SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] 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 Section 240.14a-11(c) or Section 240.14a-12
LAND'S END, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Notes:
LOGO
NOTICE OF 1995 ANNUAL MEETING
AND PROXY STATEMENT
April 17, 1995
Dear Shareholder:
The annual meeting of Lands' End, Inc. shareholders will be held at our
headquarters in Dodgeville, Wisconsin, on Wednesday, May 17, 1995, beginning at
10:00 a.m. C.D.T. (See map for directions.)
The directors and officers of your company join me in extending you a cordial
invitation to attend.
For those of you interested in seeing firsthand how we fill an order, tours
of our facilities will be available before the meeting. The first tour will
leave the activity center at 8:00 a.m. and the last one will leave promptly at
9:00 a.m.
The agenda for the meeting includes the election of two directors, the
approval of an amendment to the Company's Stock Option Plan and the
ratification of the appointment of independent public accountants. There also
will be a brief management presentation on the state of the business.
I hope you can be there, but whether you attend the meeting in person or not,
it's important that your shares be represented. To make sure they are, please
mark your votes on the enclosed proxy card, and sign, date and mail it in the
postage-paid envelope. It will help us keep postage costs down if you take a
minute to do so now.
LOGO
Gary C. Comer
Chairman
LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1995
To Our Shareholders:
The annual meeting of shareholders of Lands' End, Inc. (the "Company") will
be held at the offices of the Company, One Lands' End Lane, Dodgeville,
Wisconsin 53595, on May 17, 1995, at 10:00 a.m. C.D.T. for the following
purposes:
1. To elect two members to the Board of Directors of the Company to serve
until the annual meeting of shareholders in 1998 and until their
successors are duly elected and qualified.
2. To approve an amendment to the Company's Stock Option Plan.
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the fiscal year ending February 2, 1996.
4. To consider and act upon such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 24, 1995, as
the record date for the meeting. All shareholders of record on that date are
entitled to notice of and to vote at the meeting.
Please complete and return the enclosed proxy in the envelope provided
whether or not you intend to be present at the meeting in person.
By order of the Board of Directors,
LOGO
Robert S. Osborne
Secretary
Dodgeville, Wisconsin
April 17, 1995
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE.
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Lands' End, Inc., a Delaware corporation (the "Company"),
of proxies to be voted at the 1995 annual meeting of shareholders on Wednesday,
May 17, 1995, and at any adjournment thereof (the "Annual Meeting"). This Proxy
Statement and the accompanying proxy card are being mailed to shareholders on
or about April 17, 1995.
PROXIES
Properly signed and dated proxies received by the Company's Secretary prior
to or at the Annual Meeting will be voted as instructed thereon or, in the
absence of such instructions, (a) FOR election to the Board of Directors of the
persons nominated by the Board, (b) FOR approval of the amendment to the
Company's Stock Option Plan, (c) FOR the ratification of the appointment of
Arthur Andersen LLP as independent public accountants for the Company, and (d)
in accordance with the best judgment of the persons named in the proxy on any
other matters which may properly come before the meeting. Any proxy may be
revoked for any reason prior to voting by notifying the Secretary of the
Company in writing of such revocation or by voting by ballot at the meeting,
which will cancel any proxies previously submitted. The Company has appointed
an officer of Firstar Trust Company, transfer agent for the Company, to act as
an independent inspector at the Annual Meeting.
VOTING OF PROXIES AND SHARES OUTSTANDING
Holders of record at the close of business on March 24, 1995, of shares of
the Company's common stock, $.01 par value per share (the "Common Stock"), are
entitled to vote on all matters which may be properly presented at the Annual
Meeting. The number of shares of Common Stock of the Company outstanding on
March 24, 1995, the record date for the meeting, was 34,725,616 all of one
class and each entitled to one vote, owned by 3,065 shareholders of record. All
share numbers and share prices contained in this Proxy Statement have been
adjusted where necessary to reflect the Company's May 1994 two-for-one stock
split effected in the form of a stock dividend.
The holders of at least a majority of the shares of Common Stock must be
present in person or by proxy at the Annual Meeting in order for the Annual
Meeting to be held. Directors will be elected by a plurality of the votes cast
for the election of directors. The affirmative vote of the holders of a
majority of the shares of Common Stock present and entitled to vote at the
Annual Meeting is required for approval of each of the other actions proposed
to be taken at the Annual Meeting. On each such proposed action, pursuant to
Delaware law, abstentions are treated as present and entitled to vote and thus
have the effect of a vote against a proposed action. A broker non-vote (where a
broker submits a proxy but does not have authority to vote a customer's shares
on one or more matters) on a proposed action is considered not entitled to vote
on that action and thus is not counted in determining whether an action
requiring approval of a majority of the shares present and entitled to vote at
the Annual Meeting has been approved.
ELECTION OF DIRECTORS
In January 1995, the Board of Directors decreased from seven to six the
number of directors which constitute the full Board. The directors are now
divided into three classes composed of two directors each. One class is elected
each year for a three year term. The two nominees for election as directors to
serve until the annual meeting of shareholders in 1998 and until their
respective successors are duly elected and qualified, are John N. Latter and
Michael J. Smith. The Board of Directors recommends that shareholders vote
"FOR" the election of Messrs. Latter and Smith.
2
The following tabulation sets forth, as of March 24, 1995, certain
information about each nominee for election to the Company's Board of Directors
and each continuing director.
DIRECTOR NOMINEES FOR A TERM TO EXPIRE IN 1998
JOHN N. LATTER AGE: 69
Director of the Company since 1978. Since 1980, Mr. Latter has been
independently employed as a financial consultant.
MICHAEL J. SMITH AGE: 34
President and Chief Executive Officer of the Company since December 1994.
