D. Kennedy Frierson, Jr.
DIXIE GROUPAbout D. Kennedy Frierson, Jr.
- Age 58; Vice President & Chief Operating Officer (COO) of The Dixie Group since August 2009; Director since 2012; long-tenured operator across sales and manufacturing roles since 1998 .
- Background/credentials: Led Masland Residential (2005–2009), GM of Dixie Home (2003–2005), Business Unit Manager at Bretlin (2002–2003), with prior operational and sales roles at DXYN; no education disclosed in company filings .
- Performance context: Company TSR collapsed over 2022–2024 (hypothetical $100 fell to $12 by 2024), while net income remained negative (2024: -$13.0M), informing a 2024 decision to pay no cash incentives or equity under the 2024 plan, indicating pay aligned to weak outcomes .
- Governance context: He is the CEO’s son (Daniel K. Frierson), serves as both executive and director (non‑independent), on a board with combined Chair/CEO; Lead Independent Director chairs executive sessions .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| The Dixie Group | Chief Operating Officer | 2009–present | Enterprise operations leadership across manufacturing/supply chain during industry shift to hard surfaces . |
| The Dixie Group | President, Masland Residential | Dec 2005–Jan 2006 (President); Feb 2006–Jul 2009 (VP & President) | Led premium residential brand positioning and sales execution . |
| The Dixie Group | EVP & GM, Dixie Home | 2003–2005 | Drove mid/upper-tier residential portfolio growth . |
| The Dixie Group | Business Unit Manager, Bretlin | 2002–2003 | Managed unit P&L/operations . |
| The Dixie Group | Various operations and sales roles | Since 1998 | Progressive operating responsibility ahead of COO role . |
External Roles
- None disclosed in company filings .
Fixed Compensation
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base salary ($) | 375,000 | 375,000 | 375,000 |
| Target annual cash incentive (% of salary) | Not disclosed | Not disclosed | COO eligible 45%–105% (2024 plan framework; applies to 2024 plan adopted post‑year end; payouts, if any, in Mar-2025) |
| Actual annual cash bonus ($) | — | 303,301 | — (no cash incentives paid for 2024 plan year) |
Notes: The committee set 100% of cash incentive on consolidated operating income (adjusted) for 2024/2025; significant discretion reserved to adjust for unusual items .
Performance Compensation
- 2023 awards (granted in 2024): Cash paid; Long‑Term Incentive (LTI) restricted shares and “Career Shares” granted; options granted 5/25/2023 with a market condition .
| Component | Metric | Weighting | Target | Actual | Payout/Grant | Vesting |
|---|---|---|---|---|---|---|
| Annual cash (2023) | Consolidated operating income (adjusted) | 100% (committee discretion) | Not disclosed | Not disclosed | $303,301 (for FY23, paid Q1‑2024) | N/A |
| LTI Restricted Stock (FY23 plan) | Financial + individual objectives (committee discretion) | Not disclosed | Not disclosed | Not disclosed | 47,481 shares (granted 2024) | Ratable over 3 years |
| Career Shares (FY23 plan) | Retention-oriented | Not disclosed | Not disclosed | Not disclosed | 26,260 shares (granted 2024) | If age ≤60: ratable over 5 yrs after reaching 61; if 61+: over 2 yrs |
| Stock options (granted 5/25/2023) | Price hurdle (market condition) | N/A | Stock trades ≥$3.00 for 5 consecutive days | Not met/disclosed | 40,000 options @ $1.00 exercise; expire 5/25/2028 | Must be held 2 years; also requires the $3.00/5‑day condition |
- 2024 plan outcomes: No cash, no LTI shares, and no Career Shares were awarded to NEOs for 2024 performance, reflecting negative operating results .
- 2025 plan design: COO cash opportunity 45%–105% of salary; LTI shares up to 35% of salary plus any cash award; Career Shares set at 35% of COO salary; awards (if earned) to be granted/paid in March 2026; 100% cash metric is consolidated operating income (adjusted); committee retains full discretion .
