DUTY FREE INTERNATIONAL, INC.
63 Copps Hill Road
Ridgefield, Connecticut 06877
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 23, 1996
To the Stockholders of
DUTY FREE INTERNATIONAL, INC.:
You are cordially invited to attend the Annual Meeting of
Stockholders of DUTY FREE INTERNATIONAL, INC., a Maryland corporation,
which will be held on May 23, 1996, at 10:00 a.m., Baltimore time, at
the Hyatt Regency Hotel, 300 Light Street, Baltimore, Maryland 21202,
for the following purposes:
(1) To elect three (3) Class A Directors for terms expiring at the
1999 Annual Meeting of Stockholders and one (1) Class C
Director for a term expiring at the 1998 Annual Meeting of
Stockholders;
(2) To ratify the appointment of KPMG Peat Marwick LLP as the
Company's Independent Auditors for the fiscal year ending
January 26, 1997;
(3) To consider and act upon a stockholder proposal to eliminate
the election of Directors by classes;
(4) To consider and act upon a stockholder proposal that the
Company's Board of Directors be comprised of a majority of
independent Directors; and
(5) To transact such other business as may properly come before
the Annual Meeting or any adjournments or postponements
thereof.
A copy of the Company's Annual Report to Stockholders, Proxy
and Proxy Statement are being mailed together with this notice.
Only stockholders of record at the close of business on
March 29, 1996 are entitled to notice of, and to vote at, the
Annual Meeting and any adjournments or postponements thereof. Such
stockholders may vote in person or by Proxy.
You are cordially invited to be present at the Annual Meeting. It
is important to you and to the Company that your shares be voted at the
Annual Meeting.
By Order of the Board of Directors
Gerald F. Egan, Secretary
April 12, 1996
- - ------------------------------------------------------------------------
IMPORTANT NOTICE
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY AND THEN SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED STAMPED AND
ADDRESSED ENVELOPE. THE GIVING OF THE PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE AT THE ANNUAL MEETING IF THE PROXY IS REVOKED, AS SET
FORTH IN THE PROXY STATEMENT.
- - ------------------------------------------------------------------------
<PAGE>
DUTY FREE INTERNATIONAL, INC.
-------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 1996
This Proxy Statement and the accompanying proxy materials are being
furnished to the stockholders of Duty Free International, Inc., a
Maryland corporation, in connection with the solicitation of Proxies by
the Board of Directors of the Company for use at the Annual Meeting of
Stockholders to be held at the Hyatt Regency Hotel, 300 Light Street,
Baltimore, Maryland 21202, on May 23, 1996, at 10:00 a.m., Baltimore
time, and any adjournments or postponements thereof. Only stockholders
of record at the close of business on March 29, 1996 (the "Record Date")
will be entitled to notice of, and to vote at, the Annual Meeting.
Management anticipates that the mailing to stockholders of this Proxy
Statement and the accompanying Proxy materials, together with a copy of
the Company's Annual Report to Stockholders for the fiscal year ended
January 28, 1996, will occur on or about April 22, 1996.
At the Annual Meeting, the stockholders of the Company will be
asked to (i) consider and vote upon the election of three (3) Class A
Directors and one (1) Class C Director of the Company; (ii) ratify the
appointment of KPMG Peat Marwick LLP as the Company's Independent
Auditors for the fiscal year ending January 26, 1997; (iii) consider and
act upon a stockholder proposal to eliminate the election of Directors
by classes; (iv) consider and act upon a stockholder proposal that the
Company's Board of Directors be comprised of a majority of independent
Directors; and (v) consider and vote upon any other business that may
properly come before the Annual Meeting.
The principal executive offices of the Company are located at
63 Copps Hill Road, Ridgefield, Connecticut 06877, and its telephone
number at that address is (203) 431-6057.
The date of this Proxy Statement is April 12, 1996.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE
AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY
TO THE COMPANY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
VOTING AND PROXIES
VOTING RIGHTS
Holders of record of the Company's common stock, par value $0.01
per share (the "Common Stock"), on the Record Date will be entitled to
one vote for each share held on all matters to come before the Annual
Meeting of Stockholders. At the close of business on the Record Date,
there were outstanding 27,268,397 shares of Common Stock. The presence,
in person or by proxy, of stockholders entitled to cast a majority of
all votes entitled to be cast at the Annual Meeting will constitute a
quorum. Directors will be elected by a plurality of the votes cast.
Action on a matter other than the election of Directors, including the
ratification of the appointment of KPMG Peat Marwick LLP as Independent
Auditors and each of the stockholder proposals, will be approved if the
number of shares cast for the proposal exceeds the number of shares cast
against the proposal. Abstentions and broker non-votes will not be
included in determining the outcomes of matters being acted upon.
PROXIES
If the accompanying Proxy is properly executed and returned, the
shares represented by the Proxy will be voted in accordance with the
instructions specified in the Proxy. In the absence of instructions to
the contrary, such shares will be voted in favor of (i) all of the
nominees for election to the Board of Directors listed in this Proxy
Statement and named in the accompanying Proxy and (ii) the ratification
of KPMG Peat Marwick LLP as the Company's Independent Auditors for the
fiscal year ending January 26, 1997, and against each of the stockholder
proposals. The Board does not intend to bring any other matters before
the Annual Meeting and is not aware of any matters which will come
before the Annual Meeting other than as described herein. In the
absence of instructions to the contrary, however, it is the intention of
each of the persons named in the accompanying Proxy to vote the shares
each Proxy represents in accordance with such persons' discretion with
respect to any other matters properly coming before the Annual Meeting.
