SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the Securities
Exchange Act of 1934
[ X ] Filed by Registrant
[ ] Filed by Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a- (6)e (2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to rule 14a-11
or Rule 14a-12
DUCKWALL-ALCO STORES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box) :
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(I) (4) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which
transaction applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the
filling fee is calculated and stat how it was
determined):
4) Proposed maximum aggregate value of
transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11 (a) (2) and identify the
filing for which the offset fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
_____________________________________________________________________________
<PAGE>
DUCKWALL-ALCO STORES, INC.
401 Cottage Street
Abilene, Kansas 67410
(785) 263-3350
April 28, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Duckwall-ALCO Stores, Inc., to be held at the principal offices of
the Company, located at 401 Cottage Street, Abilene, Kansas on
Thursday, May 25, 2000, commencing at 10:00 a.m., local time. The
business to be conducted at the meeting is described in the attached
Notice of Annual Meeting and Proxy Statement. In addition, there will
be an opportunity to meet with members of senior management and review
the business and operations of the Company.
Your Board of Directors joins with me in urging you to attend the
meeting. Whether or not you plan to attend the meeting, however,
please sign, date and return the enclosed proxy card promptly. A
prepaid return envelope is provided for this purpose. You may revoke
your proxy at any time before it is exercised and it will not be used
if you attend the meeting and prefer to vote in person.
Sincerely yours,
/s/ Glen L. Shank
Glen L. Shank
Chairman of the Board
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Duckwall-ALCO Stores, Inc., a Kansas corporation ("Duckwall" or the "Company"),
will be held at the principal executive offices of Duckwall located at 401
Cottage Street, Abilene, Kansas, on Thursday, May 25, 2000, commencing at
10:00 a.m., local time, and thereafter as it may from time to time be
adjourned, for the following purposes:
1. To elect five directors to hold office for a one-year term until
the 2001 Annual Meeting of the Stockholders of Duckwall and until
their respective successors are duly elected and qualified or
until their respective earlier resignation or removal;
2. To consider and act upon ratification and approval of the
selection of the accounting firm of KPMG LLP as the independent
auditors of Duckwall for the fiscal year ending January 28, 2001;
3. To consider and act upon any other matters which may properly
come before the Annual Meeting of the Stockholders or any
adjournment or adjournments thereof.
In accordance with the provisions of the Bylaws of the Company, the Board
of Directors has fixed the close of business on April 7, 2000 as the record
date for determination of the stockholders entitled to notice of, and to vote
at, the Annual Meeting of the Stockholders and any adjournment or adjournments
thereof.
All stockholders are cordially invited to attend the meeting. Whether or
not you intend to be present at the meeting, the Board of Directors of Duckwall
solicits you to sign, date and return the enclosed proxy card promptly. A
prepaid return envelope is provided for this purpose. You may revoke your
proxy at any time before it is exercised and it will not be used if you attend
the meeting and prefer to vote in person. Your vote is important and all
stockholders are urged to be present in person or by proxy.
By Order of the Board of Directors
/s/ Charles E. Bogan
Charles E. Bogan
Vice President and Secretary
April 28, 2000
Abilene, Kansas
<PAGE>
DUCKWALL-ALCO STORES, INC.
401 Cottage Street
Abilene, Kansas, 67410-2832
__________________
PROXY STATEMENT
__________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 2000
__________________
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Duckwall-
ALCO Stores, Inc., a Kansas corporation ("Duckwall" or the "Company"), in
connection with the solicitation of proxies by the Board of Directors of
Duckwall for use at the Annual Meeting of Stockholders to be held on Thursday,
May 25, 2000, and at any adjournment or adjournments thereof (the "Annual
Meeting"). The Annual Meeting will commence at 10:00 a.m., local time, and
will be held at the principal offices of the Company, located at 401 Cottage
Street, Abilene, Kansas, 67410-2832.
This Proxy Statement and the enclosed form of proxy were first mailed
to the Company's stockholders on or about April 28, 2000.
Proxies
You are requested to complete, date and sign the enclosed form of proxy
and return it promptly in the enclosed postage prepaid envelope. Shares
represented by properly executed proxies will, unless such proxies previously
have been revoked, be voted in accordance with the stockholders' instructions
indicated in the proxies. If no instructions are indicated, such shares will
be voted in favor of the election of the nominees for director named in this
Proxy Statement, in favor of ratifying the selection of the accounting firm
of KPMG LLP as Duckwall's independent auditors for the current fiscal year,
and, as to any other matter that properly may be brought before the Annual
Meeting, in accordance with the discretion and judgment of the appointed
attorneys-in-fact. A stockholder who has given a proxy may revoke it at any
time before it is exercised at the Annual Meeting by filing written notice of
revocation with the Secretary of the Company, by executing and delivering to
the Secretary of the Company a proxy bearing a later date, or by appearing at
the Annual Meeting and voting in person.