In 1983, Mr. Smith entered the employ of the Company as a Market Research
Analyst. In 1985, he became Circulation Manager of Planning and in 1988, he
was promoted to Manager of Merchandise Planning and Research. In 1990, Mr.
Smith was named Managing Director of Coming Home and in 1991, he was
elected Vice President of that business. Mr. Smith has been serving as a
director of the Company since his appointment to his current positions in
December 1994.
DIRECTORS WHOSE TERM EXPIRES IN 1996
GARY C. COMER AGE: 67
Founder of the Company and Chairman of the Board of Directors. Mr. Comer
was President of the Company from 1963 until 1989, and served as Chief
Executive Officer from 1963 until 1990. He has been a director of the
Company since 1963. Prior to 1963, Mr. Comer was employed for ten years as
a copywriter at Young & Rubicam.
DAVID B. HELLER AGE: 64
Director of the Company since 1986. Since 1974, Mr. Heller has been
President of Advisory Research, Inc., an investment advisory firm.
DIRECTORS WHOSE TERM EXPIRES IN 1997
RICHARD C. ANDERSON AGE: 65
Vice Chairman of the Company since 1984. Mr. Anderson served as Chief
Executive Officer of the Company from 1990 through January 1993. In
addition, Mr. Anderson served as President and Chief Operating Officer from
1989 until 1992. He has been a director of the Company since 1979. From
1977 to 1984, Mr. Anderson was a senior executive of Needham, Harper &
Steers, serving as Executive Vice President in charge of programming and
media from 1981 until 1984. Mr. Anderson serves as a director of the
Company's majority-owned subsidiary, The Territory Ahead. He has also
provided creative consulting services to the Company and has been
compensated for his services in each capacity. See "Meetings and
Compensation of Directors; Committees of the Board."
HOWARD G. KRANE AGE: 61
Director of the Company since 1986. Mr. Krane's professional corporation is
a partner of Kirkland & Ellis, with which he has practiced law since 1957.
Kirkland & Ellis renders legal services to the Company. Mr. Krane is also
Chairman of the Board of Trustees of the University of Chicago.
3
MEETINGS AND COMPENSATION OF DIRECTORS; COMMITTEES OF THE BOARD
The Board of Directors held twelve formal meetings during the fiscal year
ended January 27, 1995. All directors attended at least 75% of the total number
of meetings of the Board and Committees of which they were members. Directors
who are not salaried officers or employees of the Company receive an annual
retainer of $25,000 (other than the Company's founder, who receives no such
compensation). Richard C. Anderson receives an additional $15,000 annual
retainer from the Company for serving as a director of the Company's majority-
owned subsidiary, The Territory Ahead. Mr. Anderson also received total cash
compensation of $38,230 from the Company in consideration for his providing
creative consulting services to the Company during fiscal year 1995. Directors
who are salaried officers or employees of the Company earn no additional
compensation for their services as directors.
The Board has three standing committees: The Audit Committee, the
Compensation Committee and the Performance Compensation Committee. The Board
does not have a nominating committee. The functions of the standing committees
are described briefly below:
AUDIT COMMITTEE
The members of the Audit Committee are John N. Latter (chairman) and David B.
Heller. The functions of the Audit Committee are to recommend the appointment
of the Company's independent public accountants, to review and approve the
scope of the yearly audit and proposed budget for audit fees, to review the
results of the annual audit, to review the Company's internal controls and the
functions of the Company's internal audit staff, and to report to the Board of
Directors on the activities and findings of the Audit Committee and make
recommendations to the Board of Directors based on such findings. The Company's
internal audit staff and its independent public accountants have direct access
to the Audit Committee to discuss auditing and any other accounting matters.
The Audit Committee held two formal meetings during fiscal year 1995.
COMPENSATION COMMITTEE
The members of the Compensation Committee are Howard G. Krane (chairman),
Gary C. Comer, David B. Heller and John N. Latter. The Compensation Committee
monitors the Company's overall compensation policies and specifically reviews
and approves all compensation to be paid to the Company's Chief Executive
Officer, to the four other most highly compensated executive officers and to
any other officer whose annual compensation is $300,000 or more (except to the
extent that such responsibility is specifically vested in the Performance
Compensation Committee). The Compensation Committee administers the Restricted
Stock Plan and establishes the terms of any benefits granted thereunder. The
Compensation Committee held six formal meetings during fiscal year 1995.
None of the members of the Compensation Committee is or has been, for a
period of at least one year prior to appointment, eligible to receive a benefit
under any plans of the Company entitling participants to acquire Common Stock,
stock options or stock appreciation rights.
PERFORMANCE COMPENSATION COMMITTEE
The members of the Performance Compensation Committee are David B. Heller
(chairman) and John N. Latter. The Performance Compensation Committee
administers the Stock Option Plan and establishes the terms of any benefits
granted thereunder. The Performance Compensation Committee also administers the
Company's non-stock based compensation plans which are intended to provide
"performance-based compensation" (as defined in the federal Omnibus Budget
Reconciliation Act of 1993 ("OBRA")) including, but not limited to,
establishing objective performance goals and measures and certifying that such
performance goals and other material terms are satisfied. The Performance
Compensation Committee is comprised solely of directors who are not (i) current
employees of the Company (or any related entity),
4
(ii) former employees of the Company (or any related entity) receiving
compensation for prior services (other than certain pension benefits), (iii)
former officers of the Company (or any related entity), or (iv) consultants or
individuals who are otherwise receiving compensation for personal services in
any capacity other than as a director. The Performance Compensation Committee
held four formal meetings during fiscal year 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Gary C. Comer, who currently serves on the Compensation Committee, is the
Company's founder and Chairman of the Board. Mr. Comer was President of the
Company from 1963 until 1989, and served as Chief Executive Officer from 1963
until 1990. Mr. Comer is retired from active employment at the Company.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overall Policy
Lands' End believes that its employees are its most valuable asset. The
Company's goal is to recruit, motivate, reward, and retain the best hourly and
salaried work force in the direct marketing industry. The Company has developed
and implemented its compensation plans, including those for executive officers,
with that goal in mind.