Any stockholder may revoke his or her Proxy at any time prior to
the voting thereof on any matter (without, however, affecting any vote
taken prior to such revocation). A Proxy may be revoked by filing with
Gerald F. Egan, Vice President of Finance, Chief Financial Officer,
Treasurer and Secretary of the Company at 63 Copps Hill Road,
Ridgefield, Connecticut 06877, a written notice of revocation or a
subsequently dated Proxy at any time prior to the time it has been voted
at the Annual Meeting, or by attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of
itself constitute revocation of a Proxy).
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company currently has a classified Board of Directors
consisting of three Class A Directors, two Class B Directors and two
Class C Directors. The current terms of the Directors continue until
the Annual Meetings of Stockholders to be held in 1996, 1997 and 1998,
respectively, and until their respective successors are elected and
qualified. After the Annual Meeting of Stockholders on May 23, 1996,
the Company's Board of Directors will consist of three Class A
Directors, two Class B Directors and three Class C Directors.
The following information is furnished with respect to the three
nominees for Class A Director, the one nominee for Class C Director, and
the Directors who will continue in office after the Annual Meeting until
the expiration of their respective terms. The Board of Directors has
unanimously recommended the election of the nominees named below.
Unless otherwise instructed, it is the intention of the persons named in
the accompanying Proxy to vote all shares of Common Stock represented by
properly executed Proxies for all the nominees to the Board of Directors
named below. Although each of the nominees has indicated that he will
serve as a Director of the Company, should any one or more of them be
unable to serve, the Proxies will be voted for the election of a
substitute nominee or nominees designated by the Board of Directors.
NOMINEES FOR ELECTION
NOMINEES FOR CLASS A DIRECTORS - TERMS TO EXPIRE IN 1999
David H. Bernstein, age 61, was the Chairman of the Board of the
Company from 1986 to 1993 and has been a Director since the Company's
formation in 1983. He served until 1992 as President of Samuel Meisel
and Company, Inc., a wholly owned subsidiary of the Company ("Meisel"),
with which he had been associated since 1957. He currently serves as
the President of the International Association of Airport Duty Free
Stores, Inc., the trade association representing all major airport duty
free operators in North, South and Central America, and the Caribbean.
He has served in this capacity for the past twelve years. Mr. Bernstein
is a member of the Board of Trustees of The Johns Hopkins University and
is Chairman of the Board of Trustees of Sinai Hospital. He is a
director of Fenton Hill Florida, Inc., in which the Company has a 25%
interest.
John A. Couri, age 55, has been a Director since the Company's
formation. Mr. Couri was Co-Chief Executive Officer from October 1993
to May 1994 and served as Chairman of the Board of the Company from
October 1993 to December 1994. He was Chief Executive Officer of the
Company from 1987 to 1993, President from 1983 to 1993 and Chief
Financial Officer from 1987 until 1990. In addition, he served as
President of the Northern Border Division from its formation until
1989. Mr. Couri was employed by IDF Services, Inc. ("IDF Services")
from 1972 to 1987, and served as a director of that corporation until
the merger of that corporation with the Company in 1992.
Heribert Diehl, age 62, has been a Director since the Company's
formation. Mr. Diehl has been an employee of Gebr. Heinemann, a
stockholder of the Company, since 1962 and has been a managing director
of that firm since 1983. Gebr. Heinemann is a major wholesale supplier
of duty free merchandise and an operator of duty free concessions in
Europe.
<PAGE>
Nominee for Class C Director - Term to Expire in 1998
-----------------------------------------------------
Stephen M. Waters, age 49, is a private investor. He was Co-Chief
Executive of Morgan Stanley U.K. Group from 1992 to 1996 and a Managing
Director of Morgan Stanley & Company, Inc. from 1988 to 1996. He is a
member of the Chancellor's City Promotion Panel in the United Kingdom, a
member of the Harvard Business School Visiting Committee and Chairman of
the Financial Aid Council at Harvard College.
VOTE REQUIRED
Directors are elected by a plurality of votes cast at the Annual
Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH
OF THE NOMINEES FOR ELECTION AS DIRECTORS
CONTINUING DIRECTORS
The remaining Directors of the Company, whose terms expire in 1997
and 1998, respectively, are:
Class B Directors - Terms to Expire in 1997
-------------------------------------------
Jack Africk, age 67, was the Vice Chairman of the Board of the
Company from May 1993 through December 1994, and was the Vice Chairman
of UST Inc. from 1990 to 1993. Mr. Africk was a director and Executive
Vice President of UST Inc. from 1987 to 1990, and previously served as
the President and Chief Executive Officer of United States Tobacco
Company, a wholly owned subsidiary of UST Inc. Mr. Africk is also a
director of Crown Central Petroleum Corp., Tanger Factory Outlets and
Transmedia Network, Inc.
Carl Reimerdes, age 55, has been a Vice President and a Director of
the Company since its formation and the principal operating officer of
the Company's Airport Division and its predecessor since 1983. Mr.
Reimerdes was employed by IDF Services from 1972, and served as its
President and as a director, until the merger of that corporation with
the Company in 1992.
Class C Directors - Terms to Expire in 1998
-------------------------------------------
Alfred Carfora, age 45, was elected President and Co-Chief
Executive Officer of the Company in October 1993 and became Chief
Executive Officer in May 1994. Previously, he served as Executive
Vice President and Chief Operating Officer, and he has been a
Director of the Company since 1985. Prior to 1992, Mr. Carfora had
principal operating responsibilities for the Company's Northern
Border Division and Airport Division. Mr. Carfora was employed by IDF
Services from 1973 to 1988 and served as its Vice President, Secretary
and Treasurer and as a director until the merger of that corporation
with the Company in 1992.
