plan are credited at the election of the executive into the same funds available for contribution under our 401(k) plan. Participants begin receiving distributions after retirement or termination of employment or if specifically elected by the participant, in a specified year while actively employed.

 

Name

   Executive
Contributions in Last
Fiscal Year
     Registrant
Contributions in
Last Fiscal Year
     Aggregate
Earnings in Last
Fiscal Year(1)
     Aggregate
Withdrawals/

Distributions
     Aggregate Balance
at Last Fiscal

Year End(2)
 

Ralph P. Scozzafava

                                       

Steven G. Rolls

                                   $ 26,879   

Jon D. Botsford

                                       

Raymond J. Johnson

                                       

Edward D. Teplitz

                                       

 

(1) There were no above-market returns in 2011 on account balances held in the nonqualified deferred compensation plan.
(2) All executive contributions and contributions by us have been reported in the Summary Compensation Table in prior years.

POTENTIAL PAYMENTS UPON

TERMINATION OR CHANGE OF CONTROL

The section below describes the payments that may be made to named executive officers upon an executive’s employment with our company being terminated pursuant to individual agreements in effect on December 31, 2011.

Employment Agreements

We amended and restated the employment agreement with Ralph P. Scozzafava effective July 1, 2010. The terms of this agreement terminate effective June 30, 2013. Under the terms of this employment agreement, if Mr. Scozzafava is terminated by us without cause or if he is constructively terminated at anytime, including following a change in control of our company, he is entitled to receive the following under the terms of the agreement:

 

   

two years of base salary plus a payment that represents the target annual bonus for the year of termination multiplied by two;

   

a pro-rated annual bonus under the short-term incentive plan in effect on the termination date payable as if Mr. Scozzafava had remained an employee throughout the period;

   

a prorated cash bonus under the long-term incentive plan in effect on the termination date if at least 18 months of the three year performance period has lapsed payable as if Mr. Scozzafava had remained an employee throughout the period;

   

immediate vesting of any unvested equity awards that were outstanding on the date of the termination of his employment if pursuant to the terms of the awards and our equity plans he is entitled to accelerated vesting;

   

two years of continued health, dental and vision coverage on an after-tax basis;

 

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one year of continued participation in the company’s welfare plans, other than health, dental, vision and the long-term and short-term disability plans; and

   

reimbursement for expenses associated with outplacement services, job search expenses and financial counseling costs up to $40,000.

In addition, pursuant to the terms of the amended and restated employment agreement, we phased-out excise tax gross-ups effective December 31, 2011, and as a result, Mr. Scozzafava is no longer entitled to an excise tax gross-up in the event of a change in control.

For a period of two years following termination of his employment, Mr. Scozzafava will be subject to a non-compete. Constructive termination under the agreement means termination by Mr. Scozzafava due to a material diminution in Mr. Scozzafava’s authority, duties or responsibilities; a change in the geographic location of the executive’s position; or a material reduction in base pay, incentive compensation and benefits.

Executive Severance Plan

We amended and restated our Executive Severance Plan effective July 1, 2010. Our Executive Severance Plan covers certain executives, including our named executive officers other than Mr. Scozzafava. Under this plan, if the executive’s employment is terminated by us without cause or the executive is constructively terminated, the executive is entitled to receive the following:

 

   

one year of base salary plus a payment that represents the target annual bonus for the year of termination;

   

a pro-rated annual bonus under the short-term incentive plan in effect on the termination date payable as if the executive had remained an employee throughout the period;

   

a prorated cash bonus under the long-term incentive plan in effect on the termination date if at least 18 months of the three year performance period has lapsed payable as if the executive had remained an employee throughout the period;

   

immediate vesting of any unvested equity awards that were outstanding on the date of termination if pursuant to the terms of the awards and our equity plans the executive is entitled to accelerated vesting;

   

one year of continued participation in all of the company’s welfare plans (including health, dental and vision coverage on an after-tax basis) other than long-term and short-term disability; and

   

reimbursement for expenses associated with outplacement services, job search expenses and financial counseling costs up to $40,000.

