SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
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( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
OWENS & MINOR, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING
IN PERSON, THE BOARD OF DIRECTORS URGES YOU TO SIGN AND
RETURN THE PROXY IN THE ENCLOSED ENVELOPE.
OWENS & MINOR, INC.
4800 COX ROAD
GLEN ALLEN, VIRGINIA 23060-6292
March 21, 1995
You are cordially invited to attend the Annual Meeting of Shareholders of
Owens & Minor, Inc. The meeting will be held on Tuesday, May 2, 1995 at 10:00
a.m. in the Corporate Office Building, 4800 Cox Road, Glen Allen, Virginia. Morning refreshments will be served and tours will be conducted. Valet parking will also be available. Directions to the building are on the back of the proxy statement.
The primary business of the meeting will be to elect three directors and to ratify the appointment of KPMG Peat Marwick LLP as independent accountants. During the meeting, I will also report to you on the condition and performance of Owens & Minor during 1994 and the first quarter of 1995. You will have the opportunity to meet members of the Board of Directors as well as senior management and ask questions on matters of importance to you and all shareholders.
I hope to see you on May 2, 1995. Whether you plan to attend or not, please complete, sign, date and return the enclosed proxy card as soon as possible in the postage-paid envelope provided. Your vote is important. All of us at Owens & Minor appreciate your continued interest in and support of the Company.
G. GILMER MINOR, III
Chairman, President and
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 2, 1995
TO THE SHAREHOLDERS OF OWENS & MINOR, INC.:
You are hereby notified that the Annual Meeting of Shareholders of Owens & Minor, Inc., a Virginia corporation (the "Company"), will be held in the Corporate Office Building, 4800 Cox Road, Glen Allen, Virginia, on Tuesday, May 2, 1995 at 10:00 a.m.
The purposes of the meeting are:
1. To elect three directors to serve until the Annual Meeting of Shareholders in 1998 (Proposal 1);
2. To ratify the appointment of KPMG Peat Marwick LLP as independent accountants (Proposal 2); and
3. To transact such other business as may properly be brought before the meeting.
The Board of Directors has fixed the close of business on March 7, 1995 as the record date for the determination of shareholders entitled to receive notice of and to vote at the meeting and any adjournment(s) or postponement(s) thereof.
Your attention is directed to the attached Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
DREW ST. J. CARNEAL,
March 21, 1995
WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING IN PERSON, THE BOARD OF DIRECTORS URGES YOU TO SIGN AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE.
[Logo] STREET ADDRESS MAILING ADDRESS 4800 Cox Road P.O. Box 27626 Glen Allen, Virginia 23060-6292 Richmond, Virginia 23261-7626
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 2, 1995
March 21, 1995
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Owens & Minor, Inc., a Virginia corporation (the "Company"), for use at the Annual Meeting of Shareholders of the Company, to be held in the Corporate Office Building, 4800 Cox Road, Glen Allen, Virginia, on May 2, 1995 at 10:00 a.m., and at any adjournment(s) or postponement(s) thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The expense of this solicitation will be borne by the Company. The Company will reimburse brokers and other persons holding stock in their name as nominees for their expenses in obtaining authorization to execute proxies from their principals. Corporate Investor Communications, Inc. has been retained to aid in such solicitation of proxies by telephone or telegraph or by personal calls at an anticipated cost to the Company of $4,000 plus expenses.
All proxies received pursuant to this solicitation will be voted FOR the election of directors as set forth below and in favor of Proposal 2 unless contrary instructions are given. Any person who has returned a proxy to the Company has the power to revoke it at any time before its exercise by submitting a subsequently dated proxy, by giving notice in writing to the Secretary of the Company prior to the commencement of the meeting, or by voting in person at the meeting.
Only shareholders of record at the close of business on March 7, 1995 will be entitled to vote at the meeting or any adjournment(s) or postponement(s) thereof. As of such record date, the Company had outstanding and entitled to vote 30,805,848 shares of Common Stock, $2.00 par value per share (the "Common Stock"), each of which is entitled to one vote, and 1,150,000 shares of Series B Cumulative Preferred Stock, $100 par value per share (the "Series B Preferred Stock"), each of which is entitled to 6.06 votes. Each holder of Series B Preferred Stock has agreed to vote his shares of Series B Preferred Stock with respect to each matter to be voted upon at the Annual Meeting in the same proportion as the votes cast on such matter by holders of the Common Stock (excluding certain holders of 5% or more of the Common Stock).
This Proxy Statement and form of proxy is first being mailed to shareholders of the Company on or about March 21, 1995.