Susan H. Stackhouse, age 42, has been President of Fenton Hill
Florida, Inc. since 1986 and a Director of the Company since 1992. Ms.
Stackhouse joined Fenton Hill Florida, Inc., formerly known as Bonanni
Exports, Inc., in 1980 as General Manager and served as its Executive
Vice President from 1984 until her election as President in 1986. Fenton
Hill Florida, Inc., in which the Company has a 25% interest, operates
duty free and retail concessions in eight airports. Mr. Bernstein, a
Director and executive of the Company, is also a director of Fenton Hill
Florida, Inc. Ms. Stackhouse has served as a director of the
International Association of Airport Duty Free Stores, Inc. since 1986.
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Board of Directors met four times during the fiscal year ended
January 28, 1996. All of the Directors attended at least 75% of the
aggregate of all meetings of the Board of Directors and the Committees
on which they served during the fiscal year ended January 28, 1996.
The members of the Audit Committee presently consist of Messrs.
Africk and Diehl. The Audit Committee is responsible for reviewing,
with the Company's Independent Auditors, (i) the general scope of the
accountants' audit services and the annual results of their audit, (ii)
the reports and recommendations made to the Audit Committee by the
Independent Auditors and the Company's Internal Audit Department, and
(iii) the Company's internal controls structure. The Audit Committee
held four meetings during the fiscal year ended January 28, 1996.
The Executive Committee currently consists of Messrs. Africk,
Bernstein, Carfora, Couri and Reimerdes. The Executive Committee may
exercise all powers of the Board of Directors between meetings of the
Board except as otherwise provided by law or by the By-laws of the
Company. The Executive Committee held four meetings during the fiscal
year ended January 28, 1996.
The Compensation Committee presently consists of Ms. Stackhouse
and Messrs. Africk and Diehl. The Compensation Committee is responsible
for reviewing and making recommendations to the Board of Directors
concerning remuneration to the Company's executive officers. The
Compensation Committee determines the bonuses awarded under the
Company's Incentive Compensation Plan and administers and makes awards
of stock options under the Company's stock option plans. The
Compensation Committee held five meetings during the fiscal year ended
January 28, 1996.
The Nominating Committee currently consists of Messrs. Couri and
Reimerdes. The Nominating Committee reviews the qualifications of, and
recommends to the Board, candidates for election to the Board. The
Nominating Committee considers suggestions from many sources, including
stockholders, regarding possible candidates for Director. Such
suggestions, together with appropriate biographical information, may be
submitted to the Secretary of the Company. The Nominating Committee
held one meeting during the fiscal year ended January 28, 1996.
EXECUTIVE OFFICERS
The Company's executive officers include Alfred Carfora, President
and Chief Executive Officer; John Edmondson, Executive Vice President
and Chief Operating Officer; David H. Bernstein, Chairman of the
Executive Committee of the Board of Directors; Carl Reimerdes, Vice
President; and Gerald F. Egan, Vice President of Finance, Treasurer,
Chief Financial Officer and Secretary. Information concerning each
executive officer's age and length of service with the Company, other
than Messrs. Edmondson and Egan, can be found herein under the section
entitled "ELECTION OF DIRECTORS". Each of these executive officers was
elected by, and serve at the pleasure of, the Board of Directors. John
Edmondson, who was appointed Executive Vice President and Chief
Operating Officer in September 1995, inadvertently did not file a Form 3
on a timely basis as required by Section 16 of the Securities and
Exchange Act of 1934, as amended.
<PAGE>
John Edmondson, age 51, was appointed Executive Vice President and
Chief Operating Officer of the Company in September 1995. From June
1992 to September 1995, Mr. Edmondson had principal operating
responsibilities for the Company's Southern Border Division. He also
had principal operating responsibilities for the Company's Northern
Border Division from May 1994 to September 1995. Before joining the
Company in 1992, Mr. Edmondson was a Senior Vice President for Host
Marriott Corporation with complete responsibility for over 150 retail
and duty free airport locations.
Gerald F. Egan, age 48, joined the Company in August 1989 as Vice
President of Finance. He was elected Chief Financial Officer by the
Board of Directors in January 1990, Treasurer in May 1993 and Secretary
in June 1994. Prior to joining the Company, Mr. Egan had served, since
1985, as chief financial officer of H.B. Ives Company, a manufacturer of
architectural and builders hardware. Mr. Egan previously had been
employed by Cadbury-Schweppes, Inc., a beverage and confectionery
producer, in various financial management positions prior to becoming
its Vice President-Controller in 1984. Mr. Egan is a certified public
accountant.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth certain
information about the cash and non-cash compensation earned by or
awarded to Alfred Carfora, President and Chief Executive Officer, and
the four other most highly compensated executive officers of the Company
for the fiscal years ended January 1996, 1995 and 1994.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Long-term
Compensation
Annual compensation(1) Awards
---------------------- ------------
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary Bonus Options (2) Compensation(3)
- - ------------------------- ----- -------- -------- ------------ ---------------
Alfred Carfora, President 1996 $325,000 $175,000 --- $ 7,954
and Chief Executive 1995 $299,000 $150,000 $125,000 $ 7,477
Officer 1994 $275,000 $ 0 $ 20,000 $13,383
John Edmondson, 1996 $245,000 $150,000 --- $ 2,491
Executive Vice 1995 $216,000 $100,000 $ 40,000 $ 2,270
President and Chief 1994 $200,000 $ 75,000 --- $ 0
Operating Officer
David H. Bernstein, 1996 $150,000 $ 0 $ --- $ 6,091
Chairman of the 1995 $256,000 $ 75,000 $125,000 $11,844
Executive Committee 1994 $325,000 $ 0 $ 25,000 $15,358
of the Board, former
Chairman of the Board
Carl Reimerdes, 1996 $288,000 $100,000 $ --- $ 7,394
Vice President 1995 $275,000 $125,000 $125,000 $ 8,942
1994 $275,000 $ 25,000 $ 20,000 $13,795
Gerald F. Egan, Vice 1996 $182,000 $125,000 $ --- $ 6,734
President of Finance, 1995 $170,000 $125,000 $ 60,000 $ 7,051
Treasurer, Secretary 1994 $150,000 $100,000 $ 20,000 $12,595
and Chief Financial
Officer
- - -------------------------
(1) Salary and bonus amounts relate to the year in which earned, regardless of when paid.
