Owens & Minor, inc.
OWENS & MINOR INC/VA/ (Form: DEF 14A, Received: 03/19/2014 10:14:26)
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

 

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¨ Preliminary Proxy Statement

 

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x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to §240.14a-12

 

 

Owens & Minor 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

Notice of

2014

Annual Meeting

and

Proxy Statement

WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING IN

PERSON, THE BOARD OF DIRECTORS URGES YOU TO VOTE.

Owens & Minor, Inc.

9120 Lockwood Boulevard

Mechanicsville, Virginia 23116

 


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          LOGO
     

9120 Lockwood Boulevard

Mechanicsville, Virginia 23116

(804) 723-7000

March 19, 2014

Dear Shareholders:

It is a pleasure to invite you to our Annual Meeting of Shareholders on Thursday, May 1, 2014 at 10:00 a.m. The meeting will be held at the corporate headquarters of Owens & Minor, Inc., 9120 Lockwood Boulevard, Mechanicsville, Virginia 23116. Directions to our offices are on the last page of the proxy statement.

The Notice of 2014 Annual Meeting of Shareholders and Proxy Statement describe the items of business for the meeting. In addition to considering these matters, we will review significant accomplishments and events since our last shareholders’ meeting as well as future opportunities and initiatives we intend to pursue. Our Board of Directors and management team will be there to discuss items of interest and answer any questions.

The Notice of 2014 Annual Meeting of Shareholders contains instructions on how to access our proxy materials and our 2013 Annual Report/Form 10-K over the Internet as well as how shareholders can receive paper copies of such documents, if they so desire.

You may vote your shares by the Internet or by telephone or, if you prefer, you may request paper copies of the proxy materials and submit your vote by mail by following the instructions on the proxy card. We encourage you to vote via the Internet. Whichever method you choose, your vote is important so please vote as soon as possible. All of us at Owens & Minor appreciate your continued interest and support.

Warm regards,

 

LOGO

CRAIG R. SMITH

Chairman & Chief Executive Officer


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Proxy Statement

Table of Contents

   Page  

Notice of Annual Meeting of Shareholders

     i   

About the Meeting

     1   

Corporate Governance

     3   

Report of the Governance & Nominating Committee

     4   

Board Meetings

     5   

Committees of the Board

     5   

Director Compensation

     7   

Director Nominating Process

     9   

Communications with the Board of Directors

     9   

Proposal 1: Election Of Directors

     10   

Nominees for Election

     10   

Retiring Director

     14   

Proposal 2: Ratification Of Independent Registered Public Accounting Firm

     14   

Fees Paid to Independent Registered Public Accounting Firm

     15   

Report of the Audit Committee

     15   

Stock Ownership Information

     17   

Compliance with Section 16(a) Reporting

     17   

Stock Ownership by Management and the Board of Directors

     17   

Stock Ownership by Certain Shareholders

     18   

Equity Compensation Plan Information

     18   

Executive Compensation

     19   

Compensation Discussion and Analysis

     19   

Report of the Compensation & Benefits Committee

     35   

Summary Compensation Table

     36   

Grants of Plan Based Awards Table

     39   

Outstanding Equity Awards at Fiscal Year-End Table

     41   

Option Exercises and Stock Vested Table

     42   

Retirement Plans

     42   

Pension Benefits Table

     43   

Nonqualified Deferred Compensation Plan

     44   

Potential Payments Upon Termination or Change in Control

     45   

Proposal 3: Advisory Shareholder Vote on Executive Compensation

     48   

Certain Relationships and Transactions

     49   

Shareholder Proposals

     50   

Other Matters

     51   

Appendix A — Audit Committee Pre-Approval Policies and Procedures for Services by Independent Auditors

     A-1   

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the annual meeting, please vote your shares promptly, as instructed in the Notice of Internet Availability of Proxy Materials, by the Internet or by telephone. You may also request a paper proxy card to submit your vote by mail, if you prefer. We encourage you to vote via the Internet.


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LOGO

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held Thursday, May 1, 2014

T O T HE S HAREHOLDERS O F O WENS  & M INOR , I NC .:

The Annual Meeting of Shareholders of Owens & Minor, Inc. (the “Company” or “Owens & Minor”) will be held on Thursday, May 1, 2014 at 10:00 a.m. at the offices of Owens & Minor, 9120 Lockwood Boulevard, Mechanicsville, Virginia.

The purposes of the meeting are:

 

  1. To elect the ten directors named in the attached proxy statement, each for a one-year term and until their respective successors are elected and qualified;

 

  2. To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2014;

 

  3. To conduct an advisory vote on the compensation of our named executive officers; and

 

  4. To transact any other business properly before the annual meeting.

Shareholders of record as of March 6, 2014 will be entitled to vote at the annual meeting.

Your attention is directed to the attached proxy statement. The Notice of Internet Availability of Proxy Materials is being distributed on or about March 19, 2014. This proxy statement, the proxy card and Owens & Minor’s 2013 Annual Report/Form10-K are being furnished on the Internet on or about March 19, 2014.

B Y O RDER O F T HE B OARD O F D IRECTORS

G RACE R. D EN H ARTOG

Senior Vice President, General Counsel

& Corporate Secretary

 

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LOGO

 

Street Address

  

Mailing Address

9120 Lockwood Boulevard   

P.O. Box 27626

Mechanicsville, Virginia 23116   

Richmond, Virginia 23261-7626

PROXY STATEMENT

Annual Meeting of Shareholders

to be held on May 1, 2014

ABOUT THE MEETING

What You Are Voting On

Proxies are being solicited by the Board of Directors for purposes of voting on the following proposals and any other business properly brought before the meeting:

 

Proposal 1: Election of the ten directors named in this proxy statement, each for a one-year term and until their respective successors are elected and qualified.

 

Proposal 2: Ratification of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2014.

 

Proposal 3: To conduct an advisory vote on the compensation of our named executive officers (“NEOs”).

Who is Entitled to Vote

Shareholders of Owens & Minor, Inc. (the “Company” or “Owens & Minor”) as of the close of business on March 6, 2014 (the “Record Date”) are entitled to vote. Each share of the Company’s common stock (“Common Stock”) is entitled to one vote. As of March 6, 2014, 63,190,826 shares of Common Stock were issued and outstanding.

How to Vote

You can vote by the Internet, by telephone or by mail.

By Internet .    You may vote by the Internet by following the specific instructions on the Notice of Internet Availability of Proxy Materials. Shareholders who have requested a paper copy of a proxy card by mail may submit proxies over the Internet by following the instructions on the proxy card. We encourage you to vote via the Internet. If your shares are held by your bank or broker in street name, please refer to the instruction form that you receive from your bank or broker or contact your bank or broker to determine whether you will be able to vote by the Internet.

By Telephone .    You may vote by telephone by calling the toll-free number on the proxy card and following the instructions. Shareholders will need to have the control number that appears on their notice available when voting. If your shares are held by your bank or broker in street name, please refer to the instruction form that you receive from your bank or broker or contact your bank or broker to determine whether you will be able to vote by telephone.

 

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By Mail .    Shareholders who have requested a paper copy of a proxy card by mail may submit proxies by completing, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided.

However you choose to vote, you may revoke a proxy prior to the meeting by (1) submitting a subsequently dated proxy by any of the methods described above, (2) giving notice in writing to the Corporate Secretary of the Company or (3) voting in person at the meeting (attendance at the meeting will not itself revoke a proxy).

What Happens if You Do Not Make Selections on Your Proxy

If your proxy contains specific voting instructions, those instructions will be followed. However, if you sign and return your proxy card by mail or submit your proxy by telephone or via the Internet without making a selection on one or more proposals, you give authority to the individuals designated on the proxy card to vote on the proposal(s) for which you have not made specific selections or given instructions and any other matter that may arise at the meeting. If no specific selection is made or instructions given, it is intended that all proxies that are signed and returned or submitted via telephone or Internet will be voted “FOR” the election of all nominees for director, “FOR” the ratification of KPMG LLP as our independent registered public accounting firm in 2014, and “FOR” the approval, on an advisory basis, of the compensation of our NEOs.

Whether Your Shares Will be Voted if You Don’t Provide Your Proxy

Whether your shares will be voted if you do not provide your proxy depends on how your ownership of shares of Common Stock is registered. If you own your shares as a registered holder, which means that your shares of Common Stock are registered in your name, and you do not provide your proxy, your shares will not be represented at the meeting, will not count toward the quorum requirement, which is explained below, and will not be voted.

If you own your shares of Common Stock in street name, your shares may be voted even if you do not provide your broker with voting instructions. Brokers have the authority under New York Stock Exchange (“NYSE”) rules to vote shares for which their beneficial owner customers do not provide voting instructions on certain “routine” matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a broker non-vote.

The Company believes that only the proposal to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2014 is a routine matter for which brokerage firms will have discretionary voting power if you do not give voting instructions with respect to this proposal. The proposal to elect directors as well as the proposal to approve, on an advisory basis, the compensation of our NEOs are non-routine matters for which brokerage firms will not have discretionary voting power and for which specific voting instructions from their customers are required. As a result, brokerage firms will not be allowed to vote on these non-routine matters on behalf of their customers if the customers do not return specific voting instructions.

What Constitutes a Quorum

A majority of the outstanding shares of Common Stock present or represented by proxy constitutes a quorum. A quorum is required to conduct the annual meeting. If you vote your proxy, you will be considered part of the quorum. Abstentions, withheld votes (with respect to the election of directors) and shares held by brokers or banks in street name (“broker shares”) that are voted on any matter are included in the quorum. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.

 

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The Vote Required to Approve Each Item

Election of Directors .    The affirmative vote of a plurality of the votes cast at the meeting is required for the election of directors. A properly returned proxy indicating “withhold authority” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated. Broker non-votes will not be counted as votes cast on the proposal and will have no effect on this proposal.

Ratification of Appointment of KPMG LLP .    The ratification of the appointment of KPMG LLP requires that the votes cast “for” this proposal exceed the number of votes cast “against” this proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal.

Advisory Vote on Executive Compensation .    The advisory vote to approve the compensation of our executive officers named in the Summary Compensation Table requires that the votes cast “for” this proposal exceed the number of votes cast “against” this proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal.

How to Obtain a Paper Copy of the Proxy Materials

Shareholders will find instructions about how to obtain a paper copy of the proxy materials on the notice they received in the mail about the Internet availability of proxy materials.

What it Means if You Get More Than One Notice about the Internet Availability of Proxy Materials

Your shares are probably registered differently or are held in more than one account. Please vote all proxies to ensure that all your shares are voted. Also, please have all of your accounts registered in the same name and address. You may do this by contacting our transfer agent, Computershare Shareowner Service, LLC, at 1-866-252-0358.

Costs of Soliciting Proxies

Owens & Minor will pay all costs of this proxy solicitation. The Company has retained Georgeson, Inc. to aid in the distribution and solicitation of proxies for approximately $6,000 plus expenses. The Company will reimburse brokers and other custodians, nominees and fiduciaries for their expenses in forwarding proxy and solicitation materials.

CORPORATE GOVERNANCE

General.     The Company is managed under the direction of the Board of Directors, which has adopted Corporate Governance Guidelines to set forth certain corporate governance practices. Each year, we review our corporate governance policies and practices relative to applicable laws, including the Dodd-Frank Wall Street Reform Act and the Sarbanes-Oxley Act of 2002 and rules promulgated thereunder or adopted by the Securities and Exchange Commission (“SEC”) and the NYSE, the exchange on which the Common Stock is listed, as well as the policies and practices recommended by groups and authorities active in corporate governance.

Corporate Governance Materials.     The Company’s Bylaws, Corporate Governance Guidelines, Code of Honor and the charters of the Audit, Compensation & Benefits, and Governance & Nominating Committees are available on our website at http://www.owens-minor.com under “Corporate Governance.” The information available on, or that can be accessed through, our website is not a part of, or incorporated by reference into, this proxy statement.

Code of Honor.     The Board of Directors has adopted a Code of Honor that is applicable to all employees of the Company, including the principal executive officer, the principal financial officer and the principal

 

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accounting officer, as well as the members of the Board of Directors. We intend to post any amendments to or waivers from our Code of Honor (to the extent applicable to the Company’s chief executive officer, principal financial officer, principal accounting officer, any other executive officer or any director) on our website.

Director Independence.     The Board of Directors has determined that the following Board members and/or nominees are “independent” within the meaning of the NYSE listing standards and the Company’s Corporate Governance Guidelines: Stuart M. Essig, Richard E. Fogg, John W. Gerdelman, Lemuel E. Lewis, Martha H. Marsh, Eddie N. Moore, Jr., James E. Rogers, David S. Simmons, Robert C. Sledd and Anne Marie Whittemore. To assist it in making determinations of independence, the Board has adopted categorical standards which are included in the Company’s Corporate Governance Guidelines available on our website at http://www.owens-minor.com under “Corporate Governance.” The Board has determined that all directors and/or nominees identified as independent in this proxy statement meet these standards.