PROPOSAL 1. ELECTION OF DIRECTORS
In February, 1995, the Board of Directors adopted an amendment to the Company's Bylaws, to become effective at the Annual Meeting, reducing the number of directors from 10 to 9. This reduction will eliminate the vacancy due to the retirement of Vice Chairman Philip M. Minor at the time of the Annual Meeting. The Board of Directors will remain divided into three classes, with one class being elected every year for a term of three years. Three nominees are expected to be elected at this Annual Meeting to serve for a term of three years, until their successors are elected and have qualified. The remaining six directors will continue to serve as set forth below. Each of the nominees is currently a director of the Company and has agreed to serve if elected. Unless otherwise directed, a proxy will be voted for the three nominees shown below. If some unexpected occurrence should, in the judgment of the Board of Directors, make necessary the substitution of some other person for any of the nominees, the shares represented by proxies will be voted for such other person as the Board of Directors may select, or the Board of Directors may amend the Bylaws to reduce the number of directors to the total of the remaining nominees and any such substitute nominee or nominees in which case the shares represented by proxies shall be voted for the remaining nominees and any such substitute nominee or nominees. No proxy can be voted for more than three persons.
The election of each nominee for director requires the affirmative vote of a plurality of the votes cast in the election of directors by the holders of the Common Stock and Series B Preferred Stock, voting together as a single class. Votes that are withheld and Broker Shares that are not voted in the election of directors will not be included in determining the number of votes cast.
The names and ages of the nominees and continuing directors, their principal occupation or employment during the past five years and other relevant data regarding them as of March 7, 1995, based on information received from the respective nominees and continuing directors, are set forth below. Each of the nominees and the directors has served continuously since the year he or she joined the Board of Directors.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
For the Three-Year Term Expiring April 1998:
(photo) JAMES B. FARINHOLT, James B. Farinholt, Jr., 60, is Special Assistant to the JR. President of Virginia Commonwealth University, advising on campus expansion, commercialization of scientific discoveries, and development of the Virginia Biotechnology Research Park. From 1978 to 1995, Mr. Farinholt served as President of Galleher & Company, Inc., an investment company. Mr. Farinholt has been a director since 1974 and is Chairman of the Strategic Planning Committee and a member of the Executive Committee. (photo) E. MORGAN MASSEY E. Morgan Massey, 68, is President and Chief Executive Officer of South American Coal, N.V. and Chairman Emeritus of A.T. Massey Coal Company, Inc., both coal companies. Mr. Massey served A.T. Massey Coal Company, Inc. as Chairman and Chief Executive Officer in 1991, and as President and Chief Executive Officer from 1972 to 1990. Mr. Massey has been a director since 1988 and is a member of the Compensation & Benefits and Strategic Planning Committees. Mr. Massey also serves as Chairman of the Massey Cancer Center Advisory Board, Richmond, Virginia, Vice Chairman of the U.S. Energy Association, Washington, D.C., and a member of the Board of the University of Virginia Engineering Foundation. (photo) ANNE MARIE WHITTEMORE Anne Marie Whittemore, 49, is a partner in the law firm of McGuire, Woods, Battle & Boothe, L.L.P. Mrs. Whittemore has been a director since 1991 and is a member of the Executive and Compensation & Benefits Committees. Mrs. Whittemore also serves on the Board of Directors of USF&G Corporation, James River Corporation and the T. Rowe Price Income Funds.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Terms Expiring April 1996:
(photo) R.E. CABELL, JR. R.E. Cabell, Jr., 71, Retired (Of Counsel) from the law firm of Williams, Mullen, Christian & Dobbins. Mr. Cabell has been a director since 1962 and is Chairman of the Audit Committee and a member of the Executive Committee. Mr. Cabell also serves on the Board of Directors of the C.F. Sauer Company and is a Trustee of Hampden-Sydney College. (photo) VERNARD W. HENLEY Vernard W. Henley, 65, is Chairman of the Board, President and Chief Executive Officer of Consolidated Bank and Trust Company, Richmond, Virginia. Mr. Henley has been a director since 1993, and is a member of the Audit and Compensation & Benefits Committees. (photo) G. GILMER MINOR, III G. Gilmer Minor, 54, is Chairman, President and Chief Executive Officer of the Company. Mr. Minor has been a director since 1980 and is Chairman of the Executive Committee and a member of the Strategic Planning Committee. Mr. Minor also serves as a member of the Boards of Directors of Crestar Financial Corporation and Richfood Holdings, Inc. Mr. Minor is the nephew of Philip Minor, retiring Vice Chairman of the Board.
Terms Expiring April 1997:
(photo) WILLIAM F. FIFE William F. Fife, 73, served as Executive Vice President of the Company from 1987 until his retirement in 1991. Mr. Fife has been a director of the Company since 1962 and is a member of the Audit and Executive Committees.