The Board of Directors and its compensation-related committees believe that
the Company has derived significant benefits over the years from the fact that
its founder and senior executive officers have had substantial amounts of stock
ownership in the Company and developed a strongly collegial management culture.
The principal executive compensation philosophy used to recruit, motivate and
retain the Company's executives has been to create the possibility for
significant equity ownership and to base additional incentive compensation on
specific financial performance goals, consisting of percentage increases in net
sales and the level of pretax earnings expressed as a percentage of net sales.
Committee Structure
The Compensation Committee consists of Gary C. Comer and three outside
directors, David B. Heller, Howard G. Krane and John N. Latter, who have never
been employees of the Company. No member of the Compensation Committee is
eligible to receive awards under any of the compensation plans which it
administers. The Compensation Committee receives and considers recommendations
from time to time from officers of the Company and from independent
professional compensation consultants.
The Performance Compensation Committee consists of Mr. Heller as chairman,
and Mr. Latter, each of whom is believed to meet the eligibility requirements
specified in OBRA. Accordingly, it is anticipated that compensation paid under
these plans, including gains realized upon the exercise of nonqualified stock
options, will remain deductible by the Company for federal income tax purposes.
Compensation Criteria
In 1994, the Compensation Committee and the Board engaged a nationally
recognized compensation consulting firm to assist the Compensation Committee
and the Board in developing an overall perspective on base, incentive and long-
term compensation and benefit practices in the specialty retail business.
Representatives of this consulting firm have met formally with the Compensation
Committee (sometimes with other Board members in attendance) on a regular basis
and have had numerous other informal discussions with members of the
Compensation Committee and the Board.
The Compensation Committee relates total compensation levels for the
Company's senior executives to the compensation paid to executives of a peer
group of companies (the "comparator group"). The comparator group is comprised
of companies that tend to have national and international business operations
and similar
5
sales volumes, market capitalizations, employment levels, and lines of
business. The Compensation Committee reviews and approves the selection of
companies used for compensation comparison purposes. The companies chosen for
the comparator group used for compensation purposes generally are not the same
companies which comprise the published industry index in the Performance Graph
included in this Proxy Statement. The Compensation Committee believes that the
Company's most direct competitors for executive talent are not necessarily all
of the companies that would be included in the published industry index
established for comparing shareholder returns.
Although comparator group survey data has been used in developing the
Company's overall compensation perspective, the Compensation Committee and the
Board have also considered other factors which, in their subjective judgment,
affect the comparability and usefulness of such data to the Company. These
factors include the Company's leading position as a direct merchant, the
evolving nature of its business as the Company makes investments in developing
new catalog formats and expands internationally, and elements of its corporate
culture, including the historical importance of executive stock ownership and
the use of sales growth and profitability measures for incentive compensation.
The Compensation Committee and the Board have determined that it is desirable
for the Company to maintain a competitive package of base, incentive and long-
term compensation and that, at senior executive levels, the package should be
strongly weighted toward long-term, stock-based compensation, thereby aligning
management interests with those of the Company's shareholders. These
determinations are reflected in the Company's current compensation practices.
Section 162(m) of the Internal Revenue Code (adopted pursuant to OBRA)
imposes an annual limit of $1 million on the deductibility of compensation
payments to a company's chief executive officer and the four other most highly
compensated executive officers for whom proxy statement disclosure is required
and who are employed at the end of such company's taxable year ("Covered
Employees"). "Performance-based compensation" (as defined in OBRA) is excluded
from this limit. It is the Company's intention to preserve the deductibility of
compensation paid to its Covered Employees, to the extent feasible and
consistent with the Company's overall compensation philosophy.
Contemplated Omnibus Long-Term Incentive Plan
The Compensation Committee and the Performance Compensation Committee, in
consultation with their professional compensation advisers, are beginning to
consider the adoption of a comprehensive omnibus long-term incentive plan that
would provide for, among other things, the grant of stock options, stock
appreciation rights and restricted stock. It is expected that such a plan would
be adopted by the Compensation Committee and the Performance Compensation
Committee during the course of the coming year and would be presented to the
Company's shareholders for approval in next year's proxy statement. If such a
plan were to be adopted and approved, it is expected that the Stock Option Plan
and the Restricted Stock Plan would be superseded by the new plan at such time.
Recent Changes in Senior Management
Fiscal year 1995 presented a number of significant changes in the composition
of the Company's senior executive officers. In August 1994, David F. Dyer
resigned as Vice Chairman, Merchandising and Sales. In October 1994, Stephen A.
Orum was promoted to Executive Vice President and Chief Operating Officer in
addition to continuing his responsibilities as Chief Financial Officer. In
December 1994, William T. End resigned as President and Chief Executive
Officer, and Michael J. Smith was promoted to those positions. Finally, in
January 1995, Mindy C. Meads was promoted to Senior Vice President,
Merchandising.
Components of Compensation
Base Salary. In determining salary adjustments, the Compensation Committee
considers the size and responsibility of the individual's position, the
individual's overall performance and the base salaries paid by competitors for
comparable positions. The base salary level for the Company's Chief Executive
Officer is
6
currently somewhat below the median for the Company's comparator group. The
average base salary level for the Company's other Named Executive Officers is
currently at the approximate median for the Company's comparator group.
