SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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
[X] Definitive proxy statement permitted by Rule
14a-6(e) (2) )
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FEDERAL SCREW WORKS
(Name of Registrant as Specified in Its Charter)
_________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: ______
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies: ________
______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction: _____________________
______________________________________________________________________
(5) Total fee paid: ______________________________________________________
[ ] Fees paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: _____________________________________________
(2) Form, schedule or registration statement no.: _______________________
(3) Filing party: _______________________________________________________
(4) Date filed: _________________________________________________________
FEDERAL SCREW WORKS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is Hereby Given, that the Annual Meeting of Shareholders of
FEDERAL SCREW WORKS, a Michigan corporation, will be held at the offices of
the Company, 535 Griswold, Ste. 2400, Detroit, Michigan 48226, on THURSDAY,
OCTOBER 23, 1997 at 10:00 a.m. (Detroit time), for the following purposes:
1. To elect two directors for a term of three years and until their
successors shall be duly elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business September 2, 1997 are
entitled to notice of and to vote with respect to this solicitation.
By Order of the Board of Directors,
FEDERAL SCREW WORKS
W. T. ZurSchmiede, Jr., Secretary
Principal executive office:
535 Griswold, Ste. 2400
Detroit, Michigan 48226-3602
Detroit, Michigan
September 26, 1997
PLEASE FILL IN, SIGN AND MAIL PROMPTLY THE
ACCOMPANYING PROXY, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
This statement is furnished in connection with the solicitation of
Proxies being made by the Board of Directors of Federal Screw Works
(hereinafter designated the "Company"), to be used at the Annual Meeting of
Shareholders of the Company to be held on THURSDAY, OCTOBER 23, 1997 and at
any adjournment or adjournments of the meeting, for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders. The meeting will
be held at the principal executive offices of the Company, 535 Griswold, Ste.
2400, Detroit, Michigan 48226.
The Company has only one class of securities, consisting at the close of
business on September 2, 1997 of 1,086,512 issued and outstanding shares of
common stock of the par value of $1.00 per share. Each of the 1,086,512
shares is entitled to one vote at the Shareholders' meeting. The common stock
transfer books will not be closed, but only Shareholders of record as of the
close of business September 2, 1997 are entitled to receive notice of and to
vote with respect to this solicitation. The approximate date on which the
proxy statement and form of proxy are to be first sent or given to security
holders is September 26, 1997.
Execution and return of a Proxy will not in any way affect a
Shareholder's right to attend the meeting and to vote in person, and a
Shareholder giving a Proxy has the power to revoke it at any time before it
is exercised. Properly executed Proxies in the accompanying form, received in
due time, and not previously revoked, will be voted at the meeting, or any
adjournment of the meeting, as specified in the meeting.
Election of Directors
The Company's Articles of Incorporation and Bylaws provide that the
number of Directors, as determined from time to time by the Board of
Directors, may be increased or decreased, but not to less than three. The
Board of Directors previously set the number of Directors at seven. On June
15, 1997, John J. Slavin, a valued Director of the Company since 1965, passed
away. At its meeting of August 15, 1997, the Board of Directors reduced the
number of Directors to six. The Board of Directors will continue to be
divided into three classes, with each class consisting of two Directors. At
the 1997 Annual Meeting two Directors will be elected for a three-year term
and in each case until their successors are elected and qualified. The
nominees are two present Directors of the Company whose terms expire at the
meeting. Other Directors whose terms have not expired will continue in office
in accordance with their previous elections. The favorable vote of at least
two-thirds (2/3) of the issued and outstanding shares of common stock will be
required to elect Directors. An abstention by a Shareholder or a Broker
non-vote has the effect of a negative vote. Votes cast are counted by two
Inspectors of Election, one of which is the State Street Bank & Trust Co.,
the Company's Stock Transfer Agent. Management has nominated for election the
persons named in the following table, which sets forth certain information as
to each of the nominees and each Director whose term will continue after the
Annual Meeting. The persons named in the enclosed form of Proxy will vote
such Proxy for the election of the nominees described in the following table.
Although management does not contemplate that any of the nominees will be
unable to serve, in the event that any nominee is unable to serve as Director
at the date of the Annual Meeting, the Proxy will be voted for any other
nominee who may be designated by the present Board of Directors, or the Board
of Directors may appropriately reduce the number of Directors
1
to be elected and to comprise the Board. The names of such nominees, and of
the Directors who will continue as such for their respective terms, their
principal occupations and the year in which each first became a member of the
Board of Directors of the Company are as follows:
Name and Principal Term Director
Occupation Expires Since
------------------ ------- --------
Nominees standing for election to term expiring in 2000:
Hugh G. Harness*
Business Consultant. President of the Company,
1985 through Jan. 1994. Executive Vice President,
1982 to 1985. Senior Vice President--Corporate
Development, 1976 to 1982. Vice
President--Corporate Development, 1975 to 1976.