(photo) JAMES E. ROGERS James E. Rogers, 49, is a Partner of SCI Investors Inc. and Chairman of Custom Papers Group Inc., a paper manufacturing company. From 1991 to 1992, Mr. Rogers served as President and Chief Executive Officer of Specialty Coatings International Inc. Prior to joining Specialty Coatings International in 1991, Mr. Rogers served as Senior Vice President and Group Executive of James River Corporation. Mr. Rogers has been a director since 1991 and is Chairman of the Compensation & Benefits Committee and a member of the Executive and Strategic Planning Committees. Mr. Rogers also serves on the Boards of Directors of Wellman, Inc. and Caraustar Industries, Inc. (photo) JAMES E. UKROP James E. Ukrop, 57, is Vice Chairman and Chief Executive Officer of Ukrop's Super Markets, Inc., a retail grocery chain. Mr. Ukrop has been a director since 1987 and is a member of the Compensation & Benefits and Strategic Planning Committees. Mr. Ukrop also serves as a member of the Boards of Directors of Richfood Holdings, Inc. and Legg Mason, Inc.
SERIES B PREFERRED STOCK DIRECTOR
Pursuant to the Company's Articles of Incorporation, the holders of the Series B Preferred Stock are entitled to elect one member of the Board of Directors of the Company for so long as any share of Series B Preferred Stock remains outstanding. Such director (the "Series B Director") is in addition to the number of Directors of the Company elected by the holders of the Common Stock and Series B Preferred Stock, voting together as a single class. On May 10, 1994 the holders of the Series B Preferred Stock elected Carl G. Grefenstette as the Series B Director. It is anticipated that the holders of the Series B Preferred Stock will re-elect Mr. Grefenstette in 1995.
(photo) CARL G. GREFENSTETTE Carl G. Grefenstette, 67, is Chairman and Chief Executive Officer of The Hillman Company, diversified investments and operations. From 1989 to 1993, Mr. Grefenstette served as President and Chief Executive Officer of The Hillman Company. Mr. Grefenstette also serves on the Boards of Directors of The Hillman Company, The Hillman Foundation, The Polk Foundation, Inc., Duquesne University, and PNC Bank Corp. Mr. Grefenstette has been a director of the Company since 1994 and is a member of the Audit and Strategic Planning Committees.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings during 1994. All directors attended at least 75% of the total meetings of the Board of Directors and any Committees on which they serve. The Board has Executive, Audit, Compensation & Benefits and Strategic Planning Committees. The Board does not have a Nominating Committee.
None of the members of the Audit Committee are employees of the Company or its subsidiaries. The function of the Audit Committee is to oversee the Company's financial reporting and internal control structure and to serve as a direct line of communication among the Company's independent auditors, the Company's Internal Audit Department and the Board of Directors. The Audit Committee met four times during the past year.
None of the members of the Compensation & Benefits Committee are
employees of the Company or its subsidiaries. The function of the Compensation &
Benefits Committee is to recommend to the Board of Directors the salaries and
compensation of the executive officers of the Company, and to make such other
studies and recommendations concerning compensation and compensation policies as
may be brought to their attention for consideration. The Compensation & Benefits
Committee administers the Savings & Protection Plan, the Employee Stock Purchase
Plan, the 1985 and 1993 Stock Option Plans, the Supplemental Executive
Retirement Plan, and the Annual Incentive Plan for employees who are subject to
Section 16 of the Securities Exchange Act of 1934. The Compensation & Benefits Committee met five times during the past year.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. In 1994, each non-employee director was paid an annual retainer of $10,000 ($13,000 for committee chairmen), plus $1,000 for each Board meeting attended, $800 for each meeting of the Board's committees and $500 for telephone conference meetings.
DIRECTORS COMPENSATION PLAN. The Directors Compensation Plan (the "Directors Plan") provides for automatic, annual grants of options to purchase Common Stock. During 1994, each eligible director was granted options to purchase 2,532 shares of Common Stock at a per share exercise price of $14.917. In addition, the Directors Plan allows eligible directors to defer the receipt of all or part of their director fees. Amounts deferred are "invested" in bookkeeping accounts that measure earnings and losses based on the performance of a particular investment. Subject to certain restrictions, a director will be permitted to take cash distributions in whole or in part from a deferred fee account either prior to or following the termination of his or her service as a director. The Directors Plan also allows eligible directors to receive payment of all or part of their director fees in Common Stock rather than cash.
CAPITAL STOCK OWNED BY
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth as of March 7, 1995 the number of shares of Common Stock and Series B Preferred Stock beneficially owned by each director, the named executive officers in the Summary Compensation Table, all current executive officers and directors of the Company as a group, and all persons (including any "group" as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act")) who, to the knowledge of the Company, is the beneficial owner of more than 5% of Common Stock or Series B Preferred Stock.