Salaried Incentive Bonus Plan. The Salaried Incentive Bonus Plan establishes
bonus eligibility amounts ranging from 10% to 100% of base salary for
individual participants. Participants earn bonuses equal to their bonus
eligibility amounts, multiplied by a factor which depends on overall corporate
results measured by a matrix of (i) growth in net sales and (ii) pretax income
expressed as a percentage of net sales for the fiscal year of participation,
with a one percent change in pretax income expressed as a percentage of net
sales being weighted much more heavily in the matrix than a one percent change
in growth in net sales. No bonuses are payable if net sales increase by 7% or
less in a year or if pretax income expressed as a percentage of net sales is 5%
or less. The matrix is subject to further review and adjustment from time to
time by the Performance Compensation Committee. For fiscal year 1995, net sales
grew by 14% and pretax income expressed as a percentage of net sales was 6.0%,
which resulted in a bonus for each individual participant equal to 78.75% of
such participant's bonus eligibility amount. For most of the Company's salaried
employees, the bonus eligibility amounts have historically been 10% of base
salary. For the Company's Named Executive Officers, the bonus eligibility
amounts have historically been 40-100% of base salary.
Stock Options. In fiscal year 1995, the Company did not award any stock
option grants. However, in February 1995 (i.e., the first month of fiscal year
1996), the Company awarded stock option grants to a number of employees,
including grants to Michael J. Smith, Mindy C. Meads, Stephen A. Orum and
Francis P. Schaecher in the amounts of 110,000 shares, 60,000 shares, 60,000
shares and 30,000 shares, respectively. These grants are consistent with the
Company's previously announced goal of providing significant stock-based
incentive compensation for senior executives so as to incent management to
increase shareholder value over time.
CHIEF EXECUTIVE OFFICER COMPENSATION
William T. End served as the Company's President and Chief Executive Officer
throughout most of fiscal year 1995. Until October 1994, Mr. End also served as
the Company's Chief Operating Officer, at which time Stephen A. Orum assumed
such responsibilities. In December 1994, William T. End resigned as President
and Chief Executive Officer, and Michael J. Smith was promoted to those
positions.
Mr. End's annual base salary was $402,000 during the term of his service in
fiscal year 1995. Mr. Smith's annual base salary has been set at $300,000,
which the Compensation Committee and the Board believe to be appropriate given
comparator group practice for this position as well as Mr. Smith's previous
compensation history. During fiscal year 1995, Mr. End also received a bonus of
$316,545 under the Salaried Incentive Bonus Plan. Until his promotion in
December 1994, Mr. Smith was Vice President of Coming Home and, in that
capacity, he received a bonus of $44,936 under the Salaried Incentive Bonus
Plan.
The Performance Compensation Committee did not award any stock option grants
in fiscal year 1995. The Performance Compensation Committee did award stock
option grants in December 1993 (including a 200,000 share stock option grant to
Mr. End). In February 1995, the Performance Compensation Committee awarded Mr.
Smith options to purchase 110,000 shares of the Company's Common Stock at
$16.50 per share (the closing market price per share of the Common Stock on the
date of grant). The options are exercisable for ten years and vest at the rate
of 10% in year one, 15% in year two, 20% in year three, 25% in year four and
30% in year five. The specific number and vesting rate of the options awarded
was based principally on subjective judgment factors, including the review of
overall compensation practices described above and the then current level of
Mr. Smith's beneficial ownership of stock in the Company.
Submitted by the Compensation Committeeof
the Board of Directors
Howard G. Krane, Chairman
Gary C. Comer
David B. Heller
John N. Latter
7
SUMMARY COMPENSATION TABLE
Set forth below is certain information concerning the compensation for each
of the Named Executive Officers for the fiscal year ended January 27, 1995:
LONG-TERM
COMPENSATION
------------------
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------
RESTRICTED
OTHER ANNUAL STOCK STOCK ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2)
------------------ ------ ------- ------- ------------ ---------- ------- ------------
Michael J. Smith(3)..... 1995 142,654 44,936 -0- -0- -0- 8,604
President and Chief
Executive Officer
William T. End(3)....... 1995 401,962 316,545 -0- -0- -0- 876,824
Former President and 1994 351,730 319,980 -0- -0- 200,000 74,102
Chief Executive Officer 1993 300,000 156,000 -0- -0- -0- 12,362
Mindy C. Meads(4)....... 1995 258,039 116,282 -0- -0- -0- 19,507
Senior Vice President,
Merchandising
Stephen A. Orum(5)...... 1995 203,192 96,008 -0- -0- -0- 14,631
Executive Vice 1994 180,038 50,259 -0- -0- 38,600 50,280
President, Chief 1993 156,273 30,004 -0- 53,250 -0- 9,352
Operating Officer and
Chief Financial Officer
Francis P. Schaecher.... 1995 186,000 87,885 -0- -0- -0- 16,783
Senior Vice President, 1994 175,605 148,182 -0- -0- 8,600 54,059
Operations 1993 153,750 78,900 -0- -0- -0- 10,838
David F. Dyer(6)........ 1995 273,462 -0- -0- -0- -0- 11,668
Former Vice Chairman, 1994 351,730 319,980 -0- -0- 200,000 74,102
Merchandising and Sales 1993 300,000 156,000 -0- -0- -0- 12,362
- --------
(1) Dividends, if any, on shares of restricted stock are paid at the same time
and at the same rate as dividends on the Company's unrestricted Common
Stock. The aggregate number and value (based on the closing price of the
Company's Common Stock ($16.25) on the New York Stock Exchange on January
27, 1995) of each Named Executive Officer's restricted stock holdings as
of such date are as follows: Mr. Smith, 2,600 shares, $42,250; Mr. End, 0
shares, $0; Ms. Meads, 3,200 shares, $52,000; Mr. Orum, 3,200 shares,
$52,000; Mr. Schaecher, 0 shares, $0; and Mr. Dyer, 0 shares, $0.