(2) This column represents options to purchase the stated number of shares of Common Stock.
(3) This column includes other compensation that could not properly be reported in any other
column of the Summary Compensation Table. The amounts for fiscal 1996 include the
contributions by the Company to the Duty Free International, Inc. Employees' Retirement
Savings Plan for all named executives.
</TABLE>
The following table summarizes for the named executive officers
information about the exercise of stock options by the named executive
officers during the fiscal year ended January 28, 1996 and the value of
stock options they held at January 28, 1996.
[CAPTION]
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND JANUARY 28, 1996 OPTION VALUES
<TABLE>
<S> <C> <C> <C> <C> <C>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY (1)
OPTIONS AT JANUARY 28, 1996 OPTIONS AT JANUARY 28, 1996 (2)
SHARES ACQUIRED VALUE --------------------------- -------------------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------- --------------- ------------ ----------- ------------- ----------- ---------------
Alfred Carfora $ 0 $ 0 $ 91,667 $ 89,999 $ 118,537 $ 135,416
John Edmondson $ 0 $ 0 $ 26,668 $ 33,332 $ 46,669 $ 93,331
David H. Bernstein $ 0 $ 0 $ 98,334 $ 91,666 $ 67,709 $ 135,416
Carl Reimerdes $ 0 $ 0 $ 91,667 $ 89,999 $ 118,537 $ 135,416
Gerald F. Egan $ 4,000 $ 21,500 $ 53,334 $ 46,666 $ 32,500 $ 65,000
- - -------------------
(1) Options are "in-the-money" if the closing market price of the Company's Common
Stock on January 26, 1996 exceeded the exercise prices of the options.
(2) The value of exercisable options represents the difference between the exercise
price of the options and the closing market price of the Company's Common Stock on
January 26, 1996.
</TABLE>
<PAGE>
The named executive officers did not receive any stock option
grants during the fiscal year ended January 28, 1996.
Compensation of Directors
-------------------------
Each Director who was not an officer of or consultant to the
Company or a holder of more than 3% of the Company's Common Stock
received $10,000 for serving on the Board of Directors and $1,000 for
each Board of Directors meeting and each committee meeting attended
during the fiscal year ended January 28, 1996.
Each non-employee Director is granted stock options annually under
the 1989 Stock Option Plan to purchase (i) 1,000 shares of Common Stock,
plus (ii) an additional 5,000 shares if the non-employee Director serves
on any one or more of the Audit, Compensation, Executive or Nominating
Committees of the Board of Directors, and (iii) an additional 2,500
shares if the non-employee Director serves on three or more of such
Board committees. The exercise price per share of such options will be
the fair market value of the Common Stock on the day before the date of
the grant; such exercise price will be payable in cash or in shares of
Common Stock. The options will become exercisable for one-third of the
underlying shares on each of the first three anniversaries of the date
of grant. The options will expire at the earlier of ten years after the
date of grant, one-year after cessation of service on the Board of
Directors due to death or disability, or upon cessation of service on
the Board of Directors for any other reason.
John A. Couri is a consultant to the Company's Chief Executive
Officer and Board of Directors. His consulting agreement provides for
an annual consulting fee of $150,000 through December 31, 1999 with
automatic extensions for successive one-year periods unless written
notice is given by either party of its intention not to further extend
the agreement.
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
The Compensation Committee presently consists of Ms. Stackhouse
and Messrs. Africk and Diehl. The Compensation Committee is responsible
for reviewing and making recommendations to the Board of Directors about
the salary of the Company's executive officers, determining the amount
and distribution of bonuses paid under the Company's Incentive
Compensation Plan and stock options awarded under the Company's stock
option plans. The Compensation Committee held five meetings during the
fiscal year ended January 28, 1996. Ms. Stackhouse, a Director, is the
President and an owner of Fenton Hill Florida, Inc., which is 25% owned
by the Company and which has certain arrangements for the purchase of
merchandise and services from the Company. For the Company's fiscal year
ended January 28, 1996, such arrangements included the payment of
approximately $180,000 for services rendered and the purchase of
approximately $799,000 of merchandise, at cost. On April 28, 1994,
Fenton Hill Florida, Inc. redeemed 3.2 shares of its own stock from the
Company for $775,000, leaving the Company with 1.7 shares or 25% of the
outstanding common stock. A total of $75,000 was paid to the Company
upon execution of the agreement and a promissory note for $700,000 was
signed. The note is payable in five equal installments beginning April
1997. Mr. Bernstein, a Director and executive of the Company, is a
Director of Fenton Hill Florida, Inc. Mr. Diehl is a member of the
executive committee of Gebr. Heinemann, a partnership which is a
greater than five percent stockholder of the Company.