For a period of twelve months following termination of employment, each executive will be subject to a non-compete. Constructive termination under the plan means termination of employment due to a material diminution in the executive’s authority, duties or responsibilities; a change in the geographic location of the executive’s position; or a material reduction in base pay, incentive compensation and benefits.

Change in Control Agreements

We have Change in Control Agreements with each of our named executive officers, other than Mr. Scozzafava, which term ends on December 31, 2011, and continues in effect for successive one year periods unless either party terminates the agreement by providing at least three months written notice prior to the expiration. Under the Change in Control Agreements, if the executive’s employment is terminated by us without cause or the executive is constructively terminated within two years following a Change in Control, the executive is entitled to receive the following:

 

   

one and one-half years of base salary plus a payment that represents the target annual bonus for the year of termination multiplied by 1.5;

   

a pro-rated annual bonus under the short-term incentive plan in effect on the termination date payable as if the executive had remained an employee throughout the period;

   

a prorated cash bonus under the long-term incentive plan in effect on the termination date if at least 18 months of the three year performance period has lapsed payable as if the executive had remained an employee throughout the period;

 

35


   

immediate vesting of any unvested equity awards that were outstanding on the date of the termination of the executive’s employment if pursuant to the terms of the awards and our equity plans the executive is entitled to accelerated vesting;

   

one and one-half years of continued health, dental and vision coverage on an after-tax basis;

   

one year of continued participation in all of the company’s welfare plans (other than health, dental and vision coverage and long-term and short-term disability); and

   

reimbursement for expenses associated with outplacement services, job search expenses and financial counseling costs up to $40,000.

In addition, pursuant to the terms of the Change in Control Agreements, we phased-out excise tax gross-ups effective December 31, 2011, and as a result, executives are no longer entitled to an excise tax gross-up in the event of a change in control.

For a period of one and one-half years following termination of employment, each executive will be subject to a non-compete. Constructive termination under the agreements means termination of employment due to a material diminution in the executive’s authority, duties or responsibilities; a change in the geographic location of the executive’s position; or a material reduction in base pay, incentive compensation and benefits.

Termination and Change in Control Table for 2011

The tables below outline the potential payments to our Chief Executive Officer and other named executive officers upon the occurrence of certain termination triggering events. The amounts in the tables assume that the listed officer left our company effective December 31, 2011 and that the price per share of our common stock on that date was $1.23. Amounts actually received should any of the named executive officers cease to be employed by our company will vary based on factors such as the timing during the year of any such event, our stock price, and any changes to our benefit arrangements and policies. Named executive officers will be entitled to receive all amounts accrued and vested under our 401(k) plan and deferred compensation plans in which the named executive officer participates. These amounts will be determined and paid in accordance with the applicable plans and are not included in the tables because they are not termination payments.

 

36


Ralph P. Scozzafava

Chairman of the Board & Chief Executive Officer

 

Executive Benefits &

Payments Upon

Termination(1)

      Involuntary
Termination
                   
  Voluntary
Termination
  For
Cause
  Not For
Cause
    Death     Disability     Change in
Control(7)
 

Compensation

           

Severance

      $ 3,000,000                    $ 3,000,000   

Short-Term Incentive Plan(2)

                               

Long-Term Incentive Plan(2)

                               

Stock Options (Unvested & Accelerated)(3)

                               

Restricted Stock (Unvested & Accelerated)(3)

                             89,968   

Restricted Stock Units (Unvested & Accelerated)(3)

        2,000,007      $ 2,000,007      $ 2,000,007        4,000,015   

Benefits

           

Benefits Continuation(4)

        26,764                      26,764   

280G Tax Gross-Up(5)

                               

Other Benefits(6)

        40,000                      40,000   
 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

      $ 5,066,771      $ 2,000,007      $ 2,000,007      $ 7,156,747   

Steven G. Rolls

           

Chief Financial Officer

           

Executive Benefits &

Payments Upon

Termination(1)

      Involuntary
Termination
                   
  Voluntary
Termination
  For
Cause
  Not For
Cause
    Death     Disability     Change in
Control(7)
 

