<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE DIXIE GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
THE DIXIE GROUP, INC.
1100 SOUTH WATKINS STREET
CHATTANOOGA, TENNESSEE 37404
(423) 698-2501
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of The Dixie Group, Inc.:
The Annual Meeting of Shareholders of The Dixie Group, Inc. will be held at
the Company's general office, 1100 South Watkins Street, Chattanooga, Tennessee
37404, on April 29, 1999, at 10:00 a.m., Eastern Daylight Time, for the
following purposes:
1. Election of nine individuals to the Board of Directors for a term
of one year each; and
2. Such other business as may properly come before the Annual Meeting
of Shareholders, or any adjournment thereof.
Only shareholders of record of the Common Stock and Class B Common Stock at
the close of business on March 5, 1999, are entitled to notice of, and to vote
at, the Annual Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for more complete information regarding the matters to be acted upon at the
Annual Meeting.
By Order of the Board of Directors
Daniel K. Frierson
Chairman of the Board
Chattanooga, Tennessee
Dated: March 30, 1999
PLEASE READ THE ATTACHED MATERIAL CAREFULLY AND COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES OF COMMON STOCK AND CLASS B COMMON
STOCK WILL BE REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON, SHOULD YOU SO DESIRE.
<PAGE> 3
THE DIXIE GROUP, INC.
1100 SOUTH WATKINS STREET
CHATTANOOGA, TENNESSEE 37404
(423) 698-2501
---------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1999
---------------------
PROXY STATEMENT
---------------------
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company for the purposes set forth in the accompanying Notice of Annual Meeting
of Shareholders. This proxy statement and the enclosed proxy will be mailed on
or about March 30, 1999, to shareholders of record of the Company's Common Stock
and Class B Common Stock as of the close of business on March 5, 1999.
At the Annual Meeting, holders of the Company's Common Stock, $3.00 par
value per share ("Common Stock"), and Class B Common Stock, $3.00 par value per
share ("Class B Common Stock"), will be asked to: (i) elect nine individuals to
the Board of Directors for a term of one year each and (ii) transact any other
business that may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR
THE ELECTION OF THE NINE NOMINEES FOR DIRECTOR.
RECORD DATE, VOTE REQUIRED AND RELATED MATTERS
The Board has fixed the close of business on March 5, 1999, as the Record
Date for the determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting. Each outstanding share of Common Stock is entitled to
one vote, and each outstanding share of Class B Common Stock is entitled to 20
votes, exercisable in person or by properly executed Proxy, on each matter
brought before the Annual Meeting. Cumulative voting is not permitted. As of
March 5, 1999, 10,630,779 shares of Common Stock, representing 10,630,779 votes,
were held of record by approximately 3,650 shareholders (including an estimated
2,650 shareholders whose shares are held in nominee names), and 735,228 shares
of Class B Common Stock, representing 14,704,560 votes, were held by 15
individual shareholders, together representing an aggregate of 25,335,339 votes.
Shares represented at the Annual Meeting by properly executed Proxy will be
voted in accordance with the instructions indicated therein unless such Proxy
has previously been revoked. If no instructions are indicated, such shares will
be voted FOR the election of the nine nominees for director as set forth in this
Proxy Statement.
Any Proxy given pursuant to this solicitation may be revoked at any time by
the shareholder giving it by delivering to the Secretary of the Company a
written notice of revocation bearing a later date than the Proxy,
<PAGE> 4
by submitting a later-dated, properly executed Proxy, or by revoking the Proxy
and voting in person at the Annual Meeting. Attendance at the Annual Meeting
will not, in and of itself, constitute a revocation of a Proxy. Any written
notice revoking a Proxy should be sent to The Dixie Group, Inc., P. O. Box 751,
Chattanooga, Tennessee 37401, Attention: Starr T. Klein, Secretary.
The persons designated as proxies were selected by the Board of Directors
and are Daniel K. Frierson, John W. Murrey, III, and Robert J. Sudderth, Jr. The
cost of solicitation of Proxies will be borne by the Company.
The presence, in person or by Proxy, of the holders of a majority of the
aggregate outstanding vote of Common Stock and Class B Common Stock entitled to
vote is necessary to constitute a quorum at the Annual Meeting. The affirmative
vote of a plurality of the total votes cast that are represented in person or by
Proxy at the Annual Meeting is required to elect the Board of Directors'
nominees.
The Board is not aware of any other matter to be brought before the Annual
Meeting for a vote of shareholders. If, however, other matters are properly
presented, Proxies representing shares of Common Stock and Class B Common Stock
will be voted in accordance with the best judgment of the proxyholders. Shares
covered by abstentions and broker non-votes, while counted for purposes of
determining the presence of a quorum at the Annual Meeting, are not considered
affirmative votes and thus will have no effect upon the election of directors by
a plurality vote.
A copy of the Company's Annual Report for the year ended December 26, 1998,
is enclosed herewith.
PRINCIPAL SHAREHOLDERS
Shareholders of record at the close of business on March 5, 1999, the
Record Date, will be entitled to vote at the Annual Meeting. Messrs. Daniel K.
Frierson, T. Cartter Frierson, and Paul K. Frierson collectively have the power
to direct 15,215,813 votes (1,554,483 shares of Common Stock and 733,440 shares
of Class B Common Stock), representing 60.14% of the total votes eligible to be
cast at the Company's Annual Meeting.
