SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant |_|
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|_| 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-12
A.C. MOORE ARTS & CRAFTS, INC.
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(Name of Registrant as Specified In Its Charter)
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A.C. MOORE ARTS & CRAFTS, INC.
500 University Court
Blackwood, NJ 08012
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 22, 2003
To the Shareholders of A.C. Moore Arts & Crafts, Inc.:
The 2003 Annual Meeting of Shareholders of A.C. Moore Arts & Crafts,
Inc. (the "Company" or "A.C. Moore") will be held on Thursday, May 22, 2003, at
9:00 a.m., prevailing time, at the Holiday Inn, 542 Route 9, Fishkill, New York,
for the purpose of considering and acting upon the following:
1. To elect two Class A directors to hold office for a term of three
years and until their successors are duly elected and qualified, as
described in the accompanying Proxy Statement;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending December 31,
2003.
3. To transact such other business as may properly come before the
Annual Meeting.
Only shareholders of record at the close of business on April 10, 2003,
are entitled to notice of, and to vote at, the Annual Meeting or any adjournment
or postponement thereof.
If the Annual Meeting is adjourned for one or more periods aggregating
at least 15 days because of the absence of a quorum, those shareholders entitled
to vote who attend the reconvened Annual Meeting, if less than a quorum as
determined under applicable law, shall nevertheless constitute a quorum for the
purpose of acting upon any matter set forth in this Notice of Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED
TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
By Order of the Board of Directors
Janet Parker
Secretary
Blackwood, New Jersey
April 15, 2003
A.C. MOORE ARTS & CRAFTS, INC.
500 University Court
Blackwood, NJ 08012
(856) 228-6700
----------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
----------------------
The accompanying proxy is solicited by the Board of Directors of A.C.
Moore Arts & Crafts, Inc. (the "Company" or "A.C. Moore") for use at the 2003
Annual Meeting of Shareholders (the "Meeting") to be held on Thursday, May 22,
2003, at 9:00 a.m., prevailing time, at the Holiday Inn, 542 Route 9, Fishkill,
New York, and any adjournments or postponements thereof. This Proxy Statement
and accompanying proxy card are first being mailed to shareholders on or about
April 15, 2003.
The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
facsimile, telegraph or teletype by officers, directors or employees of the
Company, without additional compensation. Upon request, the Company will pay the
reasonable expenses incurred by record holders of the Company's Common Stock who
are brokers, dealers, banks or voting trustees, or their nominees, for mailing
proxy material and annual shareholder reports to the beneficial owners of the
shares they hold of record.
Only shareholders of record, as shown on the stock transfer books of
the Company, at the close of business on April 10, 2003 (the "Record Date") are
entitled to notice of, and to vote at, the Meeting or any adjournment or
postponement thereof. On the Record Date, there were 18,986,879 shares of common
stock, no par value per share ("Common Stock") outstanding.
Proxies in the form enclosed, if properly executed and received in time
for voting, and not revoked, will be voted as directed on the proxies. If you
sign and return your proxy card but do not indicate how you want your shares
voted, the persons named in the enclosed proxy will vote your shares of Common
Stock "for" the election of all nominees for directors hereinafter named and
"for" ratification of the appointment of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") as the independent auditors of the Company for the
year ending December 31, 2003. With respect to any other matter that properly
comes before the meeting, the proxy holders will vote the proxies in their
discretion in accordance with their best judgment and in the manner they believe
to be in the best interest of A.C. Moore. Sending in a signed proxy will not
affect a shareholder's right to attend the Meeting and vote in person since the
proxy is revocable. Any shareholder who submits a proxy has the power to revoke
it by, among other methods, giving written notice to the Secretary of the
Company at any time before the proxy is voted.
The presence, in person or represented by proxy, of the holders of a
majority of the outstanding shares of Common Stock will constitute a quorum for
the transaction of business at the Meeting. All shares of the Company's Common
Stock present in person or represented by proxy (including broker non-votes) and
entitled to vote at the Meeting, no matter how they are voted or whether they
abstain from voting, will be counted in determining the presence of a quorum. If
the Meeting is adjourned because of the absence of a quorum, those shareholders
entitled to vote who attend the adjourned meeting, although constituting less
than a quorum as provided herein, shall nevertheless constitute a quorum for the
purpose of electing directors. If the Meeting is adjourned for one or more
periods aggregating at least 15 days because of the absence of a quorum, those
shareholders entitled to vote who attend the reconvened Meeting, if less than a
quorum as determined under applicable law, shall nevertheless constitute a
quorum for the purpose of acting upon any matter set forth in the Notice of
Annual Meeting.
Each share of Common Stock is entitled to one vote on each matter which
may be brought before the Meeting. The election of directors will be determined
by a plurality vote and the two nominees receiving the most "for" votes will be
elected. Approval of any other proposal will require the affirmative vote of a
majority of the shares cast on the proposal. Under the Pennsylvania Business
Corporation Law, an abstention, withholding of authority to vote or broker
non-vote will have no effect on the vote and will not be counted in determining
whether the proposal has received the required shareholder vote.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the Board of
Directors shall consist of not fewer than one nor more than 15 directors, with
the exact number to be fixed by the Board of Directors. The Board of Directors
has fixed the number of directors at seven. Pursuant to the Articles of
Incorporation of the Company, the directors are divided into three classes,
which is required to be as nearly equal in number as possible. One class of
directors is to be elected annually for a term of three years. The Board of
Directors is currently comprised of two classes of two directors each, and one
class of three directors.