Member of Harness, Dickey and Pierce law firm,
Patent Counsel to the Company, 1954 to 1975. Age
66. ............................................. 1997 1965
Thomas ZurSchmiede*
President of the Company, Feb. 1994. Vice
President--Big Rapids Division, 1988-1994; Vice
President--Corporate Development, 1984-1988;
Director of Corporate Development, 1983 to 1984;
General Manager, Votrax Division of the Company,
1983; Assistant to the President of the Company,
1981 to 1983. Age 46. ........................... 1997 1984
Directors continuing in office for their respective terms:
Dr. Thomas W. Butler, Jr.+
President, Thomas W. Butler & Associates, Inc.,
business consultants. Vice President, The Genlyte
Group, 1985 to 1987, manufacturer of lighting
systems. Dean, School of Engineering and Computer
Science, Oakland University, Rochester, Michigan,
1984 to 1985. Vice President, Engineering and
Research, AMF Inc., manufacturers of leisure and
industrial products, 1974 to 1984. Age 74. ...... 1999 1978
F. D. Tennent+
Business Consultant. Senior Vice President--
Finance & Secretary of the Company, 1976 to 1986.
Treasurer, 1983 to 1986. Vice President--Finance,
Secretary-Treasurer of the Company, 1969 to 1976.
Age 71. ......................................... 1998 1978
Robert F. ZurSchmiede*
Vice President--Romulus Divisions, since 1986.
Vice President and General Manager of the Romulus
Division, 1984 to 1986; Assistant General Manager
of the Romulus Division, 1983 to 1984; Assistant
Manufacturing Manager, Romulus Division, 1982 to
1983; Sales Representative for the Company, 1981
to 1982; Inventory Control Supervisor, Detroit
and Romulus Divisions, 1979 to 1981; Production
Foreman Big Rapids and Detroit Divisions, 1979.
Age 44. ......................................... 1999 1984
W. T. ZurSchmiede, Jr.*
Chairman of the Board & Chief Executive Officer
since 1978; Chief Financial Officer, Secretary
and Treasurer, since 1988. President of the
Company and Chief Executive Officer, 1970 to
1978. Age 71. ................................... 1998 1959
<FN>
* Member of Executive Committee of the Company's Board of Directors.
+ Member of Audit Committee of the Company's Board of Directors.
2
Director's Remuneration and Committees of the Board
Directors who are also employees of the Company receive no compensation
in addition to their salaries and benefits received as employees. Directors
who are not employees of the Company are paid a retainer fee of $4,500
quarterly for all services as a Director. In addition, the Chairman of the
Audit Committee receives an additional $750 quarterly and the Chairman of the
Salary Compensation Committee receives an additional $750 quarterly. The
Company has entered into an agreement with each Director under which the
Company confirms to the Director the indemnification provided for directors
under the Michigan Business Corporation Act. These agreements also require
the Company to secure its indemnification obligations by bank letters of
credit, trusts or other arrangements.
To attract, retain and motivate service on the Company's Board of
Directors, the Company has a retirement plan for Directors who are not also
employees of the Company. A Director who has served at least five years on
the Board of Directors is entitled to a retirement benefit beginning as of
the first day of the fiscal quarter following the date of termination of his
or her directorship. The benefit will be paid quarterly for a period of time
equal to the years of Board service of the Director, but not to exceed
fifteen years (10 years if the recipient is not the Director or his spouse).
Each payment will be in the amount of the quarterly base retainer fee being
paid to the Director at the time of his or her termination as a Director or
$4,500, whichever is greater. Directors who are former employees of the
Company but who have at least one year of service on the Board as a
non-employee of the Company will be entitled to the same benefits as if all
of their Board service had been as a non-employee. The plan is funded
pursuant to the terms of a so-called Rabbi trust created September 13, 1995.
The trust is irrevocable, but in the event all benefits payable under the
plan have been paid, all amounts remaining in the trust would be returned to
the Company. In the event of the insolvency (as defined in the trust
agreement) of the Company, all amounts held in trust would be subject to the
claims of the Company's creditors.
During the fiscal year ended June 30, 1997, the Board of Directors held
six meetings. The Company has standing Audit, Salary Compensation, Finance
and Restricted Stock Bonus Committees but does not have a standing Nominating
Committee or any Committee performing similar functions.
