<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.1a-11(c) or Section
240.1a-12
KANEB SERVICES, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
KANEB SERVICES, INC.
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $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
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;*
4) Proposed maximum aggregate value of transaction:
*Set forth amount on which the filing is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes:
<PAGE> 2
KANEB SERVICES, INC.
2435 North Central Expressway
Suite 700
Richardson, Texas 75080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 22, 1995
To the Stockholders of
Kaneb Services, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of
Kaneb Services, Inc. (the "Company") will be held at 265 Peachtree Center
Avenue, Atlanta, Georgia 30303, at 2:00 P.M., Eastern time, on June 22, 1995,
for the following purposes:
(1) To elect a board of directors;
(2) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on April 27, 1995,
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
Stockholders are cordially invited to attend the meeting in person.
Those who will not attend and who wish their stock voted are requested to sign,
date and promptly mail the enclosed proxy for which a stamped return envelope
is provided.
By Order of the Board of Directors
Howard C. Wadsworth
Vice President, Treasurer and Secretary
Richardson, Texas
April 28, 1995
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE URGED TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD PROMPTLY. IF YOU ATTEND THE MEETING,
YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY
<PAGE> 3
KANEB SERVICES, INC.
2435 North Central Expressway
Suite 700
Richardson, Texas 75080
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies of the holders of Common Stock on behalf of the Board of Directors
of Kaneb Services, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on June 22, 1995, at 265 Peachtree
Center Avenue, Atlanta, Georgia 30303, at 2:00 P.M. Eastern time, or at any
adjournment of such meeting. Copies of the Notice, Proxy Statement and form of
proxy are being mailed to stockholders on or about April 28, 1995.
A proxy received by management of the Company may be revoked by the
stockholder giving the proxy at any time before it is exercised. However, mere
attendance at the meeting will not itself have the effect of revoking the
proxy. A stockholder may revoke his proxy by notification in writing (or in
person if he attends the meeting) given to Howard C. Wadsworth, Vice
President, Treasurer and Secretary of the Company, 2435 North Central
Expressway, Suite 700, Richardson, Texas 75080. A proxy may also be revoked by
proper execution of a proxy bearing a later date. A proxy in the accompanying
form when properly executed and returned will be voted in accordance with the
instructions contained therein. A proxy received by management which does not
withhold authority to vote or on which no specification has been indicated will
be voted in favor of the proposals set forth in the proxy.
The Company's principal executive offices are located at 2435 North
Central Expressway, Suite 700, Richardson, Texas 75080, and its telephone
number is (214) 699-4000.
The cost of preparing and mailing the proxy, Notice and Proxy
Statement will be paid by the Company. In addition to mailing copies of this
material to all stockholders, the Company has retained D.F. King & Co. to
request banks and brokers to forward copies of such material to persons for
whom they hold stock of the Company and to request authority for execution of
the proxies. The Company will pay D.F. King & Co. a fee of $4,000, excluding
expenses, and will reimburse banks and brokers for their reasonable
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
At the date of this Proxy Statement, the management of the Company
does not know of any business to be presented at the meeting other than as set
forth in the Notice accompanying this Proxy Statement. If any other business
should properly come before the meeting, it is intended that the shares
represented by proxies will be voted with respect to such business in
accordance with the judgment of the persons named in the proxy.
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors of the Company has fixed the close of business
on April 27, 1995, as the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting. At that date there
were outstanding 33,286,634 shares of Common Stock of the Company, and the
holders thereof of record on that date will be entitled to one vote for each
share held by them for each proposition to be presented at the meeting.
As of April 10, 1995, all directors and officers of the Company as a
group owned beneficially an aggregate of 2,681,677 shares, representing 8.1% of
the outstanding shares of Common Stock of the Company. Such ownership number
includes 996,436 shares which can be acquired by officers and directors of the
Company during the next 60 days pursuant to the exercise of outstanding stock
options.