(2) For fiscal year 1995, these amounts represent the Company's contributions
to the Retirement Plan and the Company's contributions to the Deferred
Compensation and Excess Benefit Plan, in the following amounts: Mr. Smith,
$8,604, $0, respectively; Mr. End, $8,132, $32,142, respectively; Ms.
Meads, $8,163, $11,344, respectively; Mr. Orum, $8,358, $6,273,
respectively; Mr. Schaecher, $8,135, $8,648, respectively; and Mr. Dyer,
$3,605, $8,063, respectively. In addition, with respect to Mr. End, this
amount includes the following payments and benefits paid, payable or
accrued to Mr. End in connection with his resignation from employment with
the Company: (i) $603,000 in severance payments, (ii) $225,000 in payments
in connection with the exercise of stock options and (iii) $8,550 in
employee welfare benefits. For additional information, see "Termination of
Employment Arrangements."
(3) On December 2, 1994, William T. End resigned as President and Chief
Executive Officer. Michael J. Smith was appointed as President and Chief
Executive Officer effective December 2, 1994.
(4) Ms. Meads was appointed a Senior Vice President of the Company on January
12, 1995.
(5) Mr. Orum was named as Executive Vice President and Chief Operating Officer
of the Company on October 24, 1994, in addition to continuing his previous
function as the Company's Chief Financial Officer.
(6) Mr. Dyer resigned from his employ with the Company effective September 2,
1994.
8
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUE TABLE
Set forth below is certain information relating to options to acquire Common
Stock exercised by each Named Executive Officer during the fiscal year ended
January 27, 1995, and options to acquire Common Stock held by each Named
Executive Officer as of such date.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES STOCK OPTIONS STOCK OPTIONS AT
ACQUIRED VALUE AT FY-END (#) FY-END ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ----------- --------- ------------- ----------------
Michael J. Smith.......... 4,000 25,500 560/18,240 0/32,000
William T. End............ 160,000 1,348,125 20,000/0 0/0
Mindy C. Meads............ -0- -0- 13,280/13,120 42,720/28,480
Stephen A. Orum........... -0- -0- 19,720/38,880 54,720/76,480
Francis P. Schaecher...... -0- -0- 81,720/26,880 790,000/197,500
David F. Dyer............. 120,000 1,470,000 0/0 0/0
- --------
(1) Upon exercise of an option, an individual does not receive cash equal to
the amount contained in the Value Realized column of this table. Instead,
the amounts contained in the Value Realized column reflect the increase in
the price of the Company's Common Stock from the option award date to the
option exercise date. No cash is realized until the shares received upon
exercise of an option are sold.
(2) Calculated based upon the closing price of the Company's Common Stock
($16.25) on the New York Stock Exchange on January 27, 1995.
TERMINATION OF EMPLOYMENT ARRANGEMENT
In connection with William T. End's resignation as an officer and director
of the Company on December 2, 1994, the Company and Mr. End entered into an
agreement pursuant to which Mr. End received the consideration described
below. Through January 31, 1995 (the date on which Mr. End ceased to be an
employee of the Company), Mr. End continued to receive salary payments at his
then current annual rate in accordance with the Company's normal payroll
policies and continued to participate in the Company's Profit-Sharing, 401(k)
and Deferred Compensation and Excess Benefit Plans. In addition, Mr. End fully
participated in the Company's Salaried Incentive Bonus Plan with respect to
fiscal year 1995. Through July 31, 1996, Mr. End is entitled to receive
severance payments at an annual rate equal to his annual rate of salary in
effect on the date of his resignation, payable in accordance with the
Company's normal payroll policies. Mr. End is also entitled to participate in
the Company's medical, dental, disability insurance and similar employee
welfare benefit plans, at the Company's expense, through July 31, 1996,
provided that such participation shall terminate earlier in the event that Mr.
End accepts employment with another company that provides benefit plans
covering similar matters.
On January 5, 1995, Mr. End exercised all 150,000 of his remaining vested
and unexercised "in-the-money" stock options at a strike price of $6.375 per
share. Following such exercise, the Company purchased from Mr. End all of the
Company's Common Stock issued to Mr. End pursuant to such option exercise, at
a purchase price per share of $14.625, which is equal to the closing price per
share of the Company's Common Stock on the New York Stock Exchange on the
trading day immediately preceding such purchase (the "Market Price").
Following such purchase of stock from Mr. End, the Company paid to Mr. End,
$225,000 as severance compensation, which amount is equal to the product of
multiplying (i) the number of such options times (ii) the difference between
the Market Price and the closing price per share of the Company's Common Stock
($16.125) on the New York Stock Exchange on December 2, 1994.
9
PERFORMANCE GRAPH
The following graph presents the cumulative total shareholder return of the
Company, the Standard & Poor's MidCap 400 Index and the Value Line Retail Index
for a five year period. Cumulative total shareholder return is defined as share
price appreciation assuming reinvestment of dividends. The Company's Common
Stock is included in both the Standard & Poor's MidCap 400 Index and the Value
Line Retail Index. In addition to the Company, 51 retailers (including catalog
companies) comprise the Value Line Retail Index. The dollar amounts shown on
the following graph assume that $100 was invested on February 1, 1990 in
Company Common Stock, stocks constituting the Standard & Poor's MidCap 400
Index and stocks constituting the Value Line Retail Index with all dividends
being reinvested. The January 31st dates shown on the following graph do not
correspond exactly with the last day of the Company's fiscal year in calendar
years 1993, 1994 and 1995.
