SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a 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 ss. 240.14a-11(c) or ss. 240.14a-12
(Name of Registrant as Specified in its Charter)
APS HOLDING CORPORATION
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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:
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 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:
<PAGE>
[APS LOGO]
June 9, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
APS Holding Corporation, on Monday, July 6, 1998, at 9:00 a.m. This year's
Annual Meeting will be held in the Amphitheatre at the Sheraton Crown Hotel,
15700 John F. Kennedy Boulevard, Houston, Texas 77032-4830.
You may attend the Annual Meeting at which you may choose to vote your
shares personally even if you have previously returned the enclosed proxy. The
vote of each stockholder is important. I urge you to fill in, date, sign and
return the enclosed proxy card promptly, regardless of whether you will be able
to attend the Annual Meeting. If you do attend, you will still be able to vote
your shares personally. If you are unable to attend, however, this will ensure
that your shares are represented and will avoid additional proxy soliciting
expenses for the Company.
Sincerely,
Bettina M. Whyte
President and Chief Executive Officer
<PAGE>
APS HOLDING CORPORATION
15710 John F. Kennedy Boulevard, Suite 700
Houston, Texas 77032-2347
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 6, 1998
TO THE STOCKHOLDERS OF APS HOLDING CORPORATION:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of APS Holding Corporation (the "Company") will be held in the
Amphitheatre at the Sheraton Crown Hotel, 15700 John F. Kennedy Boulevard,
Houston, Texas 77032-4830, on Monday, July 6, 1998, at 9:00 a.m., Houston time,
for the following purposes:
1. To elect six directors of the Company to serve until the 1999 Annual
Meeting of Stockholders.
2. To ratify the appointment of Coopers & Lybrand LLP as the Company's
independent auditors for the fiscal year ending January 30, 1999.
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
Only holders of record of Class A Common Stock, par value $.01 per share,
at the close of business on June 5, 1998, are. entitled to notice of, and to
vote at, the Annual Meeting. A list of stockholders of the Company as of the
close of business on June 5, 1998, will be available for inspection during
normal business hours from June 6, 1998 to July 3, 1998 at the offices of the
Company, 15710 John F. Kennedy Boulevard, Suite 700, Houston, Texas 77032-2347.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE COMPANY. A SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
E. Eugene Lauver
Senior Vice President and Secretary
Dated: June 9, 1998
<PAGE>
APS HOLDING CORPORATION
15710 John F. Kennedy Boulevard, Suite 700
Houston, Texas 77032-2347
(713) 507-1100
-------------------
PROXY STATEMENT
-------------------
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of APS Holding Corporation (the "Company") for use in connection with the Annual
Meeting of Stockholders (the "Annual Meeting") to be held on Monday, July 6,
1998, at 9:00 a.m., Houston time, in the Amphitheatre at the Sheraton Crown
Hotel, 15700 John F. Kennedy Boulevard, Houston, Texas 77032-4830, and at any
adjournment(s) thereof.
At the Annual Meeting, stockholders of the Company will consider and vote
upon the following matters:
1. Election of six directors of the Company to serve until the 1999
Annual Meeting of Stockholders.
2. Ratification of the appointment of Coopers & Lybrand, LLP as the
Company's independent auditors for the fiscal year ending January
30, 1999.
3. Transaction of such other business as may properly come before the
meeting or any adjournment(s) thereof.
The mailing address of the principal executive offices of the Company is
15710 John F. Kennedy Boulevard, Suite 700, Houston, Texas 77032-2347. This
Proxy Statement and the related proxy were first mailed to stockholders on or
about June 9, 1998.
The Company's annual report on Form 10-K for the year ended January 31,
1998, including financial statements, is being mailed herewith to all
stockholders entitled to vote at the Annual Meeting. The annual report does not
constitute a part of the proxy soliciting material.
On February 2, 1998, the Company and each of its principal subsidiaries
filed petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware, and the Company and such subsidiaries are presently operating their
businesses as debtors in possession in such proceedings. Payment of amounts that
may be payable, or implementation of arrangements that may be in effect, as
described in this proxy statement, for periods after the fiscal year ended
January 31, 1998 may be subject to such proceedings.