The Audit Committee, comprising Messrs. Tennent (Chairman), Butler (Vice
Chairman), and Slavin held two meetings during the year. Generally, the Audit
Committee recommends to the full Board the engagement or discharge of the
independent public accountants to be appointed for the Company; reviews the
proposed scope of the annual audit and the findings of the independent public
accountants upon completion of the annual audit; reviews the independence of
the public accountants and considers the range of their audit and non-audit
fees; reviews with the independent public accountants and with appropriate
corporate personnel the adequacy of internal procedures, and controls and
monitors the Company's published policies on management integrity.
The Finance Committee, comprising Messrs. ZurSchmiede, Jr. (Chairman),
Harness and Tennent, held two meetings during the year. The Finance Committee
studies and makes recommendations to the Board concerning fundamental
financial policies of the Company with particular attention to the incurrence
of material corporate debt and material capital expenditures.
The Salary Compensation Committee comprising Messrs. Tennent (Chairman),
Butler (Vice Chairman), Slavin, and ZurSchmiede, Jr., held three meetings
during the year. The Committee recommends the salaries of all elected
officers, including bonuses, and is responsible for the continuing study of
executive compensation, so that the Company may remain competitive in that
regard.
The Restricted Stock Bonus Committee, comprising Board members who are
not employees of the Company and who are not eligible for any stock award
pursuant to the Company's Restricted Stock Bonus Plan (Messrs. Tennent,
Chairman, Butler, and Slavin) administers the Company's Restricted Stock
Bonus Plan. The Committee recommends the persons who are to receive such
awards, the form and amount of awards to be made to each person and the
conditions under which awards are restricted. The Restricted Stock Bonus
Committee did not meet during the year.
3
Compensation Committee Report
The Salary Compensation Committee of the Board of Directors ("the
Committee") was composed of four senior members of the Board until Mr.
Slavin's death. Three members of the Board now compose the Committee. It is
the primary responsibility of the Committee to monitor the Company's
compensation policies and programs. The Committee recommends to the full
Board the salaries of all elected officers, the allocation of any cash bonus
fund among elected officers and the criteria applicable to the accrual of the
cash bonus fund. The Committee is responsible for the continuing study of
executive compensation generally, so that the Company may remain competitive
in that regard, and in doing so engages and consults outside compensation
specialists. The two non-officer members of the Committee also comprise the
Restricted Stock Bonus Committee which recommends persons to receive
restricted stock awards, the form and amount of awards to be made, and the
conditions under which awards are restricted.
Executive Compensation Policy
The base salaries of the executive officers of the Company are based on
the Company's performance and each executive's contribution to the
operational success of the Company as a whole, particularly in view of the
very demanding conditions in the automotive industry. There had been no
increases in base salaries since fiscal 1994 until fiscal 1997 when the
Committee, based on the Company's operating results, recommended a five
percent increase in such base salaries, which became effective February 1,
1997. The Compensation Committee will continue its evaluation of each
executive's performance under the Company's highly competitive circumstances,
as well as the Company's performance, including improving production
efficiencies with emphasis on quality and parts requiring high technology.
While the Compensation Committee takes into consideration the factors
mentioned above, the Committee does rely to a large degree upon subjective
(rather than objective) standards and evaluations to determine executive
compensation.
The Compensation Committee will continue to emphasize the Company's
long-term performance and increases in shareholder value, will support a
bonus incentive program based on the financial performance of the Company,
and will offer meaningful and competitive retirement and supplemental
benefits that are consistent with the Company's objective of rewarding and
retaining key employees.
The Cash Bonus Plan described in footnote (1) to the Summary
Compensation Table on page 7 was adopted in 1989, and is similar to a plan in
place for many years prior to 1989. Bonuses awarded under the Plan are
discretionary. The Plan is structured in such a way that no bonus amount is
accrued in any fiscal year unless earnings exceed a base amount equal to
eight percent of beginning of the year shareholders' equity.
CEO Compensation
The compensation of the Chief Executive Officer is fixed by the full
Board of Directors (other than the CEO), after considering recommendations of
the Compensation Committee. The Committee reviews the performance of the CEO
and makes recommendations consistent with the objectives, performance, and
results mentioned above. The Committee engages and consults with outside
compensation consultants, and considers overall competitive compensation
arrangements of other automotive industry suppliers as well as a broad range
of companies, some of which may not be comparable to the Company for
Performance Graph purposes. However, because of the extremely competitive
automotive markets served by the Company, the Committee does not specifically
link remuneration of the CEO solely to quantitative measures of performance.
In determining the CEO's compensation, the Committee further considers
the Company's improvement, on an operating basis, of its financial position,
improvement in its financial structure, and improvement in shareholder value.
As with the other executives, factors considered by the Committee in
recommending the CEO's compensation to the full Board are generally
subjective.
Under the Long Term Incentive Plan described in the Company's 1995 Proxy
Statement, a bonus would be due to the CEO only if certain specified
performance goals were met by the Company for the fiscal years 1995 and 1996.