The following table presents information regarding beneficial ownership of
the Company's equity securities by beneficial owners of more than 5% of the
Common Stock or Class B Common Stock. The table also presents beneficial
ownership information for the executive officers named in the Summary
Compensation Table, the nominees for director, and all directors and executive
officers as a group as of March 5, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIALLY OWNED(1) % OF CLASS (1)
- ------------------------------------ -------------------- --------------------- --------------
<S> <C> <C> <C>
Daniel K. Frierson................ Common Stock 1,560,483(2)(3)(4) 14.24%
111 East and West Road Class B Common Stock 661,440(5) 89.96
Lookout Mountain, TN 37350
Paul K. Frierson.................. Common Stock 1,306,216(3)(4)(6) 12.17
606 Fleetwood Drive Class B Common Stock 251,373(7) 34.19
Lookout Mountain, TN 37350
T. Cartter Frierson............... Common Stock 273,886(3)(8) 2.5
1103 Tinker Bell Lane Class B Common Stock 226,121(9) 30.75
Lookout Mountain, GA 30750
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS BENEFICIALLY OWNED(1) % OF CLASS (1)
- ------------------------------------ -------------------- --------------------- --------------
<S> <C> <C> <C>
SunTrust Banks, Inc............... Common Stock 1,513,544(10) 14.28%
25 Park Place Class B Common Stock -- --
Atlanta, GA 30303
The TCW Group, Inc................ Common Stock 754,900(11) 7.12
865 South Figueroa Street Class B Common Stock -- --
Los Angeles, CA 90017
Franklin Resources, Inc........... Common Stock 700,000(12) 6.61
777 Mariners Island Blvd Class B Common Stock -- --
San Mateo, CA 94404
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
ADDITIONAL DIRECTORS AND EXECUTIVE OFFICERS: TITLE OF CLASS BENEFICIALLY OWNED(1) % OF CLASS (1)
- -------------------------------------------- -------------------- --------------------- --------------
<S> <C> <C> <C>
Philip H. Barlow....................... Common Stock 124,311(13) 1.16%
Class B Common Stock -- --
Glenn A. Berry......................... Common Stock 58,064(14) *
Class B Common Stock -- --
J. Don Brock........................... Common Stock 7,500(15) *
Class B Common Stock -- --
Paul K. Brock.......................... Common Stock 25,371(15) *
Class B Common Stock -- --
Lovic A. Brooks, Jr.................... Common Stock 1,124,306(4)(15)(16) 10.57
Class B Common Stock -- --
William N. Fry, IV..................... Common Stock 140,900(17) 1.31
Class B Common Stock -- --
John W. Murrey, III.................... Common Stock 9,700(15) *
Class B Common Stock -- --
George B. Smith........................ Common Stock 125,743(18) 1.04
Class B Common Stock -- --
Peter L. Smith......................... Common Stock 17,685(15) *
Class B Common Stock -- --
Robert J. Sudderth, Jr................. Common Stock 1,117,306(4)(15) 10.54
Class B Common Stock -- --
All Directors and Executive Officers as a
Group Common Stock 2,445,905(4)(19) 19.92
(18 Persons) Class B Common Stock 733,440(5)(7) 99.76
</TABLE>
- ---------------
* Percentage of shares beneficially owned does not exceed 1% of the Class.
(1) Under the rules of the Securities and Exchange Commission and for the
purposes of the disclosures in this table, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of such
security, or "investment power,"
3
<PAGE> 6
which includes the power to dispose or to direct the disposition of such
security. Under these rules, more than one person may be deemed to be a
beneficial owner of the same securities. The Class B Common Stock is
convertible on a share-for-share basis into shares of Common Stock;
however, information presented in this table as to the number of shares of
Common Stock beneficially owned and the percent of class does not give
effect to the possible conversion of shares of Class B Common Stock into
shares of Common Stock.
(2) Includes: (i) 4,030 shares of Common Stock as to which Mr. Frierson has
sole investment and sole voting power; (ii) 151,288 shares of Common Stock
for which Mr. Frierson has subscribed but has not yet purchased, pursuant
to the Company's Stock Ownership Plan; (iii) 126,676 shares of Common Stock
owned by the wife, children, and grandchildren of Daniel K. Frierson and as
to which he shares voting and investment power; (iv) options, which are
exercisable within 60 days of the Record Date, to purchase 136,250 shares
of Common Stock owned directly by Mr. Frierson; and (v) options, which are
exercisable within 60 days of the Record Date, to purchase 6,000 shares of
Common Stock owned by one of his children and as to which he shares voting
and investment power.
(3) Includes 27,433 shares of Common Stock held by Daniel K. Frierson, Paul K
Frierson, and T. Cartter Frierson, as trustees of a charitable remainder
trust formed by Rowena K. Frierson.
(4) Includes 1,108,806 shares of Common Stock owned by The Dixie Group, Inc.
Retirement Plans for which Daniel K. Frierson, Paul K. Frierson, Lovic A.
Brooks, Jr., and Robert J. Sudderth, Jr. are fiduciaries and for which
SunTrust Bank, Chattanooga, N.A. serves as trustee.
(5) Includes: (i) 105,072 shares of Class B Common Stock owned by Mr.