COMPARISON OF FIVE-YEAR TOTAL RETURN
AMONG LANDS' END, INC., S&P MIDCAP 400 INDEX AND VALUE LINE RETAIL INDEX
[GRAPH APPEARS HERE]
VALUE OF $100 INVESTED ON FEBRUARY 1,
1990 AT
---------------------------------------
1/31/91 1/31/92 1/31/93 1/31/94 1/31/95
------- ------- ------- ------- -------
Lands' End, Inc......................... $106 $197 $162 $304 $201
S&P MidCap 400 Index.................... 112 158 176 203 193
Value Line Retail Index................. 108 155 164 167 138
10
PRINCIPAL SHAREHOLDERS
The following table shows certain information concerning the number of
shares of the Company's Common Stock beneficially owned, directly or
indirectly, by each director and nominee for director of the Company, the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (the "Named Executive Officers") and the
directors and executive officers as a group. The following table also sets
forth information concerning each person known to the Company as of March 24,
1995, to be the "beneficial owner" (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of more than 5% of the Company's Common
Stock. Unless otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them. Except as described in the notes below, all information in the
table and the accompanying footnotes is given as of March 24, 1995, and has
been supplied by each of the persons included in the table.
PERCENT
BENEFICIAL OWNERS AMOUNT OF CLASS
----------------- ---------- --------
Gary C. Comer(1)..................................... 18,149,800 52.27
Capital Research and Management Company(2)........... 2,010,000 5.79
Richard C. Anderson(3)............................... 1,284,010 3.70
David B. Heller...................................... 8,000 *
Howard G. Krane(4)................................... 20,000 *
John N. Latter....................................... 160,000 *
Mindy C. Meads(5).................................... 17,280 *
Stephen A. Orum(6)................................... 36,120 *
Francis P. Schaecher(7).............................. 181,720 *
Michael J. Smith(8).................................. 7,760 *
All directors and executive officers as a group (9
persons)(9)......................................... 19,864,690 57.00
- --------
(1) Mr. Comer's address is Citicorp Plaza, Suite 620, 8420 W. Bryn Mawr
Avenue, Chicago, Illinois 60631.
(2) As disclosed on its Schedule 13G filed with the Securities and Exchange
Commission, Capital Research and Management Company, 333 South Hope
Street, Los Angeles, California 90071, a registered investment adviser and
an operating subsidiary of The Capital Group Companies, Inc., as of
December 31, 1994, exercised investment discretion with respect to
2,010,000 shares which were owned by various institutional investors.
Capital Research and Management Company has no power to direct the vote of
such shares.
(3) Share amount shown includes 108,000 shares of the Company's Common Stock
owned by Mr. Anderson's wife as to which he disclaims beneficial
ownership.
(4) Share amount shown includes 2,000 shares of the Company's Common Stock
owned by Mr. Krane's wife as to which he disclaims beneficial ownership.
(5) Share amount shown includes exercisable options for 13,280 shares of
Company Common Stock granted to Ms. Meads on December 9, 1991 and December
10, 1993 under the Stock Option Plan.
(6) Share amount shown includes (i) exercisable options for 19,720 shares of
Company Common Stock granted to Mr. Orum on December 9, 1991, April 6,
1993 and December 10, 1993 under the Stock Option Plan and (ii) options
for 6,000 shares of Company Common Stock granted to Mr. Orum on April 6,
1993 under the Stock Option Plan, which options will become exercisable
within 60 days.
(7) Share amount shown includes exercisable options for 81,720 shares of
Company Common Stock granted to Mr. Schaecher on November 27, 1990 and
December 10, 1993 under the Stock Option Plan.
(8) Share amount shown includes (i) exercisable options for 560 shares of
Company Common Stock granted to Mr. Smith on December 10, 1993 under the
Stock Option Plan and (ii) options for 4,000 shares of Company Common
Stock granted to Mr. Smith on April 6, 1993 under the Stock Option Plan,
which options will become exercisable within 60 days.
(9) Share amount shown includes exercisable options and options which will
become exercisable within 60 days for 125,280 shares of Company Common
Stock granted to certain executive officers under the Stock Option Plan.
*Less than 1%.
11
APPROVAL OF AMENDMENT TO THE STOCK OPTION PLAN
The Company seeks shareholder approval of an amendment to the Stock Option
Plan to extend the termination date of the Stock Option Plan from December 31,
1995 until December 31, 2000 (the "Plan Amendment"). The termination date of
the Stock Option Plan means the date on which no further options may be granted
under the Stock Option Plan; provided that all options which prior to the
termination date have not expired, terminated or been exercised or surrendered
may be exercised thereafter in accordance with their terms. The Board of
Directors recommends that shareholders vote "FOR" the approval of this
amendment to the Stock Option Plan.
A total of 2,500,000 shares of Company Common Stock are authorized for
issuance pursuant to the Stock Option Plan. The Plan Amendment does not
increase such number of authorized shares. Stock options with respect to
1,510,500 shares authorized under the Stock Option Plan have been granted to
date.
Although the Company is currently seeking shareholder approval to extend the
termination date of the Stock Option Plan for five years, the Compensation
Committee and the Performance Compensation Committee, in consultation with
their professional compensation advisers, are beginning to consider the
adoption of a comprehensive omnibus long-term incentive plan that would provide
for, among other things, the grant of stock options. It is expected that such a
plan would be adopted by the Compensation Committee and the Performance
Compensation Committee during the course of the coming year and would be
presented to the Company's shareholders for approval in next year's proxy
statement. If such a plan were to be adopted and approved, it is expected that
the Stock Option Plan and the Restricted Stock Plan would be superseded by the
new plan at such time.
The following summary of the Stock Option Plan is qualified in its entirety
by the full text of the Stock Option Plan, a copy of which may be obtained by
shareholders of the Company upon request directed to the Secretary of the
Company at One Lands' End Lane, Dodgeville, Wisconsin 53595. For additional
information regarding stock options granted to certain officers, see "Executive
Compensation" above.