Structure and Leadership of the Board.     The Board of Directors has no policy with respect to the separation of the offices of Chairman of the Board and the Chief Executive Officer. Instead, the Board believes that it is in the best interests of the Company for this determination to be made as part of the succession planning process when it selects a new Chief Executive Officer. With the retirement of G. Gilmer Minor, III as Chairman of the Board effective at the conclusion of our 2013 Annual Meeting, the Board selected Craig R. Smith, our Chief Executive Officer, to also serve as Chairman of the Board. This decision was based on the Board’s desire to preserve continuity in the operation of the Board, the pursuit of our strategic goals and our unique corporate culture. The Board believes that the role of its independent lead director, who has served in this position for over ten years, preserves and maintains the appropriate level of Board independence, consistent with corporate governance best practices. The Company’s Corporate Governance Guidelines provide for the annual election of an independent lead director to, among other things, preside at Board meetings in the absence of the Chairman, preside at meetings of the independent directors, serve as principal liaison on behalf of the independent directors and advise the Chairman and the board committee chairmen with respect to agendas and information requirements relating to the Board and committee meetings. The Board believes that the independent lead director enhances communications between board members (including the Chairman) and committees as well as the overall functioning of the Board’s leadership.

The Board’s Role in Risk Oversight.     The Board of Directors currently administers its risk oversight function through the full Board and not through a separate risk committee of the Board. However, each of the Audit Committee, the Compensation & Benefits Committee and the Governance & Nominating Committee oversees the specific financial, compensation and governance risks, respectively, relating to its functions and responsibilities and reports on these matters to the full Board. The Board performs its risk oversight function through regular reporting by the Board committees as well as the officers and management-level personnel who supervise the day-to-day risk management activities of the Company.

Risk Assessment of Compensation Programs .    With respect to our overall compensation programs, Company management has reviewed our compensation policies and practices to determine whether they create risks that are reasonably likely to have a material adverse effect on the Company. As part of this assessment, we reviewed the design and features of our compensation and benefits programs and policies, potential risks that could be created by these programs and features of our programs and corporate governance policies that help to mitigate risk. Management reviewed and discussed the results of the assessment with the Compensation & Benefits Committee. Based on this review, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

REPORT OF THE GOVERNANCE & NOMINATING COMMITTEE

The Governance & Nominating Committee is composed of four directors, all of whom are independent. The Governance & Nominating Committee met four times during 2013. During 2013, the Committee devoted considerable time and attention to board succession planning and new director recruitment in response to the

 

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scheduled retirement of several directors from the board during the 2013-2014 time period. An outside consulting firm assisted the Committee in the identification and strategic recruitment of directors possessing the qualities, character, experience and expertise that will contribute to the leadership and success of the Company in the rapidly changing health care environment. As a result of these efforts, two new directors were seated in October 2013, both of whom have held significant leadership positions in the medical device and/or pharmaceutical manufacturing industries and possess the qualities, character and other attributes expressed in the Company’s Corporate Governance Guidelines.

Also during 2013, as provided in its charter, the Governance & Nominating Committee received reports on the status and impact of new federal legislation and regulations affecting the Company’s governance policies and disclosure obligations; reviewed and approved the Committee’s charter and the Company’s Corporate Governance Guidelines; developed a director skills matrix to highlight relevant areas of expertise and enhance board effectiveness; reviewed the performance of the chief executive officer; reviewed with the chief executive officer proposed organization changes and related management promotions, as well as succession plans for members of senior management; engaged an outside compensation firm to review and assess the Company’s director compensation program relative to comparable peer companies; and implemented the Board’s 2013 self-assessment process.

THE GOVERNANCE & NOMINATING

COMMITTEE

Anne Marie Whittemore, Chairman

Lemuel E. Lewis

Eddie N. Moore, Jr.

Robert C. Sledd

BOARD MEETINGS

The Board of Directors held six meetings during 2013. All directors attended at least 75% of the meetings of the Board and committees on which they served. The Company’s Corporate Governance Guidelines provide that, absent unusual or unforeseen circumstances, directors are expected to attend each annual meeting of shareholders. All directors attended the 2013 Annual Meeting of Shareholders.

Under the Company’s Corporate Governance Guidelines, the independent directors meet in executive session after each regularly scheduled Board meeting. These meetings are chaired by a lead director who is elected annually by the non-management directors following each annual meeting of shareholders. James E. Rogers currently serves as lead director and presides over these executive sessions. As lead director, Mr. Rogers is also invited to participate in meetings of all Board committees but is permitted to vote only in meetings of committees of which he is a member. Shareholders and other interested parties may contact the lead director by following the procedures set forth in “Communications with the Board of Directors” on page 9 of this proxy statement.

COMMITTEES OF THE BOARD

The Board of Directors currently has the following committees, which the Board established to assist it with its responsibilities:

Audit Committee:     Oversees (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the qualification and independence of the Company’s independent registered public accounting firm, (iv) the performance of the Company’s independent registered public accounting firm and internal audit functions and (v) issues involving the Company’s ethical and legal compliance responsibilities. The Audit Committee has sole authority to appoint, retain, compensate, evaluate and

 

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terminate the Company’s independent registered public accounting firm. The Board of Directors has determined that each of Richard E. Fogg (Chairman of the Audit Committee), Lemuel E. Lewis and Eddie N. Moore, Jr. is an “audit committee financial expert,” as defined by SEC regulations, and that each is financially literate, as such term is interpreted by the Board in its business judgment. All members of the Audit Committee are independent as such term is defined under the enhanced independence standards for audit committees in the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules thereunder as incorporated into the NYSE listing standards and under the Company’s corporate governance guidelines.

Compensation & Benefits Committee:     Administers executive compensation programs, policies and practices. Advises the Board on salaries and compensation of the executive officers and makes other studies and recommendations concerning compensation and compensation policies. May delegate authority for day-to-day administration and interpretation of compensation plans to certain senior officers of the Company (other than for matters affecting executive officer compensation and benefits). For further information on this committee’s processes and procedures, see “Compensation Discussion and Analysis” on page 19 of this proxy statement. All members of the Compensation & Benefits Committee are independent within the meaning of the enhanced NYSE listing standards and the Company’s Corporate Governance Guidelines.

Governance & Nominating Committee:     Considers and recommends nominees for election as directors and officers and nominees for each Board committee. Reviews and recommends changes to director compensation. Reviews and evaluates the procedures, practices and policies of the Board and its members and leads the Board in its annual self-review. Oversees the governance of the Company, including reviewing and recommending changes to the Corporate Governance Guidelines. All members of the Governance & Nominating Committee are independent within the meaning of the NYSE listing standards and the Company’s Corporate Governance Guidelines.

Executive Committee:     Exercises limited powers of the Board when the Board is not in session.

Strategic Planning Committee:     Reviews and makes recommendations for the strategic direction of the Company. Conducts an annual strategic planning retreat for the Board of Directors and senior management.

BOARD COMMITTEE MEMBERSHIP

 

Director   Board   Audit  

Compensation &

Benefits

  Executive  

Governance &

Nominating

 

Strategic

Planning

Stuart M. Essig

  X       X           X

Richard E. Fogg

  X   X*       X       X

John W. Gerdelman

  X   X               X*

Lemuel E. Lewis

  X   X           X    

Martha H. Marsh

  X   X               X

Eddie N. Moore, Jr.

  X   X           X    

James E. Rogers

  X       X   X        

David S. Simmons

  X   X               X

Robert C. Sledd

  X       X*   X   X   X

Craig R. Smith

  X*           X*       X

Anne Marie Whittemore

  X       X   X   X*    

No. of meeting in 2013

  6   8   5   0   4   2

*Chairman

 

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DIRECTOR COMPENSATION

The Governance & Nominating Committee reviews director compensation annually, and it is the responsibility of this committee to recommend to the Board of Directors any changes in director compensation. The Board of Directors makes the final determination with respect to director compensation. The Governance & Nominating Committee has the authority under its charter to retain outside consultants or advisors to assist it in gathering information and making decisions. In 2013, based upon a review of competitive market practices, the Governance & Nomination Committee increased the annual equity retainer granted to non-employee directors from $80,000 to $90,000 and increased the cash retainer for each of the Compensation & Benefit Committee Chair and the Governance & Nominating Committee Chair by $1,000.

The Company uses a combination of cash and equity compensation to attract and retain qualified candidates to serve on its Board of Directors. In setting director compensation, the Company considers the commitment of time directors must make in performing their duties, the level of skills required by the Company of its Board members and the market competitiveness of its director compensation levels. The table below sets forth the schedule of fees paid to non-employee directors for their annual retainer and service in various capacities on Board committees and in Board leadership roles. Employee directors do not receive any additional compensation other than their normal salary for serving on the Board or any of its committees.

Schedule of Director Fees

 

Type of Fee    Cash      Equity  

Annual Retainer

   $ 30,000       $ 90,000 (1) 

Additional Retainer for Lead Director

     30,000            

Additional Retainer for Audit Committee Chair

     10,000            

Additional Retainer for Compensation & Benefits Committee Chair

     10,000            

Additional Retainer for Governance & Nominating Committee Chair

     9,000            

Additional Retainer for Other Committee Chairs

     8,000            

Board or Audit Committee Attendance Fee (per meeting)

     2,000            

Compensation & Benefits Committee Attendance Fee

     1,800            

Other Committee Attendance Fee (per meeting)

     1,500            

Board or Committee Telephone Conference (per meeting, other than Audit Committee)

     1,000            

Audit Committee Telephone Conference (per meeting)

     1,200            

Board Retreat (annual 2-day meeting)

     3,000            

(1) Restricted stock grant with one-year vesting period.

Directors may defer the receipt of all or part of their director fees under the Directors’ Deferred Compensation Plan. Amounts deferred are “invested” in bookkeeping accounts that measure earnings and losses based on the performance of a particular investment. Directors may elect to defer their fees into the following two subaccounts: (i) an account based upon the price of the Common Stock and (ii) an account based upon the current interest rate of the Company’s fixed income fund in its 401(k) plan. Subject to certain restrictions, a director may take cash distributions from a deferred fee account either prior to or following the termination of his or her service as a director.

 

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Director Compensation Table

The table below summarizes the actual compensation paid by the Company to non-employee directors during the year ended December 31, 2013.

 

(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)  
Name   Fees Earned
or Paid
in Cash
($)(1)
   

Stock

Awards
($)(1)(2)(4)

   

Option

Awards
($)(3)(4)

    Non-Equity
Incentive Plan
Compensation
($)
   

Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings
($)

    All Other
Compensation
($)
    Total
($)
 

A. Marshall Acuff. Jr. (5)

  $ 10,600      $ —            —          —          —        $ —          $ 10,600   

J. Alfred Broaddus, Jr. (5)

    9,100        —            —          —          —          —            9,100   

Stuart M. Essig

    24,100        45,000        —          —          —          —            69,100   

Richard E. Fogg

    71,600        90,000        —          —          —          —            161,600   

John W. Gerdelman

    69,600        90,000        —          —          —          —            159,600   

Lemuel E. Lewis

    64,600        90,000        —          —          —          —            154,600   

Martha H. Marsh

    61,600        90,000        —          —          —          —            151,600   

G. Gilmer Minor, III (5) (6)

    41,500        —            —          —          —          325,000        366,500   

Eddie N. Moore, Jr.

    64,600        90,000        —          —          —          —            154,600   

James E. Rogers

    82,200        90,000        —          —          —          —            172,200   

Davis S. Simmons

    22,500        45,000        —          —          —          —            67,500   

Robert C. Sledd

    70,000        90,000        —          —          —          —            160,000   

Anne Marie Whittemore

    69,000        90,000        —          —          —          —            159,000   

(1) Includes amounts deferred by the directors under the Directors’ Deferred Compensation Plan.

(2) The amounts included in the “Stock Awards” column are the aggregate grant date fair value of the awards computed in accordance with the FASB ASC Topic 718.

(3) “Option Awards” were not granted to Directors in 2013.

(4) As of December 31, 2013, each director had the following number of stock awards and option awards outstanding:

 

     Stock Awards      Option Awards  

Mr. Acuff

     —           —       

Mr. Broaddus

     —           —       

Mr. Essig

     1,203         —       

Mr. Fogg

     2,785         —       

Mr. Gerdelman

     2,785         —       

Mr. Lewis

     2,785         —       

Ms Marsh

     2,785         —       

Mr. Minor

     —           —       

Mr. Moore

     2,785         —       

Mr. Rogers

     2,785         22,500   

Mr. Simmons

     1,203         —       

Mr. Sledd

     2,785         —       

Ms. Whittemore

     2,785         —       

 

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(5) Messrs Acuff, Broaddus and Minor retired from the Board of Directors at the 2013 Annual Meeting.

(6) The Board of Directors awarded Mr. Minor an honorarium of $325,000 upon his retirement from the Board in April 2013 in recognition of his 19 years of service as Chairman of the Board and his contributions to the many successes of the Company.

Stock Ownership Guidelines for Directors

The Company maintains stock ownership guidelines for its directors which provide that each director shall attain, within five years after his or her service on the Board begins, a level of equity ownership of Common Stock having a value of at least five times the annual cash retainer fee or $150,000, whichever is higher. Each director who has served on the Board for at least five years has achieved this ownership objective.

DIRECTOR NOMINATING PROCESS

Director Candidate Recommendations and Nominations by Shareholders.     The Governance & Nominating Committee charter provides that the Governance & Nominating Committee will consider director candidate recommendations by shareholders. Shareholders should submit any such recommendations to the Governance & Nominating Committee through the method described under “Communications with the Board of Directors” below. In addition, our Bylaws provide that any shareholder of record entitled to vote for the election of directors at the applicable meeting of shareholders may nominate directors by complying with the notice procedures set forth in the Bylaws and summarized in “Shareholder Proposals” on page 50 of this proxy statement.