<PAGE>
Compensation Committee Report on Executive Compensation
-------------------------------------------------------
The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors with respect to the Company's
executive compensation policies. In addition, the Compensation
Committee determines on an annual basis the compensation to be paid to
the Chief Executive Officer and each of the other executive officers of
the Company.
Compensation Philosophy
The Company's compensation programs for executive officers are
designed to enable the Company to:
* Hire, reward, motivate and retain the highest quality managers
possible.
* Match the Company's compensation plans to its business
strategies, as well as to the external business environment.
* Align the executive officers' interest with those of
stockholders by providing a significant portion of incentive
compensation in the form of Company stock options.
* Emphasize the relationship between pay and performance by
placing a significant portion of compensation at risk through
the Company's Incentive Compensation Plan.
Executive annual compensation levels (base salary and incentive
compensation awards) are targeted at the median of compensation paid by
comparably positioned companies for like jobs including the companies
used in the performance graph on page 11 of this Proxy Statement (the
"Peer Group").
Compensation Elements
Base Salary
In determining an executive officer's base salary, the
responsibilities of the position, the officer's experience, individual
performance, and the competitive marketplace, including a comparison of
salaries paid within the Peer Group, are considered. Based on the most
recent information available, the base salary for the Chief Executive
Officer, Alfred Carfora, ranked below the median base salary relative to
the compensation paid by the Peer Group, and the four other most highly
compensated executive officers' base salaries ranked at the median
relative to the compensation paid by the Peer Group.
Incentive Compensation Plan
Cash bonuses are provided to senior and other key executives under
the Company's Incentive Compensation Plan (the "Plan") which rewards
employees based on performance relative to predetermined objectives
established for the year. For fiscal 1996, $3,000,000 was set aside for
distribution as bonuses under the Plan. Individual bonus awards were
determined by evaluating each employee's performance toward Company,
divisional or departmental objectives established for the year. No
specific performance measures were defined.
<PAGE>
Stock Options
The last principal component of compensation arises from the
Company's grant of stock options under the Company's Stock Option Plans.
Stock option grants are designed to more closely align the interests of
management with those of stockholders, and because the full value of an
employee's compensation package cannot be realized unless stock price
appreciation occurs over a number of years, stock option grants are
utilized to retain key employees and to provide an incentive for them to
create long-term shareholder value. In granting stock options under the
Stock Option Plans, the Committee considers (i) the recipient's level of
responsibility, (ii) the recipient's specific function within the
Company's overall organization; (iii) the recipient's performance toward
Company, divisional or departmental objectives established for the year;
(iv) the number of options granted to executive officers by the other
companies included in the Peer Group; and (v) the amount of options
currently held by the executive officer. The Stock Option Plans are
administered by the Compensation Committee and provide that no one
person, including executive officers, may be granted options for the
purchase of more than 250,000 shares in any fiscal year (subject to
adjustments as noted in the Stock Option Plans in order to prevent
dilution or enlargement of the rights of optionees).
Benefits
The Company provides its executives with medical and other benefits
that are generally available to its employees.
Tax Compliance Policy
Section 162(m) of the Internal Revenue Code generally limits to
$1,000,000 the tax deductible compensation paid to each of the Chief
Executive Officer and the four highest-paid executive officers who are
employed as executive officers on the last day of the year. However, the
limitation does not apply to performance-based compensation provided
certain conditions are satisfied.
The Company's policy is generally to preserve the federal income
tax deductibility of compensation paid, to the extent feasible. The
Compensation Committee believes that the incentive compensation and
stock option awards earned for fiscal 1996 and compensation arising from
exercise of stock options granted in fiscal 1996 will be deductible by
the Company.
The Compensation Committee considers its primary goal to be the
design of compensation strategies that further the best interests of the
Company and its stockholders. To the extent not inconsistent with that
goal, the Compensation Committee will attempt, where practical, to use
compensation policies and programs that preserve the deductibility of
compensation expenses. The Compensation Committee reserves the right to
use its judgment, where merited by the Compensation Committee's need for
flexibility to respond to changing business conditions or by an
executive's individual performance, to nevertheless authorize
compensation payments which may not, in a specific case, be fully
deductible by the Company.
<PAGE>
Chief Executive Officer's Compensation
The compensation program for Alfred Carfora, the Company s Chief
Executive Officer, including salary, annual cash incentive and stock
options was determined using the criteria set forth above. As with the
other executive officers, emphasis is placed on incentive compensation,
with approximately 35% of his fiscal year 1996 compensation (salary and
cash bonus) being incentive based.
Four major factors affected the actions of the Compensation
Committee in fiscal 1996 regarding the compensation of Mr. Carfora:
* The Company's Airport Division opened a total of 17 new
stores, increasing the division s store count to 100.
* In July 1995, the Company s North Border Division acquired two
additional duty free stores in Michigan.
* In January 1996, the Company announced the addition of Air
Canada to its Inflight Division s on-board concession program.
* The Company successfully enacted a series of cost reduction
programs which contributed to the Company s improved
profitability.
The Compensation Committee has agreed, at Mr. Carfora s request,
not to increase his base salary of $325,000 at this time. Mr. Carfora's
base salary is below the median base salary for Chief Executive Officers
included in the Peer Group.