Frierson's wife and children as to which he shares investment and voting
power and (ii) 556,368 shares of Class B Common Stock held pursuant to a
shareholder agreement under which he has been granted a proxy, which
expires October 2005, to vote such shares (the "Shareholder Agreement").
The proxy is terminable under certain limited circumstances prescribed in
the Shareholder Agreement. The Shareholder Agreement is among the Estate of
J. Burton Frierson, the wife of J. Burton Frierson (Rowena K. Frierson),
and the five sons of J. Burton and Rowena K. Frierson (Daniel K. Frierson;
Paul K. Frierson; T. Cartter Frierson; James W. Frierson; and J. Burton
Frierson, III). The 556,368 shares of Class B Common Stock subject to the
Shareholder Agreement include: (a) 236,178 shares of Class B Common Stock
owned directly by him; 94,069 shares of Class B Common Stock owned directly
by Paul K. Frierson; 15,678 shares of Class B Common Stock owned directly
by T. Cartter Frierson; (b) 40,000 shares of Class B Common Stock held by
Paul K. Frierson, T. Cartter Frierson, and Daniel K. Frierson as
co-trustees of the Frierson Family Trusts; (c) 45,304 shares of Class B
Common Stock held by Paul K. Frierson, T. Cartter Frierson, and Daniel K.
Frierson as co-trustees of the Special Purpose Trust of J. Burton Frierson;
and (d) 125,139 shares of Class B Common Stock owned directly by Rowena K.
Frierson but subject to a general power of attorney granted to Daniel K.
Frierson and T. Cartter Frierson.
(6) Includes: (i) 17,225 shares of Common Stock as to which Mr. Frierson holds
sole investment and sole voting power; (ii) 68,700 shares of Common Stock
for which Mr. Frierson has subscribed but has not yet purchased, pursuant
to the Company's Stock Ownership Plan; (iii) 50,802 shares of Common Stock
owned by his wife and children and as to which he shares investment and
voting power; and (iv) options, which are exercisable within 60 days of the
Record Date, to purchase 33,250 shares of Common Stock owned directly by
Mr. Frierson.
(7) Includes: (i) 94,069 shares of Class B Common Stock owned directly by Mr.
Frierson; (ii) 40,000 shares of Class B Common Stock held by Paul K.
Frierson, T. Cartter Frierson, and Daniel K. Frierson as co-trustees of the
Frierson Family Trusts; and (iii) 45,304 shares of Class B Common Stock
held by Paul K. Frierson, T. Cartter Frierson, and Daniel K. Frierson as
co-trustees of the Special Purpose Trust of J. Burton Frierson and held
subject to the Shareholder Agreement described in Note 5. Also includes
4
<PAGE> 7
72,000 shares of Class B Common Stock owned by his children and as to which
he shares investment and voting power.
(8) Includes: (i) 148,402 shares of Common Stock as to which Mr. Frierson holds
sole investment and sole voting power and (ii) 98,048 shares of Common
Stock owned by his wife and children as to which he shares investment and
voting power.
(9) Includes: 15,678 shares of Class B Common Stock owned directly by Mr.
Frierson; (ii) 40,000 shares of Class B Common Stock held by Paul K.
Frierson, T. Cartter Frierson, and Daniel K. Frierson as co-trustees of the
Frierson Family Trusts; (iii) 45,304 shares of Class B Common Stock held by
Paul K. Frierson, T. Cartter Frierson, and Daniel K. Frierson as
co-trustees of the Special Purpose Trust of J. Burton Frierson; and (iv)
125,139 shares of Class B Common Stock owned directly by Rowena K. Frierson
but subject to a general power of attorney granted to Daniel K. Frierson
and T. Cartter Frierson. All such shares of Class B Common Stock are held
subject to the Shareholder Agreement described in Note 5.
(10) SunTrust Banks, Inc., as Parent Holding Company for SunTrust Banks of
Tennessee, Inc.; SunTrust Banks of Georgia, Inc.; SunTrust Equitable
Securities Corporation; and in various fiduciary capacities, has reported
beneficial ownership of 1,745,960 shares of Common Stock as follows:
SunTrust Banks of Tennessee, Inc., as Parent Holding Company for SunTrust
Bank, Chattanooga, N.A. ("STB"), has reported 1,366,955 shares of Common
Stock over which STB has sole power to vote, 59,172 shares of Common Stock
over which STB has shared power to vote, 1,146,319 shares of Common Stock
over which STB has sole investment power, and 73,976 shares of Common Stock
over which STB has shared investment power.
(11) The TCW Group, Inc., as Parent Holding Company for certain associated
entities, has reported beneficial ownership of 556,700 shares of Common
Stock, for which it has sole voting and sole investment power.
(12) The 700,000 shares of Common Stock are beneficially owned by one or more
open or closed-end investment companies or other managed accounts that are
advised by direct and indirect investments advisory subsidiaries of
Franklin Resources, Inc. Such advisory contracts grant the advisory
subsidiaries of Franklin Resources, Inc. sole voting and sole investment
power over all such shares.
(13) Includes: (i) 26,575 shares of Common Stock owned directly by Mr. Barlow;
(ii) 58,942 shares of Common Stock for which Mr. Barlow has subscribed but
has not yet purchased, pursuant to the Company's Stock Ownership Plan;
(iii) options to acquire 38,794 shares of Common Stock which are
immediately exercisable or exercisable within 60 days of the Record Date.