VOTING RIGHTS AND VOTES REQUIRED
Only holders of record of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), at the close of business on June 5, 1998, are
entitled to vote at the Annual Meeting. As of the close of business on such
date, there were outstanding 13,790,110 shares of Class A Common Stock. The
Class A Common Stock is the only class of voting securities outstanding. A
majority of the outstanding shares of Class A Common Stock must be represented
at the Annual Meeting in order to constitute a quorum for the transaction of
business. Each share of Class A Common Stock entitles the record holder thereof
to one vote on each matter to be considered at the Annual Meeting.
<PAGE>
Directors are elected by a plurality of the votes cast. The six nominees
receiving the highest number of votes cast by the holders of the Class A Common
Stock will be elected as directors. There will be no cumulative voting in the
election of directors.
The affirmative vote of the holders of a majority of the shares of the
Class A Common Stock represented at the Annual Meeting in person or by proxy and
entitled to vote thereat will be required to ratify the appointment of the
Company's independent auditors for the fiscal year ending January 30, 1999.
Under Delaware law and the Company's Restated Certificate of Incorporation
and Bylaws, abstentions and broker non-votes will have no effect on the outcome
of the election of directors assuming a quorum is present or represented by
proxy at the Annual Meeting. With respect to the ratification of the appointment
of independent auditors, abstentions will have the same legal effect as a vote
against such matter and broker non-votes will have no effect on such matter. A
broker non-vote occurs if a broker or other nominee of shares does not have
discretionary authority and has not received instructions with respect to a
particular matter.
VOTING OF PROXIES
All properly completed proxies, which have not been revoked, will be voted
at the Annual Meeting in accordance with the instructions specified thereon. If
no specific instructions are specified, the shares represented by a properly
executed proxy will be voted FOR election of the nominees listed below under
"Election of Directors" and FOR ratification of the appointment of independent
auditors.
REVOCATION OF PROXIES
A proxy may be revoked by a stockholder at any time prior to the voting of
the proxy (i) by execution and delivery to the Company of a revised proxy, (ii)
by written notice to the Secretary of the Company or (iii) by voting in person
at the Annual Meeting.
SOLICITATION OF PROXIES
The solicitation of proxies by the Board of Directors will be conducted
primarily by mail. In addition, officers, directors and employees of the Company
may solicit proxies personally or by telephone, telegram or other forms of wire
or facsimile communication. The Company will reimburse brokers, custodians,
nominees and fiduciaries for reasonable expenses incurred by them in forwarding
proxy material to beneficial owners of Class A Common Stock of the Company.
The cost of solicitation will be borne by the Company.
ITEM 1.
ELECTION OF DIRECTORS
At the Annual Meeting six directors are to be elected to hold office until
the Company's 1999 Annual Meeting of Stockholders and until their respective
successors shall have been elected and qualified. It is intended that the
persons named in the enclosed proxy will vote all shares for which they shall
have received proxies FOR the election of the nominees named below unless
contrary instructions are given. Although the Board of Directors does not
anticipate that any of the nominees will be unable to serve, if such a situation
arises prior to the Annual Meeting, the persons named in the enclosed proxy will
vote for the election of such other person(s) as may be nominated by the Board
of Directors. Each of the nominees to the Board of Directors currently serves as
a director of the Company.
2
<PAGE>
Directors of the Company are elected annually and hold office until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. The Company's executive officers serve at the discretion of the
Board of Directors.
The following table sets forth, for the nominees, information regarding
their names, ages as of June 5, 1998, principal occupations and other
directorships in certain companies held by them and the length of continuous
service as a director of the Company.
<TABLE>
<CAPTION>
NOMINEES PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE DIRECTOR SINCE
<S> <C> <C>
Hubbard C. Howe Mr. Howe served as President and Chief 69 1991
Executive Officer of the Company between
March 1997 and January 1998, and has been
Chairman of the Board of the Company since
August 1992. Mr. Howe was Chairman
of the Board and Chief Executive Officer of
Remington Arms Company, Inc. ("RAC")
from December 1993 until December 1997.
He currently remains on the Board of RAC.