Voting at the Meeting
For purposes of voting on the proposals described herein, the presence
in person or by proxy of stockholders holding a majority of the total
outstanding shares of the Company's common stock, par value $0.0001 per
share ("Common Stock"), shall constitute a quorum at the Annual Meeting.
Only holders of record of shares of the Company's Common Stock as of the close
of business on April 7, 2000 (the "Record Date"), are entitled to notice of,
and to vote at, the Annual Meeting or any adjournment or adjournments thereof.
As of the Record Date, 4,485,077 shares of the Company's Common Stock were
outstanding and entitled to be voted at the Annual Meeting. Each share of
Common Stock is entitled to one vote on each matter properly to come before
the Annual Meeting.
Directors are elected by a plurality (a number greater than those cast
for any other candidates) of the votes cast by the stockholders present in
person or represented by proxy and entitled to vote at the Annual Meeting for
that purpose. The affirmative vote of a majority of the shares of the
Company's Common Stock present in person or
<PAGE>
represented by proxy and entitled to vote at the Annual Meeting, provided a
quorum is present, is required to ratify the selection of KPMG LLP as the
Company's independent auditors, and approve such other matters as properly
may come before the Annual Meeting or any adjournment thereof.
Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
Solicitation of Proxies
This solicitation of proxies for the Annual Meeting is being made by
the Company's Board of Directors. The Company will bear all costs of such
solicitation, including the cost of preparing and mailing this Proxy Statement
and the enclosed form of proxy. After the initial mailing of this Proxy
Statement, proxies may be solicited by mail, telephone, telegram, facsimile
transmission or personally by directors, officers, employees or agents of the
Company. Brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward soliciting materials to beneficial owners of
shares held of record by them, and their reasonable out-of-pocket expenses,
together with those of the Company's transfer agent, will be paid by the
Company.
A list of stockholders entitled to vote at the Annual Meeting will be
available for examination at least ten days prior to the date of the Annual
Meeting during normal business hours at the principal executive offices of
Duckwall located at 401 Cottage Street, Abilene, Kansas. The list also will
be available at the Annual Meeting.
ITEM 1
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five directors.
Robert L. Barcum resigned from the Board on March 23, 2000. One of the
purposes of this Annual Meeting is to elect five directors to serve for a
one-year term expiring at the Annual Meeting of Stockholders in 2001 and
until their respective successors are duly elected and qualified or until
their respective earlier resignation or removal. The Company does not intend
to fill the vacancy created by Mr. Barcum's resignation at this time. The
Board of Directors has designated Glen L. Shank, Dennis A. Mullin, Lolan C.
Mackey, Jeffrey Macke, and Robert L. Woodard as the five nominees proposed
for election at the Annual Meeting. Unless authority to vote for the
nominees or a particular nominee is withheld, it is intended that the shares
represented by properly executed proxies in the form enclosed will be voted
for the election as directors of all nominees. In the event that one or more
of the nominees should become unavailable for election, it is intended that
the shares represented by the proxies will be voted for the election of such
substitute nominee or nominees as may be designated by the Board of Directors,
unless the authority to vote for both nominees or for the particular nominee
who has ceased to be a candidate has been withheld. Each of the nominees has
indicated his willingness to serve as a director if elected, and the Board of
Directors has no reason to believe that any nominee will be unavailable for
election.
The Board of Directors recommends that you vote for the election of Glen
L. Shank, Dennis A. Mullin, Lolan C. Mackey, Jeffrey Macke, and Robert L.
Woodard as directors.
<PAGE>
Nominees
The following table sets forth certain information with respect to each
person nominated by the Board of Directors for election as a director at the
Annual Meeting.
Present
Position
With Director
Name Age Duckwall Since
________________________ ___ ________________________ ________
Glen L. Shank 55 Chairman and President 1988
Dennis A. Mullin (1) 52 Director 1991
Lolan C. Mackey(2) 54 Director 1998
Jeffrey Macke(1)(2) 31 Director 1998
Robert L. Woodard(1)(2) 39 Director 1998
_______________
(1) Member of Audit Committee
(2) Member of Compensation Committee
The business experience of each of the directors of the Company during
the last five years is as follows:
Glen L. Shank has served as President of the Company since June 1988
and as Chairman of the Board since May 1991. Between 1982 and 1988, Mr.
Shank served as Vice President of Merchandising of the Company. Prior to
1982, Mr. Shank served as a Buyer and as a Merchandise Manager for the
Company. Mr. Shank has approximately 33 years of experience in the retail
industry.
Dennis A. Mullin is the President and Chief Executive Officer of Steel
& Pipe Supply Co., Inc., and has served in various capacities with that
company for more than the last five years. He also serves as a director of
Commerce Bank, Kansas City.