Mr. Carfora earned an incentive compensation award of $175,000 for
the fiscal year ended January 28, 1996, which falls below the median
bonus award of chief executive officers who are included in the Peer
Group. The Compensation Committee determined the size of the award
after an evaluation of Mr. Carfora s leadership in the expansion of the
Company s Airport and Inflight Divisions, in the Company s improved
return on sales and his overall ability to manage and lead the Company.
Jack Africk
Heribert Diehl
Susan H. Stackhouse
Members of the Compensation Committee
<PAGE>
Performance Graph
The following graph compares the cumulative total return on a $100
investment in the Company's Common Stock against the cumulative total
return on a similar investment in (i) the Standard & Poor's Mid-Cap 400
Stock Index and (ii) a group of five other specialty retail companies,
consisting of: CML Group, Inc., Pier 1 Imports, Inc., Sharper Image
Corp., Tiffany & Co. and Williams-Sonoma, Inc. The graph assumes that
all investments were made on January 31, 1991, are held through the
Company's fiscal year ended January 28, 1996 and that all dividends are
reinvested.
[Performance Graph]
<TABLE>
<S> <C> <C> <C>
DUTY FREE SPECIALTY RETAIL STANDARD & POOR'S
DATE INTERNATIONAL COMPANIES MID-CAP 400
- - ---------------- ------------- ---------------- -----------------
January 31, 1991 $ 100 $ 100 $ 100
January 31, 1992 $ 308 $ 146 $ 142
January 31, 1993 $ 138 $ 174 $ 158
January 31, 1994 $ 121 $ 170 $ 182
January 29, 1995 $ 58 $ 156 $ 173
January 28, 1996 $ 101 $ 152 $ 227
- - ----------------
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as to the number
of shares of Common Stock owned, as of March 29, 1996 (except as noted
in note (3) below), by each person who is known by the Company to
beneficially own more than 5% of the Common Stock, each Director of the
Company, each executive officer named in the Summary Compensation Table
and all executive officers and Directors of the Company as a group. A
person is a beneficial owner if such person has or shares voting power
or investment power. Each beneficial owner has sole voting and
investment power unless otherwise noted. At March 29, 1996, there were
27,268,397 shares of Common Stock outstanding. Except as noted in the
footnotes below, the addresses of all stockholders, Directors, executive
officers and nominees identified in the table and accompanying footnotes
are in care of the Company's principal executive offices at 63 Copps
Hill Road, Ridgefield, Connecticut 06877.
<TABLE>
<S> <C> <C>
Number of Shares Percentage of
of Common Stock Outstanding
Name of Beneficial Owner Beneficially Owned Common Stock
- - ------------------------ ------------------ -------------
Gebr. Heinemann(1) 4,571,664 16.8%
The Capital Group Companies,
Inc. (3) 2,806,500 10.3%
FMR Corporation (13) 2,294,100 8.4%
Carl Reimerdes (5) 1,762,764 6.4%
John A. Couri (2) 1,365,508 5.0%
David H. Bernstein (4) 1,180,216 4.3%
Heribert Diehl (1)(6) 915,456 3.4%
Alfred Carfora (7) 274,228 1.0%
Gerald F. Egan (9) 61,100 *
Jack Africk (8) 50,433 *
John Edmondson (10) 33,334 *
Susan H. Stackhouse (11) 12,900 *
All executive officers and
Directors as a group
(9 persons)(12) 5,655,939 20.3%
- - ------------------------
* Represents less than 1% of the issued and outstanding Common Stock.
(1) Heribert Diehl, a member of the executive committee of Gebr. Heinemann, a
partnership, is a Director of the Company. The Company believes that certain
members of the Heinemann family who are partners in Gebr. Heinemann may be
deemed to be indirect beneficial owners of the Common Stock owned by Gebr.
Heinemann.
(2) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 106,667 shares of Common Stock.
(3) Capital Guardian Trust Company and Capital Research and Management Company
("CRMC"), operating subsidiaries of the Capital Group Companies, Inc. "CGC"),
exercised as of December 29, 1995, investment discretion with respect to
1,030,000 and 1,776,500 shares, respectively, which were owned by various
institutional investors. The stockholder has reported that its address is
33 South Hope Street, Los Angeles, California 90071. All of the foregoing
information is based on CRMC's and CGC's Schedule 13G dated February 9, 1996.
(4) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 106,667 shares of Common Stock.
(5) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 98,333 shares of Common Stock.
<PAGE>
(6) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 40,334 shares of Common Stock.
(7) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 98,333 shares of Common Stock.
(8) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 46,333 shares of Common Stock.
(9) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 60,000 shares of Common Stock.
(10) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 33,334 shares of Common Stock.
(11) This amount includes stock options exercisable within 60 days after March 29,
1996 to purchase approximately 12,000 shares of Common Stock.
(12) This amount excludes Common Stock owned by Gebr. Heinemann. The amount
includes stock options exercisable within 60 days after March 29, 1996 to
purchase approximately 602,001 shares of Common Stock.
(13) This information as to the number of shares beneficially owned as of March
29, 1996 was supplied by FMR Corporation. This number includes 1,994,100
shares beneficially owned by Fidelity Management & Research Company, a wholly
owned subsidiary of FMR Corporation, as a result of its serving as investment
advisor to various investment companies registered under Section 8 of the
Investment Company Act of 1940 and as investment advisor to certain other
funds which are generally offered to a limited group of investors, and
300,000 shares beneficially owned by Fidelity International Limited, as a
result of its serving as advisor to various non-U.S. investment companies.