Mr. Howe is a principal and a professional
employee of Clayton, Dubilier & Rice, Inc.,
a private investment company ("CD&R"), and
a general partner of Clayton & Dubilier
Associates IV Limited Partnership
("Associates"), the general partner of the
Clayton & Dubilier Private Equity Fund IV
Limited Partnership, an investment partnership
managed by CD&R ("Fund IV"). Mr. Howe
is a Director of Riverwood International
Corporation, and its parents, RIC Holding,
Inc. and Riverwood Holding, Inc., a
corporation which is an investment
partnership managed by CD&R in which
CD&R has an investment.
Wiley N. Caldwell Mr. Caldwell was President of W.W. Grainger, 71 1993
Inc., an industrial supply company, from prior
to 1991 to July 1992 and was a director of such
company until April 1993. Mr. Caldwell is also
a director of Consolidated Papers, Inc. and
Kewaunee Scientific Corp.
Michael J. Dubilier Mr. Dubilier was a professional employee of 42 1989
CD&R from prior to 1991 until 1994 and is
currently a general partner in Dubilier CRM
Fund I, a private investment partnership managed
by Dubilier & Company (not affiliated with CD&R).
3
<PAGE>
Donald J. Gogel Mr. Gogel has been a principal of CD&R 49 1989
from prior to 1991 and President since 1997.
Mr. Gogel is also a professional employee of
CD&R and a general partner of Associates.
Mr. Gogel is also a director of Turbochef, Inc.
H. Jack Meany Mr. Meany has been Chairman of the Board, 75 1990
President and Chief Executive Officer of
Farr Company since April 1994. Mr. Meany
is a director of BWIP, Inc., a corporation in
which an investment partnership managed by
CD&R formerly had an investment.
Jerry K. Myers Mr. Myers has been Chairman of the Board of 57 1996
MEDCOR, Inc. since December 1995 and
serves as a partner of CroBern Management
Partnership. Prior to joining CroBern, Mr.
Myers was President and Chief Executive
Officer of Steelcase, Inc., which he joined
prior to 1991. Mr. Myers is also a director of
DigiTrace Care Services, Inc.
</TABLE>
Additional information about the current directors and executive officers
of the Company, including information with respect to their ownership of Class A
Common Stock and their compensation, appears in the following sections of this
Proxy Statement.
Shares represented by the accompanying proxy card will be voted FOR the
election of the above nominees unless authority to vote for one or more nominees
is withheld. Stockholders may withhold authority to vote for the entire slate as
nominated or , by writing the name of one or more nominees in the space provided
in the proxy card, withhold the authority to vote for such nominee or nominees.
Directors must be elected by a plurality of the votes that could be cast by the
holders of the shares of Class A Common Stock who are present in person or by
proxy at the Annual Meeting. Abstentions on this proposal will be counted for
quorum purposes but not voted. Broker non-votes will have no effect on the
outcome of the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES NAMED
ABOVE.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 5, 1998
(unless otherwise noted) as to the beneficial ownership of Class A Common Stock
by (i) each person known by the Company to own beneficially five percent or more
of its outstanding Class A Common Stock, (ii) each of the nominees for director,
(iii) the Company's Chief Executive Officer for the 1998 fiscal year and each of
the Company's other four most highly compensated executive officers for such
year and (iv) all current directors and executive officers as a group, based on
13,783,873 shares of Class A Common Stock outstanding on such date. Such
information includes all options which will vest within sixty (60) days of such
date. Each beneficial owner has sole voting and investment power with respect to
the listed shares unless otherwise indicated.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS
- ------------------------ -------------------- -------------------
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership (1) ........ 4,119,298 30.0
Donald J. Gogel (2) ...................... 4,119,298 (2) 30.0
Hubbard C. Howe (2) (3) .................. 4,126,316 (2)(3) 30.0
Wiley Caldwell ........................... 14,035 *
Michael J. Dubilier ...................... 15,000 *
H. Jack Meany ............................ 18,385 *
Jerry K. Myers ........................... 4,000 *
David C. Barbeau (4) (5) ................. 55,491 *
Michael L. Preston (4) (5) ............... 52,119 *
All executive officers and directors
as a group (11 persons (4) (5) (6)) ...... 4,283,277 31.2
(1) The address of The Clayton & Dubilier Private Equity Fund IV Limited
Partnership ("Fund IV") is 270 Greenwich Avenue, Greenwich, Connecticut
06830. Fund IV is an investment partnership, the general partner of which
is Associates. The general partners of Associates are Joseph L. Rice, III,
Alberto Cribiore, Donald J. Gogel, B. Charles Ames, William A. Barbe, Leon
J. Hendrix, Jr., Andrall E. Pearson and Hubbard C. Howe. Such general
partners share investment discretion with respect to securities held by
Fund IV, but disclaim beneficial ownership thereof. The information is
based on Amendment No. 1 to Schedule 13G of Fund IV, Associates and its
general partners dated February 28, 1995, filed with the Securities and
Exchange Commission (the "Commission").