These goals were not successfully met, primarily due to strikes in one of the
Company's divisions and at one of the Company's major customers. No bonus was
paid out under the Plan.
4
The Committee has continued its study of CEO incentive programs and has
employed extensive use of outside compensation specialists in this regard.
Based on this review, the Committee recommended to the Board that the Long
Term Incentive Plan be extended for the fiscal years 1997 and 1998 and be
renamed the CEO Intermediate Term Bonus Plan. Factors considered in reaching
this position include the Company's continued marked improvement, total
return to shareholders relative to the Company's industry, and the stock
market generally. The Committee noted that, as evidenced by the zero payout
under the prior CEO plan, due to the sales growth threshold being narrowly
missed, the Company has demonstrated that the program provides "at-risk"
incentives tied to meaningful performance goals. The Committee concluded that
a new rolling two-year incentive plan for the CEO is desirable to remain
competitive with current market practices. Mr. ZurSchmiede, Jr. did not take
part nor become involved in these studies or conclusions. The Board of
Directors (not including the CEO) subsequently adopted the plan.
The Intermediate Term Bonus Plan is intended to provide the CEO with an
incentive tied to the sustained improvement in Company financial performance.
The amount earned under the plan will be based on the Company meeting or
exceeding prescribed goals in revenue growth and return on equity (ROE) for
fiscal years 1997 and 1998. The threshold goals in revenue growth and return
on equity for fiscal 1997 and 1998 are 8 percent average annual growth in
revenue (5.68 percent being the average annual growth for fiscal years 1988
to 1996, inclusive) and 12 percent average return on equity (9.74 percent
being the average return on equity for fiscal years 1988 to 1996, inclusive).
The maximum levels are earned at 12 percent average annual growth in revenue
and 16 percent average return on equity. Both thresholds must be met for any
award to be earned. Additional information concerning the plan is contained
in the section entitled CEO Intermediate Term Bonus Plan, below.
Compensation Committee
Thomas W. Butler, Jr.
F. D. Tennent
W. T. ZurSchmiede, Jr.
Compensation Committee Interlocks and Insider Participation
One Member of the Committee, W.T. ZurSchmiede, Jr. is an officer of the
Company; the Committee Chairman, F.D. Tennent is a former officer; John J.
Slavin, now deceased, was Of Counsel to Dykema Gossett PLLC, which regularly
provides legal services to the Company. There are no "interlocks" as defined
by the Securities and Exchange Commission.
5
CEO Intermediate Term Bonus Plan
The following table sets forth information with respect to the CEO
Intermediate Term Bonus Plan adopted by the Company's Board of Directors, which
applies only to fiscal years 1997 and 1998.
INTERMEDIATE TERM BONUS PLAN -- ADOPTED
IN FISCAL YEAR 1997
Estimated Future Payout
Performance Under Non-Stock
Number or Other Period Price-Based Plans
of Shares, Until --------------------------------
Units or Other Maturation Threshold Target Maximum
Name Rights or Payout ($) ($) ($)
---- -------------- -------------- --------- ------ -------
W. T. ZurSchmiede, Jr. .............................. (1) FY 1997 and 1998 $90,500 $181,000 $271,500
<FN>
(1) The CEO Intermediate Term Bonus Plan payment depends on the average annual
return on equity and average annual revenue (net sales) growth for the
fiscal years 1997 and 1998. No amount will be paid unless the average
return on equity equals or exceeds 12 percent and the average revenue
growth equals or exceeds 8 percent. If both thresholds are met or exceeded,
the Plan payment will equal (1) $90,500 plus (2) $22,625 multiplied by the
sum of (a) the percentage by which average return on equity exceeds 12
percent (up to a maximum of four percentage points) plus (b) the percentage
by which average revenue growth exceeds 8 percent (up to a maximum of four
percentage points). The target average return on equity equals 14 percent
and the target average revenue growth equals 10 percent. Maximum payout is
earned if average return on equity is at least 16 percent and average
revenue growth is at least 12 percent.
Return on equity is defined as net earnings for the year divided by
stockholders' equity as of the beginning of the year. Revenue equals net
sales. Average return on equity is the simple average of the return on
equity for each of fiscal years 1997 and 1998. Average revenue growth will
be the simple average of the percentage growth from the prior year for each
of the two years. All calculations will be based on the figures reported to
shareholders in each year's annual report. There will be no adjustments for
extraordinary or nonrecurring items. All calculations will be rounded to
the nearest two decimal points.