Lolan C. Mackey is currently a partner of Diversified Retail Solutions
LLC, a retail senior management advisory firm. For 25 years, Mr. Mackey was
employed in various capacities by Wal-Mart Stores, Inc. From 1990 to 1994,
he was Vice President of Store Planning. From 1994 to 1997, he was Vice
President of International Operations.
Jeffrey Macke has been a partner and lead investor with JKM Investments,
a San Francisco based hedge fund, since 1995. From 1993 to 1995, he was a
senior consultant for Senn-Delaney/Arthur Andersen LLP.
Robert L. Woodard has been the Chief Investment Officer of the Kansas
Public Employees Retirement System since 1996. From 1994 to 1996, he was
Vice-President, and General Manager of FB Capital Management of Kansas, Inc.
<PAGE>
Compensation of Directors
Non-employee directors of the Company receive compensation of $4,000 per
year, payable quarterly, plus reimbursement for expenses incurred in connection
with attendance at Board of Directors meetings. Employee directors of the
Company receive no compensation for serving on the Board or any committee
thereof.
On March 18, 1993, the Company entered into an employment agreement with
Glen L. Shank, President of the Company. The current term of the employment
agreement expires on January 31, 2002, subject to certain termination
provisions provided in the agreement. During the 2000 Fiscal Year, the
current employment agreement provided for a base salary of $275,000. In the
event of death or disability, Mr. Shank or his representative shall be
entitled to his salary through the end of the month in which his death occurs
or the last day of the sixth consecutive month of his disability, as the case
may be.
Meetings of the Board and Committees
During the fiscal year ended January 30, 2000, (the "2000 Fiscal Year"),
the Board of Directors of Duckwall held seven meetings. All of the directors
attended at least 75% of the meetings of the Board of Directors and the
committees of the Board of Directors on which they served which were held
during the 2000 Fiscal Year.
Pursuant to Duckwall's Bylaws, the Board of Directors has established
Audit and Compensation Committees of the Board of Directors. There currently
is no Nominating Committee or other committee of the Board of Directors
performing similar functions.
The Audit Committee assists the Board of Directors in fulfilling its
responsibilities with respect to Duckwall's accounting and financial reporting
practices and in addressing the scope and expense of audit and related
services provided by Duckwall's independent auditors. The Audit Committee is
responsible for recommending the appointment of Duckwall's independent
auditors and reviewing the terms of their engagement, reviewing Duckwall's
policies and procedures with respect to internal auditing, accounting and
financial controls and reviewing the scope and results of audits and any
auditor recommendations. The current members of the Audit Committee are
Dennis A. Mullin, Jeffrey Macke, and Robert L. Woodard. The Audit Committee
met twice during the 2000 Fiscal Year.
The Compensation Committee makes recommendations to the Board of
Directors regarding the compensation and benefits of Duckwall's executive
officers. The Compensation Committee also administers the Company's Incentive
Stock Option Plan. The current members of the Compensation Committee are
Lolan C. Mackey, Jeffrey Macke, and Robert L. Woodard. The Compensation
Committee met five times during the 2000 Fiscal Year.
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table sets forth for the fiscal years ending January 30,
2000, January 31, 1999, and February 1, 1998, respectively, the compensation
of the Company's chief executive officer and of each of the Company's four
other most highly compensated executive officers whose remuneration for the
2000 Fiscal Year was in excess of $100,000 for services to the Company in all
capacities:
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Compensation
Annual Compensation Payouts
_________________________ __________________________
Securities
Under- All
lying Other
Name and Fiscal Options/ Compen-
Principal Position Year Salary Bonus(1) SARs sation (2)
___________________________ ______ ____________ ____________ ____________ ____________
<S> <C> <C> <C> <C> <C>
Glen L. Shank 2000 $275,500 $108,282 50,000 $4,559(3)
Chairman and President 1999 190,500 0 4,000 5,270(4)
1998 175,474 85,000 7,800 5,736(5)
James E. Schoenbeck 2000 149,350 43,182 30,000 4,750(3)
Vice President-Operations 1999 145,450 36,000 3,500 5,461(4)
and Advertising 1998 140,426 53,500 5,800 5,927(5)
James R. Fennema 2000 144,000 41,635 25,000 4,593(3)
Vice President- 1999 139,675 34,000 3,500 5,304(4)
Merchandise 1998 135,150 51,000 5,800 5,770(5)
Richard A. Mansfield 2000 138,000 31,920 22,500 4,696(3)
Vice President-Finance 1999 133,970 28,000 2,500 5,407(4)
and Treasurer (6) 1998 98,459 30,000 9,600 0
Charles E. Bogan 2000 125,500 19,000 10,000 6,386(3)
Vice President, Secretary 1999 122,775 24,000 0 7,121(4)
and General Counsel 1998 120,275 30,000 3,800 7,519(5)
___________________________ ______ ____________ ____________ ____________ ____________
</TABLE>
_______________________
(1) Reflects bonus earned for the fiscal years ending January 30, 2000,
January 31, 1999, and February 1, 1998, respectively.