Compensation

           

Severance

      $ 760,000                    $ 1,140,000   

Short-Term Incentive Plan(2)

                               

Long-Term Incentive Plan(2)

                               

Stock Options (Unvested & Accelerated)(3)

                               

Restricted Stock (Unvested & Accelerated)(3)

                             28,792   

Restricted Stock Units (Unvested & Accelerated)(3)

        375,005      $ 375,005      $ 375,005        750,011   

Benefits

           

Benefits Continuation(4)

        13,554                      19,925   

280G Tax Gross-Up(5)

                               

Other Benefits(6)

        40,000                      40,000   
 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

      $ 1,188,559      $ 375,005      $ 375,005      $ 1,978,728   

Jon D. Botsford

           

Senior Vice President, General Counsel & Secretary

       

Executive Benefits &

Payments Upon

Termination(1)

      Involuntary
Termination
                   
  Voluntary
Termination
  For
Cause
  Not For
Cause
    Death     Disability     Change in
Control(7)
 

Compensation

           

Severance

      $ 525,000                    $ 787,500   

Short-Term Incentive Plan(2)

                               

Long-Term Incentive Plan(2)

                               

Stock Options (Unvested & Accelerated)(3)

                               

Restricted Stock (Unvested & Accelerated)(3)

                             19,119   

Restricted Stock Units (Unvested & Accelerated)(3)

        249,993      $ 249,993      $ 249,993        499,986   

Benefits

           

Benefits Continuation(4)

        13,341                      19,713   

280G Tax Gross-Up(5)

                               

Other Benefits(6)

      —           —         40,000                      40,000   
 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

      $ 828,334      $ 249,993      $ 249,993      $ 1,366,318   

 

37


Raymond J. Johnson

           

Senior Vice President- Global Supply Chain

       

Executive Benefits &

Payments Upon

Termination(1)

      Involuntary
Termination
                   
  Voluntary
Termination
  For
Cause
  Not For
Cause
    Death     Disability     Change in
Control(7)
 

Compensation

           

Severance

      $ 622,500                    $ 933,750   

Short-Term Incentive Plan(2)

                               

Long-Term Incentive Plan(2)

                               

Stock Options (Unvested & Accelerated)(3)

                               

Restricted Stock (Unvested & Accelerated)(3)

                             59,157   

Restricted Stock Units (Unvested & Accelerated)(3)

        106,195      $ 106,195      $ 106,195        212,389   

Benefits

           

Benefits Continuation(4)

        8,771                      12,802   

280G Tax Gross-Up(5)

                               

Other Benefits(6)

        40,000                      40,000   
 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

      $ 777,466      $ 106,195      $ 106,195      $ 1,258,098   

Edward D. Teplitz

           

President- Thomasville & Drexel Heritage

       

Executive Benefits &

Payments Upon

Termination(1)

      Involuntary
Termination
                   
  Voluntary
Termination
  For
Cause
  Not For
Cause
    Death     Disability     Change in
Control(7)
 

Compensation

           

Severance

      $ 624,000                    $ 936,000   

Short-Term Incentive Plan(2)

                               

Long-Term Incentive Plan(2)

                               

Stock Options (Unvested & Accelerated)(3)

                               

Restricted Stock (Unvested & Accelerated)(3)

                             16,414   

Restricted Stock Units (Unvested & Accelerated)(3)

        249,993      $ 249,993      $ 249,993        499,986   

Benefits

           

Benefits Continuation(4)

        14,109                      20,481   

280G Tax Gross-Up(5)

                               

Other Benefits(6)

      —           —         40,000                      40,000   
 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

      $ 928,013      $ 249,993      $ 249,993      $ 1,512,881   

 