At the Meeting shareholders will elect two Class A directors to serve
for a term of three years and until each of their respective successors is
elected and qualified. Unless directed otherwise, the persons named in the
enclosed proxy intend to vote such proxy "for" the election of the listed
nominees or, in the event of inability of a nominee to serve for any reason, for
the election of such other person as the Board of Directors may designate to
fill the vacancy. The Board of Directors has no reason to believe that any
nominee will not be a candidate or will be unable to serve.
The Board of Directors has nominated William Kaplan and John E. (Jack)
Parker to serve as the Class A directors. Mr. Kaplan and Mr. Parker currently
serve as directors. The nominees have consented to being named in the Proxy
Statement and to serve if elected. The following table sets forth information,
as of the Record Date, concerning A.C. Moore's directors and nominees for
election to the Board of Directors:
Director Term
Name Age Position Since (1) Expires
--------------------------------- --- ----------------------------------------------- --------- -------
William Kaplan (5)............... 75 Chairman of the Board 1984 2003
John E. (Jack) Parker (5)........ 61 Chief Executive Officer and Director 1984 2003
Richard J. Bauer (2)(3)(4)....... 77 Director 1990 2004
Richard J. Drake (3)............. 69 Director 1984 2004
Lawrence H. Fine ................ 49 President, Chief Operating Officer and Director 2002 2005
Richard Lesser (2) (3)(4)........ 68 Director 1993 2005
Eli J. Segal (2)(3).............. 60 Director 2002 2005
-------------------
(1) Includes service as a director of A.C. Moore Incorporated, the Company's
wholly-owned operating subsidiary.
(2) Member of the Compensation Committee. Mr. Segal was appointed to the
Compensation Committee in February 2003.
(3) Member of the Audit Committee.
(4) Member of the Nominating Committee
(5) Nominee for Director.
2
Patricia A. Parker resigned as a director of A.C. Moore on August 22,
2002. On August 22, 2002, A.C. Moore's Board of Directors, by resolution,
increased the number of persons to comprise A.C. Moore's Board of Directors from
six to seven and appointed Lawrence H. Fine and Eli J. Segal as directors.
The following information about A.C. Moore's directors and nominees for
director is based, in part, upon information supplied by such persons. Unless
otherwise indicated, each individual has had the same principal occupation for
more than five years.
Mr. Kaplan, our co-founder, has been the Chairman of our Board of
Directors since our inception. Mr. Kaplan also serves as the Chairman of the
Board of Directors and an executive officer of Regal Bag Corporation, an
importer and distributor of women's handbags, which he founded in 1947.
Mr. Parker, our co-founder, has been Chief Executive Officer and a
director of the Company since our inception and was our President from inception
until June 2001. From 1959 to 1984, Mr. Parker worked for the F.W. Woolworth
Company ("Woolworth") in various management positions, most recently as
President and Chief Executive Officer of the United States General Merchandise
Group where he was responsible for more than 1,000 stores, including the entire
domestic chain of Woolworth retail stores. Mr. Parker is the husband of Patricia
A. Parker, our Executive Vice President, Merchandising, and the father of Janet
Parker, our Executive Vice President, Merchandising and Marketing.
Mr. Bauer has been a director of the Company since September 1990. Mr.
Bauer is Chairman of the Board and Chief Executive Officer of Eastern Alloys,
Inc. an independent zinc alloyer, which he founded in 1965. Mr. Bauer is the
co-founder and current Chairman of the Board of Service Aluminum Corporation, an
aluminum trading company.
Mr. Drake has been a director of the Company since its founding. He is
Chairman of Drake, Sommers, Loeb, Tarshis & Catania, P.L.L.C., a professional
limited liability company which renders legal services.
Mr. Fine has been a director of the Company since August 2002. Mr. Fine
has served as our President since June 2001 and our Chief Operating Officer
since February 2003. Previously Mr. Fine was Executive Vice President - General
Merchandise Manager for arts and crafts retailer Michaels Stores, Inc., a
position he held since December 1996. From 1995 until joining Michaels in
December 1996, he was Senior Vice President of Merchandising for Party City
Corp. Prior to joining Party City, Mr. Fine held a variety of merchandising
positions with the Jamesway Corporation for nearly 16 years.
Mr. Lesser has been a director of the Company since March 1993. He is
currently a Director of The TJX Companies, Inc., a New York Stock Exchange
traded retail company, and served as The TJX Companies, Inc.'s Executive Vice
President from 1991 until December 6, 2001. Mr. Lesser is also a director of
Reebok International, a New York Stock Exchange traded shoe and apparel
manufacturer and Dollar Tree Stores, Inc., a Nasdaq traded retail company.
Mr. Segal has been a director of the Company since August 2002. Mr.