(2) Excludes perquisites and other benefits, unless the aggregate
amount of such compensation is the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for the named
executive officer.
(3) Includes contributions made by the Company for fiscal 2000 to the
named individual's account in the Duckwall-ALCO Stores, Inc. Profit
Sharing Plan and Trust (the "Profit Sharing Plan") (together with
forfeitures) in the amounts of $3,658 each for Mr. Shank, Mr.
Schoenbeck, Mr. Fennema, and Mr. Mansfield, and $3,437 for Mr.
Bogan. Also includes premiums paid by the Company with respect to
whole life insurance for each of the named individuals for fiscal
2000 in the amounts of $901 for Mr. Shank, $1,092 for Mr.
Schoenbeck, $935 for Mr. Fennema, $1,038 for Mr. Mansfield, and
$2,949 for Mr. Bogan.
(4) Includes contributions made by the Company for fiscal 1999 to the
named individual's account in the Profit Sharing Plan (together
with forfeitures) in the amounts of $4,369 each for Mr. Shank, Mr.
Schoenbeck, Mr. Fennema, and Mr. Mansfield, and $4,172 for
<PAGE>
Mr. Bogan. Also includes premiums paid by the Company with respect
to whole life insurance for each of the named individuals for fiscal
1999 in the amounts of $901 for Mr. Shank, $1,092 for Mr.
Schoenbeck, $935 for Mr. Fennema, $1,038 for Mr. Mansfield, and
$2,949 for Mr. Bogan.
(5) Includes contributions made by the Company for fiscal 1998 to the
named individual's account in the Profit Sharing Plan (together
with forfeitures) in the amounts of $4,835 each for Mr. Shank, Mr.
Schoenbeck, and Mr. Fennema, and $4,570 for Mr. Bogan. Also
includes premiums paid by the Company with respect to whole life
insurance for each of the named individuals for fiscal 1998 in the
amounts of $901 for Mr. Shank, $1,092 for Mr. Schoenbeck, $935 for
Mr. Fennema and $2,949 for Mr. Bogan.
(6) Mr. Mansfield became Vice President-Finance and Treasurer on
May 29, 1997.
Option Grants, Exercises and Holdings
The following table provides further information concerning grants of
stock options pursuant to the Duckwall-ALCO Stores, Inc., Incentive Stock
Option Plan during the 2000 Fiscal Year to the named executive officers who
received grants:
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants (1)
_____________________________________________________
Potential
% of Realized Value at
Number of Total Assumed Annual
Securities Options Rates of Stock Price
Underlying Granted to Exercise Appreciation
Options Employees or Base for Option Term
Granted in Fiscal Price Expiration ____________________
Name (#) Year ($/Sh) Date 5%($) 10%($)
______________________ __________ __________ ________ _________________ _________ ________
<S> <C> <C> <C> <C> <C> <C>
Glen L. Shank 50,000 13.31% 7.98 November 22, 2004 110,236 243,593
James E. Schoenbeck 30,000 7.99% 7.98 November 22, 2004 66,142 146,156
James R. Fennema 25,000 6.66% 7.98 November 22, 2004 55,118 121,797
Richard A. Mansfield 22,500 5.99% 7.98 November 22, 2004 49,606 109,617
Charles E. Bogan 10,000 2.66% 7.98 November 22, 2004 22,047 48,719
______________________ __________ __________ ________ _________________ _________ ________
</TABLE>
(1) The options were granted with an exercise price equal to the fair
market value of the Company's Common Stock on November 23, 1999.
Except in the event of death, if an optionee ceases to be employed
by the Company, his or her option shall terminate on the earlier of
(i) the expiration of the option, or (ii) the thirtieth day following
such termination of employment. In the event of the death of an
optionee, the option may be exercised by his or her legal
representatives on the earlier of (i) the expiration of the option,
or (ii) within twelve months of the date of death. Upon a merger,
consolidation, reorganization or liquidation of the Company, the
option may, in the discretion of the Compensation Committee, become
immediately exercisable until the day immediately prior to the date
the contemplated transaction is consummated. The options granted
were granted on November 23, 1999 and expire on November 22, 2004.
The options become exercisable in equal amounts over a four year
period beginning one year subsequent to their grant date.
None of the named executive officers exercised options during the 2000
Fiscal Year.