1
<PAGE> 4
The following table sets forth information with respect to the shares
of the Company's Common Stock owned of record or beneficially as of April 10,
1995, by all persons who own of record or are known by the Company to own
beneficially more than 5% of such class of securities:
<TABLE>
<CAPTION>
Name and Address Type of Number Percent
of Stockholder Ownership of Shares of Class
---------------- --------- --------- --------
<S> <C> <C> <C>
Gabelli Group (1) Beneficial 2,783,509 8.4%
19 Rector Street
New York, New York 10006
State of Wisconsin (2) Beneficial 3,171,000 9.5%
Investment Board
121 East Wilson Street
Madison, Wisconsin 53703
</TABLE>
(1) According to information contained in Amendment No. 10 to Schedule
13-D, dated July 22, 1993, filed with the Securities and Exchange
Commission ("S.E.C.") pursuant to the Securities Exchange Act of 1934
(the "1934 Act"). The Gabelli Group consists of Gabelli Funds, Inc.,
Gamco Investors, Inc., Gabelli & Company, Inc. and two other
affiliates.
(2) According to information contained in Amendment No. 6 to Schedule 13G,
dated February 13, 1995, filed with the Securities and Exchange
Commission ("S.E.C.") pursuant to the Securities Exchange Act of 1934
(the "1934 Act"). The State of Wisconsin Investment Board is a
government agency which manages public pension funds subject to
provisions comparable to ERISA.
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders of the Company, six directors,
constituting the entire Board of Directors of the Company, are to be elected by
the holders of Common Stock to hold office until the next annual meeting of
stockholders and thereafter until their respective successors are elected and
qualified. Of the six nominees proposed by the Board of Directors of the
Company for election by the holders of Common Stock, five are incumbent
directors. The sixth nominee, Mr. Charles R. Cox, has been nominated to fill
the vacancy created by the resignation of C.E. Bentley, who is not standing for
reelection. Although the Board of Directors does not contemplate that any of
the nominees will be unable to serve, if such should occur prior to the
meeting, proxies which do not withhold authority to vote for directors will be
voted for a substitute in accordance with the best judgment of the person or
persons voting.
The enclosed form of proxy provides a means for stockholders to vote
for all the nominees listed therein, to withhold authority to vote for one or
more of such nominees or to withhold authority to vote for all of such
nominees. Each properly executed proxy received in time for the meeting will
be voted as specified therein. If a stockholder does not specify otherwise,
the shares represented by his or her proxy will be voted for the nominees
listed therein or as noted above for other nominees selected by the Board of
Directors. Unless a stockholder who withholds authority votes in person at the
meeting or votes by means of another proxy, the withholding of authority will
have no effect upon the election of directors because the Company's By-Laws
provide that directors are elected by a plurality of the votes cast. However,
the shares held by each stockholder who signs and returns the enclosed form of
proxy will be counted for purposes of determining the presence of a quorum at
the meeting.
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<PAGE> 5
NOMINEES FOR DIRECTORS
The following table sets forth (i) the name and age of each nominee
listed in the enclosed form of proxy, (ii) his principal occupation, (iii) the
year during which he first became a director of the Company and (iv) the number
of shares of Common Stock beneficially owned by him as of April 10, 1995. Each
nominee has sole voting power and sole investment power with respect to the
shares attributed to him.
<TABLE>
<CAPTION>
If Applicable, Shares of Common Percent
Year First Stock Beneficially of Out-
Become a Owned at standing
Name Principal Occupation Director Age April 10, 1995(1) Shares
---- -------------------- -------------- --- ------------------ --------
<S> <C> <C> <C> <C> <C>
John R. Barnes Chairman of the Board, 1986 50 1,658,991 4.9%
President and Chief Executive
Officer of the Company (1)
Charles R. Cox Industrial Group N/A 52 -0- *
President of Fluor Daniel, Inc.,
an international services
company (2)
Preston A. Peak President of P.A. Peak, 1987 72 50,000 *
Inc., a general partner of
Dorchester Hugoton, Ltd.,
an oil and gas exploration
and production partnership (3)
Sangwoo Ahn General Partner of 1989 56 151,000 *
Morgan Lewis Githens & Ahn,
an investment banking firm (4)
James R. Whatley Investments (5) 1956 68 110,933 *
Ralph A. Rehm President of Northlake 1991 49 48,507 *
Consulting Company, a
financial consulting service firm (6)
</TABLE>
__________________
*Less than one percent.
(1) Shares listed include those beneficially owned by the person
indicated, his spouse or children living at home and those subject to
options exercisable by him within the next 60 days.