GENERAL
The Company's Stock Option Plan has been maintained by the Company since
1990. Under the Stock Option Plan, officers and key employees designated by the
Performance Compensation Committee are granted stock options to purchase shares
of the Company's Common Stock. Options are granted under the Stock Option Plan
with an exercise price equal to the fair market value per share of the
Company's Common Stock on the date of grant.
The purpose of the Stock Option Plan is to provide officers and key employees
of the Company with additional incentive to increase their efforts on the
Company's behalf and to remain in or enter into the employ of the Company by
granting such employees incentive stock options (within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code")) and/or nonqualified stock options (all options granted under the Stock
Option Plan which are not incentive stock options) to purchase shares of the
Company's Common Stock. The Company believes that such grants will inspire the
continued efforts of its officers and key employees and the continuity of their
employment with the Company.
ADMINISTRATION OF THE STOCK OPTION PLAN
The Stock Option Plan is currently administered by the Performance
Compensation Committee of the Board of Directors (the "Committee"). The members
of the Committee must be "disinterested persons" as that term is defined in
Rule 16b-3 of the Securities and Exchange Commission and "outside directors" as
that term is defined in Section 162(m) of the Internal Revenue Code. The
Committee has the full power to construe and interpret the Stock Option Plan,
to establish the terms of any options granted thereunder, and
12
to determine the individuals to whom options will be granted under the Stock
Option Plan. In selecting participants and in determining the type and amount
of their respective benefits, the Committee may consider such factors as it
deems pertinent. Currently, there are 22 officers and key employees of the
Company participating in the Stock Option Plan.
SHARES AVAILABLE FOR ISSUANCE UNDER THE STOCK OPTION PLAN
There is an aggregate of 989,500 shares of the Company's Common Stock
available for issuance upon exercise of options to be granted under the Stock
Option Plan, which shares may be authorized and unissued shares or treasury
shares. The closing price of the Company's Common Stock on the New York Stock
Exchange on April 6, 1995, was $17.50.
MAXIMUM GRANT TO ANY ONE EMPLOYEE
The Stock Option Plan provides that any one employee may receive options with
respect to no more than 400,000 shares of Company Common Stock in any one year.
OPTION TERMS
At the time the Committee approves the granting of an option to an officer or
key employee, the Committee must also designate (i) the date of grant of such
option (provided that such date may not be earlier than the date the option is
approved by the Committee), (ii) the option price per share of Company Common
Stock (provided that no option may have an option price per share of Company
Common Stock of less than 100 percent of the fair market value of a share of
Company Common Stock on the date of grant), (iii) the schedule and times at
which such options will vest and become exercisable (provided that no option
may be exercised later than December 31 of the year in which the tenth
anniversary of the date of grant occurs), and (iv) whether the option will or
will not constitute an incentive stock option under Section 422 of the Internal
Revenue Code. The Stock Option Plan also authorizes the Committee to determine
the form of option price payment (cash, Company Common Stock or a combination
thereof), to issue replacement options to participants who voluntarily
surrender and cancel prior options with a price per share of Company Common
Stock equal to or greater than the price per share of the prior option, to
accelerate the vesting and exercisability of all or part of any option, and to
adjust the number and type of shares of Company Common Stock subject to the
Stock Option Plan or outstanding options in order to prevent a dilution or
enlargement of benefits as a result of a corporate transaction or event.
Except as otherwise determined by the Performance Compensation Committee in
connection with a specific option: (i) any unexercised option is exercisable
for one year following a participant's retirement (or until such earlier time
as the option would otherwise expire or terminate on its own terms), (ii)
vested but unexercised options may be exercised for one year following a
termination of employment on account of death and for 180 days following a
termination of employment on account of disability (or until such earlier time
as the option would otherwise expire or terminate on its own terms) and (iii)
if a participant ceases to be employed by the Company for reasons other than
his or her disability, death or retirement, the option terminates and no
portion of the terminated option will be exercisable after that date. Stock
options have historically been granted with post-employment exercise periods
consistent with those specifically described in the Stock Option Plan. However,
after seeking the advice of its compensation consulting firm, with respect to
the stock option grants made in February 1995, the Performance Compensation
Committee extended the post-employment exercise periods in the case of a
participant's retirement or disability to three years in each case. At the same
time, the Performance Compensation Committee determined that all future grants
of stock options, unless otherwise specified at the time of grant, would have
the same modified post-employment exercise periods.
No option granted under the Stock Option Plan is transferable otherwise than
by will or the laws of descent and distribution.
13
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN
The Board of Directors may amend the Stock Option Plan at any time in its
sole discretion, but no amendment may, without the participant's consent,
impair his or her rights to any option previously granted under the Stock
Option Plan, or without shareholder approval (i) increase the maximum number of
shares of Company Common Stock which may be issued under the Stock Option Plan
(except to prevent a dilution or enlargement of benefits as a result of a
corporate transaction or event), (ii) extend the termination date of the Stock
Option Plan or any option granted under the Stock Option Plan, or (iii) enlarge
the class of employees eligible to receive options under the Stock Option Plan.
The Board of Directors may terminate the Stock Option Plan at any time with
respect to shares of Company Common Stock for which options have not previously
been granted. Shareholder approval may also be required if there are "material
changes" to the Stock Option Plan for purposes of Section 162(m) of the
Internal Revenue Code or to comply with new legislation. The Stock Option Plan
currently provides that unless terminated earlier, the Stock Option Plan will
terminate at the close of business on December 31, 1995. The Plan Amendment
provides that unless terminated earlier, the Stock Option Plan will terminate
at the close of business on December 31, 2000.
FEDERAL INCOME TAX CONSEQUENCES
The following is intended only as a brief, general summary of the federal
income tax rules relevant to stock options granted under the Stock Option Plan,
and assumes (i) that any participant subject to Section 16(b) of the Securities
Exchange Act of 1934 (typically, officers and directors and major shareholders
of the Company) will not exercise any option granted under the Stock Option
Plan before the six month anniversary of the date of grant of such option and
(ii) that the exercise of options and disposition of option shares occur during
the lifetime of the participant. This discussion is not intended to provide
guidance to participants; participants should consult their own personal tax
advisors.