Segal has served as the Chairman of the Board of SchoolSports, Inc., a magazine
and internet content provider, since 2000. From 1997 to 2000, Mr. Segal served
as the President and Chief Executive Officer of the Welfare to Work Partnership,
a nonpartisan business organization. From 1993 to 1996, Mr. Segal served as an
Assistant to the President of the United States and as Chief Executive Officer
of The Corporation For National Service, the federal government office
overseeing AmeriCorps. Mr. Segal is a director of Hasbro, Inc., a New York Stock
Exchange traded manufacturer of toys and games and Hotels.com, a Nasdaq traded
provider of discount hotel rooms.
3
Shareholder Nominations
Pursuant to A.C. Moore's Bylaws, no shareholder is permitted to
nominate a candidate for election as a director unless the shareholder complies
with the procedures set forth in the Bylaws. According to the Bylaws,
nominations by shareholders for directors to be elected at a meeting of
shareholders which have not previously been approved by the Board of Directors
must be submitted to the Secretary of the Corporation in writing, either by
personal delivery, nationally-recognized express mail or United States mail,
postage prepaid, not later than (i) the latest date upon which shareholder
proposals must be submitted to the Company for inclusion in the Company's proxy
statement relating to such meeting pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, or other applicable rules or regulations under
the federal securities laws or, if no such rules apply, at least 90 days prior
to the date one year from the date of the immediately preceding annual meeting
of shareholders, and (ii) with respect to an election to be held at a special
meeting of shareholders, the close of business on the tenth day following the
date on which notice of such meeting is first given to shareholders. Each
nomination is required to set forth: (i) the name and address of the shareholder
making the nomination and the person or persons nominated; (ii) a representation
that the shareholder is a holder of record of capital stock of the Company
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to vote for the person or persons nominated; (iii) a description of
all arrangements and understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination was made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated by the Board
of Directors; and (v) the consent of each nominee to serve as a director of the
Company if so elected. All nominations which are late will be rejected by the
Company.
Board of Directors, Committees, and Attendance at Meetings
The Board of Directors of A.C. Moore held six meetings during 2002. The
Audit Committee held four meetings; and the Compensation Committee and the
Nominating Committee each held two meetings during 2002. In addition, the
Chairman of the Audit Committee held two additional meetings with A.C. Moore's
outside auditors during fiscal 2002. All current directors attended all Board
and applicable committee meetings during the year.
The Board of Directors has three standing committees.
o The Compensation Committee reviews and makes recommendations to the
Board of Directors regarding the salaries, bonuses, and other forms
of compensation for executive officers of A.C. Moore and
administers various compensation and benefit plans. The current
members of the Compensation Committee are Messrs. Bauer, Lesser and
Segal. The report of the Compensation Committee begins on page 7 of
this Proxy Statement.
o The Audit Committee reviews the results and scope of the annual
audit of the Company's financial statements, proposes changes in
the Company's financial and accounting standards and principles and
the Company's policies and procedures with respect to its internal
accounting and financial controls. In addition, the Audit Committee
engages the Company's independent accountants and reviews the
independence of the Company's independent accountants. The Audit
Committee also approves the professional services provided by the
Company's independent accountants. The responsibilities of the
Audit Committee are described in the Audit Committee Charter
adopted by the Audit Committee and the Board of Directors, a copy
of which was attached as Appendix A to the Proxy Statement relating
to the 2001 Annual Meeting of Shareholders. The current members of
the Audit Committee are Messrs. Bauer, Drake, Lesser and Segal.
4
Each member of the Audit Committee is independent as defined in
Rule 4200(a)(14) of the National Association of Securities Dealers
listing standards. The report of the Audit Committee is set forth
below.
o The Nominating Committee makes recommendations to the Board of
Directors on Board membership. The current members of the
Nominating Committee are Messrs. Bauer and Lesser. This committee
recommended the nomination of Messrs. Fine and Segal who were
elected to the Board of Directors in August 2002 and the nomination
of the directors listed on page 2, who stand for election at the
2003 annual meeting of shareholders. The Nominating Committee will
consider nominees recommended by A.C. Moore shareholders, but only
if such nominees are submitted in accordance with A.C. Moore's
bylaws. See "Shareholder Nominations" for a description of the
procedures that must be followed to nominate a director.
Audit Committee Report
On February 18, 2003, the Audit Committee met with management to review
and discuss the audited financial statements. Management represented to the
Audit Committee that the Company's financial statements were prepared in
accordance with generally accepted accounting principles. The Audit Committee
also conducted discussions with its independent auditors,
PricewaterhouseCoopers, regarding the matters required by the Statement on
Auditing Standards No. 61. As required by Independence Standards Board Standard
No. 1, "Independence Discussion with Audit Committees," the Audit Committee has
discussed with and received the required written disclosures and confirming
letter from PricewaterhouseCoopers regarding its independence and has discussed
with PricewaterhouseCoopers its independence. Based upon the review and
discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002.
This Audit Committee Report shall not be deemed incorporated by
reference in any document previously or subsequently filed with the Securities
and Exchange Commission that incorporates by reference all or any portion of
this Proxy Statement, except to the extent that the Company specifically
requests that the Report be specifically incorporated by reference.