(2) Mr. Cox has held senior executive level positions for more than the
past five years of his twenty-six year career with Fluor Daniel, Inc.
(3) Mr. Peak has held the position described above for more than the past
five years.
(4) Mr. Ahn has been a partner of Morgan Lewis Githens & Ahn for over five
years and currently serves as a director of Broadcasting Partners,
Inc., Haynes International, Inc., ITI Technologies, Inc., PAR
Technology, Inc., Quaker Fabric Corporation, and Stuart Entertainment,
Inc.
(5) Mr. Whatley previously served as Chairman of the Board of Directors of
the Company from February 1981 until April 1989 and also serves as a
director of United Financial Group, Inc..
(6) Mr. Rehm is President of Northlake Consulting Company, which provides
financial consulting services. He provided consulting services on
behalf of some of Kaneb's subsidiaries in 1993 and 1994 and previously
was engaged in financial consulting services for Northlake Consultants
from June 1989 to May 1990, prior to which he served as Senior Vice
President of Finance and Administration of Kaneb from December 1986.
3
<PAGE> 6
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions with the
Company of the executive officers of the Company.
<TABLE>
<CAPTION>
Years of Service
Name Office Age In Office
---- ------ --- ----------------
<S> <C> <C> <C>
John R. Barnes Chairman of the Board, President 50 8
and Chief Executive Officer
Jere M. Denton Senior Vice President 48 8
Edward D. Doherty Senior Vice President 59 6
Frank E. Sheeder Senior Vice President 52 1 (1)
Howard C. Wadsworth Vice President, Treasurer
and Secretary 50 4 (1)
Tony M. Regan Controller 35 4 (1)
</TABLE>
(1) Mr. Sheeder has been employed by the Company since May 1994, prior to
which he served for over two years as Senior Vice President and
General Manager of an international specialty chemical division of
Rhone-Poulenc, Inc. Previously he spent over 18 years with General
Electric Company, most recently as General Manager of several
specialty industrial businesses. Prior to joining the Company in
October 1990, Mr. Wadsworth served for more than five years as the
General Manager of Dorchester Hugoton, Ltd. Mr. Regan has been
employed by the Company since July 1990, prior to which he was a
certified public accountant with Ernst & Young for eight years.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1994, the Board of Directors of the Company held 11 meetings.
Each incumbent director attended more than 75% of the aggregate of the total
number of such meetings and the total number of meetings held by all committees
of the Board of Directors on which he served, except Messrs. Ahn and Rehm who
were unable to attend 3 board meetings each.
The Board of Directors of the Company has an Audit Committee composed
of Preston A. Peak (Chairman), Sangwoo Ahn and Ralph A. Rehm. The functions of
the Audit Committee, which held 2 meetings during 1994, include planning for
the annual audit, review of the results of the examination of the Company's
financial statements, approval of fee estimates for the annual audit and
approval of non-audit services and consideration of the effect of such
non-audit services on the auditors' independence. The Board of Directors of the
Company also has a standing Compensation Committee composed of James R. Whatley
(Chairman), Ralph A. Rehm and C.E. Bentley. The function of the Compensation
Committee, which met three times in 1994, is to establish and review the
compensation programs for the executive officers of the Company and its
subsidiaries and to formulate, recommend and implement incentive, stock option
or other bonus plans or programs for the officers and key employees of the
Company and its subsidiaries. The Board of Directors of the Company also has
an Executive Committee composed of James R. Whatley, Preston A. Peak and John
R. Barnes. The function of the Executive Committee, which did not meet during
1994, is to exercise all of the powers, within certain limitations, of the
Board of Directors in the management of the business of the Company during
intervals between meetings of the Board.
4
<PAGE> 7
The Board of Directors of the Company also has a Nominating Committee,
composed of non-employee directors, which has the duty and responsibility to
consider and recommend future nominees to the Board of Directors of the
Company. The Nominating Committee also considers nominees recommended by
stockholders of the Company. Such recommendations for 1996 nominees must be
submitted in writing by January 1, 1996, to Howard C. Wadsworth, Vice
President, Treasurer and Secretary of the Company, 2435 North Central
Expressway, Suite 700, Richardson, Texas 75080. The submitted recommendations
must be accompanied by a statement of qualifications of the recommended nominee
and a letter from the nominee affirming that he will agree to serve as a
director of the Company if elected by the stockholders.
