Our Compensation Committee’s policy is to provide compensation for our executive officers that represents conservative salaries coupled with challenging performance-based incentives.  As such, our executive compensation program is sensitive to:

	(1)	The compensation paid to executive officers at comparable companies but accomplished through lower salaries and higher annual incentive opportunities, coupled with lower long-term incentives;
	(2)	Our financial performance compared against challenging return on capital-type targets (currently an EVA, or Economic Value Added, measure) for annual incentives, and operating income and total shareholder return for long-term incentives;
	(3)	Each individual officer’s contribution to our Company.

The annual incentive bonus for Mr. Chumbley was based on the same EVA performance measurement, but was determined by the financial performance of the CUF division only.  Based on average capital employed for that division of $19,841,000 and a blended capital charge of 17.9%, the EVA target for the CUF division was $8,500,000, which would have required operating income (before bonus payments and non-recurring items) of $12,056,000 for the target level bonus.  The operating income level (before bonus payments and non-recurring items) that would have been required for the maximum bonus was $16,514,000, with a maximum level EVA target of $12,750,000.  The actual pre-bonus operating income, excluding certain non-recurring items, achieved by the CUF division was $11,473,000 and the average capital employed at year-end was $19,580,000 which resulted in an EVA calculation of $7,970,000 and Mr. Chumbley receiving a bonus of $162,024, which amount represented 93% of his target level bonus opportunity set forth in the “Grants of Plan-Based Awards” table.

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table provides information about the equity awards our named executive officers held as of the end of fiscal 2019.

 

(1)          We calculated these values using a price of $20.74, the closing price per share of our common stock on the New York Stock Exchange as of April 28, 2019.

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The following table provides information about stock options exercised and common stock acquired on vesting by the named executive officers in fiscal 2019.

 

 

	(1)	Value realized based on $30.90 per share, the closing price of our common stock on June 12, 2018, the trading day the stock award vested.
	(2)	Mr. Culp, III passed away on December 8, 2018.
	(3)	Of the 36,327 shares that vested for Mr. Culp, III during fiscal 2019, (i) 17,648 of such shares were granted to Mr. Culp, III under the Company’s long-term incentive program for fiscal 2016 and vested, based upon the achievement of three-year cumulative operating income, on June 12, 2018; (ii) 9,833 of such shares were granted to Mr. Culp, III under the Company’s long-term incentive program for fiscal 2017 and vested at the target level upon the death of Mr. Culp, III on December 8, 2018, pursuant to the terms of the award; and (iii) 8,846 of such shares were granted to Mr. Culp, III under the Company’s long-term incentive program for fiscal 2018 and vested at the target level upon the death of Mr. Culp, IIII on December 8, 2018, pursuant to the terms of the award.
	(4)	Value realized based on (i) $30.90 per share, the closing price of our common stock on June 12, 2018, the trading day the stock award vested with respect to 17,648 shares; and (ii) $20.56 per share, the closing price of our common stock on December 7, 2018, the trading day the stock award vested in connection with Mr. Culp’s death, with respect to the remaining 18,679 shares.

 

 

A total of 36,777 restricted stock units were granted to named executive officers during fiscal 2016, with each unit consisting of the right to receive between one and two shares of the Company’s common stock based on the achievement of cumulative operating income, excluding certain one-time or unusual items of the Company, or the division that employs the award recipient, during the three fiscal years following the grant (fiscal years 2016 – 2018 for the restricted stock units granted in fiscal 2016).

 

The long-term incentive program for Mr. Culp, III, Mr. Saxon, Mr. Bowling and Mr. Gallagher was based upon the three-year cumulative operating income, excluding one-time or unusual items of the Company on a consolidated basis.  The three-year cumulative operating income target level (at which one share would be earned for each unit) was $69,743,000, the superior level (at which 1.5 shares would be earned for each unit) was $73,984,000, and the maximum level (at which two shares would be earned for each unit) was $78,393,000.  The actual three-year cumulative operating income level achieved, excluding certain one-time or unusual items, for the Company was $87,863,000, resulting in the vesting of the stock shown in the table above for Mr. Culp, III, Mr. Saxon, Mr. Bowling and Mr. Gallagher.

Nonqualified Deferred Compensation

Name           (a)	Executive Contributions in Last FY ($) (b)	Registrant Contributions in Last FY ($) (c)(1)	Aggregate Earnings in Last FY ($) (d)(2)	Aggregate Withdrawals/ Distributions ($) (e)	Aggregate Balance at Last FYE ($) (f)
Franklin N. Saxon	--	72,845	206,872	--	3,889,922
Robert G. Culp, IV	--	35,508	21,899	--	331,992
Boyd B. Chumbley	48,286	31,635	24,439	--	486,807
Kenneth R. Bowling	10,359	27,798	16,861	--	331,658
Thomas B. Gallagher	--	--	242	--	4,504
Robert G. Culp, III (3)	--	21,140	15,900	1,232,944	--

Potential Payments Upon Termination or Change of Control

	●	any person, entity or group acquiring, directly or indirectly, 35% or more of our common voting stock (subject to certain exceptions);
	●	a merger or consolidation involving us and another entity, if we are not the surviving entity and after the merger or consolidation the holders of 35% or more of the voting stock of the surviving corporation were not holders of our voting stock immediately before the transaction;
	●	our liquidation or dissolution, or a sale or transfer of substantially all of our assets; or
	●	a change in the majority of our directors that our directors have not approved.