<PAGE>
<TABLE>
Last Fiscal Year End Option Values
<CAPTION>
_________________________________________________________________
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End (#) FY-End ($) (1)
_________________________ ___________ _____________ ___________ _____________
Name Exercisable Unexercisable Exercisable Unexercisable
_________________________ ___________ _____________ ___________ _____________
<S> <C> <C> <C> <C>
Glen L. Shank 12,650 57,900 0 0
James E. Schoenbeck 9,325 36,275 0 0
James R. Fennema 8,875 31,225 0 0
Richard A. Mansfield 5,425 29,175 0 0
Charles E. Bogan 5,550 12,350 0 0
_________________________ ___________ _____________ ___________ _____________
</TABLE>
______________
(1) The value of unexercised in-the-money options equals the difference
between the option exercise price and the closing price of Duckwall-
ALCO Stores, Inc. stock at fiscal year end, multiplied by the number
of shares underlying the options. The closing price of Duckwall-ALCO
stock on January 30, 2000 was $7.81.
Emoloyee Stock Option Plan
In May 1993, the Company adopted the Duckwall-ALCO Stores, Inc.
Incentive Stock Option Plan (the "Plan") to encourage key employees of the
Company to participate in the ownership of the Company and promote the
success of the business of the Company. Presently, 650,000 shares of
Common Stock are authorized for issuance upon exercise of options under the
Plan. The number of shares and option price covered by outstanding options
may be adjusted in the event of any stock dividend, stock split,
reorganization, merger, consolidation, liquidation or any combination or
exchange of shares of Common Stock. The Plan is administered by the
Compensation Committee of the Board of Directors who are appointed by the
Board. The price of each option shall be its fair market value as determined
by the Compensation Committee if the Common Stock is not traded on a public
market. Employees of the Company eligible to receive options are those selected
by the Compensation Committee in its sole discretion on the basis that such
employees have made material contributions to the successful performance of
the Company in the past, or are expected to make material contributions in
the future.
Of the 650,000 shares of Common Stock available under the Plan,
an aggregate of 548,987 shares were subject to options as of April 1, 2000.
<PAGE>
Compensation Committee Report
This report has been prepared by the Compensation Committee of
the Board of Directors, which currently consists of Lolan C. Mackey, Jeffrey
Macke, and Robert L. Woodard. Mr. Robert L. Barcum served on the Compensation
Committee until his resignation from the Board of Directors on March 23, 2000.
The Committee has general responsibility for the establishment, direction and
administration of all aspects of the compensation policies and programs for
the Company's executive officers. During Fiscal 2000, the Compensation
Committee was composed of four independent outside directors, none of whom
is an officer or employee of the Company. The Chief Executive Officer of
the Company, and certain other executive officers of the Company, may attend
meetings of the Compensation Committee, but are not present during discussions
or deliberations regarding their own compensation. The Compensation
Committee meets at least annually or more frequently as the Company's Board
of Directors may request.
Compensation Policy. The Company's executive compensation policy
is premised upon three basic goals: (1) to attract and retain qualified
individuals who provide the skills and leadership necessary to enable the
Company to achieve both its short and long-term earnings growth and return
on investment objectives; (2) to create incentives to achieve Company and
individual performance objectives through the use of performance-based
compensation programs; and (3) to link executive pay to corporate performance,
including share price, recognizing that there is not always a direct and
short-term correlation between executive performance and share price. The
Company's compensation program is reviewed annually to ensure that
compensation levels and incentive opportunities are competitive and reflect
the performance of the Company and the individual executive officer.
At a meeting on March 22, 1999, the Compensation Committee determined
that they would recommend to the Board of Directors that the Company engage
an outside compensations consultant to assess and recommend a compensation
plan for the top five executive members of management. The plan should include
base salary, bonus, stock options, and other benefits. Upon approval by the
Board, the Committee contacted six (6) firms requesting proposals. In May,
the Committee reviewed all proposals that had been received and determined
that two applicants should be interviewed. Upon completion of the interview
process, the Committee recommended to the Board on May 27, 1999, that the
firm of Watson Wyatt and Company, Dallas, Texas, be retained for the purpose
of evaluating the compensation of the five executive officers and further
submitting a plan for future compensation. On July 29, 1999, at a Special
Meeting of the Board of Directors, a representative of Watson Wyatt and
Company appeared before the Board and presented that firm's Compensation
Audit and Report (the Report). Based upon the Report, the Board directed
the Compensation Committee to meet and review the Report and submit a report
and recommendation at the meeting of the Board of Directors on August 26,
1999. The committee met on August 16, 1999, and recommended to the Board:
1) That the base compensation of the President and Chief Executive officer
be $275,000 retroactive to the first of the fiscal year, and 2) That an
Annual Incentive or Bonus Plan be adopted for the current fiscal year. The
Plan will provide for threshold, target and outstanding performance levels
for each measure and for each executive position. For the fiscal year ending
January 30, 2000, the performance levels to be used are net income and gross
margin return on investment. In future years, same store sales will be used
as an additional performance measure. The Board of Directors unanimously
approved the recommendation.