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company paid for
the fiscal years ended December 31, 1994, 1993 and 1992 to the chief executive
officer and the four most highly compensated executive officers of the Company
whose cash compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- Number of All Other
Name and Salary Bonus Other Options/ Compensation
Principal Position Year (1) (2) (3) SARS (4)
------------------ ---- ------ ----- ----- --------- ------------
<S> <C> <C> <C> <C> <C>
John R. Barnes 1994 $ 313,296 $ 7,788
Chairman of the Board, 1993 313,296 9,388
President and Chief 1992 313,296 $ 450,000(5) 9,115
Executive Officer
Edward D. Doherty 1994 180,417 $ 40,000 6,833
Senior Vice President 1993 180,000 88,000 7,442
1992 180,000 57,180 $ 14,400 85,467(6)
Jere M. Denton 1994 180,417 37,000 7,674
Senior Vice President 1993 180,000 12,000 8,271
1992 180,000 8,138
Frank E. Sheeder 1994 122,051(7) 140,000 168(7)
Senior Vice President
Howard C. Wadsworth 1994 150,833 25,000 3,305
Vice President, 1993 150,000 3,174
Treasurer and Secretary 1992 150,000 11,250 15,000 3,361
</TABLE>
(1) Includes compensation representing employee contributions to the
Company's thrift plan and health benefits plan.
(2) Annual incentive bonus amount earned during the year shown, paid in
the following year unless otherwise noted. 1994 includes additional
non-recurring bonus awards of $25,000 each earned during 1993 and a
portion of 1994 and paid during 1994 to Messrs. Denton and Wadsworth
for performance and effort in connection with a foreign assignment.
(3) Consists of lump-sum payments in lieu of cost-of living increases.
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<PAGE> 8
(4) Includes the Company's payments to its defined contribution thrift
plan and the imputed value of Company-paid group term life insurance
for coverage in excess of $50,000. The defined contribution plan
covers all full- time domestic employees of the Company. The Plan
allows for employee contributions of up to 12% of pay which may be
directed to any of four investments, contributions to the Plan are
matched by the Company with stock at a rate of 50% for Company stock
investments and 25% for other investments. The Company also
contributes the equivalent of an additional 2% of pay to the Plan
investment(s) of choice for each participant.
(5) Mr. Barnes received 175,000 and 275,000 options on June 23, 1992, with
exercise prices of $6.38 and $8.50 respectively. These exercise
prices represented 150% and 200% of the Company's Common Stock closing
price ($4.25) on that date. Further, provisions call for 20% of the
above options to vest each year, so that vesting on all 450,000 shares
will not occur until June 23, 1997. The options were granted in lieu
of cost-of-living salary increases from the year 1992 through June 23,
1997.
(6) Includes the value of 25,000 shares of previously restricted stock
issued in 1989, restrictions on which lapsed during 1992.
(7) Represents amounts for period from May 23, 1994 (date of employment)
through December 31, 1994.
OPTIONS/SAR'S GRANTED DURING LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
% of Total Assumed Annual Rates of
Granted Stock Price Appreciaton
Number of Options/ To Employees Exercise Price For Option Term (1)
Name SAR's Granted During Year ($/Share) Expiration Date 5% 10%
---- ------------------ ------------ -------------- --------------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Frank E. Sheeder 140,000 93.3% $3.125 05/22/2004 $275,141 $ 697,262
</TABLE>
(1) Compounded annually from date of grant at grant price until expiration
date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held at Fiscal In-the-Money
Shares Year End Options at Fiscal Year End
Acquired on Value --------------------------- --------------------------
Name Exercise (1) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John R. Barnes -0- $ -0- 225,000 225,000 $ -0- $ -0-
Edward D. Doherty -0- -0- 250,000 -0- -0- -0-
Jere M. Denton -0- -0- 183,936 -0- 18,750 -0-
Frank E. Sheeder -0- -0- 15,000 125,000 -0- -0-
Howard C. Wadsworth -0- -0- 65,000 -0- -0- -0-
</TABLE>
(1) There were no options or SAR's exercised by the named executives or
any other option holders during 1994.