FMR Corporation has sole voting power with respect to zero shares and sole
dispositive power with respect to 1,994,100 shares. Fidelity International
Limited has sole voting and dispositive power with respect to all the shares
it beneficially owns. The principal office of FMR Corporation is
82 Devonshire Street, Boston, Massachusetts 02109.
</TABLE>
CERTAIN TRANSACTIONS
See "Compensation of Directors" on page 7 and "Compensation
Committee Interlocks and Insider Participation" on page 8.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
At the Annual Meeting, the Company's stockholders will be asked to
ratify the appointment of KPMG Peat Marwick LLP as the Company's
Independent Auditors for the fiscal year ending January 26, 1997. The
Company has been advised by KPMG Peat Marwick LLP that none of its
members has any financial interest in the Company. For the fiscal
year ended January 28, 1996, KPMG Peat Marwick LLP was not engaged by
the Company for any professional services other than audit, tax and
other related services. It is expected that representatives of KPMG
Peat Marwick LLP, the Company's Independent Auditors, will be present at
the Annual Meeting to respond to appropriate questions of stockholders
and to make a statement if they so desire.
VOTE REQUIRED
The affirmative vote of a majority of votes cast is required to
ratify the appointment of KPMG Peat Marwick LLP as the Company's
Independent Auditors for the fiscal year ending January 26, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 26, 1997.
<PAGE>
PROPOSAL 3 - STOCKHOLDER REQUEST TO ELIMINATE THE
ELECTION OF DIRECTORS BY CLASSES
The Company has been informed that William Steiner, whose address
is 4 Radcliff Drive, Great Neck, New York, 11024, a beneficial owner of
1,000 shares of the Company's Common Stock, intends to introduce the
following resolution at the Annual Meeting.
"RESOLVED, that the stockholders of the Company request the Board
of Directors take the necessary steps, in accordance with state law, to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be effected in a manner that does not
affect the unexpired terms of directors previously elected."
SUPPORTING STATEMENT BY STOCKHOLDER
"The election of directors is the primary avenue for stockholders
to influence corporate governance policies and to hold management
accountable for it's implementation of those policies. I believe that
the classification of the Board of Directors, which results in only a
portion of the Board being elected annually, is not in the best
interests of the Company and it's stockholders."
"The Board of Directors of the Company is divided into three
classes serving staggered three-year terms. I believe that the
Company's classified Board of Directors maintains the incumbency of the
current Board and therefore of current management, which in turn limits
management's accountability to stockholders."
"The elimination of the Company's classified Board would require
each new director to stand for election annually and allow stockholders
an opportunity to register their views on the performance of the Board
collectively and each director individually. I believe this is the one
of the best methods available to stockholders to insure that the Company
will be managed in a manner that is in the best interest of the
stockholders."
"I am a founding member of the Investors Rights Association of
America and I believe that concerns expressed by companies with
classified boards that the annual election of all directors could leave
companies without experienced directors in the event that all incumbents
are voted out by stockholders, are unfounded. In my view, in the
unlikely event that stockholders vote to replace all directors, this
decision would express stockholder dissatisfaction with the incumbent
directors and reflect the need for change."
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
THE BOARD OF DIRECTORS STATEMENT ON THIS PROPOSAL
The staggered election of directors provides that the number of
directors in each class is as equal as possible, each director serves a
three year term, and one of the three classes is elected each year.
This staggered election is similar to procedures which have been adopted
by the shareholders of many major corporations. In the opinion of the
Board of Directors, a staggered Board of Directors facilitates
continuity and stability of leadership and policy by assuring that
experienced personnel familiar with the Company and its business will be
on the Board of Directors at all times. In the event of any unfriendly
or unsolicited proposal to restructure or acquire the Company, the
staggered system would permit the Company time to negotiate with the
sponsor, to consider alternative proposals and to assure that
stockholder value is maximized.
<PAGE>
VOTE REQUIRED
The affirmative vote of a majority of votes cast is required to
approve this proposal.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "AGAINST" THIS PROPOSAL.
PROPOSAL 4 - STOCKHOLDER REQUEST THAT THE COMPANY'S
BOARD OF DIRECTORS BE COMPRISED OF A MAJORITY OF
INDEPENDENT DIRECTORS
The Company has been informed that Dr. Charles Miller, whose
address is 23 Park Circle, Great Neck, New York 11023, a beneficial
owner of 900 shares of the Company's Common Stock, intends to introduce
the following resolution at the Annual Meeting.
"Whereas the board of directors is meant to be an independent body
elected by shareholders charged by law and shareholders with the duty,
authority and responsibility to formulate and direct corporate policies
and is to be held to the highest standard of fiduciary care, duty and
loyalty."
"Now therefore be it resolved that the shareholders request that
the company's board of directors be comprised of a truly independent
board, meaning that the majority of the board will be non-family members
and individuals who do not currently work or consult with the company,
have been employed by the company or have consulted with the company in
the past."
SUPPORTING STATEMENT BY STOCKHOLDER
"I believe that shareholders will be better served when the
majority of the board is truly independent. Such independent
individuals hopefully will bring true objectivity to serious issues
facing our company."
"As matters stand today the members of the board of directors are
either family members, individuals who either are employed by, do work
for, or have been employed by the company in the past. There is an
apparent conflict of interest each time matters concerning executive
compensation policies, possible takeover offers and corporate
governance issues arise. I am a founding member of the Investors Rights
Association of America and I believe this is a matter that is urgent and
must be presented to the shareholders for action."