(1) For purposes of this analysis, we assumed the compensation of each executive is as follows: Mr. Scozzafava, current base salary is equal to $750,000 with a short-term incentive target equal to 100% of base salary; Mr. Rolls, current base salary is equal to $475,000 with a short-term incentive target equal to 60% of base salary; Mr. Botsford, current base salary is equal to $350,000 with a short-term incentive target equal to 50% of base salary; Mr. Johnson, current base salary is equal to $415,000 with a short-term incentive target equal to 50% of base salary; and Mr. Teplitz, current base salary is equal to $390,000 with a short-term incentive target equal to 60% of base salary.
(2) The table does not include payments under the 2011 Short-Term Incentive Plan because performance targets were not met. Assumes that no payouts will be made under the cash portion of the 2010-2012 Performance Share Plan because it is no longer probable that payouts will be made under the plan, and assumes that no payouts will be made under the cash portion of the 2011-2013 Long-Term Incentive Plan because at least 18 months of the three year performance period has not lapsed.
(3) All unvested restricted stock awards awarded under the 2008 Incentive Plan accelerate and vest immediately on a change in control. Unvested stock options and restricted stock awards awarded under the 2010 Omnibus Incentive Plan will vest on a change in control unless the awards are continued or substituted for in connection with a change in control. This table assumes that the awards were continued or substituted for in connection with the change in control. As of December 31, 2011, the outstanding restricted stock units payout at $6.26 per share on a change in control and $3.13 per share in the event of an involuntary termination of employment without cause, death and disability.
(4) Benefits continuation includes the cost of continuing health, dental and vision, as well as life insurance and accidental death and dismemberment insurance.
(5) Effective December 31, 2011, the executive’s right to an excise tax gross-up is eliminated.
(6) Other benefits include cost of outplacement services, reasonable job hunting expenses, and travel expenses up to $40,000.
(7) Assumes that the executive was involuntarily terminated-not for cause following a change in control.

 

38


ADVISORY VOTE ON EXECUTIVE COMPENSATION

(Proposal 3)

We are providing our stockholders with the opportunity to cast an advisory vote on the compensation of our named executive officers. While this vote is advisory and therefore not binding, it is important and will provide us with information regarding our stockholders’ sentiment about our executive compensation philosophy, policies and practices, which our Human Resources Committee will be able to consider when determining future executive compensation.

At our 2011 Annual Meeting of Stockholders, we submitted to our stockholders the opportunity to vote, in an advisory vote, on the compensation of our executive officers for the first time, and at this meeting, a substantial majority of the votes cast on the proposal were voted in favor of the proposal. Our Human Resources Committee believes this affirms our stockholders’ support of our executive compensation.

The ultimate objective of our executive compensation program is to retain, attract and motivate leaders who create long-term value for our stockholders. Underlying this objective is our goal to pay for performance such that an executive’s total compensation reflects our company’s performance. This pay for performance philosophy must be balanced however, with the need to retain qualified executives; and in recent years, the Human Resources Committee has placed an emphasis on retention due to the ongoing uncertainty in the U.S. economy which has negatively impacted consumers’ discretionary spending on furniture, our financial results, and ultimately, our executive officers’ total realized compensation.

When making compensation decisions each year, the Committee reviews each executive’s total realized compensation as well as each executive’s total target compensation since total realized compensation is a core component to retaining executives as this reflects the actual amounts received by executives. As discussed more fully in the Compensation Discussion and Analysis, beginning on page 16 of this Proxy Statement, and in line with our pay for performance philosophy, we have not paid any performance-based incentives to our executives over the past few years other than the payment of the 2008 restricted stock unit award in 2010, due to the failure to achieve financial performance goals established by the Committee. As a result, each executive’s actual compensation is well below the target median of our peer group.

In light of this and the other factors described in the Compensation Discussion and Analysis, the Human Resources Committee made the following decisions in 2011 with respect to executive compensation:

 

   

Froze base salaries and the value of target short-term incentive compensation for executive officers.

   

Reduced the full value of each executive’s target long-term incentive compensation by 18% to bring target total compensation for each executive closer to the median of the company’s new peer group.

   

Approved a redesigned short-term incentive plan that pays on the achievement of corporate net earnings, corporate net sales goals and individual objectives, which individual goals were included for the first time in the short-term incentive plan to give the Committee the flexibility to recognize that an executive’s performance may not always be linked directly to the company’s achievement of corporate financial goals and that the achievement of other objectives may also need to be rewarded.