Nonqualified Stock Options. The holder of a nonqualified stock option ("NQO")
does not recognize taxable income upon the grant of the NQO, nor is the Company
entitled, for income tax purposes, to a deduction. The participant recognizes
ordinary income on the exercise of an NQO equal to the excess of the fair
market value of the shares received on exercise over the option exercise price.
The fair market value of the shares is measured on the exercise date.
If the Company complies with applicable documentation requirements, it is
generally entitled to a deduction in computing its federal income taxes in an
amount equal to the ordinary income recognized by the participant on the
exercise of the NQO.
If a participant sells shares acquired pursuant to the exercise of an NQO,
the participant will recognize capital gain or loss equal to the difference
between the selling price of the shares and their fair market value on the
exercise date.
Incentive Stock Options. The holder of an incentive stock option ("ISO") does
not realize taxable income upon the grant or exercise of the ISO and the
Company is not entitled to any deduction in respect of such grant or exercise.
As discussed below, however, a participant may be subject to the alternative
minimum tax on the exercise of an ISO.
The income tax treatment of any gain or loss realized upon a participant's
disposition of option shares depends on the timing of the disposition. If the
option shares have been held for at least one year and if at least two years
have elapsed since the date of grant of the ISO (the "Required Holding
Periods"), then the participant recognizes (i) long-term capital gain to the
extent that the selling price exceeds the option price or (ii) capital loss to
the extent that the option price exceeds the selling price. In either case, no
deduction is allowed to the Company.
If a participant disposes of option shares before the expiration of the
Required Holding Periods (a "disqualifying disposition"), then (i) if the
selling price exceeds the fair market value of the option shares on the date
the ISO was exercised, the excess of such fair market value over the option
price is taxable to the
14
participant as ordinary income and the excess of the selling price over such
fair market value is taxable to the participant as capital gain, (ii) if the
selling price exceeds the option price but does not exceed the fair market
value of the option shares on the date the ISO was exercised, the excess of the
selling price over the option price is taxable to the participant as ordinary
income and (iii) if the selling price is less than the option price, the
difference is treated as capital loss to the participant. In each case, the
Company is entitled to a deduction equal to the amount of ordinary income (but
not capital gain) recognized by the participant on the disqualifying
disposition.
The amount by which the fair market value of shares of Company Common Stock
(determined as of the exercise date) received through the exercise of an ISO
exceeds the option exercise price is included in the participant's alternative
minimum taxable income and may subject the participant to alternative minimum
tax. Such alternative minimum tax may be payable even though the participant
receives no cash upon the exercise of his or her ISO with which to pay such
tax.
Exercise with Previously Owned Shares. The previous discussion assumes that
all shares of Company Common Stock acquired on the exercise of an NQO or ISO
are paid for in cash. If a participant pays for all or a portion of the option
exercise price with previously owned shares of Company Common Stock, the
participant will generally (although not in all cases) recognize no gain or
loss on the previously owned shares surrendered. The participant's tax basis in
and holding period for the surrendered shares (for purposes of determining
capital gains and losses, but not for purposes of determining whether a
disqualifying disposition occurs and its consequences) will generally carry
over to an equal number of shares received.
LIMITATION ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Last year Congress enacted certain provisions into the Internal Revenue Code
under which compensation paid to certain executive officers in excess of $1
million per year may not be deductible. The Company believes that compensation
income recognized by its executive officers pursuant to the Stock Option Plan
will be exempted from those provisions and that the Company will therefore not
lose the benefit of any potential tax deductions.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that shareholders ratify the appointment of
Arthur Andersen LLP as independent public accountants to audit the Company's
consolidated financial statements for the fiscal year ending February 2, 1996.
A representative of Arthur Andersen LLP will be present at the meeting with the
opportunity to make a statement if such representative so desires, and will be
available to respond to appropriate questions raised orally at the meeting or
submitted in writing to the Company's Secretary before the meeting.
OTHER INFORMATION
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater than ten-percent
shareholders are required by Securities and Exchange Commission regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons that no Section 16(a) forms were required for those persons,
except as described below, all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten percent beneficial owners were
complied with during the two fiscal years ended
15
LANDS' END 1995 ANNUAL MEETING
LOGO
LANDS' END, INC.
ANNUAL MEETING OF SHAREHOLDERS--MAY 17, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary C. Comer, Michael J. Smith and Robert S.
Osborne as Proxies, each with the power to appoint his substitute and hereby
authorizes each of them to represent and to vote, as designated below, all of
the shares of common stock of Lands' End, Inc. held of record by the
undersigned on March 24, 1995, at the annual meeting of shareholders to be held
on May 17, 1995, or any adjournment thereof.
1. ELECTION OF DIRECTORS
NOMINEES: John N. Latter and Michael J. Smith
[_] For all nominees EXCEPT those whose names are inserted on the line
below.
--------------------------------------------------------------------------
[_] Withhold authority to vote for all nominees.
2. PROPOSAL TO APPROVE AMENDMENT TO STOCK OPTION PLAN
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO APPROVE THE APPOINTMENT OF ARTHUR ANDERSEN LLP as the
independent public accountants of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be Signed and Dated on other side)
- -------------------------------------------------------------------------------
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN ITEM 1,
FOR PROPOSAL 2 AND FOR PROPOSAL 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
a corporation, please sign
in full corporate name by
President or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
Dated _________________ 1995
-----------------------------
Signature
-----------------------------
Please mark, sign, date Signature if held jointly
and return this proxy
card promptly using the
enclosed envelope.