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
THE BOARD OF DIRECTORS STATEMENT ON THIS PROPOSAL
The Board has nominated for election this year an additional
outside Director, Stephen M. Waters. After the Annual Meeting of
Stockholders on May 23, 1996, the Company's Board of Directors should
then include four individuals (out of a total of eight) who are not
employees or consultants to the Company. None of the Board members are
related. Under Dr. Miller's proposal, Mr. Africk would not be considered
independent, because he was Vice Chairman of the Board of the Company
from May 1993 through December 1994. Currently, Mr. Africk is not an
employee or consultant to the Company and meets the independence
standard embraced by the New York Stock Exchange. While the Board
recognizes the important role of independent directors, it believes that
the imposition of additional constraints on the director selection
process beyond the standards embraced by the New York Stock Exchange is
<PAGE>
both undesirable and unwarranted. The Board of Directors also includes
four individuals, Messrs. Bernstein, Couri, Diehl and Reimerdes, who are
major stockholders of the Company and whose interests are aligned with
other stockholders.
The Board believes that proposals which seek to impose rigid
eligibility requirements for directors are not in the best interests of
stockholders, because such proposals restrict rather than enhance the
corporation's ability to locate the most qualified individuals to serve
as directors. The ultimate judgement on the composition of the board of
directors is made by stockholders in voting for directors. A
stockholder who believes that a particular nominee is not qualified to
serve by reason of lack of independence or any other reason is free to
vote as he or she deems best. The stockholder proposal would merely
limit the freedom of choice presently enjoyed by stockholders.
VOTE REQUIRED
The affirmative vote of a majority of votes cast is required to
approve this proposal.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "AGAINST" THIS PROPOSAL.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented
for consideration other than the matters described in the Notice of
Annual Meeting, but if other matters are presented, it is the intention
of the persons named in the accompanying Proxy to vote on such matters
in accordance with their judgment.
STOCKHOLDER PROPOSALS FOR THE 1997
ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals to be presented at the 1997 Annual Meeting of
Stockholders must be received, in writing, by the Secretary of the
Company at the Company's principal executive offices no later than
December 20, 1996 in order to be included in the Company's proxy
materials relating to that meeting.
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 1996, filed with the Securities and Exchange Commission, is
available to stockholders, without charge, upon written request.
Exhibits to the Form 10-K will be furnished upon payment of $.50 per
page, with a minimum charge of $5.00. Requests for copies should be
directed to Duty Free International, Inc., 645 Madison Avenue, 6th
Floor, New York, New York 10022, Attention: Investor Relations
Administrator.
SOLICITATION OF PROXIES
The accompanying Proxy is solicited by the Company and the cost of
such solicitation will be borne by the Company. Proxies may be
solicited by officers, Directors and employees of the Company, none of
whom will receive any additional compensation for their services.
Solicitation of Proxies may be made personally or by mail, telephone,
telegraph, facsimile or messenger. The Company will pay persons holding
shares of Common Stock in their names or in the names of nominees, but
<PAGE>
not owning such shares beneficially, such as brokerage houses, banks and
other fiduciaries, for the reasonable expense of forwarding soliciting
materials to their principals.
Ridgefield, Connecticut
April 12, 1996
<PAGE>
DUTY FREE INTERNATIONAL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD AT THE HYATT REGENCY HOTEL, 300 LIGHT
STREET, BALTIMORE, MARYLAND 21202, THURSDAY, MAY 23, 1996 AT 10:00
A.M., BALTIMORE TIME.
The undersigned hereby appoints each of ALFRED CARFORA and JOHN A.
COURI proxies, each with full power of substitution, to represent and
vote all shares of Common Stock which the undersigned would be entitled
to vote at the 1996 Annual Meeting of Stockholders of Duty Free
International, Inc., and any adjournment or postponements thereof, upon
any and all matters which may properly be brought before this Meeting,
provided that said shares shall be voted as specified on the matters
referred to below which are more fully set forth in the Proxy Statement
dated April 12, 1996.
The Board of Directors Recommends a Vote FOR Items 1 and 2.
1. Election of Directors: David H. Bernstein, John A. Couri, Heribert
Diehl for terms ending in 1999, and Stephen
M. Waters for a term ending in 1998.
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ]
listed above for all nominees listed above
(Except as marked
to the contrary)
INSTRUCTIONS: To withhold authority to vote for any individual
nominee write that nominee's name in the space provided below.
- - ------------------------------------------------------------------------
2. Ratification of appointment of KPMG Peat Marwick LLP as the Company's
Independent Auditors for the fiscal year ending January 26, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors Recommends a Vote AGAINST Items 3 and 4.
3. A stockholder proposal to eliminate the election of Directors by
classes.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. A stockholder proposal that the Company's Board of Directors be
comprised of a majority of independent Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR ITEMS 1 AND 2 AND AGAINST ITEMS 3 AND 4. THE PROXIES MAY
VOTE, IN THEIR SOLE DISCRETION, UPON ANY OTHER MATTERS WHICH MAY
PROPERLY COME BEFORE THIS MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. THE UNDERSIGNED HEREBY REVOKES ALL PROXIES PREVIOUSLY GRANTED.
<PAGE>
Please sign exactly as your name appears
hereon. Executors, administrators, trustees,
etc. should so indicate when signing. If shares
are held jointly, each holder should sign.
Dated: , 1996
-------------------------
---------------------------------------------
Signature
---------------------------------------------
Signature
<PAGE>