   

Approved a mix of long-term performance-based cash and service-based equity awards to alleviate retention concerns associated with the reduction in the value of executive long-term incentive compensation.

   

Approved new executive stock ownership guidelines which require executive officers to own an increased number of shares of our common stock equal to a specified multiple of their annual base salary.

By establishing these performance-based incentive plans, 67% of our Chief Executive Officer’s total 2011 target compensation was at-risk and 50 to 55% of total target compensation for all other named executive officers in 2011 was at-risk.

 

39


We believe the information we have provided in this Proxy Statement demonstrates that our executive compensation program was designed appropriately to retain, attract and motivate executives who create long-term value for our stockholders. Accordingly, we request approval of the company’s executive compensation program and specifically, the resolution set forth below:

“RESOLVED, that the stockholders approve, in an advisory vote, the compensation of the company’s named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative disclosures that accompany the compensation tables) in this Proxy Statement.”

The Board of Directors recommends that stockholders vote “FOR” the approval of the compensation of our named executive officers.

 

40


OWNERSHIP OF SECURITIES

Ownership of Our Voting Stock

The following table provides information about the beneficial ownership of shares of our common stock as of March 9, 2012, by each person or group that, to our knowledge, beneficially owns more than 5% of the outstanding shares of our common stock; by each of our current directors and each nominee for election as a director; by each of our named executive officers; and all of our directors and named executive officers as a group. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and unless otherwise noted in the notes that follow. Percentage of beneficial ownership is based on 56,369,220 shares of common stock outstanding as of the close of business on March 9, 2012. Each share of common stock is entitled to one vote.

Unless otherwise indicated below, the address for each listed director and executive officer is Furniture Brands International, Inc., 1 North Brentwood Boulevard, 15th Floor, St. Louis, Missouri 63105.

 

Name of Beneficial Owner

   Number of shares      Percent  

5% Stockholder

     

Samson Holding Ltd.(1)

     7,221,373         12.81

Evercore Trust Company, N.A.(2)

     4,710,317         8.36

Wellington Management Company, LLP(3)

     4,437,638         7.87

Royce & Associates, LLC(4)

     3,671,414         6.51

Dimensional Fund Advisors LP(5)

     3,396,846         6.03

Executive Officers and Directors

     

Ralph P. Scozzafava(6)

     1,305,103         2.29

Steven G. Rolls(7)

     213,281         *   

Jon D. Botsford(8)

     120,937         *   

Raymond J. Johnson(9)

     153,549         *   

Edward D. Teplitz(10)

     126,144         *   

Kent J. Hussey

             *   

Ira D. Kaplan(11)

     35,977         *   

Ann S. Lieff(12)

     37,171         *   

Maureen A. McGuire(13)

     44,977         *   

Aubrey B. Patterson(14)

     38,202         *   

George E. Ross, Ph.D.(15)

     41,338         *   

Alan G. Schwartz(11)

     35,977         *   

James M. Zimmerman(16)

     42,484         *   
  

 

 

    

All Directors and Executive Officers as a Group(13)

     2,195,140         3.84

 

 * Less than one percent.
(1) According to a Schedule 13D/A filed by Samson Holding Ltd. with the SEC on February 22, 2008, this consists of 7,221,373 shares of common stock beneficially owned by Samson Holding Ltd., which we refer to as Samson. According to the filing, Samson has shared voting power and shared dispositive power over 7,221,373 shares of common stock. Also included as reporting persons are Advent Group Limited, Magnificent Capital Holding Limited, Mr. Shan Huei Kuo and Ms. Yi-Mei Liu, all of whom have shared voting power and shared dispositive power as to 7,211,373, all as a result of their direct or indirect ownership of a controlling interest in Samson and which or whom may be deemed to beneficially own and have shared power to vote, dispose or to direct the disposition of those shares beneficially owned by Samson. The address of Samson is Level 28, Three Pacific Place, 1 Queen’s Road East, Hong Kong.
(2)