Sole Voting and Aggregate Title Name of Investment Percentage of Class Beneficial Owner Power(1) Other(2) Owned COMMON STOCK Philip M. Minor........................ 638,797 1,828 2.1% G. Gilmer Minor, III................... 420,510 20,936 1.4% R. E. Cabell, Jr....................... 87,131 8,655 * James B. Farinholt, Jr................. 10,596 -- * William F. Fife........................ 323,889 174 1.1% Carl G. Grefenstette................... 1,000 3,765,569(3)(4) 10.9% Vernard W. Henley...................... 3,282 -- * E. Morgan Massey....................... 199,129 -- * James E. Rogers........................ 10,126 -- * James E. Ukrop......................... 36,730 -- * Anne Marie Whittemore.................. 9,846 225 * Robert E. Anderson, III................ 105,684 5,517 * Henry A. Berling....................... 314,594 12,798 1.1% Richard P. Byington.................... -- 138 * Craig R. Smith......................... 40,454 3,539 * All Executive Officers and Directors as a group (25 persons)................. 3,112,982 3,853,814 19.9% Henry Hillman, Elsie Hilliard Hillman and C.G. Grefenstette, Trustees of the Henry L. Hillman Trust U/A Dated 11/18/85 (the "Hillman Trust")....... 3,765,569(3) -- 10.9% FMR Corp., Edward C. Johnson, 3d, Fidelity Management & Research Company 82 Devonshire Street Boston, MA 02109..................... 699,349 1,760,575(5) 8.0% SERIES B PREFERRED STOCK(4)(6) Hillman Trust.......................... 621,381 -- 54.0% Juliet Lea Hillman Simonds............. 112,040 -- 9.7% Audrey Hillman Fisher.................. 112,040 -- 9.7% Henry L. Hillman, Jr................... 112,040 -- 9.7% William T. Hillman..................... 112,040 -- 9.7%
*Represents less than 1% of the total number of shares outstanding.
(1) Includes 438,142 shares which certain officers and directors of the Company have the right to acquire through the exercise of stock options within 60 days following March 7, 1995.
(2) Includes: (a) shares held by certain relatives; (b) shares held in various fiduciary capacities; (c) shares held by the Company's Employee Stock Purchase Plan and 401(k) Plan; (d) grants of restricted stock through the Company's Annual Incentive Plan; and (e) shares that the shareholder has shared power to dispose of or to direct disposition of. These shares may be deemed to be beneficially owned under the rules and regulations of the Securities and Exchange Commission ("SEC"), but the inclusion of such shares in the table does not constitute an admission of beneficial ownership.
(3) The Hillman Trust owns 621,381 shares of Series B Preferred Stock which are convertible into an aggregate of approximately 3,765,569 shares of Common Stock. Mr. Grefenstette is a trustee of the Hillman Trust.
(4) The 1,150,000 shares of outstanding Series B Preferred Stock are convertible into approximately 6,969,000 shares of Common Stock and are owned by the individuals listed in the table above under "Series B Preferred Stock" and Howard B. Hillman and Tatnall L. Hillman (each, a "Hillman Shareholder" and collectively, the "Hillman Shareholders"). Each Hillman Shareholder has agreed that so long as he owns any shares of Series B Preferred Stock or the Hillman Shareholders and their affiliates collectively own at least 5% of the outstanding shares of Common Stock, he will vote such shares, with respect to each matter to be voted upon by the holders of such shares, in the same proportion as the votes cast on such matter by all other holders of Common Stock (excluding certain holders of 5% or more of the Common Stock). Such voting agreement does not apply to certain matters including amendments to the Company's Articles of Incorporation or Bylaws, the election of the Series B Director and certain matters specified by Virginia law.
(5) The number of shares owned is as of February 14, 1995, as reported in the Schedule 13G filed by FMR Corp. and received by the Company on February 17, 1995.
(6) None of the directors, named executive officers in the Summary Compensation Table or current executive officers, other than Mr. Grefenstette, owns any Series B Preferred Stock.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The Company's directors, its executive officers, and any persons holding more than 10% of outstanding shares of Common Stock are required to file reports with the SEC concerning their initial ownership of Common Stock and any subsequent changes in that ownership. The Company believes that the filing requirements were satisfied, except that Richard L. Farinholt, former Vice President, Technology Systems of the Company, failed to report a transaction effected in December, 1994. In making this disclosure, the Company has relied solely on written representations of its directors, executive officers and beneficial owners of more than 10% of the Common Stock and copies of the reports that they have filed with the SEC.
REPORT OF THE COMPENSATION & BENEFITS COMMITTEE
The Compensation & Benefits Committee (the "Committee") of the Board of
Directors is comprised of five outside directors who are not current or past
employees of the Company. The principal functions of the Committee are to
oversee the design and competitiveness of the Company's total compensation
program, to evaluate the performance of the Company's senior executives and
approve related compensation actions, and to administer the Company's 1985 and
1993 Stock Option Plans, Supplemental Executive Retirement Plan, Savings &
Protection Plan, and Annual Incentive Plan for employees who are subject to
Section 16 of the Exchange Act, in accordance with the terms of each respective plan. The Committee met five times during calendar year 1994.