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<PAGE> 9
DIRECTORS' FEES
In 1994, each member of the Board of Directors of the Company who was
not also an employee of the Company was paid an annual retainer of $20,000 in
lieu of any attendance fees for board or committee meetings. As of April 10,
1995, outside directors had been granted non-qualified options to purchase a
total of 180,000 shares of Common Stock at an average price of $3.14 per share,
representing 100% of the fair market value of the common stock on the dates of
grant. These options each provide for expiration at the end of 10 years from
the date of grant or within three months after such person ceases to be a
director of the Company, which ever is sooner. At April 10, 1995, Messrs. Ahn,
Peak and Whatley held options to purchase 50,000 shares each and Mr. Rehm held
options to purchase 30,000 shares of the Company's Common Stock.
CERTAIN TRANSACTIONS
During 1994, Mr. Rehm, who is currently a director standing for reelection,
performed special foreign and other assignments on behalf of some of the
Company's subsidiaries. Mr. Rehm was paid a total of $146,770 in 1994 as
remuneration for such services and he was reimbursed for appropriate travel and
living expenses.
TERMINATION AGREEMENTS
From time to time, the Company has entered into termination agreements
with key employees of the Company and its subsidiaries which provide, as
amended, that the Company will pay into an escrow account an amount equal to
the then current annual base salary of the employee if (i) shares of Common
Stock of the Company have been acquired other than directly from the Company by
one person or corporation who thereby becomes the owner of more than 10% of the
issued and outstanding shares of Common Stock of the Company, or (ii) any
shareholder or other person or corporation has made a tender offer for shares
of Common Stock of the Company. If after either of the foregoing events
occurs, the employment of the employee terminates, voluntarily or
involuntarily, for any reason other than for cause, disability, retirement at
normal age, or death, the escrow agent will pay the escrowed sum to the
employee immediately upon his demand, but only if (i) a new director of the
Company is elected who was not nominated by management of the Company, or (ii)
more than 20% of the issued and outstanding shares of Common Stock of the
Company are owned by one person or corporation other than a person who is a
present officer or director of the Company. In addition, Messrs. Barnes,
Denton and Doherty, and Sheeder have termination agreements which provide that
should their employment be terminated as a consequence of a change in control,
the Company will pay each individual an amount equal to 299% of their average
salary for the five years prior to the change of control as defined in the
agreement. At present, 8 officers and key employees of the Company and its
subsidiaries have entered termination agreements with the Company. If a change
of control of the Company as set forth above were to occur at the present time,
an aggregate of $3,156,075 would be payable to these individuals.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Whatley and Rehm were both formerly officers of the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible
for establishing the types and levels of compensation for executive officers of
the Company. The Compensation Committee is composed of three independent, non-
employee directors, among whom only Messrs. Whatley and Rehm have previously
served as officers of the Company. Following review and approval by the
Committee, decisions relating to executive compensation are typically reported
to the full Board of Directors.
The Committee has directed the preparation of this report and has
approved its contents and its submission to the stockholders. As provided by
the rules of the Securities and Exchange Commission, this report is not deemed
to be filed
7
<PAGE> 10
with the Commission nor incorporated by reference into any prior or future
fillings under the Securities Act of 1933 or the Securities and Exchange Act of
1934.
Levels of executive compensation, in the Committee's opinion,
generally should be determined based upon the performance of the Company and
the contributions of individual officers to such performance and in comparison
to persons with comparable responsibilities in business enterprises similar in
size or nature. Compensation plans should align executive compensation with
returns to stockholders giving due consideration to the achievement of both
long-term and short-term objectives. Such compensation policies and practices
have allowed the Company to attract, retain and motivate its key executives.
The compensation of the officers of the Company consists primarily of
base salaries and the opportunity to participate in certain incentive
arrangements, including the 1994 Stock Incentive Plan (the "1994 Plan"), the
grant of contractual non-qualified stock options and awards of the Company's
Adjustable Rate Cumulative Class A Preferred Stock, Series C Preferred ("Series
C Preferred"). Officers have also previously participated in the Company's
1984 stock option plan ("1984 Option Plan") which expired by its own terms in
March 1994. The value of these plan benefits is or was directly related to the
future performance of the Company's common stock.