Process for Identifying and Evaluating Director Candidates.     The Governance & Nominating Committee evaluates all director candidates in accordance with the director qualification standards and the criteria described in our Corporate Governance Guidelines. These guidelines require the Governance & Nominating Committee on an annual basis to review and evaluate the requisite skills and characteristics of individual Board members and nominees as well as the composition of the Board as a whole. This assessment includes whether the member or candidate is independent and includes considerations of diversity, age, skills and experience in the context of the Board’s needs. The goal of the Governance & Nominating Committee is to have a Board whose membership reflects a mix of diverse skill sets, technical expertise, educational and professional backgrounds, industry experiences and public service as well as perspectives of different genders and ethnicities. The Governance & Nominating Committee reviews its annual assessment with the Board each year and, as new member candidates are sought, attempts to maintain and enhance the level of diverse backgrounds and viewpoints of directors constituting the Board. As part of the Board’s annual self-assessment process, the Board will consider the effectiveness of its overall composition and structure as well as its performance and functioning.

Our Bylaws provide that no director nominee can stand for election if, at the time of appointment or election, the nominee is over the age of 72. There are no differences in the manner in which the Governance & Nominating Committee evaluates director candidates based on whether the candidate is recommended by a shareholder. The Governance & Nominating Committee did not receive any nominations from any shareholders for the 2014 annual meeting.

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

The Board of Directors has approved a process for shareholders and other interested parties to send communications to the Board. Shareholders and other interested parties can send written communications to the Board, any committee of the Board, non-management directors as a group, the lead director or any other individual director at the following address: P.O. Box 26383, Richmond, Virginia 23260. All communications will be relayed directly to the applicable director(s).

 

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PROPOSAL 1: ELECTION OF DIRECTORS

Ten directors are nominated for election to the Board of Directors for a one-year term expiring at the 2015 Annual Meeting of Shareholders or until their respective successors are elected. Each nominee has agreed to serve if elected and qualified. If any nominee is not able to serve, the Board may designate a substitute or reduce the number of directors serving on the Board. Proxies will be voted for the nominees shown below (or if not able to serve, such substitutes as may be designated by the Board). The Board has no reason to believe that any of the nominees will be unable to serve.

Our Bylaws currently provide that the Board of Directors shall consist of 11 directors. The Governance & Nominating Committee has recommended to the Board of Directors, and the Board of Directors has approved, ten persons as nominees for election to the Board of Directors. At its meeting immediately following the Annual Meeting, the Board of Directors intends to amend the Bylaws to decrease the size of the Board of Directors from 11 to ten directors to remove the vacancy created by the departure of retiring director Mr. Fogg, which will be effective immediately following the Annual Meeting. See “Retiring Director” below. Proxies cannot be voted for a greater number of directors than the number of nominees named.

Information on each nominee, including the particular experience, qualifications, attributes or skills that led the Board to conclude that he or she should serve as a director of the Company, is set forth below.

NOMINEES FOR ELECTION

 

   

LOGO

  

Stuart M. Essig, 52, has served as Chairman of the Board of Integra LifeSciences Holdings Corporation since 2012. From 1997 to 2012, he served as Chief Executive Officer of Integra LifeSciences, during which time he transitioned the business into a global surgical products company. Prior to joining Integra LifeSciences, Mr. Essig was a managing director in mergers and acquisitions for Goldman Sachs Group, Inc. He also has been a Managing Partner since 2012 of Prettybrook Partners, a health care services and medical technology investment firm, and a Partner since 2013 in Wellington Partners, a pan-European venture capital firm. In addition to Integra LifeSciences, he also currently serves on the board of directors of St. Jude Medical, Inc. Mr. Essig was appointed to the Board of Directors in October 2013.

 

The Board of Directors has nominated Mr. Essig to continue his service as a director of the Company based on his strong background and leadership experience in the medical device manufacturing industry and broad-based knowledge of the health care industry. His insights into the medical supplies manufacturing industry, both domestic and international, bring a new perspective to Owens & Minor’s board that will assist us both logistically and strategically as we seek to manage and grow our many relationships with the manufacturing community at home and abroad.

 

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LOGO

  

John W. Gerdelman, 61, is Managing Partner of River2, an investment and consulting partnership. Mr. Gerdelman was President of Long Lines Limited, a telecommunications service provider, from 2010 to 2011. Before joining Long Lines in 2010, he co-founded Intelliden Corporation, a network solutions provider for which Mr. Gerdelman served as Executive Chairman from 2003 until it was acquired by IBM in 2010. Mr. Gerdelman has served in a number of leadership positions for other telecommunications companies, including 15 years with MCI Communications Corporation. He currently serves on the boards of directors of Brocade Communications Systems, Inc. and Sycamore Networks, Inc. and previously served on the boards of Proxim Wireless Corporation, APAC Customer Services, Inc. and McData Corporation. Mr. Gerdelman has been a director of the Company since 2010.

 

The Board of Directors has nominated Mr. Gerdelman to continue his service as a director of the Company based on his unique entrepreneurial background, extensive experience in finance and accounting and expertise in telecommunications and information systems. The Board believes the Company will benefit from Mr. Gerdelman’s business management experience and perspectives as Owens & Minor continues to expand systems and technology solutions used to support our own business operations as well as to provide customers with new products for supply chain management.

      
   

LOGO

  

Lemuel E. Lewis, 67, is President of LocalWeather.com, a web-based privately-held media company he founded in 2008. He served as Executive Vice President and Chief Financial Officer of Landmark Communications, Inc., a privately-held media and broadcasting company, from 2000 to 2006. Mr. Lewis was appointed to the Board of the Federal Reserve Bank in 2004 and served as Deputy Chairman from 2007 to 2008, Chairman of the Audit Committee from 2005 to 2008, and Chairman from 2009 until his retirement from the board on December 31, 2010. He currently serves on the boards of directors of Markel Corporation and Dollar Tree, Inc. and previously served on the board of Landmark Communications, Inc. Mr. Lewis has been a director of the Company since 2011.

 

The Board of Directors has nominated Mr. Lewis to continue his service as a director of the Company based on his breadth of experience in accounting and finance through his service as Chief Financial Officer of a private media company, as well as his service on the Board of the Federal Reserve Bank of Richmond where he chaired the Audit Committee. He also brings a wide range of differing perspectives to the Company based on his service on a number of Virginia college and foundation boards and through his membership on the boards of two other public companies, including service on their audit committees.

 

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LOGO

  

Martha H. Marsh, 65, retired in 2010 as President & Chief Executive Officer of Stanford Hospital & Clinics, a position she held since 2002. She also served as the Chief Executive Officer of the University of California Davis Health System from 1999 to 2002. After beginning her career at Arthur Andersen in 1975, she served the health care industry for more than thirty years in a variety of leadership positions, including as Senior Vice President for Professional Services and Managed Care at the University of Pennsylvania Health System. Ms. Marsh has also served on a variety of health care boards and committees. She currently serves on the board of AMN Healthcare Services, Inc. Ms. Marsh was appointed to the Board of Directors in October 2012.

 

The Board of Directors has nominated Ms. Marsh to continue her service as a director of the Company based on her extensive background in and knowledge of the health care industry and specifically the health care provider marketplace with which we conduct our business. Having served in the lead management position of some of the most prestigious health care systems in the United States, she brings unique perspectives on the requirements of and challenges faced by the health care provider industry as well as a deep understanding of the entire U.S. health care marketplace. Her broad-based background in accounting, finance, operations and management in the context of the health care industry brings a multi-disciplinary and highly relevant point of view to our Board of Directors in assessing issues and challenges within the health care marketplace.

      
   

LOGO

  

Eddie N. Moore, Jr., 66, currently serves as Interim President and Chief Executive Officer of Norfolk State University. From 2011 to 2012, he served as President of St. Paul’s College. He is President Emeritus of Virginia State University after serving as its President from 1993 to 2010. Prior to leading Virginia State University, Mr. Moore served as state treasurer for the Commonwealth of Virginia, heading the Department of the Treasury and serving on fifteen state boards and authorities. He also serves on the board of directors of Universal Corporation. Mr. Moore has been a director of the Company since 2005.

 

The Board of Directors has nominated Mr. Moore to continue his service as a director of the Company based on his strong background in accounting and finance, which qualify him to serve as an audit committee financial expert, and his leadership experience in managing prominent educational institutions. The Board believes that Mr. Moore’s experiences in the public sector bring unique perspectives and disciplines to the Board’s deliberations and decision-making processes.

      
   

LOGO

  

James E. Rogers, 68, has served as Chairman of the Board of BackOffice Associates, LLC, a private company that provides data quality, migration and governance solutions, since 2011. He served as President of SCI Investors Inc, a private equity investment firm, from 1993 until his retirement in 2011. He also serves on the board of directors of NewMarket Corporation and formerly served on the boards of Caraustar Industries, Inc., Wellman, Inc., Chesapeake Corp. and Cadmus Communications, Inc. Mr. Rogers has been a director of the Company since 1991.

 

The Board of Directors has nominated Mr. Rogers to continue his service as a director of the Company based on his leadership experience as a former chief executive officer and other senior executive positions with several public and private companies, as well as his breadth of knowledge about the Company, its culture and the health care distribution industry acquired through his 23-year tenure on the Company’s Board of Directors. In addition, Mr. Rogers has demonstrated significant leadership and communication skills in his service as the Company’s independent lead director for the more than ten years.

 

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LOGO

  

David S. Simmons, 49, has served as Chairman & Chief Executive Officer of Pharmaceutical Product Development, LLC, a global contract pharmaceutical research organization, since 2012. From 2001 to 2012, Mr. Simmons served in a variety of management positions with Pfizer, Inc., including as President and General Manager of the Emerging Markets and Established Products Business Units, Regional President of the Eastern Europe Pharmaceutical Division, President of the Pharmaceutical Division in Greece and Vice President of Marketing in Canada. Mr. Simmons was appointed to the Board of Directors in October 2013.

 

The Board of Directors has nominated Mr. Simmons to continue his service as a director of the Company based on his extensive background and experience in the global pharmaceutical business and the breadth of knowledge he brings to Owens & Minor and its international operations through his leadership positions with Pfizer in Europe and abroad. With a strong background in finance, operations and logistics in the context of the pharmaceutical industry, Mr. Simmons brings unique knowledge and perspectives to the Company, especially with respect to our third party logistics growth and globalization strategy.

      
   

LOGO

  

Robert C. Sledd, 61, served as a Senior Economic Advisor to the Governor of Virginia from 2010 until January 2014. Since 2008, he also has served as Managing Partner of Pinnacle Ventures, LLC and Sledd Properties, LLC. From 1995 to 2008, he served as Chairman of Performance Food Group Co. (“PFG”), a foodservice distribution company that he co-founded in 1987. He served as Chief Executive Officer of PFG from 1987 to 2001 and from 2004 to 2006. He also serves on the boards of directors of SCP Pool Corporation and Universal Corporation. Mr. Sledd has been a director of the Company since 2007.

 

The Board of Directors has nominated Mr. Sledd to continue his service as a director of the Company based on his expertise in economic and business development policy, as well as his experience as a former chief executive of a foodservice distribution company, including his knowledge and understanding of the specific issues and challenges faced by companies in the business of distribution and supply chain management. His experiences in founding, growing and taking public PFG allow him to contribute to the Board a breadth of perspectives and ideas on matters of corporate management, governance and strategic growth.

      
   

LOGO

  

Craig R. Smith, 62, has served as Chairman & Chief Executive Officer of Owens & Minor since his appointment as Chairman of the Board in August 2013. He served as President & Chief Executive Officer of Owens & Minor from 2005 until August 2013. Mr. Smith, who joined the Company in 1989, served as President & Chief Operating Officer of the Company from 1999 until 2005 and as Chief Operating Officer of the Company from 1995 to 1999. In 2010, he was appointed to the board of directors of the Virginia Biotechnology Research Partnership Authority. Mr. Smith has been a director of the Company since 2005.

 

The Board of Directors has nominated Mr. Smith to continue his service as a director of the Company based on his position as Chief Executive Officer of the Company and his unique ability to communicate to and inform the Board about the Company’s day-to-day operations and management issues as well as industry developments. The Board believes that Mr. Smith brings an invaluable perspective on the Company’s historical and current operations and its ongoing relationships with customers and suppliers. Mr. Smith is the only director nominee who is not independent.

 

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LOGO

  

Anne Marie Whittemore, 67, has been a partner in the law firm of McGuireWoods LLP since 1977. She also serves on the boards of directors of T. Rowe Price Group, Inc. and Albemarle Corporation, and is a former chairman of the board of the Federal Reserve Bank of Richmond, Virginia. Ms. Whittemore has been a director of the Company since 1991.

 

The Board of Directors has nominated Ms. Whittemore to continue her service as a director of the Company based on the unique background and perspectives she brings to the board as an attorney whose areas of specialty include corporate governance and complex commercial and securities litigation matters. Her experience includes representation of several Fortune 100 corporations and other companies in matters involving corporate governance and shareholder matters. Ms. Whittemore also has extensive experience as a public company director and member of both compensation and governance committees, which the Board believes contributes to her strong leadership skills as Chairman of the Company’s Governance & Nominating Committee.

The Board of Directors unanimously recommends a vote FOR the election of each nominee as director.