THE AUDIT COMMITTEE
Richard J. Bauer
Richard J. Drake
Richard Lesser
Eli J. Segal
Director Compensation
Directors' Fees. Except for Mr. Kaplan, who receives annual directors'
compensation of $150,000 for his services as Chairman of the Board, directors
who are not officers, employees or consultants of the Company receive a
directors' fee of $15,000 annually plus $1,000 for each Board of Directors
meeting they attend, $1,000 for a Committee Chair, and $500 for each committee
meeting they attend.
Stock Options. Messrs. Bauer, Drake, Lesser and Segal, each a
non-employee director of the Company, were each granted an option to acquire
20,000 shares of Common Stock in 2002 under the Company's 2002 Stock Option
Plan.
5
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the Record Date, certain
information with respect to the beneficial ownership of the Common Stock (i) by
each person who is known by A.C. Moore to be the beneficial owner of more than
5% of the Common Stock, (ii) by each director and nominee for director of A.C.
Moore, (iii) by each executive officer of A.C. Moore named in the Summary
Compensation Table and (iv) by all directors and executive officers of A.C.
Moore as a group. Except as otherwise indicated, to the knowledge of the
Company, the beneficial owners of the Common Stock listed below have sole
investment and voting power with respect to such shares.
Shares Beneficially Owned (1)
-------------------------------
Name of Beneficial Owner Number Percent
----------------------------------------------------- ----------------- -----------
William Kaplan (2)................................... 2,982,000 (3) 15.7
Jack Parker (2)...................................... 2,956,600 (4) 15.6
Patricia A. Parker .................................. 30,000 (5) *
Lawrence H. Fine..................................... 38,294 (6) *
Leslie H. Gordon..................................... 178,667 (7) *
Rex A. Rambo......................................... 91,476 (8) *
Richard J. Bauer..................................... 76,800 (9) *
Richard J. Drake..................................... 67,000 (10) *
Richard Lesser....................................... 44,000 (11) *
Eli J. Segal......................................... 0 *
Massachusetts Financial Services Company............. 1,264,200 (12) 6.7
L&K 2002 Grantor Retained Annuity Trust #1 .......... 1,535,162 (13) 8.1
The 2003 William Kaplan GRAT ........................ 1,300,000 (13) 6.8
All executive officers and
directors as a group (12 persons).................. 6,611,115 (14) 33.8
-------------------
* Denotes less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and includes voting or
investment power with respect to the Common Stock. Shares of Common Stock
issuable upon the exercise of securities currently exercisable or
exercisable within 60 days of the Record Date are deemed outstanding for
computing the share ownership and percentage ownership of the person
holding such securities, but are not deemed outstanding for computing the
percentage of any other person.
(2) The address of each of Messrs. Kaplan and Parker is 500 University Court,
Blackwood, New Jersey 08012.
(3) Includes: (i) 1,535,162 shares held of record by the L&K 2002 Grantor
Retained Annuity Trust #1 and (ii) 1,300,000 shares held of record by The
2003 William Kaplan GRAT. Mr. Kaplan is the Investment Trustee of the L&K
2002 Grantor Retained Annuity Trust #1 and The 2003 William Kaplan GRAT.
Accordingly, Mr. Kaplan has the sole power to vote and dispose of the
shares owned of record by the L&K 2002 Grantor Retained Annuity Trust #1
and The 2003 William Kaplan GRAT.
(4) Does not include 30,000 shares subject to presently exercisable options
owned by Patricia A. Parker, Mr. Parker's spouse, as to which Mr. Parker
disclaims beneficial ownership.
(5) Ms. Parker's total includes 30,000 shares subject to presently exercisable
options. Does not include 2,956,600 shares owned of record by Jack Parker,
Ms. Parker's spouse, as to which Ms. Parker disclaims beneficial ownership.
(6) Includes: (i) 33,333 shares subject to presently exercisable options and
(ii) 961 shares of Common Stock allocated to Mr. Fine's account under A.C.
Moore's 401(k) Plan. This information related to the 401(k) Plan is based
on a plan statement dated as of December 31, 2002.
(7) Includes 153,667 shares subject to presently exercisable options.
6
(8) Includes: (i) 68,000 shares subject to presently exercisable options and
(ii) 4,676 shares of Common Stock allocated to Mr. Rambo's account under
A.C. Moore's 401(k) Plan. This information related to the 401(k) Plan is
based on a plan statement dated as of December 31, 2002.
(9) Includes 64,000 shares subject to presently exercisable options.
(10) Includes 63,000 shares subject to presently exercisable options.
(11) Represents 44,000 shares subject to presently exercisable options.
(12) Information with respect to Massachusetts Financial Services Company (MFS)
is derived from MFS' Schedule 13G relating to A.C. Moore filed with the
SEC. The address of MFS is 500 Boyleston Street, Boston, MA 02116.
(13) The address of each of the L&K 2002 Grantor Retained Annuity Trust #1 and
The 2003 William Kaplan GRAT is c/o Robert J. Laughlin, V.P., J.P. Morgan
Trust Company of Delaware, 500 Stanton Christiana Road, Newark, DE 19713.
William Kaplan is the Investment Trustee of the L&K 2002 Grantor Retained
Annuity Trust #1 and The 2003 William Kaplan GRAT. Accordingly, Mr. Kaplan
has the sole power to vote and dispose of the shares owned of record by the
L&K 2002 Grantor Retained Annuity Trust #1 and The 2003 William Kaplan
GRAT.