(14) Includes: (i) 800 shares of Common Stock owned directly by Mr. Berry with
sole voting power and investment power; (ii) 49,764 shares of Common Stock
for which Mr. Berry has subscribed but has not yet purchased pursuant to
the Company's Stock Ownership Plan; and (iii) options, which are
exercisable within 60 days of the Record Date, to acquire 7,500 shares of
Common Stock.
(15) Includes an option to acquire 7,500 shares of Common Stock, which is
immediately exercisable, issued to all non employee directors.
(16) Includes 8,000 shares owned directly by Mr. Brooks.
(17) Includes: (i) 40,900 shares owned directly by Mr. Fry (ii) 72,500 shares of
Common Stock for which Mr. Fry has subscribed but has not yet purchased,
pursuant to the Company's Stock Ownership Plan; and (iii) options, which
are exercisable within 60 days of the Record Date, to acquire 27,500 shares
of Common Stock.
(18) Includes: (i) 23,460 shares of Common Stock owned directly by Mr. Smith;
(ii) 72,283 shares of Common Stock for which Mr. Smith has subscribed but
has not yet purchased, pursuant to the
5
<PAGE> 8
Company's Stock Ownership Plan; and (iii) options, which are exercisable
within 60 days of the Record Date, to acquire 30,000 shares of Common
Stock.
(19) Includes: (i) options, which are either immediately exercisable or
exercisable within 60 days of the Record Date, to acquire 349,044 shares of
Common Stock; (ii) 573,463 shares for which individuals in this group have
subscribed, but have not yet purchased, and (iii) 173,744 shares held by
spouses and children of certain individuals comprising this group.
6
<PAGE> 9
PROPOSAL 1
ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES FOR DIRECTOR
Pursuant to the Company's Bylaws, all Directors are elected to serve a one
year term, or until their successors are elected and qualified. The Board of
Directors is permitted to appoint directors to fill the unexpired terms of
directors who resign.
The names of the nominees for election to the Board, their ages, their
principal occupation or employment (which has continued for at least the past
five years unless otherwise noted), directorships held by them in other
publicly-held corporations or investment companies, the dates they first became
directors of the Company, and certain other relevant information with respect to
such nominees are as follows:
J. Don Brock, age 60, is the Chairman of the Board and the Chief
Executive Officer of Astec Industries, Inc., a manufacturer of asphalt and
environmental equipment located in Chattanooga, Tennessee. He has been a
director of the Company since 1997. Dr. Brock is a member of the Company's
Audit Committee.
Paul K. Brock, age 66, was the Chairman of Brach & Brock Confections,
Inc., a candy manufacturer headquartered in Chattanooga, Tennessee until
1995. He has been a director of the Company since 1983. Mr. Brock is
Chairman of the Company's Compensation Committee and a member of the
Company's Executive Committee.
Lovic A. Brooks, Jr., age 71, is a Member of Constangy, Brooks &
Smith, LLC, attorneys-at-law, in Atlanta, Georgia. He has been a director
of the Company since 1993. Mr. Brooks is a member of the Company's
Compensation Committee and is a member of the Company's Retirement Plans
Committee.
Daniel K. Frierson, age 57, is Chairman of the Board of the Company, a
position he has held since 1987. He also has been Chief Executive Officer
of the Company since 1980 and a director of the Company since 1973. Mr.
Frierson serves as a director of SunTrust Bank, Chattanooga, N.A. and of
Astec Industries, Inc., headquartered in Chattanooga, Tennessee, and of
Printpack, Inc., headquartered in Atlanta, Georgia. Mr. Frierson is
Chairman of the Company's Executive Committee and a member of the Company's
Retirement Plans Committee.
Paul K. Frierson, age 61, is Vice President of the Company and
President of the Company's Candlewick Yarns subsidiary, positions he has
held since 1989. He served as Executive Vice President of Candlewick Yarns
from 1984 to 1989 and has been a director of the Company since 1988. Mr.
Frierson serves as a director of NationsBank/Chattanooga. Mr. Frierson is a
member of the Company's Retirement Plans Committee.
William N. Fry, IV, age 40 is President and Chief Operating Officer of
the Company, a position he has held since February, 1999. He has been a
director of the Company since 1998. He served as Executive Vice President
and Chief Operating Officer, Floorcovering Business, from January, 1997 to
February, 1999; Executive Vice President and Chief Operating Officer,
Candlewick, Carriage and Bretlin from January, 1996 to January, 1997;
President of Bretlin from January, 1995 to January, 1996; and Executive
Vice President of Bretlin from November, 1993 to January, 1995.
7
<PAGE> 10
John W. Murrey, III, age 56, is a Senior Member of the law firm of
Witt, Gaither & Whitaker, P.C., general counsel to the Company, in
Chattanooga, Tennessee. He has been a director of the Company since 1997.
Mr. Murrey is chairman of the Company's Audit Committee. Mr. Murrey serves
as a director of Coca-Cola Bottling Co. Consolidated in Charlotte, North
Carolina.
Peter L. Smith, age 57, is a Managing Director of Lazard Freres & Co.,
LLC, investment bankers, in New York, New York. He has been a director of
the Company since 1987. Mr. Smith is a member of the Company's Audit
Committee.