RETIRING DIRECTOR

Effective immediately following the Annual Meeting, the term of Mr. Fogg expires, at which time he will retire from the Board. The Company gratefully acknowledges Mr. Fogg’s 11 years of service and dedication to our Board.

 

   

LOGO

   Richard E. Fogg, 73, retired in 1997 from the accounting firm of Price Waterhouse, LLP (now PricewaterhouseCoopers LLP) where he was a partner for 23 years and served in a variety of leadership positions, including Associate Vice Chairman, Tax. Mr. Fogg is a Certified Public Accountant. Since his retirement in 1997, Mr. Fogg has provided strategic consulting services to several privately held companies. Mr. Fogg has been a director of the Company since 2003 and will retire from the Board immediately following the 2014 Annual Meeting.

PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee (with confirmation of the Board) has selected KPMG LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2014 and has directed that management submit such appointment of KPMG LLP for ratification by the shareholders at the annual meeting. Representatives of KPMG LLP will be present at the annual meeting to answer questions and to make a statement, if they desire to do so.

Under the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder, the Audit Committee is solely responsible for the appointment, compensation and oversight of the work of the Company’s independent registered public accounting firm. Shareholder ratification of this appointment is not required by the Company’s Bylaws or otherwise. If shareholders fail to ratify the appointment, the Audit Committee will take such failure into consideration in future years. If shareholders ratify the appointment, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it is determined that such a change would be in the best interests of the Company.

The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of KPMG LLP to serve as the Company’s independent registered public accounting firm for 2014.

 

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FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

For each of the years ended December 31, 2013 and 2012, KPMG LLP billed the Company the fees set forth below in connection with professional services rendered by that firm to the Company:

 

     Year 2013      Year 2012  

Audit Fees

   $ 1,605,000       $ 1,157,750   

Audit-Related Fees

     24,500         41,125   

Tax Fees

     0         0   

All Other Fees

     152,000         0   
  

 

 

    

 

 

 

Total

   $ 1,781,500       $ 1,198,875   

Audit Fees.     These were fees for professional services performed for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s 10-Q filings, Sarbanes-Oxley compliance and any services normally provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees.     These were fees primarily for the annual audits of the Company’s employee benefit plan financial statements and consultations by management related to financial accounting and reporting matters.

All Other Fees.     These were fees primarily for other non-audit related services, including internal control attestations and other accounting advisory services.

The Audit Committee has established policies and procedures for the approval and pre-approval of audit services and permitted non-audit services. The Audit Committee has the sole responsibility to engage and terminate the engagement of the Company’s independent registered public accounting firm, to pre-approve such firm’s performance of audit services and permitted non-audit services and to review with the Company’s independent registered public accounting firm its fees and plans for all auditing services. All services provided by and fees paid to KPMG LLP in 2013 were pre-approved by the Audit Committee, and there were no instances of waiver of approval requirements or guidelines during this period. The Audit Committee’s pre-approval policies and procedures for services by independent registered public accounting firms are set forth in Appendix A to this proxy statement.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee is composed of six directors, each of whom is independent under the enhanced independence standards for audit committees in the Exchange Act and the rules thereunder as incorporated into the listing standards of the NYSE and under the Company’s Corporate Governance Guidelines, and three of whom have been determined by the Board of Directors to be audit committee financial experts. The Audit Committee operates under a written charter adopted by the Board of Directors, which the Audit Committee reviews at least annually and revises as necessary to ensure compliance with current regulatory requirements and industry changes.

As its charter reflects, the Audit Committee has a broad array of duties and responsibilities. With respect to financial reporting and the financial reporting process, management, the Company’s independent registered public accounting firm and the Audit Committee have the following respective responsibilities:

Management is responsible for:

 

   

Establishing and maintaining the Company’s internal control over financial reporting;

 

   

Assessing the effectiveness of the Company’s internal control over financial reporting as of the end of each year; and

 

   

Preparation, presentation and integrity of the Company’s consolidated financial statements.

 

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The Company’s independent registered public accounting firm is responsible for:

 

   

Performing an independent audit of the Company’s consolidated financial statements and the Company’s internal control over financial reporting;

 

   

Expressing an opinion as to the conformity of the Company’s consolidated financial statements with U.S. generally accepted accounting principles; and

 

   

Expressing an opinion as to the effectiveness of the Company’s internal control over financial reporting.

The Audit Committee is responsible for:

 

   

Selecting the Company’s independent registered public accounting firm;

 

   

Overseeing and reviewing the financial statements and the accounting and financial reporting processes of the Company; and

 

   

Overseeing and reviewing management’s evaluation of the effectiveness of internal control over financial reporting.

In this context, the Audit Committee has met and held discussions with management and KPMG LLP, the Company’s independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements for the year ended December 31, 2013 were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee has reviewed and discussed these consolidated financial statements with management and KPMG LLP, including the scope of the independent registered public accounting firm’s responsibilities, critical accounting policies and practices used and significant financial reporting issues and judgments made in connection with the preparation of such financial statements.

The Audit Committee has discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standard No. 16, Communications with Audit Committees , issued by the Public Company Accounting Oversight Board (PCAOB). The Audit Committee has also received the written disclosures and the letter from KPMG LLP required by the PCAOB regarding the independence of that firm and has discussed with KPMG LLP the firm’s independence from the Company.

In addition, the Audit Committee has discussed with management its assessment of the effectiveness of internal control over financial reporting and has discussed with KPMG LLP its opinion as to the effectiveness of the Company’s internal control over financial reporting.

Based upon its discussions with management and KPMG LLP and its review of the representations of management and the report of KPMG LLP to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 for filing with the SEC.

THE AUDIT COMMITTEE

Richard E. Fogg, Chairman

John W. Gerdelman

Lemuel E. Lewis

Martha H. Marsh

Eddie N. Moore, Jr.

David S. Simmons

 

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STOCK OWNERSHIP INFORMATION

Compliance With Section 16(a) Reporting

Based solely on the Company’s records and information provided by our directors, executive officers and beneficial owners of more than 5% of the Common Stock, we believe that all reports required to be filed by our directors and executive officers under Section 16(a) of the Exchange Act were filed on a timely basis during 2013 except that, due to an inadvertent broker error, a sale of seven shares of Common Stock managed for Brian J. Shotto, Senior Vice President, Manufacturer Services, occurred in April 2013 that was reported late on a Form 5 filed on February 12, 2014.

Stock Ownership by Management and the Board of Directors

The following table shows, as of March 6, 2014, the number of shares of Common Stock beneficially owned by each director and nominee, our NEOs and all current directors and executive officers of the Company as a group.

 

Name of
Beneficial Owner
   Sole Voting and Investment
Power (1)
     Other (2)      Aggregate
Percentage
Owned
 

Stuart M. Essig

     1,203         0         *   

Richard E. Fogg

     44,323         0         *   

John W. Gerdelman

     10,453         0         *   

Lemuel E. Lewis

     14,255         0         *   

Martha H. Marsh

     4,172         0         *   

Eddie N. Moore, Jr.

     14,115         0         *   

James E. Rogers

     65,063         0         *   

Robert C. Sledd

     17,096         0         *   

Anne Marie Whittemore

     63,023         0         *   

David S. Simmons

     1,203         0         *   

Craig R. Smith

     305,712         0         *   

James L. Bierman

     79,520         0         *   

Richard A. Meier

     38,066         0         *   

Erika T. Davis

     75,983         0         *   

Brian J. Shotto

     20,812         0         *   

D. Andrew Edwards

     0         0         *   

Michael L. Lowry

     6,337         0         *   

All Executive Officers and Directors as a group (22 persons)

    
953,816
  
     19,424         1.54

* Represents less than 1% of the total number of shares outstanding.

(1) Includes 15,000 shares which certain directors of the Company have the right to acquire through the exercise of stock options within 60 days following March 6, 2014.

(2) Includes: (a) shares held by certain relatives or in estates; (b) shares held in various fiduciary capacities; and (c) shares for which the shareholder has shared power to dispose or to direct disposition. These shares may be deemed to be beneficially owned under the rules and regulations of the SEC, but the inclusion of such shares in the table does not constitute an admission of beneficial ownership.

 

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Stock Ownership by Certain Shareholders

The following table shows, as of March 6, 2014, any person (including any “group” as that term in used in Section 13(d)(3) of the Exchange Act) who, to our knowledge, was the beneficial owner of more than 5% of the Common Stock.

 

Name and Address of Beneficial Owner    Shares Beneficially Owned     Percentage Owned  

BlackRock, Inc.

40 East 52nd Street, New York, NY 10022

     5,956,312 (1)       9.43

FMR LLC

245 Summer Street, Boston, MA 02210

     3,400,077 (2)       5.38

Kayne Anderson Rudnick Investment Management, LLC

1800 Avenue of the Stars, 2 nd Floor

Los Angeles, CA 90067

     3,371,761 (3)       5.34

River Road Asset Management, LLC

462 South Fourth Street, Suite 1600

Louisville, KY 40207

     4,137,226 (4)       6.55

Vanguard Group, Inc.

100 Vanguard Blvd., Malvern, PA 19355

     4,117,484 (5)       6.52

(1) Based upon a Schedule 13G report or amendment filed by BlackRock, Inc. with the SEC on January 30, 2014.

(2) Based upon a Schedule 13G report or amendment filed by FMR LLC with the SEC on February 13, 2014.

(3) Based upon a Schedule 13G report or amendment filed by Kayne Anderson Rudnick Investment Management, LLC with the SEC on January 13, 2014.

(4) Based upon a Schedule 13G report or amendment filed by River Road Asset Management, LLC with the SEC on February 12, 2014.

(5) Based upon a Schedule 13G report or amendment filed by Vanguard Group, Inc. with the SEC on February 12, 2014.

Equity Compensation Plan Information

The following table shows, as of December 31, 2013, information with respect to compensation plans under which shares of Common Stock are authorized for issuance.

 

Plan Category   

(a)

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

    

(b)

Weighted-average exercise
price of outstanding options,
warrants and rights

    

(c)

Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities reflected
in column (a))

 

Equity compensation plans approved by shareholders (1)

     64,000       $ 23.33         2,000,000   

Equity compensation plans not approved by shareholders (2)

     —             —            —         

Total

     64,000       $ 23.33         2,000,000   

 

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(1) These equity compensation plans are the 2003 Directors’ Compensation Plan and 2005 Stock Incentive Plan. No additional awards may be made under the 2003 Directors’ Compensation Plan. However, shares may be issued under such plan upon the exercise of options that remain outstanding under such plans.

(2) The Company does not have any equity compensation plans that have not been approved by shareholders.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy and program, the compensation decisions made by the Compensation & Benefits Committee under this program and the considerations that went into the making of these decisions in light of the Company’s performance in 2013.

Our fiscal year 2013 NEOs are:

 

Craig R. Smith    Chairman & Chief Executive Officer
James L. Bierman    President & Chief Operating Officer
Richard A. Meier    Executive Vice President & Chief Financial Officer
Erika T. Davis    Senior Vice President, Administration & Operations
Brian J. Shotto    Senior Vice President, Manufacturer Services
D. Andrew Edwards*    Former Vice President, Controller and Acting Chief Financial Officer
Michael W. Lowry*    Vice President, Controller and Former Interim Chief Financial Officer

*Mr. Edwards served as Acting Chief Financial Officer in 2013 until he left the Company on February 7, 2013. Mr. Lowry served as Interim Chief Financial Officer from February 8–28, 2013 until Mr. Meier assumed the Chief Financial Officer position on March 1, 2013.

 

 

 

Executive Summary

2013 Performance Highlights

2013 was a year of continued challenges and slow recovery in the health care services industry. Health care providers experienced lower utilization, reduced reimbursement rates, and uncertainty around the impact of implementation of the Patient Protection and Affordable Care Act. Additionally, we faced intense pricing and competitive pressures in the medical/surgical supply distribution and third-party logistics markets. Despite these challenges, we made significant progress in renewing strategic customer relationships, integrating our Movianto acquisition, and improving our logistics infrastructure during 2013. Highlights of 2013 performance include:

 

   

Renewal of Customer Relationships . During 2013, we renewed many of our long-standing and strategic GPO and customer relationships, including signing or extending contracts with MedAssets, HealthTrust Purchasing Group, two of our large group purchasing organization customers, and their member providers.

 

   

Integration of Movianto . We acquired Movianto in August 2012 in order to establish a European platform and extend our global reach with new capabilities to serve our health care manufacturer customers. During 2013, we focused heavily on the integration of Movianto, making key management changes and implementing a new centralization strategy to drive consistency of processes and services throughout Movianto’s network. We succeeded in moving Movianto from a loss position at the time of acquisition to one of profitability and increased growth.

 

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Improved Logistics Infrastructure . We continued initiatives to optimize our network of distribution facilities through closure of small, less efficient distribution centers and opening and undertaking plans to open larger regional distribution centers with capabilities to provide a broader range of services to both our provider and manufacturer customers.

 

   

Total Shareholder Return . The per share closing price of Owens & Minor, Inc. Common Stock increased from $28.51 on December 31, 2012 to $36.56 on December 31, 2013, and when including the impact of dividend reinvestments, represents a total shareholder return of 32% for 2013.

Despite significant accomplishments in 2013, our financial results were below targeted levels for the year under our annual incentive program, and as a result, we did not pay bonuses to our NEOs for 2013 performance. In addition, we did not achieve our two-year performance target for performance shares issued in 2012 and, consequently, did not pay out any shares for the 2012-2013 performance cycle.