Policies:
- Hedging/pledging: Hedging or hypothecation of restricted stock awards prior to vesting is expressly prohibited .
Equity Ownership & Alignment
- Capital structure: Class B shares carry 20 votes/share; convertible 1:1 into Common. Insiders (directors and officers) held 69.7% of total vote as of Mar 10, 2025, implying effective voting control .
- Beneficial ownership (as of Mar 10, 2025):
| Holder | Class | Shares | % of Class |
|---|---|---|---|
| D. Kennedy Frierson, Jr. | Common (beneficial, incl. deemed conversion) | 443,399 | 3.0% |
| Class B | 426,549 | 34.1% |
Breakdown (as of Mar 10, 2025):
- Outright: 0 Common; 158,972 Class B .
- Spousal: 100 Common .
- Children’s trusts: 2,585 Common; 15,540 Class B .
- 401(k): 2,301 Common .
- Unvested restricted: 11,864 Common; 252,037 Class B .
- Options: 40,000 unexercisable (5/25/2028; $1.00 strike; $3.00/5‑day condition) .
- Year-end 2024 unvested restricted stock: 263,901 shares (market value $171,800 at $0.651) .
- Ownership guidelines/pledging: No executive ownership multiple policy disclosed; no pledging disclosure; hedging/hypothecation of unvested awards prohibited .
Implications:
- Large unvested balance (263,901 shares) suggests future vesting supply; actual liquidity impact depends on grant dates and trading volumes on OTCQB .
- Option hurdle at $3.00 is significantly above year-end market price used for valuation ($0.651), making near-term monetization unlikely without substantial price appreciation .
Employment Terms
- Role/tenure: COO since 2009; Director since 2012; son of the CEO (related-party family relationship) .
- Incentive equity treatment:
- Change-in-control: Immediate vesting of all share awards (single-trigger) .
- Termination without cause: Immediate vesting of Career Shares and the expensed portion of LTI restricted shares .
- Retirement: Expensed amount of share awards vests at retirement age and is paid by March 15 of the following year .
- Severance multiple, non-compete/non-solicit, garden leave, consulting arrangements: Not disclosed in filings reviewed .
- Deferred comp/retirement: Executives may defer up to 90% of total compensation; company contributed 2% to qualified plan in 2024 (no non‑qualified contributions); 2023 company contribution 1% .
- Perquisites: Company contributions and insurance premiums totaled $6,281 in 2024 ($3,300 plan contribution; $2,981 insurance) .
Board Governance
- Service history: Director since 2012; management director (non‑independent) .
- Committees: None disclosed for D. Kennedy; current committees are Audit (Owens—Chair; Blue; Brock; Murray) and Compensation/Nominations & Corporate Governance (Blue—Chair; Brock; Murray) .
- Leadership structure: CEO also serves as Chairman; Lead Independent Director (Blue) chairs executive sessions; Board met 5 times in 2024; all directors met ≥75% attendance .
- Independence issues/dual roles: Family relationship disclosed (CEO’s son); combined Chair/CEO roles concentrate authority; insiders and family group control Class B voting power, raising entrenchment considerations .
- Director compensation: Applies to non‑employee directors only (retainer $40k cash + $40k equity; chair adders $10k); not applicable to management directors like D. Kennedy .