(2) Includes 4,119,298 shares owned by Fund IV as to which Messrs. Gogel and
Howe share investment discretion but disclaim beneficial ownership.
(3) 7,018 of these shares are held by Gene S. Howe, the wife of Hubbard C.
Howe. Mr. Howe disclaims beneficial ownership of the shares held by Mrs.
Howe.
(4) Includes shares that the officers have a right to purchase within sixty
(60) days pursuant to stock options as follows: Mr. Barbeau - 26,139; Mr.
Preston - 26,067; and three other executive officers - 28,219.
(5) The Company has financed a portion of the purchase price of 21,052 shares
for each of Messrs. Barbeau, Lauver and Preston and the officers have
pledged such shares to the Company as collateral for such financing.
See "Transactions with Management and Certain Stockholders".
(6) Includes shares attributed to Messrs. Gogel and Howe. See notes (2) and
(3) above. All current executive officers and directors as a group hold
options which have vested within sixty (60) days after June 5, 1998, to
5
<PAGE>
purchase 80,425 shares of Class A Common Stock, and which have been
included in the beneficial ownership figures for all executive officers
and directors as a group. No additional options will vest within sixty
(60) days after such date.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four regularly scheduled meetings and four
special meetings in fiscal 1998. All directors attended at least 75% of the
aggregate total number of meetings of the Board of Directors and each committee
on which such director served, except that Messrs. Caldwell and Gogel each
attended at least 66 2/3% of such total number of meetings.
The Board of Directors currently has three standing committees.
EXECUTIVE COMMITTEE. The Executive Committee, currently consisting of
Messrs. Caldwell, Gogel and Howe, met three times during fiscal 1998. It has
authority to act for the Board of Directors on most matters during intervals
between Board of Director meetings.
COMPENSATION COMMITTEE. The Compensation Committee, currently consisting
of Messrs. Dubilier and Howe, met two times during fiscal 1998. It reviews and
recommends to the Board of Directors the compensation of employees of the
Company, including bonuses, benefit plans and stock options. The Compensation
Committee also administers the employee benefit plans for the Company.
AUDIT COMMITTEE. The Audit Committee, currently consisting of Messrs.
Caldwell and Myers, met four times during fiscal 1998. It recommends to the
Board of Directors the appointment of the independent auditors of the Company
and reviews with the independent auditors the scope and results of the Company's
audits, the Company's accounting and internal control systems and the services
provided by the independent auditors to the Company.
COMPENSATION OF DIRECTORS
During fiscal 1998, members of the Board of Directors who were not
employees of the Company or CD&R ("Non-Employee Directors") received $1,000 for
each board meeting attended and an annual retainer of $20,000. The chairman of
the Audit Committee and the chairman of the Compensation Committee each received
an additional $2,000 annual retainer for chairing such committees. All directors
are reimbursed for reasonable travel and lodging expenses incurred to attend
meetings.
6
<PAGE>
EXECUTIVE COMPENSATION
The Summary Compensation Table summarizes the compensation paid to the
Company's Chief Executive Officer and each of its four most highly compensated
executive officers (collectively, the "Named Executives") for the previous three
fiscal years for the Company and its subsidiaries.