Robert J. Sudderth, Jr., age 56, is Chairman and Chief Executive
Officer of SunTrust Bank, Chattanooga, N.A. in Chattanooga, Tennessee. He
has been a director of the Company since 1983. Mr. Sudderth is a member of
the Company's Executive Committee, a member of the Company's Compensation
Committee, and a member of the Company's Retirement Plans Committee.
Daniel K. Frierson and Paul K. Frierson are brothers. Paul K. Brock is the
first cousin of Daniel K. Frierson and Paul K. Frierson. Other than as set forth
above, no director, nominee, or executive officer of the Company has any family
relationship, not more remote than first cousin, to any other director, nominee,
or executive officer.
COMMITTEES, ATTENDANCE, AND DIRECTORS' FEES
The Company has a standing Executive Committee, Audit Committee, Retirement
Plans Committee, and Compensation Committee, but no nominating committee.
Members of the Executive Committee during 1998 were Daniel K. Frierson,
Paul K. Brock, and Robert J. Sudderth, Jr. Except as otherwise limited by law or
by resolution of the Board of Directors, the Committee has and may exercise all
of the powers and authority of the Board of Directors for the management of the
business and affairs of the Company, which power the Committee exercises between
the meetings of the full Board of Directors. The Executive Committee performs
the function of a nominating committee. The Executive Committee met three times
in 1998.
Members of the Audit Committee during 1998 were John W. Murrey, III., J.
Don Brock, and Peter L. Smith. The Audit Committee evaluates audit performance,
handles relations with the Company's independent accountants, and evaluates
policies and procedures relating to internal accounting functions and controls.
The Committee recommends to the Board of Directors the appointment of the
independent accountants for the Company. The Audit Committee met two times in
1998.
Members of the Retirement Plans Committee during 1998 were Daniel K.
Frierson, Lovic A. Brooks, Jr., Paul K. Frierson and Robert J. Sudderth, Jr. The
Retirement Plans Committee administers the Company's retirement plans. The
committee met two times in 1998.
Members of the Compensation Committee during 1998 were Paul K. Brock, Lovic
A. Brooks, Jr., and Robert J. Sudderth, Jr. The Compensation Committee
administers the Company's compensation plans, reviews and may establish the
compensation of the Company's officers, and makes recommendations to the Board
of Directors concerning such compensation and related matters. The Compensation
Committee met four times in 1998.
During 1998, no director attended fewer than 75% of the total of meetings
of the Board of Directors and any Committee of the Board of Directors on which
he served.
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<PAGE> 11
Directors who are employees of the Company do not receive any additional
compensation for their services as members of the Board of Directors.
Non-Employee directors receive an annual retainer of $10,000 cash and $10,000 in
value of Performance Units under the Directors Stock Plan. In addition to the
annual retainer, directors who are not employees of the Company receive $500 for
each Board meeting attended and $400 for each committee meeting attended.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, and regulations of
the Securities and Exchange Commission ("SEC") thereunder, require the Company's
executive officers and directors and persons who beneficially own more than 10%
of the Company's Common Stock, as well as certain affiliates of such persons, to
file initial reports of such ownership and monthly transaction reports covering
any changes in such ownership with the SEC and the National Association of
Securities Dealers. Executive officers, directors and persons owning more than
10% of the Company's Common Stock are required by SEC regulations to furnish the
Company with all such reports they file. Based solely on its review of the
copies of such reports received by it and written representations that no other
reports were required for such persons, the Company believes that, during fiscal
year 1998, all filing requirements applicable to its executive officers,
directors, and owners of more than 10% of the Company's Common Stock were
complied with.
CERTAIN TRANSACTIONS BETWEEN THE COMPANY AND DIRECTORS AND OFFICERS
The Company adopted a Stock Ownership Plan in 1996 for its most senior
executive officers, to encourage such officers to own a number of shares of
Common Stock with a fair market value equal to twice such participant's base
salary. All subscriptions are at the prevailing market price on the relevant
subscription date and are payable either in cash or through a combination of
cash and/or the surrender to the Company of either (i) shares of Common Stock
already owned by the participant or (ii) a portion of the shares of Common Stock
otherwise covered by the subscription. As of March 5, 1999, officers listed in
the Summary Compensation Table have participated in the plan as follows: Daniel
K. Frierson-151,288 shares ($799,994 aggregate subscription price); William N.
Fry, IV-72,500 shares ($487,812.50 aggregate subscription price); George B.
Smith-72,283 shares ($439,991.50 aggregate subscription price); Glenn
Berry-49,764 shares ($379,991 aggregate subscription price); and Philip H.
Barlow-58,942 shares ($359,996 aggregate subscription price);
Mr. Murrey is a Senior Member of Witt, Gaither & Whitaker, P.C., a law firm
to which the Company paid $583,266 in 1998 for certain legal services performed
for the Company. Mr. Smith is a managing director of Lazard Freres & Co., LLC,
an investment banking firm that performs certain investment banking functions
for the Company from time to time.