6
Executive Compensation
The following table sets forth information with respect to the
compensation paid by the Company during the Company's last three fiscal years
to (i) the Chief Executive Officer of the Company and (ii) each of the four
highest compensated executive Officers of the Company whose compensation
exceeded $100,000.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Restricted
Other Annual Stock All Other
Name and Principal Position Year Salary Bonus (1) Compensation (2) Awards (3) Compensation (4)
--------------------------- ---- ------ --------- ---------------- ---------- ----------------
W. T. ZurSchmiede, Jr. ................. 1997 $301,250 $275,000 $42,200 0 $14,857
Chairman of the Board and 1996 295,000 181,000 42,200 0 13,575
Chief Executive Officer, 1995 295,000 320,000 32,900 0 11,993
Chief Financial Officer,
Secretary and Treasurer
Thomas ZurSchmiede ..................... 1997 296,250 275,000 43,160 0 30,177
President and C.O.O. 1996 290,000 181,000 0 0 27,648
1995 290,000 180,000 43,200 0 11,040
Robert F. ZurSchmiede .................. 1997 245,000 275,000 39,150 0 21,891
Vice President -- 1996 240,000 181,000 0 0 19,507
Romulus Divisions 1995 240,000 180,000 39,000 0 8,300
J. M. O'Brien .......................... 1997 245,000 275,000 43,732 0 28,888
Vice President -- 1996 240,000 181,000 43,732 0 26,123
Sales and Marketing 1995 240,000 180,000 43,600 0 11,657
Jeffrey M. Harness ..................... 1997 214,585 216,000 33,327 0 13,423
Vice President -- Chelsea 1996 210,000 202,000 33,327 0 11,533
and Brighton Divisions 1995 210,000 80,000 34,600 0 3,551
<FN>
- ----------------
(1) A Cash Bonus Plan, the eligible participants in which are the Officers of
the Company, was adopted for the fiscal year ended June 30, 1989, and has
been in effect each subsequent year. The bonus fund is subject to a
discretionary award by the Board to those eligible participants
recommended to the Board by the Salary Compensation Committee which
receives a recommendation from the CEO and the President. Any accrued
bonus fund not awarded may be carried forward for award in the current or
subsequent years. Under the Plan no allocation is made to the bonus fund
in any fiscal year in which pre-tax earnings fail to exceed a base amount
equal to eight (8%) percent of beginning of the year shareholders'
equity. In any year that pre-tax earnings exceed the base amount, an
allocation is made to the bonus fund calculated as a percentage of
pre-tax earnings, the percentage being equal to the sum of one percent
(1%) plus .04 of one percent (1%) for each $10,000 that pre-tax earnings
exceed the base amount. The maximum percentage allowable is 9-1/2%. For
the fiscal year ended June 30, 1997, the base amount was $2,712,063, the
percentage allowance was 9-1/2% and the fund allocation was $1,316,000
all of which was awarded by the Board. The Plan has been continued for
the fiscal year to be ended June 30, 1998, with the base amount of
pre-tax earnings required for allocation being increased to $3,206,422 as
a result of a $6,179,494 increase in shareholders' equity. Pre-tax
earnings is defined to exclude the effect of FAS 106.
(2) The amount shown for each officer in 1997 includes special payments to
assist them in obtaining life insurance in lieu of the Company
undertaking such expense directly, and gross-up payments for tax
liabilities on such insurance premium payments, at each officer's
effective tax rate, as follows: W. T. ZurSchmiede, Jr., $22,385
(premium), $19,815 (tax liability gross-up); J. M. O'Brien, $23,200 and
$20,532; Jeffrey M. Harness, $18,180 and $15,147; Thomas ZurSchmiede,
$23,370 and $19,790; Robert F. ZurSchmiede, $21,590 and $17,560.
7
(3) Subject to the contingencies of death or retirement under the Company's
Salaried Employees' Retirement Plan, the Restricted Stock Bonus Plans
require that each Participant "earn out" awarded shares over a period
which extends to the earlier of ten years or the Participant's normal
retirement date. During the period of restriction, the certificates
representing the shares are deposited with the Company. The dividend paid
to shareholders of the Company is paid on these shares. At June 30, 1997,
the aggregate number and market value (at the then amount of
$47.00/share) of unvested restricted shares of Company common stock held
by each of the named executive Officers were: W. T. ZurSchmiede, Jr.,
2,800 shares valued at $131,600; Robert F. ZurSchmiede, 2,800 shares
valued at $131,600; Thomas ZurSchmiede, 2,800 shares valued at $131,600;
J. M. O'Brien, 2,800 shares valued at $131,600; and Jeffrey M. Harness,
2,000 shares valued at $94,000. No restricted stock awards were made in
the 1995, 1996, or 1997 fiscal years.