SUMMARY OF COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
FISCAL
YEAR SECURITIES ALL OTHER
NAME AND ENDING SALARY BONUS OTHER ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION JANUARY $ (1) ($) COMPENSATION OPTIONS # ($)(2)
- ------------------ ------- ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Hoffman (3) ............. 1998 $ 87,692 -0- $ 1,920 -0- $ 717,020(4)
President & Chief ............... 1997 360,000 -0- 11,520 2,000 4,292
Officer ......................... 1996 354,375 -0- 11,520 16,155 4,755
Michael L. Preston .............. 1998 183,000 $ 30,000(11) 8,940 10,000 18,334
Senior Vice President ........... 1997 182,500 81,012 8,940 2,000 3,133
1996 176,375 65,512 8,940 8,340 4,691
David C. Barbeau ................ 1998 188,500 37,800(11) 8,940 10,000 19,523
Senior Vice President ........... 1997 182,500 90,138 8,910 2.000 3,039
1996 176,375 72,350 8,940 8.460 3,536
Clarence Gabriel, Jr.(5)......... 1998 140,308 150,000 191,463(7) 10,000 7
Senior Vice President ........... 1997 53,846 74,000 21,513(9) -0- -0-
1996 -- -- -- -- --
Ralph Nemeth (6) ................ 1998 202,750 28,420 76,921(8) 10,000 11
Senior Vice President ........... 1997 67,436 50,000 68,472(10) -0- -0-
1996 -- -- -- -- --
</TABLE>
(1) Includes, where applicable, amounts electively deferred by each Named
Executive under the A.P.S., Inc. Partnership Plan (the "Savings Plan") and
the A.P.S., Inc. Executive 401(k) Deferral Plan (the "Deferral Plan").
(2) Amounts listed in this column represent the Company's contributions to the
Savings Plan and the Deferral Plan (exclusive of amounts deferred at the
election of the Named Executive) on behalf of the Named Executive, and
premium for up to $50,000 of life insurance as well as distributions from
the Deferral Plan to the Named Executive.
(3) Mr. Hoffman resigned his position as President and Chief Executive Officer
effective March 3, 1997. Mr. Howe became President and Chief Executive
Officer on March 3, 1997 and resigned those positions on January 18, 1998.
Mr. Howe was not compensated by the Company for such services.
(4) Includes stock appreciation rights exercised May 28, 1997.
(5) Mr. Gabriel joined A.P.S., Inc. October 28, 1996 and resigned September
26, 1997.
7
<PAGE>
(6) Mr. Nemeth joined A.P.S., Inc. September 30, 1996 and resigned April 3,
1998.
(7) Includes relocation expense of $185,670.92.
(8) Includes relocation expense of $67,920.61.
(9) Includes relocation expense of $19,090.55.
(10) Includes relocation expense of $65,471.62.
(11) See "Compensation Committee Report on Executive Compensation - Annual
Incentive Compensation".
(12) Amount represents payment made in connection with termination.
OPTION GRANTS
The following table contains information concerning the grant of stock
options under the Company's 1993 Stock Option Plan and the 1990 Stock Option
Plan to the Named Executives during the Company's last fiscal year.
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIY GRANTED TO POTENTIAL REALIZABLE VALUE
UNDERLYING EMPLOYEE EXERCISE AT ASSUMED ANNUAL RATES OF
OPTIONS IN FISCAL PRICE EXPIRATION STOCK PRICE APPRECIATION FOR
NAME GRANTED YEAR 1998 ($/SH) DATE OPTION TERM (1)
- ---- -------- --------- ------- -------------- -----------------------------
0% ($) 5% ($) 10% ($)
------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark S. Hoffman - - - - - - -
Michael L. Preston 10,000 4.0 $ 9.87 Mar 25, 2007 -0- 62,072 $ 157,302
David C. Barbeau 10,000 4.0 9.87 Mar 25, 2007 -0- 62,072 157,302
Clarence Gabriel, Jr. 30,000 11.9 9.87 Dec 25, 1997 -0- -0- -0-
Ralph Nemeth 30,000 11.9 9.87 Jul 2, 1998 -0- -0- -0-
</TABLE>
(1) The amounts shown under these columns are the result of calculations at 0%
and at the 5% and 10% rates required by the Securities and Exchange
Commission and are not intended to forecast future appreciation of the
Company's stock price.