EXECUTIVE COMPENSATION PHILOSOPHY
With respect to executive compensation, the objective of the Committee is to establish and maintain programs and practices that reflect the Company's performance. The maximum compensation for executives is therefore dependent on the Company's financial performance measures that determine shareowner value. The Company also regularly evaluates executive compensation levels through competitive comparisons against its peer company group, which consists of the group reflected in the Performance Graph of this proxy statement, and other companies of similar size and operating characteristics. Base salary levels are somewhat below competitive market average levels for like experienced executives. Base salaries are combined with incentive compensation opportunities to reach competitive average total compensation levels. This combination is intended to focus management on the annual and longer-term success of the Company.
The Committee recognizes it may sometimes be necessary to sacrifice short-term financial performance to obtain longer-term business success. This belief leads the Committee to regularly monitor the balance between annual and longer-term rewards, and act as needed to encourage meaningful levels of share ownership among executives.
COMMITTEE PROCESS AND ANNUAL INCENTIVE PLAN
Early each year the Committee meets to review key aspects of the upcoming year's business plan and establish Annual Incentive Plan goals for each corporate officer, including the Chief Executive Officer, executive and senior vice presidents, and vice presidents. Goals under this plan are weighted to reflect their importance and contribution to desired company and shareowner outcomes. Annual Incentive Plan goals for named executives are based on Return on Average Equity and Return on Total Assets which combine equally to comprise approximately three-fourths of total award potential, with the balance of award potential based on results of an officer effectiveness survey ("OES"). The OES obtains feedback from supervisors, peers and subordinates on four dimensions of officer performance: leadership, teamwork, quality, and communications. Numeric results are collected and tabulated by a national compensation consulting firm and linked to Annual Incentive Plan awards through a predetermined performance schedule. Other performance measures, including earnings per share, are established along with the OES for vice presidents. The Committee receives periodic updates during the year on business performance in relation to incentive plan goals, particularly with respect
to senior executives. Discussions of management contribution and performance are the norm, not the exception, in Committee meetings.
At the close of each year, the Committee meets to discuss financial and other performance compared to Annual Incentive Plan goals and longer-term business goals. These longer-term goals center around the Company's strategic objectives to remain customer oriented in everything it does and to actively evolve its business consistent with the service needs of customers and the Company's markets. In deciding the level of annual salary increases, incentive payments, and granting of stock options, the Committee looks to the Chief Executive Officer for recommendations on senior executives, and then meets privately (without the presence of management, including the Chief Executive Officer in relation to his own compensation) to determine compensation actions for the Chief Executive Officer. The Committee's decision-making process is benefitted by input from the Company's Human Resources Department, and periodically from outside advisors, to maintain the desired level of competitiveness and technically sound compensation and benefit programs.
Company performance from continuing operations in 1994 saw sales increase 71.5% to $2.4 billion aided by the Stuart Medical, Inc. ("Stuart Medical") acquisition and income (prior to nonrecurring restructuring expenses) grow 39.3% to $25.8 million. On financial measures used to determine Annual Incentive Plan awards, return on average equity advanced to 16.2% versus 14.6% in 1993, and Return on Total Assets was 3.3% versus 5.7% the prior year.
The maximum award payable under the Company's Annual Incentive Plan to the Chief Executive Officer for full attainment of all established goals would be 65% of his base salary. As a result of the Company's financial performance in 1994, and considering OES results for the year, the Committee awarded the Chief Executive Officer an incentive payment of $172,800, representing approximately 43% of his base salary for 1994. Other senior executives were awarded annual incentive payments representing a similar proportion of their maximum annual incentive opportunity to be paid for fully meeting all goals.
Under the Company's Annual Incentive Plan, executives are also eligible to receive a bonus of Common Stock equivalent to 25% of the cash incentive payment, which becomes vested provided the officer maintains a continuous employment relationship with the Company for the following three years. The restricted stock bonus for named executives is dependent on performance against the same goals and weights as described earlier for the Annual Incentive Plan. The Chief Executive Officer received 3,032 shares of stock for 1994 performance results.