In addition, three of the named executive officers, Messrs. Denton,
Doherty and Sheeder, are entitled to receive cash bonuses related to earnings
performance in the areas of operation under their individual responsibility.
Messrs. Denton and Doherty have been eligible for a cash bonus equal to 2% of
the annual increase in before-tax profits from subsidiaries under their direct
supervision on a year to year basis. Mr. Sheeder has been eligible for a cash
bonus equal to 2% of the annual increase in after-tax profits from subsidiaries
under his direct supervision on a year to year basis. The Committee believes
that an improvement in earnings from the prior year and performance versus
budget are appropriate standards for measuring subsidiary performance and
directly links the individual participant's total potential remuneration with
the accomplishment of established growth targets. As a result of attaining
such goals in 1994, Mr. Doherty and Mr. Denton received incentive bonus
payments of $40,000 and $12,000, respectively. Incentive arrangements have
been extended to Messrs. Doherty and Denton for 1995, with modifications to
consider the increase in year to year profits on an after-tax basis computed
quarterly and to consider performance versus budget as an additional criteria.
Mr. Sheeder's incentive arrangement for 1995 has not yet been finalized.
Just like all other full-time Company employees, the named executive
officers are also eligible to participate in the Company's defined contribution
thrift plan. The Committee believes that this plan encourages longer-term
employment through gradual service-based vesting of Company contributions. By
virtue of larger employer matching contributions relative to participant
contributions invested in the Company's common stock, the plan provides an
incentive to the employees, including the named executive officers, who elect
to tie their own financial interests, in part, to those of the Company's
stockholders.
During 1994, with management's recommendation, the base salaries of
the executive officers, excluding the chief executive officer, were increased
for the first time in four years. The decision in this regard was based
primarily on improved financial results for 1994 and the fact that
cost-of-living only salary increases had not been made since 1992. In
establishing levels of executive compensation, the Committee reviews the
performance of similar businesses, as well as business in general, and the
compensation levels of persons with comparable responsibilities. Salaries are
also based on an assessment of each individual's performance, experience and
other factors relevant to comparison with compensation data contained in
published and well recognized surveys. The Committee believes that salaries
and total compensation of the executive officers ranks within close proximity
or below the median level of most comparative data.
The Company offers additional incentive for stock growth and total
stockholder return through the use of two plans whose benefits depend on common
stock performance. Shares of Series C Preferred were issued in 1991, as
described in the Summary Compensation Table and no further awards were made in
1992, 1993 or 1994. Stock options have been granted to executive officers and
other employees of the Company, from time to time, pursuant to the 1984 Option
Plan and the 1994 Stock Incentive Plan, primarily based upon the executive's or
employee's ability to influence the Company's future business objectives. All
outstanding options granted pursuant to those plans were granted at not less
than 100% of the fair market value of the Company's Common Stock on the dates
such options were granted. The
8
<PAGE> 11
Committee believes that stock options, stock appreciation rights and stock
grants are a desirable form of long-term compensation that closely connect the
interests of management with stockholder value.
Under the 1984 Option Plan and the 1994 Stock Incentive Plan, stock options
have been granted to certain of the named executive officers after the
Committee had reviewed individual awards, taking into consideration relative
accountability, anticipated performance requirements and contributions of each
executive officer. The award to Mr. Barnes in 1992 was made separately and
outside of the 1984 Option Plan and was based, among other things, on the
Committee's perception of his expected contributions to the Company's
achievement of long-range performance goals. In connection with his initial
employment with the Company during 1994, Mr. Sheeder was granted stock options
on 140,000 shares from the 1994 Stock Incentive Plan at 100% of the fair market
value on the date of the grant. No other options were granted pursuant to or
outside of the 1984 option plan or the 1994 Stock Incentive Plan to any of the
other named executives during 1994.