Compensation Components. The principal components of the
compensation program for executive officers are base salary, Annual Incentive
Bonuses, and employee stock options. Management has been granted options in
the past to provide linkage between executive pay and corporate performance
and to provide incentive to continue employment with the Company. The
Compensation Committee believes that the total compensation package awarded
to top management is fair based upon the total compensation packages awarded
to top management at comparable companies and the information contained in
the Report.
Base Salary. The Compensation Committee reviews each executive
officer's base salary from the previous year and, in determining whether to
adjust base salary levels, takes into account the Chief Executive Officer's
recommendations and assessments of each executive's growth and effectiveness
in the performance of his or her duties and the Company's performance. For
Fiscal 2000, base salary levels for the executive officers, excluding the
President,
<PAGE>
were increased by approximately two to three percent from Fiscal
1999 levels. Based upon the recommendation contained in the Watson Wyatt
Executive Compensation Audit and Report, the salary of the Chief Executive
Officer was increased by approximately 45%. An analysis of the role played
by each individual executive in generating the Company's performance included
a consideration of the executive's specific responsibilities, contributions
to the Company's business, and length of service. Based upon the information
contained in the Watson Wyatt Compensation Audit and Report, base pay levels
for the executive officers are competitive within a range that is considered
in the Compensation Committee's judgment, to be reasonable and necessary.
Bonus. In addition to the executive officers who participate in the
Annual Incentive Bonus Plan, certain other employees of the Company who, in
the discretion of the Chief Executive Officer, are considered to be in a
position to significantly influence the Company's results or operations and
level of profits are eligible to receive annual bonus awards. Annual bonus
opportunities allow the Company to communicate specific goals that are of
primary importance during the coming year and motivate employees to achieve
these goals. The selection of the persons eligible to participate in the
bonus program is necessarily subjective in nature and is made after taking
into account management's assessment of each person's level of responsibility.
The company establishes a bonus pool at the beginning of each year which is
included in the Company's operating budget for that year. Each of the
participants in the bonus program is evaluated based upon a number of
criteria related to management skills and personal characteristics. In
addition, each participant is evaluated based upon his or her
accomplishments for the year compared to the goals that were established
at the end of the previous year. The size of the bonus pools, the persons
who are eligible to receive bonuses, the targets established for bonus
participants and the amount of bonus payments can vary from year to year
and are subject to the discretion of the Compensation Committee and
management.
Stock Options. Since the Company's policy is to retain qualified
individuals to enable the Company to achieve both short- and long-term
earnings growth, it is important that there be a long-term component of the
compensation policy. The Company's Incentive Stock Option Plan, which was
approved by the Stockholders in 1993, and amended in 1997 and 1999, provides
the vehicle for addressing long-term rewards. The Compensation Committee
administers the Stock Option Plan. The Chief Executive Officer provides
recommendations to the Compensation Committee who may grant the options at
any time. The options permit the holder to purchase shares of the Company's
stock at a price equal to the fair market value of the stock at the time of
the grant. Thus, the options gain value only to the extent the stock price
exceeds the option price. To date, all of the options that have been
granted become exercisable in equal amounts over a four-year period
beginning one year subsequent to the grant date.
Compensation Committee Interlocks
Robert L. Barcum, Lolan C. Mackey, Jeffrey Macke, and Robert L.
Woodard each served on the Compensation Committee of the Board of Directors
during the 2000 Fiscal Year. Mr. Barcum resigned from the Board of Directors
on March 23, 2000.
Insider Participation
Dennis A. Mullin is President and Chief Executive Officer of Steel &
Pipe Supply Co., Inc., which owns one store leased to the Company. Mr.
Mullin is Chairman of MBI, Inc., which owns one store leased to the Company.
Mr. Mullin is a partner in DAB #1, which owns one store leased to the Company.
Mr. Mullin is also a co-trustee and/or co-executor of three trusts or estates
which own stores leased to the Company. During the 2000 Fiscal Year, the
Company paid fixed rentals aggregating approximately $644,981 and percentage
rentals aggregating approximately $13,716 to these entities. The Company
also pays the taxes, insurance and maintenance on the stores leased from
these entities. Each of the store leases has a remaining term of more than
three years.
Lolan C. Mackey is a partner in Diversified Retail Solutions LLC, a
retail senior management advisory firm. On March 20, 2000, the Company
entered into an agreement with Diversified Retail Solutions to provide
certain consulting services to the Company. The consideration to be paid by
the Company for these services is $186,500 plus reimbursement of out of pocket
expenses. The date for commencement of services is March 27, 2000. As of
March 27, 2000, no payments had been made by the Company. Mr. Mackey will
not participate in the rendering of the consulting services pursuant to the
agreement.