8
<PAGE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the value of
unexercised options held by each of the Named Executives at January 31, 1998.
None of the Named Executives exercised any stock options in fiscal year 1997.
(Stock appreciation rights were exercised as set forth in Note 4 to the Summary
of Compensation Table.)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
OPTIONS AT JANUARY 31, 1998 (AT JANUARY 31, 1998($)(1)
--------------------------- --------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Mark S. Hoffman .......... -0- -0- -0-
Michael L. Preston ....... 13,663 27,060 -0- -0-
David C. Barbeau ......... 13,663 27 -0- -0-
Clarence Gabriel, Jr ..... -0- -0- -0- -0-
Ralph Nemeth ............. 6,666 23,334 -0- -0-
(1) The closing price on the NASDAQ National Market for the Class A common
stock on the last business day in fiscal year 1998 was $.94, which was
less than the exercise prices of such options, and the Company's Chapter
11 filing was made on February 2, 1998.
PENSION PLANS
The following table shows the estimated annual benefits payable to
hypothetical participants who are entitled to the maximum benefits under the
A.P.S., Inc. Employee's Retirement Plan, a tax-qualified non-contributory
defined benefit plan maintained by the Company (the "Pension Plan"), in the
compensation and years-of-service categories indicated in the table upon
retirement at normal retirement age (65 years of age) and without regard to the
maximum limitations on such benefit imposed under the Internal Revenue Code. The
amounts shown are based upon the assumption that such benefits will be paid in
the form of a straight-life annuity.
PENSION PLAN TABLE
YEARS OF SERVICE AT OCTOBER 1, 1992
-----------------------------------
ANNUALIZED 10 20 25 30
AVERAGE YEARS OF YEARS OF YEARS OF YEARS OF
FINAL PAY SERVICE SERVICE SERVICE SERVICE
- --------- ------- ------- ------- -------
$ 50,000 $ 6,356 $ 12,711 $ 15,889 $ 19,067
75,000 10,106 20,211 25,264 30.317
100,000 13,856 27,711 34,639 41,567
125,000 17,606 35,211 44,014 52,817
150,000 21,356 42,711 53,389 64,067
175,000 25,106 50,211 62,764 75,317
200,000 28,856 57,711 72,139 86,567
225,000 32,606 65,211 81,514 98,817
9
<PAGE>
The Pension Plan provides retirement benefits based on an employee's years
of service and such employee's average annual earnings (subject to a maximum of
$200,000 annually, as adjusted by the Internal Revenue Service for cost of
living increases after 1989) for the 60 highest consecutive months' compensation
during the 120 months prior to retirement (and if the employee has been employed
less than five years, the average of compensation during all months employed).
Annual earnings include principally salary, overtime and certain bonus or
incentive compensation awards, excluding deferred compensation, fringe benefits
and other special pay.
Effective October 1, 1992, benefits under the Pension Plan were frozen by
amendments providing that no additional credit for service or increase in
covered compensation would accrue under the Plan. Participants in the Pension
Plan became fully vested in their accrued benefit on that date.
At October 1, 1992, the credited years of service and the average annual
earnings under the Pension Plan of the Named Executives were as follows:
YEARS OF SERVICE AVERAGE ANNUAL EARNINGS
Mark S. Hoffman ------- -------
Michael L. Preston 23 years 6 months $173,180
David C. Barbeau 2 years 4 months 151,733
Clarence Gabriel, Jr. ------- -------
Ralph Nemeth ------- -------
SEVERANCE POLICY
The Company has established a written severance policy for the benefit of
eligible salaried and hourly employees whose employment terminates as a result
of one of the reasons enumerated in the written severance policy. Eligible
employees receive severance pay based on a formula which takes into account
years of service and the base compensation of the employee at the time of
termination. The maximum amount of severance pay an employee may receive is 26
weeks salary. An employee's salary for these purposes includes his base pay and
excludes shift premiums, overtime, bonuses, commissions or other allowances.