Compensation & Ownership History (Multi‑year)
| Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All Other ($) | Total ($) |
|---|---|---|---|---|---|---|
| 2024 | 375,000 | — | 44,976 | — | 6,281 | 426,257 |
| 2023 | 375,000 | 303,301 | — | 16,795 | 6,031 | 701,127 |
| 2022 | 375,000 | — | 175,523 | — | 5,907 | 556,430 |
Outstanding equity at year-end
| As of | Unvested Restricted Shares (#) | Market Value of Unvested ($) | Unexercisable Options (#) | Option Terms |
|---|---|---|---|---|
| Dec 28, 2024 | 263,901 | 171,800 (at $0.651) | 40,000 | $1.00 strike; expire 5/25/2028; stock must trade ≥$3 for 5 consecutive days; 2‑year holding before vest |
Beneficial ownership snapshot
| As of | Common (beneficial) | % Common | Class B | % Class B |
|---|---|---|---|---|
| Mar 10, 2025 | 443,399 | 3.0% | 426,549 | 34.1% |
Performance & Track Record (Company context)
| Year | Company TSR – Value of $100 | Company Net Income (Loss) ($000s) |
|---|---|---|
| 2022 | 30 | (35,079) |
| 2023 | 29 | (2,718) |
| 2024 | 12 | (13,000) |
- Operating performance deteriorated in 2024 (operating loss -$5.9M vs +$5.0M in 2023), driven by lower volume and cost pressures; no 2024 incentive payouts were made to NEOs .
- Balance sheet and listing risk: Nasdaq delisting (Oct 3, 2024; OTCQB from Oct 4, 2024); going-concern emphasis; refinancing with MidCap (Feb 25, 2025) introduces monthly financial covenants and potential waiver risk .
- Legal overhang: PFAS litigation in Gordon County, GA with multiple suits filed in 2024–2025; company denies liability .
- Controls: Reported material weaknesses in 2024 related to debt presentation/disclosure and lessor lease classification documentation; remediation underway .
Say‑on‑Pay & Shareholder Feedback
- 2023 say‑on‑pay approval “in excess of 93%” (proxy reported) .
- 2025 meeting results (May 7, 2025): Say‑on‑pay votes For: 28,475,376; Against: 2,116,395; Abstain: 67,285; Broker non‑votes: 4,364,396 (computed approval ≈92.4% of votes cast incl. abstentions) .
Compensation Committee Analysis
- Committee composition: 2025 – Blue (Chair), Brock, Murray; 2024 also included Kline; all independent .
- Consultant policy: Committee may engage independent compensation consultants; retains discretion to adjust awards for unusual items .
- Meetings: Compensation/Nominating/Governance met twice (comp) and once (nom/gov) in 2024 .
Related Party Transactions
- 2024: None disclosed .
- 2023: De minimis purchases (~$64k) from Engineered Floors, a company controlled by a DXYN shareholder; reviewed per policy .
Risk Indicators & Red Flags
- Concentrated voting control via Class B (20x votes) and insider group (≈69.7% of total vote) limits external governance pressure and may reduce responsiveness to say‑on‑pay opposition .
- Listing downgrade to OTCQB and going‑concern emphasis could impact talent retention, equity award value realization, and liquidity for insider holdings .
- Material control weaknesses (2024) and PFAS litigation elevate execution and liability risk .
Investment Implications
- Pay-for-performance alignment appears intact: no 2024 incentives were paid/granted amid losses, and the 2025 plan ties 100% of cash bonus to operating income (adjusted), with committee discretion to normalize unusual items .
- Retention risk is mitigated by sizable unvested restricted stock (263,901 shares) and Career Share framework (35% of COO salary in 2025 plan), but lower stock price and OTC trading may blunt retention value and increase turnover risk if business underperforms .
- Potential insider selling pressure centers on multi‑year restricted share vesting rather than options (which require a $3.00/5‑day hurdle by 2028). Near‑term, options are unlikely monetizable without substantial appreciation from the $0.651 year‑end price used for award valuation .
- Governance risk persists: combined Chair/CEO, family relationship (COO is CEO’s son), and insider voting control can entrench leadership, though a Lead Independent Director structure and independent committees provide some counterbalance .
- Macro and balance sheet constraints (rate‑sensitive end market, monthly covenant tests under the new facility, delisting) are key execution levers for COO to improve operations, margins, and cash generation to restore incentive payout pathways and support equity value .