Compensation Committee
James R. Whatley, Chairman
Ralph A. Rehm
C.E. Bentley
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company with the New York Stock Exchange Market Index and a
peer group of six industry-related companies which include ABM Industries,
Buckeye Partners L.P., GATX Corp., Safety Kleen Corp., Santa Fe Pipe Line
Partners, L.P. and Team Inc., for the period January 1, 1990 to December 31,
1994 assuming an initial investment of $100 and the reinvestment of all
dividends. Interprovincial Pipe Line Systems, a Canadian company which was
previously included in the peer group is no longer publicly traded.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kaneb Services Inc. 100.00 72.50 85.00 65.00 57.50 42.50
- - -------------------------------------------------------------------------------------------------------------------
Peer Group 100.00 106.74 117.21 124.83 126.90 128.26
- - -------------------------------------------------------------------------------------------------------------------
NYSE Market Index 100.00 95.92 124.12 129.96 147.56 144.69
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
MARKET PRICE OF COMMON SHARES
The closing price of the Company's Common Stock on the New York Stock
Exchange on April 25, 1995 was $1.75 per share.
INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Company has not
met to select the principal accountants to audit the accounts of the Company
for the calendar year ending December 31, 1995. Price Waterhouse LLP, the
Company's independent auditors for the calendar year ended December 31, 1994,
has advised the Company that it will have in attendance at the Annual Meeting
of Stockholders a representative who will respond to appropriate questions
presented at such meeting regarding the Company's financial results and
condition at the close of its most recent fiscal year. Representatives of the
firm will be afforded an opportunity to make statements if they wish to do so.
10
<PAGE> 13
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock of the Company intended to be
presented at the Annual Meeting of Stockholders of the Company to be held in
1996 must be received by the Company, addressed to Howard C. Wadsworth, Vice
President, Treasurer and Secretary of the Company, 2435 North Central
Expressway, Suite 700, Richardson, Texas 75080, no later than February 23,
1996 to be included in the Proxy Statement and form of proxy relating to that
meeting. If the date of the 1996 annual meeting is advanced by more than 30
calendar days or delayed by more than 90 calendar days from the date of the
1995 annual meeting to which this Proxy Statement relates, the Company will
inform stockholders of such change and the date by which proposals of
stockholders must be received.
OTHER MATTERS
The Board of Directors knows of no other matters than those described
above which are likely to come before the meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgement on such
matters. A copy of the Company's 1994 Annual Report is being mailed,
concurrently with the mailing of this Proxy Statement, to stockholders who have
not previously received a copy of the Annual Report.
By Order of the Board of Directors
John R. Barnes
Chairman of the Board, President and
Chief Executive Officer
Dated: April 28, 1995
11
<PAGE> 14
KANEB SERVICES, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - JUNE 22, 1995
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints JOHN R. BARNES and HOWARD C. WADSWORTH, and
any one or both of them, with power of substitution in each, proxies for the
undersigned, to represent the undersigned and to vote all the Common Stock of
the Company which the undersigned would be entitled to vote, as fully as the
undersigned could vote and act if personally present, at the Annual Meeting of
Stockholders to be held on June 22, 1995 at 2:00 p.m., Eastern Time, at 265
Peachtree Center Avenue, Atlanta, Georgia 30303 or at any adjournment thereof.
The Proxies are authorized to vote in their discretion upon all matters
properly brought before the meeting, including any matter of which Management
was not aware a reasonable time before the solicitation of this proxy.
1. Election of the six directors who are to be elected by the holders
of Common Stock: Sangwoo Ahn, John R. Barnes, Charles R. Cox,
Preston A. Peak, Ralph A. Rehm and James R. Whatley
[ ] FOR ALL NOMINEES [ ] WITHOUT AUTHORITY TO
(except as market below) VOTE FOR ALL NOMINEES LISTED
WITHHELD FOR THE FOLLOWING ONLY (WRITE THE NAME OF THE
NOMINEE(S) ON THE SPACE BELOW)
________________________________________
2. To transact such other business as may properly come before the
meeting or any adjournment thereof; all as more particularly
described in the Proxy Statement, dated April 28, 1995, relating
to such meeting, receipt of which is hereby acknowledged.
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is made, this proxy will be voted FOR all
Nominees.
________________________________________
________________________________________
Signature of Stockholder
Please mark, date and sign as your
name(s) appear(s) to the left and return
it in the enclosed envelope. If acting
as an executor, administrator, trustee,
guardian, etc., you should so indicate
when signing. If the stockholder is a
corporation, please sign the full
corporate name, by duly authorized
officer. If shares are held jointly,
each stockholder named should sign.
Dated ____________________________, 1995