STOCK OPTION PLANS
Each year, the Committee considers the desirability of granting senior executives awards under the Company's Stock Option Plans. The Plans provide for the use of nonqualified stock options, incentive stock options, and stock appreciation rights. The decision to grant stock options is determined by return on average equity and earnings-per-share achievement, though no specific performance targets are applied for this purpose. Stock option levels are a component of competitive total compensation and include such considerations as salary grade levels, responsibility levels, and future expectations of responsibilities related to overall Company performance. The Committee believes stock option grants have historically been effective in helping to focus executives on enhancing long-term profitability and shareowner value. The Committee provided a grant of 90,000 nonqualified stock option shares at full market value on the grant date to the Chief
Executive Officer in 1994. The number of shares granted was based on progress in corporate strategy with the Stuart Medical acquisition, along with his leadership and management performance, responsibility level, and competitive practice for companies of similar size and operating characteristics, including a majority of the Peer Company Group reflected in the Performance Graph.
CORPORATE TAX CONSIDERATIONS
Congress passed a law effective in 1994, covered in Internal Revenue Service Code Section 162(m), that disallows corporate tax deductions for executive compensation in excess of $1 million for "proxy table" executives. This law does allow for certain exemptions to the deduction cap, including pay plans that depend on formulas rather than discretion and therefore are "performance-based."
All current executive compensation is fully deductible. The Committee will carefully consider any compensation plan or action that would result in the loss of compensation deductions, though no policy has been adopted by the Committee that would dictate its decisions in such a situation.
The foregoing report has been furnished by Mrs. Whittemore and Messrs. Henley, Massey, Rogers (Chairman), and Ukrop.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following performance graph compares the performance of the Common Stock to the S&P 500 Index and a Peer Group which includes the Company and the companies listed below, for the Company's last five fiscal years. The graph assumes that the value of the investment in the Common Stock and each index was $100 on December 31, 1989 and that all dividends were reinvested.
1989 1990 1991 1992 1993 1994 Owens & Minor, Inc. 100 120 246 272 426 403 S&P 500 Index 100 97 126 136 150 152 Peer Group 100 99 126 228 389 422
The Peer Group selected for purposes of the above graph consists of companies engaged in the business of distribution, and includes Owens & Minor, Inc., Arrow Electronics Inc., Bergen Brunswig Corp., Bindley Western Ind., Cardinal Health, Hughes Supply Corp., Moore Medical Corp., Nash Finch Company, Richfood Holdings, Inc., Rykoff-Sexton Inc., Super Food Services Inc., United Stationers Inc., and VWR Corp.
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended December 31, 1994, 1993 and 1992, the cash compensation paid by the Company, as well as certain other compensation paid or accrued, to the Company's Chief Executive Officer and its four other most highly compensated executive officers (the "Named Executive Officers").
Annual Compensation Long-Term Compensation(1) (a) (b) (c) (d) (e) (f) (g) (h) Awards Other Restricted All Name and Annual Stock Other Principal Salary Bonus Compensation Awards Options Compensation Position Year ($) ($) ($)(2) ($)(3) (#)(4) ($)(5) G. Gilmer Minor, III 1994 $372,654 $172,800 -- $ 43,206 90,000 $ 29,670 Chairman, President 1993 314,538 163,389 -- 40,848 30,000 28,996 & Chief Executive 1992 302,884 188,000 -- 45,755 15,000 27,842 Officer Richard P. Byington 1994 259,822 36,000 -- -- 15,000 677,957 Executive Vice 1993 (6) -- -- -- -- -- President 1992 -- -- -- -- -- -- Henry A. Berling 1994 202,210 73,745 -- 18,440 37,500 18,941 Executive Vice 1993 170,883 72,391 -- 18,101 15,000 13,999 President 1992 168,964 78,410 -- 18,364 7,500 13,621 Sales & Marketing Robert E. Anderson, III 1994 187,649 53,000 -- 13,253 33,750 16,473 Executive Vice 1993 162,375 68,357 -- 17,112 15,000 21,149 President 1992 160,615 80,840 -- 18,961 7,500 20,012 Planning & Development Craig R. Smith 1994 178,654 70,110 -- 17,528 33,750 13,666 Executive Vice 1993 127,307 65,760 -- 16,445 22,500 1,699 President 1992 93,615 32,983 -- 6,992 16,875 821 Chief Operating Officer
(1) The Company has no Long-Term Incentive Plans as defined by Item 402(a)(7)(iii) of Regulation S-K.
(2) None of the Named Executive Officers received Other Annual Compensation in excess of the lesser of $50,000 or 10% of combined salary and bonus for fiscal years 1994, 1993 or 1992.
(3) Aggregate restricted stock holdings and values at December 31, 1994 for the
Named Executive Officers are as follows: (i) Mr. Minor: 12,282 shares,
$175,019; (ii) Mr. Berling: 5,014 shares, $71,450; (iii) Mr. Anderson:
5,019 shares, $71,521; and (iv) Mr. Smith; 2,409 shares, $34,328. Mr. Byington has no
restricted stock holdings. Dividends are paid on restricted stock at the same rate as all shareholders of record.
(4) No SARs were granted in 1994, 1993 or 1992.