9
<PAGE> 12
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Beginning with this year, the Company has adopted a new Peer Group, as
described below, to replace the Value Line Textiles Index for performance graph
comparison, to better reflect the Company's decision during 1998 to exit the
remaining portion of its Textiles Business and focus exclusively on its
Floorcovering Business in the future. The new Peer Group selected by the Company
is composed of fifteen publicly traded companies in the business of producing
floorcovering and other textile home furnishing products (American Biltrite
Inc.; Armstrong World Industries, Inc.; Burlington Industries, Inc.; Congoleum
Corporation; Crown Crafts, Inc.; Culp, Inc.; Dal-Tile International Inc.;
Interface, Inc.; The Maxim Group, Inc.; Mohawk Industries, Inc.; Pillowtex
Corporation; Shaw Industries, Inc.; Springs Industries, Inc.; Synthetic
Industries, Inc.; and WestPoint Stevens Inc.). Additionally, since the Company
now is included in the Standard & Poor's 600 Stock Index, the Company believes
that the use of this index, rather than the S&P 500, will provide a more
meaningful comparison of the Company's results to a broad market benchmark of
companies of similar size. Set forth below is a line graph comparing the yearly
change in the cumulative total shareholder return on the Company's Common Stock
against the total return of the Standard & Poor's 500 Stock Index, the Standard
& Poor's 600 Stock Index, the new floorcovering and home furnishings Peer Group
and the Value Line Textiles Index for the five year period ended December 26,
1998. The comparison assumes that $100.00 were invested on December 31, 1993, in
the Company's Common Stock, the S&P 500 Index, the S&P 600 Index, and each peer
group, and assumes the reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DIXIE S & P NEW PEER OLD PEER
(FISCAL YEAR COVERED) GROUP INC S & P 500 SMALLCAP 600 GROUP ONLY GROUP ONLY
<S> <C> <C> <C> <C> <C>
1993 100.00 100.00 100.00 100.00 100.00
1994 68.21 101.32 95.23 67.12 83.71
1995 37.76 139.40 123.76 83.51 89.95
1996 75.51 171.40 150.14 90.68 110.63
1997 110.83 228.59 188.56 105.55 150.55
1998 80.43 293.91 193.70 120.62 112.48
</TABLE>
10
<PAGE> 13
COMPENSATION COMMITTEE REPORT
The Compensation Committee reviews and recommends compensation for all
executive officers of the Company. The Committee considers recommendations from
senior management and reviews public and private compensation surveys, as well
as the publicly reported executive compensation of other textile and carpet
companies. The Committee's final decisions respecting compensation of executive
officers are reported to the Board for review and ratification. Individual
officers abstain from decisions concerning their own compensation.
The Committee believes that executive compensation should reflect overall
Company performance as well as each executive's performance in specific areas of
responsibility. During 1997, the Committee undertook a comprehensive review of
executive compensation. The Company utilized the services of an independent
consultant to assist it with its review. In August of 1998, the Company again
reviewed executive compensation with the assistance of an updated survey
furnished by the independent consultant.
The Committee determined that the Company's executive officers were paid
total annual compensation that generally approximates median compensation levels
of comparable companies in 1998.
THE ELEMENTS OF EXECUTIVE OFFICER COMPENSATION
Compensation for each of the Company's executive officers may consist of
four elements: base salary; annual bonuses; stock plan awards; and retirement
and other fringe benefits. Overall, compensation is intended to be competitive
and in the median range of compensation for comparable companies. A significant
portion of each executive's compensation consists of stock options, restricted
stock awards, or other stock ownership elements designed to align the interests
of executive officers with the interests of the Company's shareholders.
Base Salary
Recommendations with respect to base salary depend on a variety of factors,
including qualifications and experience, duties and responsibilities, and the
competitive market for executive talent. No increases in base salary were
awarded in 1998 to any officer named in the Summary Compensation Table.
Bonus
The Company's management incentive plan permits the award of bonuses to
executive officers based on achieving specified levels of return on capital
employed and on individual performance. The Committee establishes the goals
under the plan at the beginning of each year. Recommendations are made by senior
management, and final bonus amounts (including discretionary bonuses) are
approved by the Compensation Committee. Bonuses were awarded under the plan
during 1998 to four of the officers named in the Summary Compensation Table. A
special incentive award was approved for payment to George Smith contingent upon
the successful sale of certain of the Company's textile facilities.
Stock Options, Restricted Stock Awards, and the Stock Ownership Plan
Each executive officer of the Company is entitled to participate in the
Company's Incentive Stock Plan. The Company's practice has been to grant options
under the plan exercisable generally at or above then existing market prices and
subject to phase-in vesting schedules. The Committee believes that such stock
options create an important incentive to enhance long-term shareholder value.
The Company's stockholders authorized an additional 500,000 shares for use under
the Plan in 1998.
11
<PAGE> 14
During 1997, restricted stock awards were made to William N. Fry, IV,
George B. Smith, and Philip H. Barlow. Restricted stock is subject to
significant holding requirements and restrictions on transferability designed to
encourage participants to remain employed by the Company. The restricted stock
grants were amended in 1998 to provide for a partial award in the event of death
or permanent disability of a participant prior to the end of the required
holding period.
Certain senior executive officers of the Company also participate in the
Company's Stock Ownership Plan. Each participant is encouraged to subscribe for
the purchase of shares having a fair market value equal to two times such
executive officer's base salary.
The Committee believes that participation in the Company's stock plans will
result in ownership of its Common Stock in amounts that are significant for its
executive officers, and will serve to align the interests of such officers with
the Company's shareholders.
Retirement Plans and Other Benefits
The Company's compensation for its executive officers also includes the
opportunity to participate in two retirement plans, one qualified for federal
tax purposes and one non-qualified, and certain health insurance, life
insurance, relocation allowances, and other benefits. Such benefits are designed
to be substantially similar to the benefits available to those for other exempt,
salaried associates.