According to a Schedule 13G/A filed by Evercore Trust Company, N.A. with the SEC on February 13, 2012, this consists of 4,710,317 shares beneficially held by Evercore Trust Company, N.A., which we refer to as Evercore. Evercore is an independent investment manager appointed to make investment decisions with respect to the 4,710,317 shares held in the Furniture Brands Master Pension Trust, which is the funding vehicle for the Furniture Brands Retirement Plan. According to the Schedule 13G/A, Evercore has sole voting power and sole dispositive power over all of the shares. The address of Evercore is 55 East 52nd Street, 36th Floor, New York, New York 10055.

 

41


(3) According to a Schedule 13G filed by Wellington Management Company, LLP with the SEC on February 14, 2012, this consists of 4,437,638 shares beneficially held by Wellington Management Company, LLP, which we refer to as Wellington. The securities are owned by clients of Wellington for whom Wellington serves as an investment advisor. According to the Schedule 13G, Wellington has shared voting and shared dispositive power over 4,437,638 shares of common stock. The address of Wellington is 280 Congress Street, Boston, Massachusetts 02210.
(4) According to a Schedule 13G/A filed by Royce & Associates, LLC with the SEC on January 12, 2012, this consists of 3,671,414 shares of common stock beneficially owned by Royce & Associates, LLC. According to the filing, Royce & Associates, LLC has sole voting power and sole dispositive power over all of the shares. The address of Royce & Associates, LLC is 745 Fifth Avenue, New York, New York 10151.
(5) According to a Schedule 13G/A filed by Dimensional Fund Advisors LP with the SEC on February 14, 2012, this consists of 3,396,846 shares beneficially held by Dimensional Fund Advisors LP, which we refer to as DFA. The securities are owned by various investment companies, trusts and separate accounts that DFA serves as investment advisor with power to direct investments and/or sole power to vote the securities. According to the Schedule 13G/A, DFA has sole voting power over 3,228,061 shares of common stock and sole dispositive power over 3,396,846 shares of common stock. The address of DFA is Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746.
(6) Includes 637,305 shares of common stock subject to options that are exercisable within 60 days of March 9, 2012. Also includes 386,003 shares of common stock underlying restricted stock awards with which Mr. Scozzafava has sole voting power but no current investment power and 261,666 shares held in a revocable trust.
(7) Includes 46,680 shares of common stock subject to options that are exercisable within 60 days of March 9, 2012. Also includes 105,936 shares of common stock underlying restricted stock awards with which Mr. Rolls has sole voting power but no current investment power.
(8) Includes 26,447 shares of common stock subject to options that are exercisable within 60 days of March 9, 2012. Also includes 60,045 shares of common stock underlying restricted stock awards with which Mr. Botsford has sole voting power but no current investment power.
(9) Includes 48,815 shares of common stock subject to options that are exercisable within 60 days of March 9, 2012. Also includes 77,764 shares of common stock underlying restricted stock awards with which Mr. Johnson has sole voting power but no current investment power.
(10) Includes 29,470 shares of common stock subject to options that are exercisable within 60 days of March 9, 2012. Also includes 67,574 shares of common stock underlying restricted stock awards with which Mr. Teplitz has sole voting power but no current investment power.
(11) Includes 20,355 shares of common stock underlying restricted stock awards with which the director has sole voting power but no current investment power.
(12) Includes 23,034 shares of common stock underlying restricted stock awards with which Ms. Lieff has sole voting power but no current investment power.
(13) Includes 26,710 shares of common stock underlying restricted stock awards with which Ms. McGuire has sole voting power but no current investment power.
(14) Includes 18,445 shares of common stock underlying restricted stock awards with which Mr. Patterson has sole voting power but no current investment power.
(15) Includes 24,638 shares of common stock underlying restricted stock awards with which Dr. Ross has sole voting power but no current investment power.
(16) Includes 21,803 shares of common stock underlying restricted stock awards with which Mr. Zimmerman has sole voting power but no current investment power.