(4) The amounts shown consist of the Company-paid portion of the premiums on
additional term life insurance, and cash payments, including tax
liabilities, to compensate each officer for the reduction in the
Company's Salaried Pension Plan contribution for 1997 due to certain
Internal Revenue Service regulations, as follows: W. T. ZurSchmiede, Jr.,
$14,857 (term insurance); Thomas ZurSchmiede, $3,090 (term insurance) and
$27,087 (pension reduction and related tax-liability compensation);
Robert F. ZurSchmiede, $2,067 and $19,824; J. M. O'Brien, $2,581 and
$26,307; Jeffrey M. Harness, $1,450 and $11,973.
8
Comparative Performance Graph
The graph below compares the cumulative total shareholder return on the
common stock of the Company for the last five fiscal years with the
cumulative total return on the S&P 500 Index and a Peer Group over the same
period (assuming initial investment of $100 in the Company's common stock,
the S&P 500 Index and the Peer Group, and reinvestment of all dividends).
COMPARISON OF 5 YEAR TOTAL RETURN
FEDERAL SCREW WORKS, S&P 500 INDEX & A PEER GROUP
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Federal Screw Works ................................. $100 $118 $135 $186 $228 $429
S&P 500 Index ....................................... $100 $113 $115 $145 $183 $246
Peer Group .......................................... $100 $105 $105 $111 $173 $243
<FN>
(1) The Peer Group for the graph shown above includes Chicago Rivet & Machine
Co., Penn Engineering & Manufacturing Corp., SPS Technologies, SPX Corp.,
Simpson Industries, Inc., Park Ohio Industries, Inc., and Hastings Mfg.
Co.
In determining the Peer Group, the Company selected primarily automotive
suppliers, companies which may be considered generally comparable in size
or larger, with similar labor markets, are direct or partial competitors
to the Company, are primarily metal working companies, and have a steady
record of earnings. The index is weighted based upon the beginning of
period market capitalization values.
9
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of September 2, 1997, information
with respect to beneficial ownership of the Company's common shares by any
shareholder known to the Company to beneficially own 5% or more of the
Company's outstanding common shares.
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------- ----------------------- --------
Dimensional Fund Advisors Inc. (1) 73,500 6.76%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
FMR Corp. (2) 108,800 10.01%
82 Devonshire Street
Boston, Massachusetts 02109-3614
Robert F. ZurSchmiede (3) 81,664 7.5 %
Hugh G. Harness (3) 105,522 9.7 %
W.T. ZurSchmiede, Jr. (3) 132,726 12.2 %
Thomas ZurSchmiede (3) 70,078 6.4 %
<FN>
- ----------------
(1) On September 3, 1997, the Company received confirmation of their holding
as of September 2, 1997 from Dimensional Fund Advisors Inc.
(2) On September 5, 1997, the Company received confirmation of their holding
as of September 2, 1997 from FMR Corp.
(3) The Company's mailing address may be used. The Nature of Beneficial
Ownership is set forth under Security Ownership of Management.
10
Security Ownership of Management
The following table sets forth the number of shares of the Company's
common stock beneficially owned as of September 2, 1997 by each director, each
officer named in the Summary Compensation Table, and all directors and
executive officers as a group.
Amount and Nature
of Beneficial Ownership Percent
as of September 2, 1997 of Class
----------------------- --------
Directors and Executive Officers who are Directors:
less
than
Dr. Thomas W. Butler, Jr. ......................... 1,000 1%
Hugh G. Harness ................................... 105,522(1) 9.7%
less
than
F. D. Tennent ..................................... 1,000 1%
W. T. ZurSchmiede, Jr. ............................ 132,726(2) 12.2%
Thomas ZurSchmiede ................................ 70,078(3) 6.4%
Robert F. ZurSchmiede ............................. 81,664(4) 7.5%
Executive Officers who are not Directors:
J. M. O'Brien ..................................... 28,200 2.6%
Vice President-Sales and Marketing since 1986;
Vice President- General Sales Manager, 1984 to
1986; General Sales Manager, 1982 to 1984;
Sabbatical at Stanford University Business
School, 1981 to 1982; Sales Representative, 1975
to 1981.
Jeffrey M. Harness ................................ 29,558 2.7%
Vice President and General Manager-Chelsea
Division and Brighton Division since 1994; Vice
President and General Manager-Chelsea Division,
1992 to 1994; General Manager-Chelsea Division,
1985 to 1992; Sales Manager-Chelsea Division,
1984 to 1985; Sales Representative, 1982 to 1984;
Management Trainee, 1981 to 1982; Chelsea
Division Junior Buyer, 1980 to 1981.