Executive officers receive a Company contribution to the qualified plan
based on a fixed percentage of their compensation and may elect to contribute an
additional limited amount of their compensation to the plan and receive a
matching Company contribution of one-half of their deferral, up to 3% of their
compensation. Participants in the non-qualified plan may make deferrals into
that plan, receive contributions from the Company equal to a percentage of their
compensation in excess of certain levels, and receive contributions from the
Company equal to a percentage of their compensation, based primarily on the
Company's return on equity.
CEO COMPENSATION
The Chief Executive Officer's compensation in 1998 included his base
salary; a bonus awarded under the management incentive plan; an additional stock
option award to bring his total incentive compensation in line with the
prevailing industry median, and retirement plan and other customary benefits.
The factors and criteria upon which such compensation was based are the same as
those applied to the Company's other executive officers.
Compensation Committee:
Paul K. Brock
Robert J. Sudderth, Jr.
Lovic A. Brooks, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Brooks is a Member of Constangy, Brooks & Smith, LLC, a law firm that
performed certain legal services for the Company in 1998.
12
<PAGE> 15
EXECUTIVE COMPENSATION INFORMATION
The following table sets forth the annual and long-term compensation during
the last three fiscal years for the Company's Chief Executive Officer and the
other four most highly compensated executive officers (the "Named Executive
Officers") for the year ended December 26, 1998, as well as the annual
compensation of each such individual for the Company's two previous fiscal
years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
---------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING ALL
ANNUAL STOCK OPTIONS/ OTHER
SALARY BONUS COMPENSATION AWARDS SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(A)(B) ($)(C) (#) (D) (E)
- --------------------------- ---- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel K. Frierson........ 1998 $400,000 $150,000 $ -- -- 80,000 $23,400
Chairman of the Board 1997 366,667 200,000 270,193 -- 80,000 29,750
and Chief Executive 1996 350,000 -- 222,147 -- 74,000 7,000
Officer
William N. Fry, IV........ 1998 250,000 110,000 1,675 -- 25,000 16,400
President 1997 216,667 150,000 5,733 $520,000 18,000 40,375
and Chief Operating 1996 170,000 125,000 583 -- 40,000 3,400
Officer
George B. Smith........... 1998 220,000 100,000 -- -- -- 16,225
Executive Vice President 1997 206,667 75,000 912 260,000 13,000 17,750
and Chief Operating 1996 186,667 -- 1 -- 30,000 3,733
Officer, Textile/Apparel
Group
Glenn A. Berry............ 1998 190,000 60,000 1,327 -- 20,000 12,060
Executive Vice President 1997 180,000 86,000 3 -- 43,000 7,875
and Chief Financial 1996 -- -- -- -- -- --
Officer
Philip H. Barlow.......... 1998 180,000 70,000 1,363 -- 12,000 12,725
Vice President and 1997 170,000 115,000 15,145 195,000 10,000 34,987
President, Carriage 1996 155,000 104,000 2,935 -- 17,000 3,100
Industries, Inc.
</TABLE>
- ---------------
(a) Reflects the excess of actual earnings of funds held for such officers'
retirement in the Company's qualified and non-qualified defined contribution
and salary savings plans over 120% of the average applicable federal rates,
determined in accordance with applicable regulations of the Securities and
Exchange Commission. The actual rate of earnings of such plans is
substantially the same as the rate of earnings on the Company's other such
plans for salaried employees and is not established or guaranteed by the
Company. Such rate of earnings may vary from year to year.
(b) No named officer received perquisites or other personal benefits in an
amount exceeding the lesser of $50,000 or 10% of such officer's salary and
bonus for periods presented.
13
<PAGE> 16
(c) The value of the restricted stock awards at December 26, 1998 is $298,750,
$149,375, and $112,031 for Mr. Fry, Mr. Smith, and Mr. Barlow, respectively.
The value of such awards included in the table is determined by the market
price of the stock at the grant date. The number of shares of Common Stock
subject to restricted stock awards held by Mr. Fry, Mr. Smith, and Mr.
Barlow at December 26, 1998 was 40,000, 20,000 and 15,000, respectively.
Restrictions lapse at the end of five years from the date of grant for Mr.
Fry and Mr. Barlow and at the end of three years for Mr. Smith.
(d) Reflects the number of shares of the Company's Common Stock subject to
options granted to the Named Executive Officers for the periods presented.
(e) Amounts reported in the "All Other Compensation" column for 1998 consist of
Company contributions on behalf of the Named Executive Officers to defined
contribution plans.
The following table sets forth information concerning options granted
during fiscal 1998 to the Named Executive Officers:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM(A)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel K. Frierson
August 13, 1998............. 80,000 26.04% $8.500 8/13/08 $428,000 $1,084,000
William N. Fry, IV
August 13, 1998............. 25,000 8.14 8.500 8/13/08 133,750 338,750
George B. Smith............... -- -- -- -- -- --
Glenn A. Berry
August 13, 1998............. 20,000 6.51% 8.500 8/13/08 107,000 271,000
Philip H. Barlow
August 13, 1998............. 12,000 3.91% 8.500 8/13/08 64,200 162,600
</TABLE>
(a) The assumed annual rates of appreciation of five and ten percent
on the market price of the Company's Common Stock at the date the options
were granted would result in the Company's Common Stock price per share
increasing as follows during the option term:
<TABLE>
<CAPTION>
ANNUAL RATE OF STOCK
APPRECIATION FOR OPTION TERM
-----------------------------
FIVE PERCENT TEN PERCENT
------------- ------------
<S> <C> <C>
Options issued at $8.50 exercise price............... $13.85 $22.05
</TABLE>
(b) The Company did not grant any stock appreciation rights ("SARs")
during fiscal 1998.