(14) Includes 592,666 shares subject to presently exercisable options. Includes
shares beneficially owned by Rex A. Rambo, a named executive officer in the
Summary Compensation Table, even though Mr. Rambo retired from A.C. Moore
on January 31, 2003 and therefore was not an executive officer on the
Record Date.
Executive Compensation
Compensation Committee Report
The Compensation Committee of A.C. Moore's Board of Directors
establishes A.C. Moore's general compensation policies, compensation plans and
specific compensation levels of A.C. Moore's most highly compensated executive
officers, and reviews the design, administration and effectiveness of
compensation programs for other key executives. The Compensation Committee's
executive compensation policies are designed to provide competitive levels of
compensation, integrate pay with A.C. Moore's annual and long-term performance
goals, reward above-average corporate performance, recognize individual
initiative and achievements, and assist A.C. Moore in attracting and retaining
qualified executives.
A.C. Moore's executive officer compensation program is comprised of
base salary, annual cash incentive compensation, and long-term incentive
compensation in the form of stock options, and various benefits available to all
full time employees of A.C. Moore, including participation in group medical and
life insurance plans and a 401(k) Plan. The Company seeks to be competitive with
compensation programs offered by companies of a similar size within the retail
industry.
Base Salary and Incentive Compensation. Prior to the beginning of each
fiscal year, financial and other goals are established for the Company. Each
executive officer is responsible for accomplishing the goals pertaining to his
or her area of responsibility. Base salaries are based on the results of
individual performance, as well as other considerations such as the executive
officer's level of responsibility, years of service with A.C. Moore,
professional background and surveys of compensation levels of comparable retail
companies. Incentive compensation is based upon the achievement of Company
profit objectives. Each executive officer of the Company received bonus
compensation during 2002 except Jack Parker who has excluded himself from the
Company's incentive compensation program. See "Summary Compensation Table."
Stock Options. A.C. Moore uses its 2002 Stock Option Plan and its 1997
Employee, Director and Consultant Stock Option Plan (the "Option Plans") as
long-term incentive plans for executive officers and key employees. The
objectives of the Option Plans with respect to executive officers are to align
7
the long-term interests of executive officers and shareholders by creating a
direct link between executive compensation and shareholder return and to enable
executives to develop and maintain a significant long-term equity interest in
A.C. Moore. The Option Plans authorize the Compensation Committee to award stock
options to officers and key employees. Stock options granted to executive
officers are based upon the level and degree of responsibility of the positions
they hold. In general under the Option Plans, options are granted with an
exercise price equal to the fair market value of the Common Stock on the date of
grant and are exercisable according to a vesting schedule determined by the
Compensation Committee at the time of grant. In 2002, 2001 and 2000, the Board
of Directors granted options to purchase an aggregate of 312,300 shares, 306,600
shares, and 368,400 shares, respectively of Common Stock under the Option Plans.
Information concerning the option grants to certain executive officers is set
forth in the Summary Compensation Table.
Policy with Respect to Section 162(m) of the Internal Revenue Code.
Generally, Section 162(m) of the Internal Revenue Code of 1986, and the
regulations promulgated thereunder (collectively, "Section 162(m)"), denies a
deduction to any publicly held corporation, such as A.C. Moore, for certain
compensation exceeding $1,000,000 paid during a calendar year to the chief
executive officer and the four other highest paid executive officers, excluding,
among other things, certain performance-based compensation. Where appropriate,
the Compensation Committee has taken action to reduce the impact of this
provision. For example, the Compensation Committee intends that the Option Plans
qualify for the performance-based exclusion. The Compensation Committee
continually evaluates to what extent Section 162(m) will apply to its other
compensation programs.
Discussion of 2002 Compensation for the Chief Executive Officer. In
considering the compensation for Mr. Parker, the Chief Executive Officer, the
Compensation Committee reviewed his existing compensation arrangements and
compensation levels of comparable retail companies. The Compensation Committee
accordingly made the determination that the annual compensation for the Chief
Executive Officer be established at $450,000 for 2002. In 2001 and 2000, the
compensation committee had established Mr. Parker's compensation at $350,000.
Mr. Parker, as a major shareholder of A.C. Moore, elected not to participate in
either the incentive compensation program or the Option Plans. Mr. Parker also
elected to reduce his compensation to $380,000 for 2002 and to $300,000 for 2001
and 2000.
As part of his overall compensation package, Mr. Parker was also
provided various life insurance policies, including a split dollar life
insurance arrangement for Mr. Parker and his wife.