(5) Includes in 1994 for (i) Mr. Minor: $3,553 company contributions to defined contribution plans, $26,117 benefit attributable to company-owned life insurance policy; (ii) Mr. Byington: $1,000 company contributions to defined contribution plans, $2,260 company-paid life insurance premiums, $674,967 paid pursuant to rights granted under a Stuart Medical phantom stock plan which vested upon the Company's acquisition of Stuart Medical on May 10, 1994; (iii) Mr. Berling: $18,941 benefit attributable to company-owned life insurance policy; (iv) Mr. Anderson: $2,661 company contributions to defined contribution plans, $13,812 benefit attributable to company-owned life insurance policy; and (v) Mr. Smith: $2,880 company contributions to defined contribution plans, $10,786 benefit attributable to company-owned life insurance policy.
(6) Mr. Byington, who was previously the President and Chief Executive Officer of Stuart Medical, served as Executive Vice President of the Company from May 10, 1994 through December 31, 1994.
EXECUTIVE SEVERANCE AGREEMENTS: In 1989, the Board of Directors authorized the Company to enter into Severance Agreements (the "Severance Agreements") with certain officers of the Company in order to encourage key management personnel to remain with the Company and to avoid distractions regarding potential or actual changes in control of the Company.
The Severance Agreements include senior vice presidents and higher ranking corporate officers, including the Named Executive Officers, who have been employed by the Company for a period of at least one year and also vice presidents who have been employed by the Company for at least ten years and are approved for participation by the Compensation and Benefits Committee.
The Severance Agreements provide for the payment of a severance benefit if such participant's employment with the Company is terminated for any reason, other than as a consequence of death, disability, or normal retirement, within two years after a Change in Control of the Company (as defined in the Severance Agreements). The severance benefit is equal to 2.99 times the average of the participant's total annual compensation from the Company, including all bonuses, which was included in gross income for income tax purposes for the five calendar years preceding the Change in Control of the Company, provided, however, no payments will be made to participants which would be treated as an "excess parachute payment" under Section 280G of the Internal Revenue Code.
Each Severance Agreement continues in effect through December 31, 1995, and unless notice is given to the contrary, the term is automatically extended for an additional year at the end of each year.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of options made during 1994 under the Company's 1993 Stock Option Plan to the Named Executive Officers. The Company granted no SARs during 1994.
Grant Date Individual Grants(1) Value(2) Number of Securities % of Total Grant Underlying Options Granted Exercise or Date Options to Employees Base Price Expiration Present Name Granted in Fiscal Year ($/Share) Date Value($) G. Gilmer Minor, III 90,000 9.3 15.417 5/10/2004 $690,012 Richard P. Byington 15,000 1.6 15.417 5/10/2004 115,002 Henry A. Berling 37,500 3.9 15.417 5/10/2004 287,505 Robert E. Anderson, III 33,750 3.5 15.417 5/10/2004 258,754 Craig R. Smith 33,750 3.5 15.417 5/10/2004 258,754
(1) Options are exercisable beginning on the first anniversary of grant date, with 40% being exercisable at that time and an additional 30% and 30% becoming exercisable on the second and third anniversary of grant date, respectively.
(2) Based upon Black Scholes option valuation model. Volatility is based on the variance of the rate of return as measured over the most recent 180 trading days prior to the grant. Other assumptions include a riskless rate of return of 7.33%, annual dividend yield of 1.17%, and option maturity of ten years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named Executive Officers concerning the exercise of options during 1994, and unexercised options held by them on December 31, 1994. There were no SARs exercised during 1994 or outstanding on December 31, 1994.
Number of Value of Securities Unexercised Underlying In-the-Money Unexercised Options at Options at FY End FY End Shares Acquired Value Exercisable/ Exercisable/ Name Upon Exercise Realized Unexercisable Unexercisable G. Gilmer Minor, III 31,500 $176,542 47,250/123,750 $261,578/192,949 Richard P. Byington 0 0 0/ 15,000 0/ 0 Henry A. Berling 11,813 131,526 39,375/ 54,375 208,232/ 96,474 Robert E. Anderson, III 11,813 135,462 39,375/ 50,625 208,232/ 96,474 Craig R. Smith 0 0 32,476/ 52,312 190,782/105,143
PENSION PLAN. The Company provides retirement benefits under a defined benefit pension plan (the "Pension Plan") pursuant to which benefits are based upon both length of service and compensation. All full-time employees of the Company become participants in the Pension Plan after one year of service and the attainment of the age of 21 years. Pension Plan benefits are determined under a formula based on an individual's earnings and years of credited service. Funding is determined on an actuarial basis.