All Directors and Officers of the Company as a group. 438,348 40.3%
<FN>
- ----------------
(1) Includes 29,628 shares as to which Mr. Harness has sole voting and
investment power. Also includes 41,876 shares owned by Mr. Harness' wife,
22,118 shares owned by his children and 1,000 shares owned by his mother,
the beneficial ownership of which may be attributable to Mr. Harness and
6,600 shares owned by the W. T. ZurSchmiede, Sr. Foundation of which Mr.
and Mrs. Harness and Mr. ZurSchmiede, Jr. comprise the three Trustees. Mr.
Harness disclaims beneficial ownership of all but 29,628 shares owned by
him and 4,300 shares owned jointly with Mrs. Harness. 6,600 of the shares
attributed to Mr. Harness are also attributed to Mr. ZurSchmiede, Jr., who
shares the related voting and investment power. Mr. Harness is Mr.
ZurSchmiede, Jr.'s brother-in-law. The elimination of duplicate holdings
reduces the percent of class to 9.1%.
(2) Includes 11,750 shares as to which Mr. ZurSchmiede has sole voting and
investment power. Also includes 114,376 shares owned by Mr. ZurSchmiede's
daughters and their spouses, individually and as custodian for
grandchildren, and 6,600 shares owned by the W. T. ZurSchmiede, Sr.
Foundation, of which he is a Trustee, the beneficial ownership of all of
which may be attributable to Mr. ZurSchmiede. Mr. ZurSchmiede disclaims
beneficial ownership of all but 11,750 shares owned by him. 6,600 of the
shares attributed to Mr. ZurSchmiede are also attributed to Mr. Harness,
who shares the related voting and investment power. The elimination of
duplicate holdings reduces the percent of class to 11.6%.
11
(3) Includes 65,278 shares as to which Mr. ZurSchmiede has sole voting and
investment power. Also includes 4,800 shares held as co-trustee for a
niece and nephews which shares are also attributable to Robert F.
ZurSchmiede, who shares the related voting and investment powers. Mr.
ZurSchmiede disclaims beneficial ownership of all but 65,278 shares owned
by him. Mr. ZurSchmiede is a son of W. T. ZurSchmiede, Jr. The
elimination of duplicate holdings reduces the percentage of class to 6%.
(4) Includes 76,864 shares as to which Mr. ZurSchmiede has sole voting and
investment power. Also includes 4,800 shares held as co-trustee for a
niece and nephews which shares are also attributable to Thomas
ZurSchmiede, who shares the related voting and investment powers. Also
includes 27,300 shares for which Mr. ZurSchmiede is custodian for his
children, the beneficial ownership of which may be attributable to Mr.
ZurSchmiede. Mr. ZurSchmiede disclaims beneficial ownership of all but
49,564 shares owned by him. Mr. ZurSchmiede is a son of W. T.
ZurSchmiede, Jr. The elimination of duplicate holdings reduces the
percentage of class to 7%.
Certain Relationships and Related Transactions
Mr. Hugh G. Harness took early retirement as President and C.O.O. of the
Company effective February 1, 1994. Mr. Harness agreed to perform consulting
services for the Company for eight years with compensation for those services
commencing in 1994 at $130,200 with annual reductions of $5,000 a year to
$95,200 in 2001. Mr. Harness' retirement supplement reported in previous
Proxy Statements as in the monthly amount of $3,333, was increased to $4,000,
payable for 120 months, commencing at his retirement. Mr. Harness'
participation in the Cash Bonus Plan, reported in prior Proxy Statements, was
terminated. Restricted shares of Company stock unvested as of June 30, 1997
in the number of 1,400 shares valued at $65,800 will continue to vest in
accordance with the vesting schedules provided for in the grants.
Restricted Stock Bonus Plans
The Board of Directors adopted a Restricted Stock Bonus Plan in 1979,
and an Employee Restricted Stock Bonus Plan in 1983, for allocation of
restricted shares of the Company's common stock to officers and other
employees of the Company in recognition of their past contributions, and to
encourage their future contributions, to the profitability of the Company.
Allocations of restricted shares to individual employees are recommended to
the Board by the Restricted Stock Bonus Committee, taking into consideration
evaluations by management. Among the factors considered by the Committee are
improvement in earnings, the Company's performance in relation to others in
its field of business, the results of the particular Division of the Company
in which an individual is employed, the performance of individual employees
and such other factors as the Committee may deem relevant. The Plan is
administered by the Restricted Stock Bonus Committee of the Board, none of
the members of which are employees of the Company or eligible to receive such
awards. No bonus shares were awarded during fiscal 1997. See further note 3
to the Summary Compensation Table, page 7.
Retirement Supplement
W. T. ZurSchmiede, Jr. in 1986 entered into an agreement with the
Company pursuant to which he has earned out supplemental retirement benefits
for 120 months after retirement by remaining in the Company's employ until
age 65. The Company may terminate such payments if, at any time, the employee
shall fail or refuse to provide advice and counsel to the Company when
reasonably requested to do so. The monthly supplement provided for Mr.