THE COMPENSATION COMMITTEE
Richard Lesser
Richard J. Bauer
8
Summary Compensation Table
The following table sets forth the compensation earned during each of
the last three years by the Company's Chief Executive Officer and four other
most highly compensated executive officers of the Company (collectively, the
"Named Executive Officers") whose aggregate salaries and bonuses exceeded
$100,000 for services rendered in all capacities to the Company during 2002:
Long Term
Annual Compensation Compensation
-------------------------- ----------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
------------------------------- ------ -------------- ---------- ---------------- ---------------
Jack Parker.................... 2002 $380,000 -- -- $48,721 (1)(2)
Chief Executive Officer 2001 300,000 -- -- 47,703 (1)(2)
2000 300,000 -- -- 46,108 (1)(2)
Lawrence H. Fine............... 2002 $338,462 $64,700 100,000 $1,500 (4)
President 2001 175,000 $100,000 (5) 100,000 (3) 1,500 (4)
Rex A. Rambo................... 2002 $315,000 $57,250 -- $1,500 (4)
Executive Vice President and 2001 300,000 47,500 28,000 (3) 1,500 (4)
Chief Operating Officer 2000 300,000 25,000 50,000 (3) 1,500 (4)
Leslie H. Gordon............... 2002 $237,500 $57,250 20,000 $1,500 (4)
Executive Vice President and 2001 225,000 47,500 18,000 (3) 1,500 (4)
Chief Financial Officer 2000 225,000 25,000 34,000 (3) 1,500 (4)
Patricia A. Parker............. 2002 $215,000 $32,350 10,000 $16,661 (2)
Executive Vice President, 2001 215,000 30,000 -- 19,310 (2)
Merchandising 2000 215,000 15,000 15,000 (3) 19,982 (2)
----------------------
(1) Includes $32,060, $28,393 and $26,126 of life insurance premiums paid by
the Company in 2002, 2001 and 2000, respectively.
(2) Includes one-half of the value of the benefit to Jack Parker and Patricia
A. Parker of the premium paid by the Company for a split-dollar
second-to-die life insurance policy. The estimated dollar value has been
computed as the present value of a loan of the amount of the premium paid
on an actuarial basis between payment of the premium and the refund to A.C.
Moore on termination of the policy. Also includes in each year, a $1,500
annual contribution by the Company pursuant to the Company's 401(k) Plan to
each of Jack Parker and Patricia A. Parker.
(3) Adjusted to reflect the two-for-one stock split distributed on July 31,
2002.
(4) Represents annual contribution by the Company pursuant to the Company's
401(k) Plan.
(5) Includes a $50,000 employment signing bonus.
9
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning stock
options granted during fiscal 2002 to the Named Executive Officers. The exercise
price per share of each option was equal to the fair market value of the Common
Stock at the grant date as determined by the Board of Directors.
Individual Grants
---------------------------------------------------- Potential Realizable
Percent of Value at Assumed Annual
Number of Total Rates of Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term(1)
Options Employees in Price Expiration ------------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
-------------------------------------- ------------ ------------ ---------- ----------- ---------- -----------
Jack Parker........................... -- -- -- -- -- --
Lawrence H. Fine...................... 100,000 32.0 $19.11 8/22/2012 $1,202,000 $3,046,000
Rex A. Rambo.......................... -- -- -- -- -- --
Leslie H. Gordon...................... 20,000 6.4 19.11 8/22/2012 240,400 609,200
Patricia A. Parker.................... 10,000 3.2 19.11 8/22/2012 120,200 304,600
-------------------
(1) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full term of the options. The 5% and 10% assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise of the option or the sale of the underlying shares, or
reflect non-transferability, vesting or termination provisions. The actual
gains, if any, on the exercise of stock options will depend on the future
performance of the Common Stock.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
The following table sets forth certain information concerning the
number and value of unexercised options to purchase Common Stock held at the end
of fiscal 2002 by the Named Executive Officers. In 2002, Rex Rambo exercised
30,000 shares of stock options.
Number of Securities Value of Unexercised In-
Underlying Unexercised The Money Options at
Options at Fiscal Year-End Fiscal Year End(1)
Shares ----------------------------- --------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------------ ----------- ---------- ------------- -------------- ----------- -------------
Jack Parker................... -- -- -- -- -- --
Lawrence H. Fine.............. -- -- 33,333 166,667 $ 146,333 $ 292,667
Rex A. Rambo (2).............. 30,000 $ 400,500 (3) 172,666 35,334 1,353,732 228,113
Leslie H. Gordon.............. -- -- 153,667 43,333 1,268,564 152,073
Patricia A. Parker............ -- -- 30,000 15,000 284,400 43,850
-------------------
(1) Based upon the latest reported sale price on the Nasdaq National Market on
December 31, 2002 ($12.71 per share) less the option exercise price.
(2) On January 31, 2003 Rex A. Rambo retired from the Company. Based upon his
years of service, the Board of Directors authorized the vesting of all of
Mr. Rambo's unvested options (options to purchase 35,334 shares of Common
Stock).
(3) Based upon the reported exercise of options and sale of shares on November
6, 2002.
10
Employment Agreements
On June 11, 2001, the Company entered into an employment agreement with
the Company's President, Lawrence H. Fine. The term of Mr. Fine's employment
agreement is three years, unless earlier terminated by the Company or Mr. Fine.
Mr. Fine's employment agreement entitles him to receive an annual base salary of
$325,000 for his first year of employment, $350,000 for his second year of
employment and $375,000 for his third year of employment. Mr. Fine's employment
agreement also provides for the payment of a minimum guaranteed annual bonus in
the amount of $50,000. Mr. Fine's employment agreement provides for severance
payments to be paid to Mr. Fine if his employment is terminated by the Company
without cause or in the event of a change in control transaction.