TRANSACTIONS WITH MANAGEMENT AND CERTAIN STOCKHOLDERS
In November 1990, each of Messrs. Barbeau, Lauver and Preston purchased
21,052 shares of Class A Common Stock from the Company and financed a portion of
the purchase price through bank loans guaranteed by the Company. In December
1997, the Company paid such bank loans, and the officers became obligated to
repay such amounts to the Company. The outstanding principal amounts of such
loans, which are secured by a pledge by the officers of such shares, are $87,918
for Mr. Barbeau, $103,944 for Mr. Lauver and $100,939 for Mr. Preston. Such
loans are payable in annual installments beginning December 8, 2000 and ending
December 8, 2002 and bear interest at the prime commercial rate from time to
time charged by a commercial bank.
CD&R, of which each of Messrs. Gogel and Howe is a principal and employee,
was paid a management fee by the Company of $300,000 for the fiscal year ended
in 1998, for financial advisory and management consulting services.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a discussion of the Company's executive compensation
program as in effect prior to the Company's Chapter 11 filing, except as
otherwise noted below.
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The Company's executive compensation program is designed to attract and
retain key executives in order to implement a business strategy to maximize
value. The Compensation Committee is responsible for administering the Company's
compensation program and establishing the compensation policy for all Company
employees, including the Chief Executive Officer and the Company's other
executive officers.
The basic policy underlying the Company's compensation program for
executive officers is that their compensation should vary depending on the
Company's success in meeting its financial and strategic objectives. Key
elements of the Company's compensation program are the Annual Bonus Plan and the
1990 and the 1993 Stock Option Plans, in addition to a competitive executive
salary structure.
BASE SALARY
The base salary for all employees exempt from the Fair Labor Standards
Act, which includes executives, is managed through the A.P.S., Inc. Salary
Administration Program. Under this program, increases in base salary are
governed by salary guidelines that are reviewed and adjusted yearly by the
Committee. The guidelines are composed of three key factors: Market Parity,
Merit and Promotions. No specific weight is assigned to any of these factors.
Base salaries for executive officers are initially determined by
evaluating the executive's level of responsibility and prior experience as
compared to jobs of comparable skill and scope with companies in the same
industry or with comparable yearly revenues (the Market Parity factor).
Individual merit increases are based on the individual performance of the
executive officer (the Merit factor). An executive officer's salary is also
increased in connection with a promotion to an executive position with a greater
level of responsibility (the Promotion factor).
In reviewing the performance of each executive officer and setting new
base salary levels for the fiscal year ending January 31, 1998 the Committee
considered each individual's contribution toward meeting the budgeted financial
plan as approved by the Board of Directors for the previous fiscal year,
compliance with the Company's capital financial plan and operating budgets and
the individual's management effectiveness. No specific relative weight was
assigned to any of these factors.
ANNUAL INCENTIVE COMPENSATION
All executive officers are eligible for annual incentive compensation. For
fiscal 1998, the size of the performance bonus was based upon the following
factors, all of which were relative to the specific target performance levels
established for the executive officer: (a) the executive officer's performance
against individual goals: (b) the performance of the executive officer's unit
within the Company against that unit's goals; and (c) the performance of the
Company against Company goals, including certain quantitative financial
objectives such as Company earnings targets. For the fiscal year ended January
31, 1998, annual incentive bonuses to the executive officers were subject to
approval of the Bankruptcy Court. As so approved, 60% of the bonuses was paid in
April, 1998, with the balance payable 20% in each of July and October 1998 if
the officer has not left the Company. In light of the Company's Chapter 11
filing, the Committee is reviewing the Company's annual incentive compensation
and will make appropriate adjustments for fiscal 1999.
STOCK OPTION PLAN
The 1993 Stock Option Plan and the 1990 Stock Option Plan provide that the
Committee may grant options ("Options") to purchase Class A Common Stock to
officers, directors and key employees of the Company or a parent or subsidiary
corporation of the Company. Unless the Committee specifies a higher or lower
exercise price, the exercise price per share for any option will be the fair
market value of a share of Class A Common Stock on the date the Option is
granted. The objectives for granting Options are to provide executives with
long-term interests and commitment to
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the Company and to align the executive's interest with that of the Company's
stockholders.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Hoffman had been the Chief Executive Officer and President of the
Company since August 1992. Mr. Hoffman's base salary was reviewed in January
1995 and was increased to $360,000 effective March 1995. In recommending the
base salary, the Committee took into account relevant salary information in the
national market and the Committee's subjective evaluation of Mr. Hoffman's
overall management effectiveness and achievement of individual goals. The
Committee did not utilize any specific performance formula in determining Mr.