 

42


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires directors and executive officers and persons who own more than ten percent of a registered class of equity securities to file with the U.S. Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of common stock and other equity securities of our company. Such reporting persons are required by rules of the SEC to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely upon a review of Section 16(a) reports furnished to us for fiscal year 2011 and written representations that no reports on Form 5 were required, we believe that our directors, executive officers and greater than ten percent stockholders complied with all Section 16(a) filing requirements applicable to them with respect to transactions during 2011.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Policies and Procedures

The Governance and Nominating Committee is responsible for review, approval, or ratification of “related person transactions” involving our company and related persons. A related person is a director, officer, nominee for director, or 5% stockholder of our company, and their immediate family members. We have adopted written policies and procedures that apply to any transaction or series of transactions in which we are a participant, the amount involved exceeds $120,000, and a related person has a direct or indirect interest.

Under our Corporate Governance Guidelines, the Governance and Nominating Committee will in addition to any other factors that it deems appropriate, analyze whether the terms are fair to our company, whether the transaction is material, the role of the related person in the transaction, the structure of the transaction and the interests of all related persons in the transaction. A related person transaction will only be approved or ratified by the Governance and Nominating Committee if the transaction is beneficial to us and the terms are fair to us.

Management presents all related person transactions to the Governance and Nominating Committee for review. The Governance and Nominating Committee determines whether the related person has a material interest in a transaction and may approve, ratify, rescind, or take other action with respect to the transaction in its discretion.

Related Person Transactions

In 2007, Samson Holding Ltd., and entities affiliated with Samson Holding, acquired more than five percent of our common stock in open market transactions. Prior to their acquisition and since their acquisition of our stock, we have purchased certain case goods from entities affiliated with Samson Holding. We paid entities affiliated with Samson Holding approximately $22.1 million for goods that we purchased during 2011. In addition, Mr. Shan Huei Kuo and his spouse, Ms. Yi-Mei Liu, may be deemed to beneficially own the shares held by Samson Holding due to Mr. Kuo’s and Ms. Liu’s controlling interest in Samson Holding. In 2011, Mr. Kuo and Ms. Liu opened new retail furniture stores in the U.S., and these retail stores paid us approximately $160,000 for furniture that we sold to them in 2011.

One of our subsidiaries, Action Transport, Inc., leases trucks, trailers and other equipment through a division of BancorpSouth, Inc. Aubrey B. Patterson, a director of our company, is the Chairman and Chief Executive Officer of BancorpSouth, Inc., and in 2011, we paid the leasing division of BancorpSouth, Inc. approximately $354,000 in connection with these leases.

 

43


OTHER MATTERS

Stockholder Proposals

Under SEC rules, a stockholder who intends to present a proposal, including nomination of a director, at our 2013 Annual Meeting of Stockholders and who wishes the proposal to be included in the proxy statement for that meeting must submit the proposal in writing to Jon D. Botsford, our Corporate Secretary, at 1 North Brentwood Boulevard, 15th Floor, St. Louis, Missouri 63105, before November 23, 2012. SEC rules set standards for the types of stockholder proposals and the information that must be provided by the stockholder making the request.

A stockholder who wishes to submit a proposal to be considered at our 2013 Annual Meeting of Stockholders and who intends that it not be included in our proxy statement and form of proxy relating to the 2013 Annual Meeting, may do so pursuant to our Bylaws. If a stockholder wants to submit a proposal for the 2013 Annual Meeting, the stockholder must submit the proposal or nomination between January 3, 2013 and February 2, 2013. If the 2013 Annual Meeting of Stockholders is held more than 30 days before or 60 days after the anniversary of the 2012 Annual Meeting, the stockholder must submit any such proposal or nomination no earlier than the 120th day before the 2013 Annual Meeting and no later than the 90th day before the 2013 Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. The submission must include information specified in our Bylaws concerning the proposal or nominee, as the case may be, and information as to the stockholder’s ownership of our stock. We will not entertain any proposals or nominations at the annual meeting that do not meet the requirements set forth in our Bylaws. To make a submission or to request a copy of our Bylaws, stockholders should contact our Corporate Secretary. We strongly encourage stockholders to seek advice from knowledgeable counsel before submitting a proposal or a nomination.