<PAGE>
Glen L. Shank, James E. Schoenbeck, Richard A. Mansfield, and Charles
E. Bogan are four of the six members of the administrative committee of the
Duckwall-ALCO Stores, Inc. Profit Sharing Plan and Trust (the "Profit Sharing
Plan"). As of March 17, 2000, the plan did not own any shares of Common
Stock of the Company.
Company Performance
The following graph compares the cumulative total return of the
Company, the Nasdaq Stock Market Index, and the Nasdaq Retail Trade Stocks
Index (dividends reinvested). The graph assumes $100 was invested on
October 27, 1994 in Duckwall-ALCO Stores, Inc. Common Stock, the Nasdaq Stock
Market Index, and the Nasdaq Retail Trade Stocks Index (the "Peer Group").
<TABLE>
Comparative Total Stock Returns
<CAPTION>
10/24/94 01/29/95 01/28/96 02/02/97 02/01/98 01/31/99 01/30/00
<S> <C> <C> <C> <C> <C> <C> <C>
Duckwall-Alco Stores, Inc. 100 102.778 108.333 145.833 161.111 147.222 86.811
Nasdaq Composite Index 100 97.497 137.789 180.642 213.475 333.135 511.520
Nasdaq Retail Stock Index 100 90.123 101.859 125.271 146.473 178.529 149.056
</TABLE>
Based upon the data reflected in the table, a $100 investment in the
Company's stock would have a total return value of $86.81 at fiscal year-end,
as compared to $511.52 for the Composite Nasdaq Index and $149.06 for the
Nasdaq Retail Stock Index.
There can be no assurances that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company does not make or endorse any predictions as to the future
stock performance.
<PAGE>
OWNERSHIP OF DUCKWALL COMMON STOCK
The following table sets forth certain information as of March 17, 2000
(as of December 31, 1999 for Goldman, Sachs Asset Management, Heartland
Advisors, Inc., Dimensional Fund Advisors, Inc., and Wellington Management
Company LLP) regarding the beneficial ownership of Duckwall Common Stock by
each person known to the Board of Directors to own beneficially 5% or more of
the Company's Common Stock, by each director of the Company, by each executive
officer named in the Summary Compensation Table under "Executive Compensation
and Other Information--Executive Compensation" and by all directors and
officers of the Company as a group. All information with respect to beneficial
ownership has been furnished by the respective directors, officers or 5% or
more stockholders, as the case may be, or by documents filed with the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Name Beneficial Ownership Share Outstanding
____________________________________________ ____________________ ___________________
<S> <C> <C>
Glen L. Shank (1)(2) 19,800 *
James E. Schoenbeck (1)(3) 11,325 *
James R. Fennema (1)(4) 13,175 *
Richard A. Mansfield (1)(5) 5,425 *
Charles E. Bogan (1)(6) 8,550 *
Lolan C. Mackey (7) 0 *
Jeffrey Macke (8) 446,300 9.70
Dennis A. Mullin (9) 111,545 2.43
Robert L. Woodard (10) 0 *
KDF, a Kansas Nominee (10) 696,500 15.14
Goldman, Sachs Asset Management (11) 889,800 19.35
Heartland Advisors, Inc. (12) 495,800 10.78
Dimensional Fund Advisors, Inc. (13). 366,000 7.96
Wellington Management Company LLP (14) 298,100 6.48
All directors and officers
as a group (10 in group) 616,120 13.40
____________________________________________ ____________________ ___________________
* Less than one percent.
(1) The address for this person is 401 Cottage Street, Abilene, Kansas
67410-2832.
(2) Mr. Shank owns options to purchase 70,550 shares of Common Stock.
Of those options, 12,650 are currently exercisable.
(3) Mr. Schoenbeck owns options to purchase 45,600 shares of Common Stock.
Of those options, 9,325 are currently exercisable.
(4) Mr. Fennema owns options to purchase 40,100 shares of Common Stock.
Of those options, 8,875 are currently exercisable.
(5) Mr. Mansfield owns options to purchase 34,600 shares of Common Stock.
Of those options, 5,425 are currently exercisable.
(6) Mr. Bogan owns options to purchase 17,900 shares of Common Stock.
Of those options, 5,550 are currently exercisable.
(7) The address for Mr. Mackey is Diversified Retail Solutions LLP, 1913
N. Walton Blvd., Bentonville, AR 72712.
<PAGE>
(8) Jeffrey Macke owns 20,000 shares of Common Stock and is a partner in
JKM Investments, LLC, which owns 62,200 shares of Common Stock.
Mr. Macke beneficially owns the following shares: Macke Limited
Partnership, 3,500 shares of Common Stock; Kenneth A. Macke and
Kathy Macke, 356,100 shares of Common Stock; Kenneth A. Macke Trust,
1,000 shares of Common Stock; Melissa Macke, 2,500 shares of Common
Stock; and Michael Macke, 1,000 shares of Common Stock. The address
for Mr. Macke is 2001 Union Street, Suite 320, San Francisco, CA 94123.