14
<PAGE> 17
The following table presents summary information concerning options
exercised during 1998 and estimates the value of unexercised options held by the
Named Executive Officers at fiscal year end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS/SARS
SHARES OPTIONS AT FY-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel K. Frierson............... -- -- 102,750 265,250 $42,701 $49,186
William N. Fry, IV............... -- -- 20,000 83,000 22,656 67,970
George B. Smith.................. -- -- 22,500 50,500 13,984 41,954
Glenn A. Berry................... -- -- -- 63,000 -- 2,813
Philip H. Barlow(a).............. -- -- 32,544 47,250 46,674 25,196
</TABLE>
- ---------------
(a) Includes options to purchase 15,794 shares of the Company's Common Stock
issued on March 12, 1993, to replace options to purchase shares of
Carriage's common stock which were canceled upon the acquisition of Carriage
by the Company. Such options include: (i) options to purchase 3,057 shares
of Common Stock at an exercise price of $4.2934 per share; (ii) options to
purchase 2,547 shares of Common Stock at an exercise price of $5.0294 per
share; and (iii) options to purchase 10,190 shares of Common Stock at an
exercise price of $5.2748 per share.
SHAREHOLDER PROPOSALS
In the event any shareholder wishes to present a proposal at the 2000
Annual Meeting of Shareholders, such proposal must be received by the Company on
or before November 26, 1999, to be considered for inclusion in the Company's
proxy materials.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has been selected as independent auditors for
the Company. A representative of Ernst & Young LLP is expected to be present at
the Annual Meeting and will have the opportunity to make a statement if he so
desires and to respond to appropriate questions from shareholders.
ADDITIONAL INFORMATION
The entire cost of soliciting proxies will be borne by the Company. In
addition to solicitation of proxies by mail, proxies may be solicited by the
Company's directors, officers, and other employees by personal interview,
telephone, and telegram. The persons making such solicitations will receive no
additional compensation for such services. The Company also requests that
brokerage houses and other custodians, nominees, and fiduciaries forward
solicitation materials to the beneficial owners of the shares of Common Stock
held of record by such persons and will pay such brokers and other fiduciaries
all of their reasonable out-of-pocket expenses incurred in connection therewith.
15
<PAGE> 18
OTHER MATTERS
As of the date of this Proxy Material, the Board does not intend to
present, and has not been informed that any other person intends to present, any
matter for action at the Annual Meeting other than those specifically referred
to herein. If other matters should properly come before the Annual Meeting, it
is intended that the holders of the proxies will vote in accordance with their
best judgment.
The Dixie Group, Inc.
Daniel K. Frierson
Chairman of the Board
Dated: March 30, 1999
16
<PAGE> 19
Appendix A
PROXY
THE DIXIE GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1999
The undersigned hereby appoints Daniel K. Frierson, John W. Murrey, III,
and Robert J. Sudderth, Jr., and each of them, proxies, with full power of
substitution, to act and to vote the shares of common stock which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at 1100 South Watkins Street, Chattanooga, Tennessee 37404, at 10:00 A.M.,
Eastern Daylight Time, on April 29, 1999, and any adjournment or adjournments
thereof, as designated on the reverse side.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE
ACCOMPANYING PREPAID SELF-ADDRESSED ENVELOPE. THANK YOU.
<TABLE>
<S> <C>
---------
SEE REVERSE
SIDE
---------
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR
OF PROPOSAL 1. THE BOARD IS NOT AWARE OF ANY OTHER MATTER TO BE BROUGHT BEFORE
THE ANNUAL MEETING FOR A VOTE OF SHAREHOLDERS. IF, HOWEVER, OTHER MATTERS ARE
PROPERLY PRESENTED, THE PROXIES WILL VOTE IN ACCORDANCE WITH THEIR BEST
JUDGMENT.
<TABLE>
<S> <C> <C>
1. Election of Directors. 2. Acting upon any other business which may be properly
FOR ALL NOMINEES WITHHOLD AUTHORITY brought before said meeting or any adjournment or
[ ] [ ]to vote for all adjournments thereof.
nominees listed
below.
J. DON BROCK; PAUL K. BROCK; LOVIC A. BROOKS, JR.;
DANIEL K. FRIERSON; PAUL K. FRIERSON; WILLIAM N. FRY, IV;
JOHN W. MURREY, III; PETER L. SMITH; ROBERT J. SUDDERTH, JR.
(Instruction: To withhold authority to vote for any individual,
write that nominee's name in the space provided below.)
- --------------------------------------------------------------
The undersigned hereby acknowledges receipt of the Notice
of Annual Meeting of Shareholders and the Proxy Materials
and Annual Report to Shareholders furnished therewith.
</TABLE>
SIGNATURE(S): DATE
---------------------------------------- ------------------
NOTE: Signature should agree with name on stock certificate as printed hereon.
When signing in a representative capacity, please give your full title.