Owens & Minor’s Compensation Philosophy and Goals

The fundamental principle underlying Owens & Minor’s executive compensation program is that we pay for performance and achievement of results. Our goal is to encourage sustained high Company and individual performance within a framework that allows us to attract, retain and motivate management. Components of our executive compensation program are designed to create the appropriate balance between short- and long-term incentives, to weigh cost against expected benefit and to align with shareholder value while promoting executive retention. These components include:

 

   

Annual incentives to drive critical business goals for each year.

 

   

Restricted stock and performance share grants to retain management and focus executives on longer-term financial performance and execution of our strategic plan.

 

   

Reasonable but competitive base salaries so executives are not motivated to take excessive risks.

 

   

Retirement, severance and other benefits to attract executive talent and encourage retention.

We believe that our executive compensation program, structured to reward performance and create long-term shareholder value, has played a significant role in effectively motivating and rewarding management to meet the challenges of our business and produce our many successes. Additionally, we believe the program effectively aligns pay and performance as demonstrated by the non-payment of incentive payouts in 2013 based on company results. Further discussion and disclosure of the Company’s compensation policies and practices are included in the pages following this Executive Summary.

 

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Summary of 2013 Pay Structure

 

LOGO

 

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Executive Compensation Practices

Our compensation program and practices are designed to meet compensation best practices and to drive performance that creates long-term shareholder value.

WHAT WE DO

 

 

þ        Pay for Performance.     We link pay to performance. A significant portion of our executives’ potential total annual compensation, both cash and equity, is based on the achievement of objective, simple and transparent financial measures that are structured to enhance short-term and long-term performance.

 

þ        Performance-Based Equity Awards .    One-half of our annual equity award grants are performance shares with multi-year performance requirements and an additional year of restricted vesting on earned shares.

 

þ        Recoupment Policy .    We have in place a recoupment policy to recover from our executives compensation paid under circumstances involving restatement of our financial statements due to misconduct.

 

þ        Share Ownership Guidelines .    Our Management Equity Ownership Program establishes stock ownership guidelines and provides incentives for achieving and maintaining the requisite levels of stock ownership. All of our NEOs exceed these ownership guidelines.

 

þ        Limited Perquisites .    We tie perquisites to a legitimate business purpose and limit the value provided to executive officers.

 

þ        Double-Triggered Change in Control Provisions .    Equity vesting and severance payments and benefits based on a change in control require termination of employment following the change in control.

 

þ        Risk Mitigation .    We mitigate risks associated with compensation by establishing caps on incentive compensation, multiple performance targets for earning incentive compensation and ongoing processes to identify and manage risk. We do not believe our compensation program creates risks that are reasonably likely to have a material adverse impact on the Company, which we confirm annually through a risk assessment of incentive-based compensation.

 

þ        Independent Compensation Consulting Firm .    The Compensation & Benefits Committee receives advice about its programs and practices from an independent consulting firm that provides no other services to the Company and has no conflicts of interest with respect to its work.

WHAT WE DON’T DO

 

 

x        No Employment Agreements .    We do not have employment agreements with any of our NEOs.

 

x        No Hedgin g.    We prohibit our executive officers and directors from hedging against the economic ownership of Company stock.

 

x        No Pledging .    We strongly discourage our executive officers from pledging Company stock, and none of our NEOs currently has any such stock pledged.

 

x        No Re-pricing of Equity Awards .    Our stock plans to do not permit the re-pricing of equity awards.

 

x        No Tax Gross-Ups .    We do not provide any tax gross-ups, including excise tax gross-ups on change in control severance payments and benefits.

 

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Say-On-Pay Vote

In April 2013, our shareholders overwhelmingly approved the compensation of our NEOs for 2012 in our say-on-pay advisory vote with 99% of votes cast in support of the program. In light of this support, the Compensation & Benefits Committee made no material changes to the general structure and philosophy behind our executive compensation program in 2013. At the 2014 annual meeting, our shareholders will again hold an advisory vote to approve executive compensation for 2013. The Compensation & Benefits Committee will continue to consider results from this year’s and future advisory votes on executive compensation.

 

 

 

The Process for Setting Executive Compensation

The Company’s executive compensation levels and programs are established, approved and administered by the Compensation & Benefits Committee of the Board of Directors, which is currently composed of four independent directors. The Compensation & Benefits Committee solicits the views of its outside consulting firm and senior management on incentive compensation and plan design issues. In addition, the Compensation & Benefits Committee evaluates the performance of our Chief Executive Officer on an annual basis jointly with the Governance & Nominating Committee, and the Chief Executive Officer provides performance evaluations of our other executive officers and recommendations as to their compensation levels.

Independent Advisor .    The Compensation & Benefits Committee has the authority under its charter to retain independent consultants or advisors to assist it in gathering information and making decisions. Management may not engage any independent advisor retained by the Compensation & Benefits Committee to perform services without the prior approval of the committee, and no such engagement by management was undertaken in 2013. The Compensation & Benefits Committee also obtains information and assistance from the Company’s Human Resources Department in evaluating and making decisions on executive compensation.

The Compensation & Benefits Committee engaged Semler Brossy Consulting Group, LLC (“Semler Brossy”) in 2013 as its independent advisor to (1) analyze competitive levels of each element of compensation and total compensation for each of the NEOs relative to our peer group and industry trends, (2) provide information regarding executive compensation trends and regulatory changes and developments and (3) provide input on annual and long-term incentive design. The Compensation & Benefits Committee has analyzed whether the work of Semler Brossy has raised any conflict of interest and has concluded that the work of our advisor, including the individuals employed by our advisor who provide consulting services to the committee, has not created any conflict of interest.

Factors Used to Determine Executive Compensation .    Consistent with past years, the Compensation & Benefits Committee considered a variety of factors in making decisions regarding compensation for our NEOs in 2013. The primary factors were as follows:

Performance.     Our policy is to provide executive officers with compensation opportunities that are based upon Company performance, their individual performance and their contribution to Company performance.

Mix of Short-Term and Long-Term Compensation.     Because the successful operation of our business requires a long-term approach, one element of our executive compensation program is long-term compensation. Although we have never had specific policies on the percentage of total compensation that should be short-term versus long-term, we considered this relationship in determining the overall balance and reasonableness of our executives’ total direct compensation packages. We believe that short-term compensation is necessary in conjunction with long-term compensation to provide remuneration for performance of the short-term goals or milestones that ultimately lead to achievement of our long-term objectives and strategic initiatives.

Mix of Performance-Based Compensation.     To create a strong link between pay and performance, a significant portion of compensation is based on the achievement of objective financial measures. We have no

 

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specific policies on the percentage of total compensation that should be “performance-based,” but consider this relationship in determining the overall balance and reasonableness of the executives’ total direct compensation packages.

Impact and Mix of Cash vs. Non-Cash Compensation.     We consider both the cost and the motivational value of the various components of compensation. Although we have no specific policies on the percentage of total compensation that should be “cash versus equity,” we consider this relationship in determining the overall balance and reasonableness of the executives’ total direct compensation packages.

Peer Group Comparisons.     Each year, we evaluate our compensation levels and programs through comparisons to available information for a group of peer companies selected by the committee (“Peer Companies”) based in part on recommendations from and analyses prepared by our compensation advisors. This evaluation helps us to assess whether our level and mix of executive pay is competitive and reasonable when compared to certain industry standards.

Since 2008, we have used a peer group of 13 companies for compensation comparisons. For 2013, we used a peer group of 12 companies (PSS World Medical was removed due to its acquisition by McKesson Corporation in 2012). The Peer Companies were selected because they are in health care distribution or other distribution industries and have revenue, net income, total assets and/or market capitalization (the “Size Indicators”) that align reasonably closely with those of the Company. The peer group also includes MeadWestvaco Corporation, a Richmond, Virginia-based company with which we believe the Company competes geographically for executive talent. These Peer Companies are as follows:

 

2013 Peer Companies

C.H. Robinson Worldwide, Inc.

   Patterson Companies, Inc.

Con-Way, Inc.

   Thermo Fisher Scientific Inc.

Genuine Parts Company

   United Natural Foods, Inc.

Henry Schein, Inc.

   United Stationers Inc.

JB Hunt Transport Services, Inc.

   W.W. Grainger, Inc.

MeadWestvaco Corporation

  

Nash Finch Company

  

Relative to the Size Indicators of the Peer Companies, the Company ranks between the 25 th percentile and median of the peer group. Using the Peer Companies, Semler Brossy analyzed the compensation components and levels as reported for the named executive officer positions of the Peer Companies and prepared a comparison of 2013 target total direct compensation and each element thereof to reported information for the Peer Companies. Based on this analysis, the Compensation & Benefits Committee determined that it is appropriate to target total compensation for our NEOs up to the median relative to the Peer Companies and to pay above or below the target level based on actual performance. The target total direct compensation (sum of base salaries, annual incentive opportunities and equity awards) for all NEOs is below median relative to the Peer Companies, generally due to lower levels of equity awards.

Tally Sheets.     We also review total compensation levels for executive officers at least annually through the use of tally sheets that quantify each element of direct and indirect compensation provided to individual executives and the portion of the executive’s total compensation represented by each element of compensation. This annual review of tally sheets also includes information on the value of executives’ unexercised stock options and outstanding stock awards as well as an evaluation of the payments and benefits that would be paid to executive officers in the event of termination of employment, including retirement or following a change in control of the Company. While providing additional context to us in making compensation decisions, the information from the tally sheets regarding unexercised stock options, outstanding stock awards and termination payments and benefits generally does not affect our compensation decisions for the NEOs. This reflects our view that an executive’s compensation level should be based on the Company’s performance, the executive’s performance and the executive’s contribution to the Company’s performance.

 

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Total Program Cost.     We consider the cost (including aggregate share usage and dilution) of the various components of our compensation program in evaluating the overall balance and reasonableness of our executives’ total direct compensation packages.

Risk Considerations.     In setting executive compensation, the Compensation & Benefits Committee reviews the various components of our program to consider whether they are appropriately structured to promote the achievement of our business goals without encouraging the taking of unnecessary risks. We believe that several elements of our program mitigate risks associated with performance-based compensation, including the following:

 

   

Limits on Incentive Compensation . Awards under our annual incentive program are capped at 200% of the executive’s target award to protect against excessive short-term incentives, and the Compensation & Benefits Committee has discretion to reduce awards based on factors it deems appropriate, including whether officers took unnecessary risks.

 

   

Performance Metrics . We use a combination of performance metrics (net revenues, income from continuing operations and return on average assets) for our annual incentive program that emphasizes profitable and disciplined growth and requires responsible and risk-based decision-making by our executives.

 

   

Performance Shares/Long-Term Equity Awards . Approximately one-half of an executive’s equity compensation each year consists of performance shares with a two-year performance cycle and an additional year of service-based vesting, which focuses management on sustaining the Company’s longer-term performance. The other half of an executive’s equity compensation each year consists of restricted stock awards and vest over a period of at least three years and, accordingly, further encourages a focus on long-term performance.

 

   

Share Ownership Guidelines . Our share ownership guidelines ensure that our executives have a significant amount of their personal wealth tied to long-term holdings in Owens & Minor stock.

 

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Elements of Compensation

In an effort to achieve the objectives identified above, our executive compensation framework consists of the following elements as further described below:

 

Element    Description    Purpose
Base Salary    Fixed cash    Provides a fixed amount of cash compensation to allow us to recruit and retain key talent
   
Annual Incentives    Cash awarded annually for performance against revenue, income and return on average assets goals    To motivate executive officers’ performance in achieving our current-year business goals
     
Long-Term Incentives   

Performance shares and restricted stock

 

•    Restricted stock vests 3 years from date of grant

 

•    Performance shares are earned if the Company achieves goals on consolidated operating earnings, domestic operating earnings, and international return on invested capital. Performance is measured over a 2-year period and, if earned, shares vest at the end of 3 years

   Rewards performance that enhances shareholder value through the use of equity-based awards that link compensation to the value of our Common Stock and the achievement of multi-year performance goals; strengthens the alignment of management and shareholder interests by creating meaningful levels of Company stock ownership by management
   
Deferred Compensation Plan    Officers may defer salary and cash bonuses into a plan that provides for investment options similar to the Company’s 401(k) plan    Provides a tax efficient opportunity to save for retirement and to ensure that our executive compensation program remains competitive in the marketplace for key executive talent
     
Retirement/Post-Termination Compensation    Participation in Company’s 401(k) plan and matching contributions similar to other teammates. SERP (frozen as of March 2012)    Provides security for the future needs of the executives and their families

We believe that the elements of our executive compensation framework support short-term and long-term performance goals by providing our executive officers with an appropriate mix of compensation elements that include (1) fixed annual compensation, (2) target-based annual and long-term incentive compensation and (3) security for the future needs of the executives and their families in the form of retirement and termination benefits.

 

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Base Salary

All of our executive officers are employed on an “at will” basis, and there are no employment agreements. We review base salaries each April.

In making base salary decisions in April 2013, the Compensation & Benefits Committee considered:

(1) Individual attributes of each named executive officer (such as responsibilities, skills, leadership and experience),

(2) Individual and overall Company performance levels,

(3) The officer’s expected future contributions to the Company, and

(4) Overall market-competitiveness of the officer’s base salary.