In accordance with the terms of his employment agreement, Mr. Fine was
granted options to acquire 100,000 shares of Common Stock under the Option Plans
upon the commencement of his employment and options for an additional 100,000
shares on August 22, 2002. Mr. Fine's employment agreement further provides that
in the third year of his employment, and in each subsequent year, Mr. Fine will
be a participant in our Option Plans, and that further stock options grants will
be in accordance with the provisions of our Option Plans.
Mr. Fine's employment agreement also prohibits him from divulging
confidential information regarding the Company or the Company's business to any
other party. In addition, Mr. Fine's employment agreement prohibits him, during
the term of his employment with the Company and for a period of two years
following termination of his employment, from engaging in a business that
competes with the Company and from soliciting as executives or managers any
individuals who were the Company's executives or managers at the time of his
employment.
Severance Arrangement
The Company has agreed to pay Leslie H. Gordon a sum equal to one year
of his then current salary if his employment is terminated by the Company
without cause.
On January 31, 2003 Rex A. Rambo retired from the Company. Based upon
his years of service as the Company's Chief Operating Officer, the Board of
Directors authorized the vesting of all of Mr. Rambo's unvested options (options
to purchase, 35,334 shares of Common Stock). In recognition of this change in
the provisions for these options, the Company recorded $271,000 in compensation
expense in 2002. This amount represents the difference between the market value
of the shares as of the date of Mr. Rambo's retirement and the option exercise
price.
Certain Relationships and Related Transactions
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consisted of Messrs. Bauer and Lesser in
2002. No person who served as a member of the Compensation Committee during 2002
was a current or former officer or employee of the Company or engaged in certain
transactions with the Company required to be disclosed by regulations of the
Securities and Exchange Commission. Additionally, there were no compensation
committee "interlocks" during 2002, which generally means that no executive
officer of the Company served as a director or member of the compensation
committee of another entity, one of whose executive officers served as a
director or member of the Compensation Committee of the Company.
11
Other Related Transactions
Richard J. Drake, a director of the Company, is a member of a law firm
which the Company has retained during 2002 and which the Company intends to
retain during 2003.
In 2002, the Company reimbursed Regal Bag Corporation and related
companies ("Regal") $374,000 for merchandise sold in the Company's stores.
William Kaplan, a director of the Company, is Chairman of the Board of Directors
and an executive officer and principal shareholder of Regal.
It has been the Company's policy that all material transactions between
the Company and its officers, directors and other affiliates must be approved by
a majority of the disinterested members of the Company's Board of Directors and
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties. Going forward, the Company will comply with any and
all approval requirements adopted by Nasdaq related to material transactions
between the Company and its officers, directors and other affiliates.
Stock Performance Graph
The following graph compares the yearly changes in the total return on
our Common Stock against two other measures of performance. The comparison is on
a cumulative basis for our last five fiscal years. The two other performance
measures are the Nasdaq Stock Market Index and the Nasdaq Retail Trade Index. In
each case, we assumed an initial investment of $100 on December 31, 1997. Dates
on the following chart represent the last trading day of the indicated calendar
year. We paid no dividends during such five-year period.
[GRAPHIC OMITTED]
December 31,
-------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
A.C. Moore 100 54 51 72 259 223
Nasdaq Stock Market Index 100 141 261 157 125 86
The NASDAQ Retail Trade Index 100 122 107 65 91 77
12
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who beneficially own
more than ten percent of the Company's Common Stock, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and greater than ten percent shareholders are required by
regulation of the Securities and Exchange Commission to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during 2002, all Section 16(a) filing requirements
applicable to the Company's executive officers, directors and greater than
ten-percent beneficial owners were complied with during 2002, except that the
following reports were not timely filed: Eli J. Segal and the L&K 2002 Grantor
Retainer Annuity Trust #1 did not timely file Forms 3 and Jack Parker, Richard
Lesser and Patricia Parker inadvertently failed to timely file certain Forms 4
related to transactions disclosed in and made pursuant to a Registration
Statement on Form S-3. All such forms were subsequently filed.
SHAREHOLDER PROPOSALS
Under the Company's bylaws, shareholder proposals with respect to the
2004 Annual Meeting of Shareholders, including nominations for directors, which
have not been previously approved by the Board of Directors must be submitted to
the Secretary of the Company not later than December 17, 2003. Any such
proposals must be in writing and sent either by personal delivery,
nationally-recognized express mail or United States mail, postage prepaid to
A.C. Moore Arts & Crafts, Inc., 500 University Court, Blackwood, NJ 08012,
attention: Secretary of the Company. Each nomination or proposal must include
the information required by the bylaws. All late or nonconforming nominations or
proposals will be rejected.
Shareholder proposals for the 2004 Annual Meeting of Shareholders must
be submitted to A.C. Moore by December 17, 2003 to receive consideration for
inclusion in A.C. Moore's Proxy Statement relating to the 2004 Annual Meeting of
Shareholders. Any such proposal must also comply with the proxy rules under the
Securities Exchange Act of 1934, including Rule 14a-8.