Other Information

We do not know of any matters that may properly come before the meeting other than those referred to in the accompanying Notice of Annual Meeting of Stockholders or other matters incident to the conduct of the meeting. As to any other matter or proposal that may properly come before the meeting, including voting for the election of any person as a director in place of a nominee named herein who becomes unable or declines to serve and voting on a proposal omitted from this Proxy Statement pursuant to the rules of the SEC, proxies will be voted in accordance with the discretion of the proxy holders.

 

By Order of the Board of Directors,
LOGO
Jon D. Botsford
Corporate Secretary

March 23, 2012

 

44


    LOGO  
 

LOGO

 

VOTE BY INTERNET - www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

  LOGO
   

 

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

 
   

 

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.

 

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

 
     
               
      CONTROL # g     000000000000    
     

 

NAME

 

THE COMPANY NAME INC. - COMMON

THE COMPANY NAME INC. - CLASS A

THE COMPANY NAME INC. - CLASS B

THE COMPANY NAME INC. - CLASS C

THE COMPANY NAME INC. - CLASS D

THE COMPANY NAME INC. - CLASS E

THE COMPANY NAME INC. - CLASS F

THE COMPANY NAME INC. - 401 K

 

 

 

SHARES

 

 

            123,456,789,012.12345

            123,456,789,012.12345

            123,456,789,012.12345

            123,456,789,012.12345

            123,456,789,012.12345

            123,456,789,012.12345

            123,456,789,012.12345

            123,456,789,012.12345

 

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:        x   

 

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KEEP THIS PORTION FOR YOUR RECORDS

 

DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

 

                       LOGO      LOGO     
     

    The Board of Directors recommends you vote FOR

     the following proposals:

 

           
     

    1.   Election of Directors

 

        For    Against    Abstain            
     

    1  Kent J. Hussey

 

    2  Ira D. Kaplan

 

    3  Ann S. Lieff

 

    4  Maureen A. McGuire

 

    5  Aubrey B. Patterson

 

    6  George E. Ross, Ph.D.

 

    7  Ralph P. Scozzafava

 

    8  James M. Zimmerman

       

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The Board of Directors recommends you vote FOR proposals 2 and 3:

 

2.   Ratification of the appointment of KPMG LLP as the company’s independent registered public accounting firm for 2012.

 

3.   Advisory vote to approve the company’s executive compensation.

 

NOTE: Such other business as may properly come before the meeting or any adjournment thereof.

 

 

 

For

 

 

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Against

 

 

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Abstain

 

 

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          For address change/comments, mark here.    ¨                      
          (see reverse for instructions)    Yes    No                            
   
     

 

    Please indicate if you plan to attend this meeting

   ¨    ¨                            
   
 

LOGO

        Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.           
                                             
                                      SHARES     
                                   CUSIP #     
                  JOB #                  SEQUENCE #     
            Signature [PLEASE SIGN WITHIN BOX]    Date         Signature (Joint Owners)        Date             


 

LOGO

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report, Notice & Proxy Statement is/ are available at www.proxyvote.com .

 

 

 

                 
          

FURNITURE BRANDS INTERNATIONAL, INC.            

Annual Meeting of Stockholders        

May 3, 2012 9:00 AM            

This proxy is solicited by the Board of Directors            

    
               
 

 

In their discretion, the proxies are authorized to vote, upon such other business as may properly come before the meeting and any postponements or adjournments thereof.

 

The stockholder(s) hereby appoint(s) Ralph P. Scozzafava and Jon D. Botsford, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of FURNITURE BRANDS INTERNATIONAL, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 AM, CDT on May 3, 2012, at Furniture Brands International Inc., 1 North Brentwood Blvd., 15th floor, St. Louis, MO 63105, and any adjournment or postponement thereof.

 

This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.

 

   

 

Address change/comments:

       

LOGO

               
          
          
          
    (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)     
     

 

(Continued and to be signed on reverse side)