The following table shows estimated annual benefits payable at normal retirement age of 65 years to persons with specified remuneration and years of service, under the Pension Plan:
Average Straight Life Annuity Benefits Based Average on Years of Credited Service Compensation(1) 15 yrs. 20 yrs. 25 yrs. 30 yrs. 35 yrs. $ 125,000 $21,772 $28,049 $34,327 $40,605 $46,883 150,000 25,859 33,452 41,046 48,639 56,232 175,000 29,946 38,855 47,764 56,673 65,582 200,000 33,895 44,120 54,344 64,589 74,793
(1) Average compensation represents compensation based upon a benefit formula applied to an employee's career average earnings, which approximates the amount of salary set forth in the Summary Compensation Table. The maximum amount of covered compensation is $150,000, or some other amount as may be determined by the Secretary of Treasury pursuant to IRC Section 401(a)(17).
Benefits are computed on a straight-life annuity basis, and are not subject to offset for Social Security benefits or other amounts. The years of service credited for the Named Executive Officers under the Pension Plan are presently as follows: Mr. Minor, III, 31 years; Mr. Byington, 0 years; Mr. Berling, 28 years; Mr. Anderson, 26 years; and Mr. Smith, 5 years.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company provides supplemental retirement benefits to certain employees selected by the Compensation & Benefits Committee under the Supplemental Executive Retirement Plan (the "SERP"). The SERP entitles participants to receive a specified percentage of the participant's average base monthly salary during the five years preceding his retirement (in the case of the Named Executive Officers, 65%) reduced by the benefit payable under the Pension Plan and Social Security. The estimated annual benefits payable under the SERP upon retirement at normal retirement age for the Named Executive Officers are: Mr. Minor, III, $109,693; Mr. Berling, $38,610; Mr. Anderson, $46,471; and Mr. Smith, $48,236. Mr. Byington is not a participant in the SERP.
PROPOSAL 2. SELECTION OF INDEPENDENT ACCOUNTANTS
Action will be taken at the meeting to ratify the appointment by the Board of Directors of KPMG Peat Marwick LLP as the independent accountants of the Company. The Audit Committee and the Board of Directors recommend that the shareholders ratify their appointment. Unless otherwise directed, the persons named in the enclosed form of proxy intend to vote such proxy for the ratification of the appointment by the Board of Directors of KPMG Peat Marwick LLP as independent accountants of the Company.
Representatives of KPMG Peat Marwick LLP are expected to be present at the Annual Meeting of Shareholders. They will have the opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions from shareholders.
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to present proposals for action at the Company's Annual Meeting of Shareholders in 1996 must submit the proposals to the Company for inclusion in the Company's 1996 Proxy Statement not later than November 21, 1995 in writing at the address shown in the heading of this Proxy Statement.
The Company does not know of any other matter to be presented for action by the shareholders at the meeting. If any other matter properly comes before the meeting, it is intended that the persons named in the accompanying form of proxy will vote thereon in their discretion.
March 21, 1995
BY ORDER OF THE BOARD OF DIRECTORS
DREW ST. J. CARNEAL,
***********************************APPENDIX****************************** PROXY OWENS & MINOR, INC.
Solicited by the Board of Directors for the Annual Meeting of Shareholders
The undersigned hereby appoints Messrs. William F. Fife, James E. Ukrop and James E. Rogers, and each of them with the power of substitution, the proxy (and if the undersigned is a proxy, the substitute proxy) of the undersigned to vote all shares held of record on March 7, 1995 by the undersigned as directed below and in their discretion on all other matters which may properly come before the Annual Meeting of Shareholders of Owens & Minor, Inc., to be held on May 2, 1995 at 10:00 A.M. in the Corporate Office Building, 4800 Cox Road, Glen Allen, Virginia, and any adjournments or postponements thereof.
THE UNDERSIGNED DIRECTS SAID PROXIES TO VOTE AS SPECIFIED UPON THE ITEMS SHOWN HEREIN WHICH ARE REFERRED TO IN THE NOTICE OF ANNUAL MEETING AND AS SET FORTH IN THE PROXY STATEMENT.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
1. Election of Directors:
For a term of three years: Messrs. James B. Farinholt, Jr. and E. Moran Massey and Mrs. Anne Marie Whittemore.
( ) FOR all nominees listed ( ) WITHHOLD AUTHORITY ( ) WITHHELD for the following only: (except as marked to contrary) to vote for all nominees listed (Write the nominee's name in the space below)
2. Ratification of appointment of KPMG Peat Marwick LLP as independent
( ) FOR ( ) AGAINST ( ) ABSTAIN
(Continued and to be signed on back)
3. In their discretion the proxies are authorized to vote upon such other matters as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Date , 1995
Please sign exactly as your name appears
Attorneys-in-fact, executors, administrators, trustees and guardians should give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Shareholders who are present at the meeting may withdraw their proxy and vote in person if they so desire.