(9) Dennis A. Mullin owns 4,000 shares of Common Stock and is the President
and Chief Executive Officer of Steel & Pipe Supply Co., Inc., which
owns 98,865 shares of Common Stock. The address of Steel & Pipe Supply
Co., Inc., is 555 Poyntz, Manhattan, Kansas 66502. Mr. Mullin is also
an executive officer of Business Building, Inc. which own 840 shares
of Common Stock and of MBI, Inc., which owns 5,840 shares of Common
Stock. Mr. Mullin is the co-trustee of an estate that owns 700 shares
of Common Stock and the executor of an estate that owns 1,300 shares
of Common Stock. The address for Mr. Mullin is 555 Poyntz, Manhattan,
Kansas 66502.
(10) KDF is the nominee holder of shares of Common Stock on behalf of the
Kansas Public Employees Retirement System ("KPERS"). KPERS has
investment and voting power with regard to these shares. Robert L.
Woodard is the Chief Investment Officer of KPERS. Mr. Woodard has
disclaimed beneficial ownership of all shares of Common Stock
beneficially owned by KDF and KPERS. The address of KPERS is 611 S.
Kansas Avenue, Suite 200, Topeka KS 66603.
(11) The address of Goldman, Sachs and Company is 85 Broad Street, New York,
New York 10004.
(12) The address of Heartland Advisors, Inc. is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
(13) The address of Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401.
(14) The address of Wellington Management Company LLP is 75 State Street,
Boston, Massachusetts 02109.
ITEM 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Board's Audit
Committee, has selected the independent certified public accounting firm of
KPMG LLP as Duckwall's independent auditors to audit the consolidated
financial statements of the Company for the year ending January 28, 2001.
Stockholders will have an opportunity to vote at the Annual Meeting on
whether to ratify the Board's decision in this regard.
KPMG LLP has served as the Company's independent auditors since 1969.
A representative of KPMG LLP is expected to be present at the Annual Meeting.
Such representative will have an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions.
Submission of the selection of the independent auditors to the
stockholders for ratification will not limit the authority of the Board of
Directors to appoint another independent certified public accounting firm to
serve as independent auditors if the present auditors resign or their
engagement otherwise is terminated.
The Board of Directors recommends that you vote for approval of the
selection of KPMG LLP.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires Duckwall's directors and executive officers, and persons who
own more than 10% of the Company's outstanding Common Stock, to file with the
Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership in Duckwall Common Stock and other equity securities.
Securities and Exchange Commission regulations require directors, executive
officers, and greater than 10% stockholders to furnish Duckwall with copies
of all Section 16(a) reports they file.
To Duckwall's knowledge, based solely upon review of the copies of
such reports furnished to Duckwall and written representations that no other
reports were required, during the 2000 Fiscal Year all Section 16(a) filing
requirements applicable to its directors, executive officers, and greater
than 10% stockholders were complied with.
OTHER BUSINESS OF THE MEETING
The Board of Directors is not aware of, and does not intend to
present, any matter for action at the Annual Meeting other than those
referred to in this Proxy Statement. If, however, any other matter properly
comes before the Annual Meeting or any adjournment, it is intended that the
holders of the proxies solicited by the Board of Directors will vote on such
matters in their discretion in accordance with their best judgment.
ANNUAL REPORT
Duckwall's Annual Report to Stockholders, containing financial
statements for the year ended January 30, 2000, is being mailed with this
Proxy Statement to all stockholders entitled to vote at the Annual Meeting.
Such Annual Report is not to be regarded as proxy solicitation material.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
It is presently anticipated that the 2001 Annual Meeting of
Stockholders will be held on May 24, 2001. Stockholder proposals intended
for inclusion in the proxy statement for the 2001 Annual Meeting of
Stockholders must be received at the Company's offices, located at 401
Cottage Street, Abilene, Kansas, 67410-2832, within a reasonable time before
the solicitation with respect to the meeting is made, but in no event later
than December 31, 2000. Proxies solicited in connection with the 2001 Annual
Meeting of Stockholders shall confer discretionary voting authority on the
appointed proxyholders to vote on certain stockholder proposals that are not
presented for inclusion in the proxy materials unless the proposing
stockholder notifies the Company by March 15, 2001 that such proposal will
be made at the meeting. Such proposals must also comply with the other
requirements of the proxy solicitation rules of the Securities and Exchange
Commission. Stockholder proposals should be addressed to the attention of
the Secretary of Duckwall.
By Order of the Board of Directors
/s/ Charles E. Bogan
Charles E. Bogan
Secretary
April 28, 2000
Abilene, Kansas
<PAGE>
</TABLE>