	(1)	the officer is terminated in anticipation of the change of control,
	(2)	the officer is terminated within three years after the change of control for any reason other than death, disability or for cause, or
	(3)	the officer terminates his employment during that three-year period following the change of control because we (or our survivor) change his employment conditions in a negative and material way.

Name		Change of Control Payment ($)				Non-Competition Payment ($)				Total Payment ($)
Mr. Saxon		$	1,791,000			$	900,000			$	2,691,000
Mr. Culp, IV		$	1,131,813			$	568,750			$	1,700,563
Mr. Chumbley		$	880,074			$	442,248			$	1,322,322
Mr. Bowling		$	752,845			$	378,314			$	1,131,159

CEO Pay Ratio

	●	an annual retainer, paid in quarterly installments, based on a fee of $55,000 for the lead director and $50,000 for the other non-employee directors, which fee was increased to $60,000 for the lead director and $55,000 for the other non-employee directors beginning with the quarterly installment paid on April 1, 2019;
	●	a grant under our 2015 equity incentive plan of 1,200 shares of common stock to our non-employee directors that were participating on our Board at October 1, 2018, which granted shares of common stock were measured at a fair market value of $23.45 per share based upon the closing price of our common stock at the date of grant (October 1, 2018);
	●	a grant of shares under our 2015 equity incentive plan, issued in quarterly installments beginning on April 1, 2019, with an aggregate annual value of $60,000 for the lead director and $55,000 for the other non-employee directors.   The number of shares granted each quarter is the number of shares valued at 25% of the yearly stock grant amount, determined with reference to the closing price of the Company’s common stock on the quarterly grant date, which resulted in a quarterly grant on April 1, 2019 of 831 shares to Mr. McAllister, 700 shares to each of Messrs. Larson and Jackson, and 717 shares to Ms. Decker, based upon a closing price of $19.18 per share at the date of the grant; and
	●	Messrs. Flavin, Larson, Jackson and McAllister also received a one-time, additional payment of $5,000 for their service in connection with a special annual operating planning meeting during fiscal 2019, and Mr. Jackson received an additional payment of $5,000 for his additional service as audit committee chair after the expiration of Mr. Flavin’s term at the 2018 annual meeting of shareholders.

Name		Fees Earned or paid in cash				Stock Awards				Option Awards				Total
		($)				($)				($)				($)
(a)		(b)				(c) (1)				(d)				(h)
Sharon A. Decker (2)			13,750				13,750				--				27,500
Fred A. Jackson			61,250				41,570				--				102,820
Kenneth R. Larson			56,250				41,570				--				97,820
Kenneth W. McAllister			61,250				44,070				--				105,320
Patrick B. Flavin (3)			30,000				--				--				30,000

	(1)	The amounts reflected in this column are the grant date fair value of the fully vested common stock awarded, computed in accordance with FASB ASC Topic 718. For information about the relevant assumptions we made in calculating the expense, please see note 16 – “Stock-Based Compensation” to the financial statements including in our fiscal 2019 Annual Report on Form 10-K.
	(2)	Ms. Decker was elected to the Board in March 2019.
	(3)	Mr. Flavin’s term as a director expired at the Company’s 2018 Annual Meeting of Shareholders.

		Fiscal 2019			Fiscal 2018
Audit Fees		496,176			$481,369
Audit-Related Fees		--			--
Tax Fees		--			--
All Other Fees (1)		$137,357			$178,962

	●	Embracing a pay for results philosophy.  Total pay is directly aligned with Company performance success through the use of management incentives;
	●	Attracting and retaining management with the knowledge, skills and ability to lead the Company successfully;
	●	Fairly compensating management for their service to the Company, which helps to retain and motivate them; and
	●	Aligning long-term interests of management with those of shareholders.

	(1)	The compensation paid to executive officers at comparable companies, but accomplished through lower salaries and higher annual incentive opportunities, coupled with lower long-term incentives;
	(2)	The Company’s financial results compared to challenging performance targets (currently EVA, or Economic Value Added for annual incentives and operating income and total shareholder return for long-term incentives); and
	(3)	Each individual officer’s assessed performance contribution to the Company.

	●	continuing to be a market leader in terms of product innovation within our industry;
	●	a planned and disciplined approach to managing the business and the utilization of capital;
	●	maintaining a strong focus on growth, return on capital and shareholder returns;
	●	prudent/calculated risk taking;
	●	being more team oriented than individual-accountability oriented;
	●	decision making that is decentralized as pertains to sales, marketing and operations, and centralized as pertains to strategic matters; and
	●	a balanced time perspective as relates to the long-term and the short-term.

	By Order of the Board of Directors,
	FRANKLIN N. SAXON
	Chairman & Chief Executive Officer