Hoffman's salary. Mr. Hoffman's salary was not changed for the last fiscal year,
and he resigned as President and Chief Executive Officer effective March 3,
1997.
OTHER
The Compensation Committee does not intend to award compensation that
would result in a limitation on the deductibility of a portion of such
compensation pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended; however, the Compensation Committee may in the future decide to
authorize compensation in excess of the limits of Section 162(m) if it
determines that such compensation is in the best interest of the Company.
COMPENSATION COMMITTEE
Michael J. Dubilier, Chairman
Hubbard C. Howe
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown below compares the cumulative stockholder
return on the Company's Class A Common Stock with the cumulative total return of
the NASDAQ Composite Index and the Peer Group (as defined below) and was
prepared based upon the following assumption:
1. $100 was invested in the Company's Class A Common Stock, the NASDAQ
Composite Index and the Peer Group on January 29, 1994 at the closing
prices of the Company's Class A Common Stock comprising the NASDAQ
Composite Index and the Peer Group, respectively, on that date. (The
Company's Class A Common Stock was delisted from the NASDAQ National
Market System as of April 1, 1998.)
2. Peer Group investment is weighted based upon the market capitalization of
each individual company within the Peer Group at the beginning of the
period.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Company's Peer Group are as follows:
AutoZone, Inc., Discount Auto Parts, Inc., Genuine Parts Company, Hi/Lo
Automotive, Inc., Pep Boys, Inc., Hahn Automotive, Inc., O'Reilly Automotive,
Inc., and Republic Automotive, Inc.
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[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
January 29, 1994 January 28, 1995 January 27, 1996 January 25, 1997 January 31, 1998
APS Holding Corporation $100.00 $122.99 $ 73.56 $ 41.38 $ 4.31
NASDAQ Composite Index $100.00 $ 95.28 $130.69 $171.22 $203.30
Peer Group $100.00 $119.57 $126.17 $122.05 $107.03
</TABLE>
ITEM 2.
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Audit Committee has recommended, and the Board of Directors has
appointed, the firm of Coopers & Lybrand, LLP, which has served as independent
auditors of the Company since fiscal 1989, as independent auditors to audit the
consolidated financial statements of the Company for the fiscal year ending
January 30, 1999. A member of that firm is expected to be present at the Annual
Meeting, will be offered the opportunity to make a statement if so desired and
will be available to respond to appropriate questions. If the stockholders do
not ratify the appointment of Coopers & Lybrand, LLP, the Board of Directors
will consider the appointment of other independent auditors. Adoption of this
proposal requires approval by a majority of the votes that could be cast by the
holders of the shares of Class A Common Stock who are present in person or by
proxy at the Annual Meeting. Abstentions on this proposal will be counted for
quorum purposes but not voted. Broker non-votes will have no effect on the
outcome of this vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS APPOINTMENT.
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ITEM 3.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) thereof, it is
intended that the enclosed proxy will be voted in accordance with the judgment
of the persons voting the proxy.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own more than 10% of the
Class A Common Stock to file with the Commission initial reports of ownership
and reports of changes in ownership of such Common Stock. Executive officers,
directors and greater than 10% stockholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms that
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than 10% beneficial
owners were complied with during the fiscal year ended January 31, 1998, except
that Forms 5 reporting the grant of options in March 1997 to each of Messrs.
Barbeau, Gabriel, John L. Hendrix, Senior Vice President and Chief Financial
Officer, Lauver, Nemeth and Preston were filed approximately 73 days after
the required filing date.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for inclusion in the proxy
material and for presentation at the Company's 1999 Annual Meeting of
Stockholders must forward such proposal to the Company's executive offices at
15710 John F. Kennedy Boulevard, Suite 700, Houston, Texas 77032-2347, addressed
to the attention of the Secretary, so that the Secretary receives it no later
than February 9, 1999.
By Order of the Board of Directors
E. Eugene Lauver
Senior Vice President and Secretary
June 9, 1998
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