We also considered that the targeted average percentage salary increase for non-executive Company teammates was approximately 2.0% in 2013. In addition, we reviewed competitive comparisons prepared by Semler Brossy indicating that our base salary levels were generally above median versus the Peer Companies even though target total direct compensation was below the median. Based on the factors above, we gave each of the NEOs a merit increase in base salary of 2.0%. We believed that these relatively modest increases in salary levels reflect the performance of each of the officers balanced against economic conditions, average salary increases being received by other Company teammates and the Company’s above-median base salary levels relative to the Peer Companies. In addition, each of Mr. Bierman, Ms. Davis, Mr. Shotto and Mr. Lowry received an increase in base salary in 2013 as reflected in the table below due to promotions into positions with greater responsibilities and the assumption of additional roles within the Company.

 

  Name    2013 Base Salary
Amount
     2013 Base Salary
Increase Percentage
    Reason for Increase
       

  Craig R. Smith

     905,084         2   Merit
       

  James L. Bierman (1)

     700,000         16   Merit and promotion to President & Chief Operating Officer
       

  Randy Meier (2)

     575,000         Not applicable      Not applicable; employed as Chief Financial Officer on 3/1/13
       

  Erika T. Davis (3)

     495,000         22   Merit and promotion to SVP, Administration & Operations
       

  Brian J. Shotto (4)

     495,000         8   Merit and promotion to SVP, Manufacturer Services
       

  D. Andrew Edwards (5)

     273,191         Not applicable      Mr. Edwards left the Company prior to merit increases in 2013
       

  Michael L. Lowry (6)

     230,000         11   Merit and promotion to Corporate Controller

(1) Mr. Bierman received a 2% merit increase and an additional 2% increase for the assumption of additional responsibilities associated with his role as Chief Operating Officer, effective April 2013. He received an additional 12% increase effective August 1, 2013 when he was promoted to President & Chief Operating Officer.

(2) Mr. Meier was employed as the Company’s Chief Financial Officer on March 1, 2013 and, accordingly, received no merit increase in 2013.

 

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(3) Ms. Davis received a 2% merit increase effective April 2013 and an additional 20% increase effective August 1, 2013 when she was promoted to Senior Vice President, Administration & Operations.

(4) Mr. Shotto received a 2% merit increase effective April 2013 and an additional 6% increase effective August 1, 2013 when he was promoted to Senior Vice President, Manufacturer Services.

(5) Mr. Edwards’ base salary amount is his 2012 base salary. He left the Company in February 2013 prior to 2013 merit increases.

(6) Mr. Lowry’s base salary is reflective of his position as Operating Vice President, Controller. He received additional base salary compensation of $20,000 for the period he served as Interim Chief Financial Officer in February 2013. Mr. Lowry received a 2% merit increase effective April 2013 and an additional 9% increase effective April 23, 2013 when he was promoted to Corporate Controller.

Annual Incentives

We provide annual incentive opportunities to executive officers to motivate their performance in achieving our current-year business goals. Each year, we establish a business plan for the forthcoming year that includes financial, strategic and other goals for the Company and that is approved by the Board of Directors. Annual incentive goals for the executive officers are set based on the approved business plan (the “Annual Incentive Plan”). These goals are weighted to reflect their relative importance and contribution to overall Company performance.

For the 2013 Annual Incentive Plan and consistent with past years, the Compensation & Benefits Committee set target annual incentive opportunities at 75% of base salary for the Chief Executive Officer and 50% of base salary for each of the other NEOs (35% for Mr. Lowry), subject to the achievement of the Company’s target performance goals. The Chief Executive Officer has a higher Target Payout Amount than the other NEOs, reflecting the broader scope of his responsibilities and authority and his greater ability to impact the Company’s performance.

The three performance metrics (“Performance Metrics”) established for determining the Target Payout Amount that could be paid were:

 

   

Company Net Revenue

 

   

Company Income from Continuing Operations

 

   

Company Return on Average Assets.

The Compensation & Benefits Committee selected, and the Board of Directors approved, the Performance Metrics, the weights assigned to them and the target achievement levels in December 2012 based on discussions with and recommendations by senior management, the approved business plan for 2013 and the growth and operational improvements called for in our strategic plan. The specific Performance Metrics were selected because income from continuing operations and revenue growth, together with effective asset management, are the most critical performance areas for the Company and key indicators of successful growth and management. They also constitute simple, objective and transparent criteria by which to measure performance. The Compensation & Benefits Committee’s goal in setting the target achievement levels was to provide management with challenging yet reasonably achievable goals that would lead the Company to meeting its 2013 business plan and position us to ultimately achieve the growth and improvement targets in our strategic plan without encouraging excessive risk-taking behavior. We believe that the use of three different performance metrics that reward revenue growth but emphasize profitable growth with effective asset management provides a balanced assessment of performance. In addition, the Compensation & Benefits Committee retains authority to reduce or eliminate incentive compensation, which allows us to monitor and respond to any behavior that we believe could be detrimental to the Company.

 

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The achievement levels for the Performance Metrics were structured to provide for a Target Payout Amount as well as a maximum of two times the Target Payout Amount. No amount would be payable in respect of any Performance Metrics for achievement below the Target Payout Amount or if the Company did not achieve a minimum of $2.00 diluted earnings per share from continuing operations for 2013.

The table below sets forth (i) the three Performance Metrics, their respective weightings, achievement levels at target and maximum as well as actual results in 2013 for each Performance Metric and (ii) the Diluted EPS qualifier and actual achievement level required for the payment of any incentive compensation.

2013 Performance Metric Achievement Levels and Actual Results

 

Performance Metrics    Weighting   

Target (1)

100%

    

Maximum (1)

200%

     2013
Actual Results
    

2013

Actual

Achievement

Company Net Revenue

($ thousands)

   25%    $ 9,405,581       $ 9,905,941       $ 9,071,532       0%

Company Income

from Continuing Operations (2)

($ thousands)

   50%    $ 125,778       $ 138,287       $ 119,738       0%

Company Return on Average Assets

   25%      5.5%           6.0%           5.16%       0%

Diluted EPS Qualifier for Receipt of Any Incentive Compensation Payout

   N/A    $ 2.00       $ 2.00       $ 1.90       No

(1) For achievement levels above the target amount but below maximum, payout amounts would be calculated based on a straight-line interpolation of the achievement level above target.

(2) For purposes of the 2013 Annual Incentive Plan, actual results exclude: acquisition-related and exit and realignment charges of $12.44 million ($8.86 million, net of tax) primarily associated with our acquisition of Movianto and the consolidation and closure of distribution and logistics centers in the United States and Europe to optimize operations.

Because the Company did not achieve any of the Performance Metrics at the target level or above and achieved diluted earnings per share from continuing operations of $1.76 in 2013 (or $1.90 per share, as adjusted to exclude certain expense and income items), no annual incentives were paid to the NEOs for 2013 performance.

Long-Term Incentives

The Company’s long-term incentive program is focused on rewarding performance that

 

   

enhances shareholder value through the use of equity-based awards that link compensation to the value of our Common Stock and achievement of multi-year performance goals, and

 

   

strengthens the alignment of management and shareholder interests by creating meaningful levels of Company stock ownership by management.

Our long-term incentive program had two components in 2013: (1) annual equity awards and (2) the Management Equity Ownership Program (“MEOP”).

When making 2013 long-term incentive equity award determinations, the Compensation & Benefits Committee focused on the Company’s longer-term financial performance and balanced the need to align the NEO’s financial interests with those of shareholders against considerations regarding the affordability of equity

 

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grants, including aggregate share usage, dilution and accounting costs. We have historically been conservative and below median relative to the Peer Companies in granting equity awards under our long-term incentive program to minimize share usage, dilution and accounting costs.

Pursuant to the Company’s long-term incentive program, the NEOs received long-term incentive awards in 2013 having the following grant date fair values:

 

       2013 Long-Term Incentive Awards (1)  
Name    Performance
Shares
(2)
     Restricted
Stock
(3)
    

MEOP
Performance Shares/

Restricted
Stock
(4)

     Total  

Mr. Smith

   $ 400,011       $ 400,011       $ 186,139       $ 986,161   

Mr. Bierman

     249,992         465,021         128,042         843,055   

Mr. Meier (5)

     299,993         799,982         0         1,099,975   

Ms. Davis

     162,508         297,530         30,120         490,158   

Mr. Shotto

     162,508         297,530         14,264         474,302   

Mr. Edwards (6)

     0         0         0         0   

Mr. Lowry (7)

     0         39,994         9,183         49,177   

(1) The amounts shown are the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718 and, in the case of performance shares, are based on probable achievement at target levels.

(2) These performance shares require achievement by the Company of specific financial metrics (discussed below) for fiscal years 2013 and 2014 as a condition to issuance of the underlying restricted stock (which, if earned, would vest on the third anniversary of the performance share award).

(3) These shares of restricted stock vest three years from the date of grant based on the executive’s continued employment with the Company. Of the restricted stock awards to Mr. Bierman, $215,029 was awarded in connection with his promotion in August 2013. Of the restricted stock awards to each of Ms. Davis and Mr. Shotto, $135,022 was awarded in connection with their promotions in August 2013.

(4) These awards were granted in January 2013 and were based on the officers’ achievement of their respective 2012 target ownership amounts under the MEOP as of December 31, 2012. Each officer, except Mr. Bierman and Mr. Shotto, received his or her award in additional performance shares (described in (3) above). Awards to Mr. Bierman and Mr. Shotto were paid in shares of restricted stock that vest five years from the date of grant. See discussion of our MEOP on page 32 of this proxy statement.

(5) Mr. Meier’s restricted stock awards consisted of $499,989 in connection with his employment by the Company on March 1, 2013 and $299,993 as his annual grant. He was not eligible for a MEOP award grant in 2013.

(6) Mr. Edwards left the Company’s employment in February 2013 and, accordingly, did not receive any long-term incentive awards for 2013.

(7) Mr. Lowry received restricted stock and MEOP restricted stock awards based on his position as Operating Vice President, Controller and not in connection with his service as Interim Chief Financial Officer during February 2013.

 

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Annual Equity Awards.     Our shareholder-approved 2005 Stock Incentive Plan permits us to award grants of non-qualified stock options, incentive stock options, stock awards, performance share awards and stock appreciation rights. Except in instances of initial executive hiring, job promotions and similar circumstances, we grant equity awards to executive officers one time each year. The Compensation & Benefits Committee’s decision to grant equity-based awards (other than the restricted stock and performance share grants made in connection with the MEOP) is discretionary and largely determined by the Company’s longer-term financial performance, strategic accomplishments and individual contributions. Equity award decisions may also be based upon outstanding individual performance, expected future performance, job promotions and the assumption of greater responsibility within the Company. We strive to maintain an appropriate balance between the aggregate number of shares used for equity grants (relative to the competitive landscape) and shareholder interests.

In 2013, the Compensation & Benefits Committee granted equity awards to the NEOs consisting of 50% service-based restricted stock that vests three years from the date of grant and 50% performance shares, which are earned only if the Company achieves specified financial metrics for calendar years 2013 and 2014. If performance requirements are met, the performance shares are paid in the form of restricted stock that vests on the third anniversary of the performance share award. If performance requirements are not met, the award is forfeited.

Prior to 2013, performance share grants were based on achievement of a single operating earnings metric. In 2013, we established three separate and weighted metrics for the performance share grant to include consolidated operating earnings, domestic operating earnings and international average return on invested capital. While maintaining the overall operating earnings metric to reflect total Company performance, we established a domestic operating earnings metric to focus officers on profitably growing our domestic business and an international return on invested capital metric to emphasize the importance of successfully integrating the Movianto acquisition. The table below shows the metrics, weights and performance levels established for the 2013 performance share awards.

2013 Performance Share Achievement Metrics

 

Performance Metric (1)    Weight    

Maximum

200%

   

Target

100%

   

Minimum

>0%

 

Growth in Consolidated Operating Earnings

     50   $ 40,000,000      $ 20,000,000        >0   

Growth in Domestic Operating Earnings

     30   $ 24,000,000      $ 9,000,000        >0   

International Average Return on Invested Capital

     20     4.7     2.7     0.7

 

(1) For achievement levels above the minimum amount but below target, or above target but below the maximum, share payout amounts would be calculated based on a straight line interpolation of the achievement level above minimum or target. There is no payout for achievement below minimum.

 

(2) The metrics are measured over the 2013 and 2014 calendar years relative to 2012 actual performance, and based on the applicable weights and achievement levels, if met, will result in the issuance of restricted stock to each officer.

Because the performance metric for the performance shares awarded in 2013 has a two-year performance period, no restricted shares would be issued until after December 31, 2014 and only if one or more of the metrics are achieved at the minimum level or above. No restricted shares were issued in respect of performance shares awarded in 2012 due to non-achievement of requisite operating earnings growth for 2012 and 2013; the Company was required to achieve a threshold level of operating earnings of $232 million in 2013 in order for executives to receive a restricted share award, and the actual operating earnings achieved for 2013 was $210.5 million (adjusted for acquisition-related and exit and re-alignment charges).