In addition, shareholders are notified that the deadline for providing
the Company timely notice of any shareholder proposal to be submitted outside of
the Rule 14a-8 process for consideration at the Company's 2004 Annual Meeting of
Shareholders is December 17, 2003. As to all such matters which the Company does
not have notice on or prior to December 17, 2003, discretionary authority shall
be granted to the persons designated in the Company's Proxy Statement related to
the 2004 Annual Meeting of Shareholders to vote on such proposal.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers, independent accountants, to serve as A.C. Moore's
independent auditors for the year ending December 31, 2003. Shareholders will be
asked to ratify this appointment. A representative of PricewaterhouseCoopers is
expected to be present at the Meeting and to be available to respond to
appropriate questions. The representative will have the opportunity to make a
statement if he or she so desires.
13
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for us by
PricewaterhouseCoopers as of or for the years ended December 31, 2002 and 2001
were:
2002 2001
--------- ---------
Audit Fees.............................. $ 156,500 $ 255,000
Audit Related fees...................... 65,000 --
Tax Fees................................ 55,285 --
All Other Fees.......................... -- --
--------- ---------
Total................................... $ 276,785 $ 255,000
========= =========
The Audit fees for the years ended December 31, 2002 and 2001,
respectively, were for professional services rendered for the audits of the
consolidated financial statements of the Company, quarterly reviews, issuance of
consents, and assistance with review of documents filed with the SEC.
Audit Related fees for the year ended December 31, 2002 were for
internal control reviews and consultations concerning financial accounting and
reporting standards.
Tax fees for the year ended December 31, 2002 were for services
performed in connection with income tax services other than those directly
related to the audit of the income tax accrual.
The Audit Committee has considered and determined that the services
provided by PricewaterhouseCoopers are compatible with PricewaterhouseCoopers
maintaining its independence.
-------------------
(1) The aggregate fees included in Audit are fees billed for the fiscal years
for the audit of the registrant's annual financial statements and reviews
of financial statements and statutory and regulatory filings or
engagements. The aggregate fees included in each of the other categories
are fees billed in the fiscal years.
The Board of Directors recommends that you vote "FOR" approval of Proposal 2.
OTHER MATTERS
A.C. Moore is not presently aware of any matters (other than procedural
matters) which will be brought before the Meeting which are not reflected in the
attached Notice of the Meeting. The enclosed proxy confers discretionary
authority to vote with respect to any and all of the following matters that may
come before the Meeting: (i) matters which the Company did not receive notice by
December 19, 2002 were to be presented at the Meeting; (ii) approval of the
minutes of a prior meeting of shareholders, if such approval does not amount to
ratification of the action taken at the meeting; (iii) the election of any
person to any office for which a bona fide nominee named in this Proxy Statement
is unable to serve or for good cause will not serve; (iv) any proposal omitted
from this Proxy Statement and the form of proxy pursuant to Rules 14a-8 or 14a-9
under the Securities Exchange Act of 1934; and (v) matters incident to the
conduct of the Meeting. In connection with such matters, the persons named in
the enclosed proxy will vote in accordance with their best judgment.
14
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K
This Proxy Statement is accompanied by A.C. Moore's 2002 Annual Report
to Shareholders which includes a copy of the Annual Report on Form 10-K for the
year ended December 31, 2002 as filed with the Securities and Exchange
Commission.
By Order of the Board of Directors
Janet Parker
Secretary
Blackwood, New Jersey
April 15, 2003
15
APPENDIX A
FORM OF PROXY
A.C. MOORE ARTS & CRAFTS, INC.
BLACKWOOD, NEW JERSEY
PROXY FOR 2003 ANNUAL MEETING OF SHAREHOLDERS, MAY 22, 2003
Solicited On Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Jack Parker and William
Kaplan, and each of them, as attorneys and proxies of the undersigned, with full
power of substitution, for and in the name, place and stead of the undersigned,
to appear at the annual meeting of shareholders of A.C. Moore Arts & Crafts,
Inc. to be held on the 22nd day of May, 2003 and at any postponement or
adjournment thereof, and to vote all of the shares of A.C. Moore Arts & Crafts,
Inc. which the undersigned is entitled to vote, with all the powers and
authority the undersigned would possess if personally present. The undersigned
hereby directs that this proxy be voted as marked on the reverse side hereof.
This Proxy will, when properly executed, be voted as directed. If no
directions to the contrary are indicated in the boxes provided, the persons
named herein intend to vote FOR each proposal listed on the reverse side hereof.
A majority of said attorneys and proxies present and acting at the
meeting in person or by their substitutes (or if only one is present and acting,
then that one) may exercise all the powers conferred hereby. Discretionary
authority is conferred hereby as to certain matters as may properly come before
the meeting.
(Continued and to be marked, signed and dated on the reverse side)
(1) ELECTION OF DIRECTORS: William Kaplan and John E. (Jack) Parker
FOR all nominees WITHHOLD AUTHORITY (INSTRUCTION: To withhold authority to vote
listed above (except to vote for the for any individual nominee, write that nominee's
as marked to the nominees listed name in the space provided below.)
contrary at right.) above.
[ ] [ ] ___________________________________________
(2) Ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent auditors for the year ending
December 31, 2003.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.
Receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement dated April 15, 2003 and the Company's 2002
Annual Report to Shareholders is hereby acknowledged.
_____________________________________________
Signature
_____________________________________________
Signature
Dated: ______________________________________
Please sign exactly as your name or names appear hereon,
including any official position or representative capacity.
Please mark, date and sign this proxy and return it promptly in the enclosed postage paid envelope.