 

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Management Equity Ownership Program & Ownership Guidelines.  In addition to the equity awards discussed above, each NEO was eligible in 2013 to earn an additional award of restricted stock or performance shares by achieving requisite stock ownership levels under the Company’s MEOP. The MEOP is intended to further strengthen the alignment of management and shareholder interests. The MEOP target ownership levels for 2013 were as follows:

 

                    Officer                     

   Value of Common Stock  

Chief Executive Officer

     4.0 x Base Salary   

President

     3.0 x Base Salary   

Executive Vice Presidents

     2.0 x Base Salary   

Senior Vice Presidents

     1.5 x Base Salary   

Vice Presidents, Regional Vice Presidents

     1.0 x Base Salary   

The Chief Executive Officer’s higher ownership target reflects the larger portion of his total compensation represented by long-term incentive award value. Eligible holdings in meeting these targets include direct holdings, indirect holdings, shares held through Company plans such as the 401(k) plan and teammate stock purchase plan, and restricted stock holdings (but excluding stock options).

Under the MEOP, participants are given approximately five years to reach the full target ownership amount with interim targets to meet each year. As of December 31, 2013, each named executive officer had achieved his or her applicable target ownership amount. Because of the success of the MEOP in increasing and maintaining meaningful stock ownership levels among management, the Company has not imposed any further stock retention requirements on its executive officers in connection with stock option exercises or vesting of restricted stock.

Provided the applicable interim ownership targets are achieved, a 10% annual equity ownership dividend is paid on all Common Stock owned up to the participant’s full target ownership amount. The dividend is paid in the form of restricted stock that vests five years from the date of grant if the desired ownership level is maintained and the executive remains in the Company’s employ. Once a participant reaches his or her total target level of ownership, the annual equity ownership dividend is reduced from 10% to 5% and is paid in performance shares rather than shares of service-based restricted stock. This feature of the plan is intended to reward executives for maintaining the requisite levels of stock ownership but also to further link their compensation to performance results.

Effective for 2014, the Compensation & Benefits Committee has determined to continue the Common Stock ownership guidelines of the MEOP, to increase Mr. Smith’s target ownership level from 4.0X base salary to 6.0X base salary and to discontinue future payment of MEOP dividends to our executives. Instead, the committee will take prior MEOP dividend amounts into consideration in establishing long-term incentive grant guidelines for the executive officers.

Retirement/Post-Termination Compensation

Retirement Compensation

The Company believes that retirement compensation is an essential component of an overall market competitive total executive compensation package in that it provides security for the future needs of the executives and their families. The NEOs are entitled to participate in the Company’s 401(k) plan and receive Company matching contributions in the same manner as other Company teammates.

The Company provides supplemental retirement benefits under a Supplemental Executive Retirement Plan (the “SERP”) for certain officers selected by the Compensation & Benefits Committee, including certain of the NEOs, as further described on page 42 of this proxy statement under “Retirement Plans—Supplemental

 

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Executive Retirement Plan.” At the time of its implementation in 1991, the SERP was designed to be competitive relative to defined benefit pension plans offered by other companies and to reward officers who provide long-term service to the Company, thereby promoting retention of highly performing executive talent. In 2012, the Compensation & Benefits Committee amended the SERP to freeze benefit levels and participants effective March 31, 2012, as part of an effort to make our overall executive compensation program more performance-based. Of the NEOs, only Mr. Smith, Mr. Bierman and Ms. Davis are participants in the SERP.

Deferred Compensation Plan

The Company has an Executive Deferred Compensation and Retirement Plan into which officers and other management-level personnel may defer salary and cash bonus. The purpose of the deferred plan is to provide security for current and future needs of the participants and their families by providing a tax efficient opportunity to save for retirement and to ensure that our compensation program remains competitive in the marketplace for key management talent. This plan provides for the same investment options as are available under our 401(k) plan (other than the Company stock fund option). For participants in this plan, the Company matches a total of up to 5% of 401(k) and deferred compensation plan contributions combined; provided that the participant has first maximized contributions under the 401(k) plan.

Change in Control Agreements

The Company has entered into change in control agreements (“CIC Agreements”) with certain officers, including certain of the NEOs, as described on page 47 of this proxy statement under “Potential Payments upon Termination or Change in Control—Change in Control Agreements.” The purpose of the CIC Agreements is to encourage key management personnel to remain with the Company and to help avoid distractions and conflicts of interest in the event of a potential or actual change in control of the Company so that executives will focus on a fair and impartial review of the acquisition proposal and the maximization of shareholder value despite the risk of losing their employment. The Compensation & Benefits Committee believes that the CIC Agreements help it to attract and retain key executive talent that could have other employment alternatives that may appear to be less risky absent these arrangements. The committee further believes that it has structured these agreements to be reasonable and to provide a temporary level of income protection to the executive in the event of employment loss due to a change in control.

The CIC Agreements do not provide for excise tax gross-up payments. In addition, the severance payment obligation under the CIC Agreements has a “double trigger” such that the payment of a severance benefit may only be made if there is a change of control and the officer’s employment with the Company is terminated by the Company without cause or the officer for good reason within 24 months after such change in control. We believe that this structure strikes an appropriate balance between the incentives and the executive hiring and retention effects described above, without providing these benefits to executives who continue to enjoy employment with an acquiring company in the event of a change of control transaction. Annually in connection with the review of executive compensation tally sheets, the Compensation & Benefits Committee reviews the severance amounts that would be payable to each named executive officer upon a change in control to ensure that the amounts are reasonable in light of the purpose of the agreements and relative to the marketplace generally. However, these amounts did not affect the committee’s compensation decisions with regard to any specific element of our 2013 executive compensation program.

Equity awards have the same “double-trigger” feature discussed above for accelerated vesting and exercisability, as applicable, in the event of a change in control. These same terms apply to the equity awards of all other teammates in the Company upon a change in control.

 

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Severance Policy

We have a formal severance policy described on page 47 of this proxy statement under “Potential Payments upon Termination or Change in Control—Severance Policy” that applies to all corporate officers who are involuntarily terminated without cause (or who resign at the request of the Company). We adopted this policy to promote management stability and provide consistent and fair treatment to our departing officers in circumstances where their performance does not constitute cause for employment termination. We believe the severance policy helps the Company attract and retain key executive talent that could have other employment alternatives that may appear to be less risky absent such a policy. The severance policy is designed to provide the officer with continued compensation and assistance for up to 18 months, depending on years of service with the Company, in an effort to assist him or her in finding new employment and is conditioned upon the officer entering into a non-competition, non-solicitation and confidentiality agreement for the benefit of the Company.

Other Benefits

In addition to the components of compensation discussed above, we provide certain other limited benefits to executives, including the NEOs, to help maximize the time key executives are able to spend on the Company’s business; to reward experience, expertise, responsibility, seniority, leadership qualities and advancement; and to ensure that our executive compensation program remains competitive in the marketplace for key executive talent. These other benefits consist of the following and are specifically disclosed by amount in note 4 to the Summary Compensation Table on page 37 of this proxy statement: funding of life insurance policy premiums (provides security for current and future needs of the executives and their families), automobile allowance or lease (ensures transportation for business travel needs, recognizing that the automobile may also be used for personal purposes), tax and financial planning and return preparation assistance (allows executives to concentrate on business matters rather than on personal financial planning), and annual physical and enhanced medical access (identifies and addresses medical issues and helps preserve the Company’s investment in its executives by encouraging them to maintain healthy lifestyles and be proactive in addressing potential health issues). In addition, NEOs may participate in our health and welfare plans, 401(k) plan and teammate stock purchase plan on the same basis as other full-time teammates. Finally, except under limited and unusual circumstances, we only pay for executive travel on commercial or private aircraft when such travel is integrally and directly related to the performance of the executive’s duties for the Company and is not personal in nature. We do not provide tax gross-ups on any income executives may realize as a result of the foregoing benefits.

Recoupment Policy

In an effort to mitigate any imprudent risk-taking behavior associated with incentive compensation, the Company has a policy that permits the recoupment of performance-based cash and equity compensation paid to executive officers. This compensation is recoverable from an executive officer if:

 

  (i) The payment or award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement of the Company’s financial statements;

 

  (ii) The Board (or its designated Compensation & Benefits Committee) determines that the executive engaged in misconduct that caused or substantially caused the need for the restatement; and

 

  (iii) A lower payment would have been made to the executive officer based upon the restated financial results.

If the foregoing conditions are met, as determined by the Board (or its designated committee), the Company, under terms of the applicable program or award agreements, will recover from the executive officer the amount by which his or her performance-based compensation for the relevant period exceeded the amount (if any) that would have been paid based on the restated financial results. The Board (or its designated committee) may take such further action as it deems necessary or appropriate to remedy the misconduct and prevent its recurrence. The recoupment policy currently will not apply to performance-based compensation after the second anniversary of the date on which such compensation was paid.

 

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Hedging and Derivatives Trading Prohibition

The Company has policies that prohibit directors, officers and other teammates with access to confidential information of the Company from engaging in certain transactions relating to our common stock, including buying or selling options and short sales. We also prohibit these individuals from hedging the economic risk of ownership of our common stock and strongly discourage holding our stock in a margin account or pledging our stock as collateral for a loan.

Tax Considerations

Section 162(m) of the Internal Revenue Code disallows corporate tax deductions for executive compensation in excess of $1 million paid annually to the NEOs other than the Chief Financial Officer. This law allows for certain exemptions to the deduction cap, including “performance-based compensation” as defined in the rules adopted under Section 162(m).

Although the Company prefers that its pay plans be “performance-based” and therefore eligible for compensation expense deductions, it also believes that, under certain circumstances, awarding compensation that is not tax deductible may better support the long-term goals of the Company and the interests of shareholders. In 2013, our Chief Executive Officer had compensation that was nondeductible.

Chief Executive Officer Compensation

Our compensation policies are applied in the same manner to all executive officers, including the Chief Executive Officer. The 2013 total direct compensation for Mr. Smith was higher than that of certain other NEOs to reflect the significant differences in their relative responsibilities and authority. We believe that the scope of Mr. Smith’s responsibilities and authority, together with his ability to impact the Company’s performance, is significantly greater than that of the other NEOs and, accordingly, is reflected in his compensation. The differential in Mr. Smith’s compensation relative to certain other executive officers also is consistent with the compensation structures of the Peer Companies and thus reflects market differentials for the chief executive officer position versus other executives.

REPORT OF THE COMPENSATION & BENEFITS COMMITTEE

The Compensation & Benefits Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on this review and discussion, the committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

THE COMPENSATION & BENEFITS COMMITTEE

Robert C. Sledd, Chairman

Stuart M. Essig

James E. Rogers

Anne Marie Whittemore

 

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SUMMARY COMPENSATION TABLE

The following table summarizes for the years ended December 31, 2013, 2012 and 2011, as applicable, the total compensation of our NEOs—the Chief Executive Officer, three individuals who served as Chief Financial Officer during portions of 2013, and the three other most highly compensated executive officers.

 

(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  

Name and Principal

Position

  Year     Salary ($)    

Bonus

($)

   

Stock

Awards

(1)

($)

   

Option
Awards

(1)

($)

   

Non-Equity

Incentive Plan

Compensation (2)

($)

   

Change in

Pension

Value and

Non-Qualified

Deferred

Compensation

Earnings (3)

($)

   

All Other

Compensation
(4)

($)

   

Total

($)

 

Craig R. Smith

    2013      $ 898,941      $ 0      $ 986,161      $ 0      $ 0      $ 0      $ 79,618      $ 1,964,720   

Chairman & Chief

    2012        878,391        0        1,084,120        0        0        1,024,137        46,391        3,033,039   

Executive Officer

    2011        852,807        0        1,083,493        0        138,916        2,018,960        46,740        4,140,916   
                                                                         

James L. Bierman (5)

    2013      $ 645,192      $ 0      $ 843,055      $ 0      $ 0      $ 0      $ 44,750      $ 1,532,997   

President & Chief

    2012        591,267        0        567,167        0        0        516,615        27,549        1,702,598   

Operating Officer

    2011        543,565        0        532,496        0        59,618        824,673        19,191        1,979,543   
                                                                         

Richard A. Meier (6)

    2013      $ 473,269      $ 0      $ 1,099,975      $ 0      $ 0      $ 0      $ 560,252      $ 2,133,496   

Executive Vice President &

    2012        —          —          —          —          —          —          —          —     

Chief Financial Officer

    2011        —          —          —          —          —          —          —          —     
                                                                         

Erika T. Davis (7)

    2013      $ 441,331     $
0
  
  $ 490,158     $ 0      $ 0     $ 0      $ 34,866     $ 966,355   

Senior Vice President,

    2012        397,587        0        370,808        0        0        330,614        30,134        1,129,143   
Administration & Operations     2011        —          —          —          —          —          —          —          —     
                                                                         

Brian J. Shotto (8)

    2013      $ 473,921      $ 0      $ 474,302      $ 0      $ 0      $ 0      $ 34,276      $ 982,499   

Senior Vice President,

    2012        —          —          —          —          —          —          —          —     

Manufacturer Services

    2011        —          —          —          —          —          —          —          —     
                                                                         

D. Andrew Edwards (6)

    2013      $ 47,229      $ 0      $ 0      $ 0      $ 0      $ 0      $ 700      $ 47,929   
Former Vice President, Controller & Acting Chief Financial Officer    
 
2012
2011
  
  
   

 

273,191

—  

 

  

   

 

0

—  

 

  

   

 

132,661

—  

  

  

   

 

0

—  

  

  

   

 

0

—  

  

  

   

 

0

—  

  

  

   

 

67,784

—  

  

  

   

 

473,636

—  

  

  

                                                                         

Michael L. Lowry (6)

    2013      $ 222,295      $ 0      $ 49,177      $ 0      $ 0      $ 0      $ 39,364      $ 310,836   

Vice President, Controller and

    2012        —          —          —          —          —          —          —          —     
Former Interim Chief Financial Officer     2011        —          —          —          —          —          —          —          —     

(1) The amounts included in column (e) are the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718, and column (e) includes awards subject to performance conditions. Of the total awards reflected in column (e) for 2013, the amount specified below for each officer represents awards subject to performance conditions, which are valued at the grant date based on probable achievement at target levels:

Mr. Smith, $586,150; Mr. Bierman, $249,992; Mr. Meier, $299,993; Ms. Davis, $192,628; Mr. Shotto, $162,508; Mr. Edwards, $0; Mr. Lowry, $0.

The grant date value of the above performance-based awards for 2013 would equal the following for each officer assuming achievement of the highest level of performance conditions:

 

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Mr. Smith, $1,172,300; Mr. Bierman, $499,984; Mr. Meier, $599,986; Ms. Davis, $385,256; Mr. Shotto, $325,016; Mr. Edwards, $0; Mr. Lowry, $0.

Assumptions used in the calculation of the stock awards included in column (e) are included in note 12 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, which is incorporated herein by reference. The actual value an NEO may receive for stock awards depends on market prices, and there can be no assurance that the amounts shown are the amounts that will be realized.

(2) The amounts included in column (g) reflect cash awards to the NEOs under the Company’s performance-based annual incentive plans for 2013, 2012 and 2011. No awards were made under the 2013 Annual Incentive Plan as discussed under “Compensation Discussion and Analysis—Annual Incentives” on page 28 of this proxy statement.

(3) The amounts included in column (h) reflect the actuarial increase in the present value of the NEO’s benefits under the Company’s Supplemental Executive Retirement Plan (“SERP”) during 2013, 2012 and 2011 determined using interest rate and mortality rate assumptions consistent with those used in the Company’s financial statements. SERP benefits were frozen effective March 31, 2012 and Messrs. Smith and Bierman and Ms. Davis are the only NEOs who are participants in the SERP. The change in value of each officer’s accumulated benefit in the SERP was negative in 2013 as follows: Mr. Smith, ($652,202), Mr. Bierman, ($357,740) and Ms. Davis, ($363,675). For additional information on the Company’s retirement plans, see “Retirement Plans” on page 42 of this proxy statement. No NEO received preferential or above-market earnings on deferred compensation.

(4) For 2013, the amounts included in column (i) consist of the following benefits or Company contributions attributable to the following:

 

       Car Lease
or
Allowance
     Tax
Planning/
Return
Preparation
     Life
Insurance
Premiums
     Deferred
Compensation
Plan and 401(k)
Plan
Company
Match
    

Annual
Physical/

Medical
Access

     Other
(a)
     Total  

Mr. Smith (b)

   $ 13,856       $ 3,800       $ 2,735       $ 44,947       $ 950       $ 13,330       $ 79,618   

Mr. Bierman

     9,600         0         0         32,056         950         2,144         44,750   

Mr. Meier (c)

     9,067         0         0         12,750         950         537,485         560,252   

Ms. Davis

     8,813         1,950         0         22,067         950         1,086         34,866   

Mr. Shotto

     9,600         0         0         23,696         950         30         34,276   

Mr. Edwards

     700         0         0         0         0         0         700   

Mr. Lowry (d)

     6,600         0         0         12,115         0         20,649         39,364   

 

  (a) Unless otherwise provided with respect to an NEO, includes miscellaneous amenities and/or awards provided at Company sales and leadership conferences and other awards or gifts.

 

  (b) Mr. Smith’s other compensation includes $12,392 attributable to his personal use of Company-leased aircraft on one occasion during 2013 which was justified to accommodate exceptional circumstances. This amount represents the actual incremental cost incurred by the Company for the personal flight inclusive of fuel, trip-related maintenance and fees and pilot expenses.

 

  (c) Included in Mr. Meier’s other compensation are the following amounts paid in connection with the terms of his employment as Chief Financial Officer: $49.985 in relocation compensation, a $200,000 signing bonus and $287,500 in guaranteed bonus for 2013 based on assumed performance at the target level under the Company’s 2013 annual incentive program.

 

  (d) Of the other compensation paid to Mr. Lowry, $20,000 was an additional amount paid to him for serving as Interim Chief Financial Officer in February 2013.

 

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(5) Mr. Bierman was named President & Chief Operating Officer effective August 1, 2013. He was formerly Executive Vice President & Chief Operating Officer.

(6) Mr. Meier joined the Company as Executive Vice President & Chief Financial Officer effective March 1, 2013. Mr. Edwards served as Acting Chief Financial Officer from January 1, 2013 until his departure from the Company on February 7, 2013. Mr. Lowry served as Interim Chief Financial Officer from February 8-28, 2013.

(7) Ms. Davis was named Senior Vice President, Administration & Operations effective August 1, 2013. She was formerly Senior Vice President, Human Resources. Ms. Davis was not an NEO prior to 2012.

(8) Mr. Shotto was named Senior Vice President, Manufacturer Services effective August 1, 2013. He was formerly Senior Vice President, Specialty Services. Mr. Shotto was not an NEO prior to 2013.

 

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GRANTS OF PLAN BASED AWARDS TABLE

The following table shows awards granted to each NEO during the year ended December 31, 2013.

 

(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)     (k)     (l)  
Name   Grant
Date
    Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
(1)
   

Estimated Potential Payouts Under
Equity Incentive Plan Awards

(2)

    All Other
Stock
Awards:
Number
of
Shares
of Stock
or
Units (3)
(#)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options (4)
(#)
    Exercise
or Base
Price of
Option
Awards
($ /Sh)
    Grant
Date
Fair
Value of
Stock
and
Option
Awards
(5)
 
    Threshold
($)
   

Target

($)

   

Maximum

($)

    Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Craig R. Smith

    1/31/13        —          —          —          6,534        13,068        26,136        —          —          —        $ 400,011   
      1/31/13        —          —          —          —          —          —          13,068        —          —          400,011   
      1/31/13        —          —          —          3,041        6,081        12,162        —          —          —          186,139   
      N/A      $ 339,4055      $ 678,813      $ 1,357,6266        —          —          —          —          —          —          —     
                                                                                         

James L. Bierman

    1/31/13        —          —          —          —          —          —          4,183        —          —        $ 128,042   
      1/31/13        —          —          —          —          —          —          8,167        —          —          249,992   
      1/31/13        —          —          —          4,084        8,167        16,334        —          —          —          249,992   
      8/01/13        —          —          —          —          —          —          5,988        —          —          215,029   
      N/A      $ 175,000      $ 350,000      $ 700,000        —          —          —          —          —          —          —     
                                                                                         

Richard A. Meier

    3/31/13        —          —          —          —          —          —          9,852        —          —        $ 299,993   
      3/31/13        —          —          —          —          —          —          16,420        —          —          499,989   
      3/31/13        —          —          —          4,926        9,852        19,704        —          —          —          299,993  
      N/A      $ 143,750      $ 287,500      $ 575,000        —          —          —          —          —          —          —     
                                                                                         

Erika T. Davis

    1/31/13        —          —          —          2,655        5,309        10,618        —          —          —        $ 162,508   
      1/31/13        —          —          —          —          —          —          5,309        —          —          162,508   
      1/31/13        —          —          —          492        984        1,968        —          —          —          30,120   
      8/01/13        —          —          —          —          —          —          3,760        —          —          135,022   
      N/A      $ 123,750      $ 247,500      $ 495,000        —          —          —          —          —          —          —     
                                                                                         

Brian J. Shotto

    1/31/13        —          —          —          —          —          —          466       —          —        $ 14,264   
      1/31/13        —          —          —          —          —          —          5,309        —          —          162,508   
      1/31/13        —          —          —          2,655        5,309        10,618        —          —          —          162,508   
      8/01/13        —          —          —          —          —          —          3,760        —          —          135,022   
      N/A      $ 123,750      $ 247,500      $ 495,000        —          —          —          —          —          —          —     
                                                                                         

D. Andrew Edwards  

    1/31/13        —          —          —          —          —          —          —          —          —          —     
      N/A        —          —          —          —          —          —          —          —          —          —     
                                                                                         

Michael W. Lowry

    1/31/13        —          —          —          —          —          —          300       —          —        $ 9,183   
      4/25/13        —          —          —          —          —          —          617        —          —          19,997   
      4/25/13        —          —          —          —          —          —          617       —          —          19,997   
      N/A      $ 40,250      $ 80,500      $ 161,000        —          —          —          —          —          —          —     

(1) The amounts shown in column (c) reflect the minimum payment level under the Company’s 2013 Annual Incentive Plan if minimum performance conditions were met and represents 50% of the target payment level shown in column (d) which is based on meeting target performance conditions. The amount shown in column (e) is 200% of the target payment level and is based on meeting maximum performance conditions. These amounts are based upon the individual’s 2013 salary and position (75% of base salary for the Chief Executive Officer and 50% of base salary for the other NEOs except Mr. Lowry for whom the amounts are based

on 35% of base salary). Mr. Edwards left the Company in early 2013 and received no grants of plan-based awards. There were no payouts under the 2013 Annual Incentive Plan as reflected in “Summary Compensation Table—Non-Equity Incentive Plan Compensation.”

 

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(2) The amounts shown in column (f) reflect the minimum restricted stock award level under 2013 performance share grants if minimum performance conditions are met and represents 50% of the target restricted stock award level shown in column (g) which is based on meeting target performance conditions. The amount shown in column (h) is 200% of the target restricted stock award level and is based on meeting the maximum performance conditions. These restricted stock awards are based on the Company’s achievement of specified performance metrics for 2013 and 2014 as discussed on page 31 of this proxy statement and, if earned, vest on the third anniversary of the performance share grant. Dividends are not paid on performance share grants unless and until the performance conditions are satisfied, resulting in the issuance of the underlying restricted stock. Neither Mr. Edwards nor Mr. Lowry received performance share grants in 2013.

(3) The amounts shown in column (i) represent grants of restricted stock that vest either three or five years from the date of grant based on the executive’s continued employment with the Company. Dividends are paid on outstanding restricted stock grants at the same rate as for all shareholders of record.

(4) No stock options were granted by the Company in 2013.

(5) The amounts shown in column (l) are the grant date fair value of each individual equity award computed in accordance with FASB ASC Topic 718.

 

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Table of Contents

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

The following table summarizes for each NEO information regarding unexercised stock options, unvested restricted stock awards and incentive plan awards outstanding as of December 31, 2013.

 

      Option Awards     Stock Awards  
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  
      Number of
Securities
Underlying
Unexercised
Options
(#)
    Number of
Securities
Underlying
Unexercised
Options
(#)
   

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

    Option
Exercise
Price
($)
    Option
Expiration
Date
   

Number of
Shares or
Units of
Stock That
Have Not
Vested

(#) (1)

   

Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested

($) (2)

   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units

or Other

Rights
That
Have Not
Vested

(#)(3)

   

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested

($)(3)

 
Name   Exercisable     Unexercisable                

Craig R. Smith

   

 

 

 

—  

—  

—  

—  

  

  

  

  

   

 

 

 

—  

—  

—  

—  

  

  

  

  

   

 

 

 

—  

—  

—  

—  

  

  

  

  

   

 

 

 

—  

—  

—  

—  

  

  

  

  

   

 

 

 

—  

—  

—  

—  

  

  

  

  

   

 

 

 

13,068

14,867

14,910

6,081

  

  

  

  

  $

 

 

 

477,766

543,538

545,110

222,321

  

  

  

  

   

 

 

 

6,534

3,041

—  

—  

  

 

  

  

  $

 

 

 

238,883

111,179

—  

—  

 

 

  

  

Total

    —          —          —          —          —          48,926        1,788,735        9,575       350,062   

James L. Bierman

   

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

—  

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

5,988

4,183

8,167

7,847

1,678

2,734

2,565

  

  

  

  

  

  

  

  $

 

 

 

 

 

 

218,921

152,930

298,586

286,886

61,348

99,955

93,776

  

  

  

  

  

  

  

   

 

 

 

 
 

 

4,084

—  

—  

—  

—  
—  

—  

 

  

  

  

  
  

  

  $

 

 

 

 

 

 

149,311

—  

—  

—  

—  

—  

—  

  

  

  

  

  

  

  

Total

    —          —          —          —          —          33,162        1,212,403        4,084       149,311  

Richard A. Meier

   

 

—  

—  

  

  

   

 

—  

—  

  

  

   

 

—  

—  

  

  

   

 

—  

—  

  

  

   

 

—  

—  

  

  

   

 

9,852

16,420

  

  

  $

 

360,189

600,315

  

  

   

 

4,926

—  

  

  

  $

 

180,095

—  

  

  

Total

    —          —          —          —          —          26,272        960,504        4,926        180,095   

Erika T. Davis

   

 

 

 

 

—  

—  

—  

—  

—  

  

  

  

  

  

   

 

 

 

 

—  

—  

—  

—  

—  

  

  

  

  

  

   

 

 

 

 

—  

—  

—  

—  

—  

  

  

  

  

  

   

 

 

 

 

—  

—  

—  

—  

—  

  

  

  

  

  

   

 

 

 

 

—  

—  

—  

—  

—  

  

  

  

  

  

   

 

 

 

 

3,760

5,309

5,633

5,376

984

  

  

  

  

  

  $

 

 

 

 

137,466

194,097

205,942

196,547

35,975