ZurSchmiede, Jr. is $4,166, the monthly disability is $3,332 and the death
benefit is $333,000. Mr. ZurSchmiede Jr.'s supplement is fully funded by
charges to operations in prior years.
Salaried Pension Plan
The Company maintains a Salaried Pension Plan, which covers all salaried
employees. The remuneration covered by the Plan is salary only. The
approximate years of credited service for the officers named in the Summary
Compensation Table are: W. T. ZurSchmiede, Jr., 30, Robert F. ZurSchmiede,
19, Thomas ZurSchmiede, 16; J. M. O'Brien, 22; Jeffrey M. Harness, 17. The
maximum salary taken into account in calculating plan benefits is limited to
$55,000, in order to comply with requirements of the Internal Revenue Code.
Company contributions are computed on an actuarial basis which provides for
fixed benefits in the
12
event of retirement at a specific age or after a specified number of years of
service. Contributions by the Company are, therefore, made to the Plan in the
aggregate and the amount of the contribution, payment, or accrual in respect
of a specified person is not and cannot readily be separately or individually
calculated by the regular actuaries for the Plan. The following table
illustrates representative retirement benefits at the maximum levels for
various service periods for employees under the Plan.
Average Salary During
The Final
Ten Years Annual Normal Retirement Benefits
of Service For Years of Credited Service Indicated(1)
- ---------- ------------------------------------------
15 20 25 30
-- -- -- --
$55,000............. $15,675 $20,900 $26,125 $26,125
<FN>
- ----------------
(1) Payable on a Life and 10 Year Certain basis. Life Only Option is not
available under the Plan. For married participants, however, the form of
benefit payment is the qualified 50% or 100% Joint and Survivor Annuity,
unless another form is elected. Benefits are increased actuarially for
late retirement. The benefit amounts set forth are not subject to any
reduction for Social Security benefits.
The amount payable to Plan participants may not be less than their June
30, 1995 accrued benefit. The estimated annual accrued benefits effective
as of June 30, 1995 are: Jeffrey M. Harness, $15,576; J. M. O'Brien,
$26,244; Robert ZurSchmiede, $22,800; Thomas ZurSchmiede, $21,492. W. T.
ZurSchmiede, Jr. elected to receive his plan benefit in a single lump sum
payment on July 1, 1995.
401K Savings Plan
The Company adopted, effective September 1, 1993, a 401(k) tax deferred
savings plan. This plan is available to all eligible employees, including
employees who are participants in the plan in accordance with their union
contract. The plan is non-contributory, that is, the Company does not match
any portion of the employees' contributions. The Company does, however, bear
the costs of administering the plan, which are expected to be about $12,500
per year. Employees may contribute up to 20% of their annual compensation,
but not more than the maximum amount permitted under the Internal Revenue
Code. Comerica Bank is the Trustee of the plan. Contributions are invested in
one or more of eight mutual funds, expanded to eighteen funds as of October
1, 1997, administered by Comerica Bank, as selected by each employee.
Relationship with Independent Public Accountants
The Board of Directors has reappointed Ernst & Young as independent
accountants to audit the financial statements of the Company for the current
fiscal year. One or more members of the firm of Ernst & Young are expected to
be present at the Annual Meeting of Shareholders, will be available to
respond to appropriate questions, and will be afforded the opportunity to
make a statement.
Compliance With Section 16(a) of the Exchange Act
Under Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors and its executive officers and persons who own more than
ten percent of the Company's equity securities are required to report
ownership of the Company's common stock and any changes in that ownership to
the Securities and Exchange Commission and to furnish to the Company copies
of all Section 16(a) forms they file. Based solely on review of the copies of
such forms furnished to the Company, and written representations of its
directors and executive officers, the Company believes that during the fiscal
year ended June 30, 1997 those filing requirements were met.
Concerning Other Matters Which May Come Before the Meeting
At the meeting, reports will be received from the Officers of the
Company relative to the operation, management and conduct of the Company
during the fiscal year ended June 30, 1997, but it is not contemplated that
there will be any vote in respect of any of said matters. Management is not
aware of any other matters to be presented for action at the meeting.
However, should any other matters requiring the vote of the Shareholders
arise, the persons named in the enclosed form of Proxy will vote such Proxy
according to their best judgment.
13
Proposals for 1998 Annual Meeting
Shareholder proposals pursuant to Rule 14(a-8) promulgated under the
Securities Exchange Act of 1934 must be received by the Company no later than
May 31, 1998 in order to be included in the Company's Proxy Statement and
Form of Proxy for that meeting. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating
to shareholders' proposals.
Concerning Expenses of Proxies Solicitation
The cost of soliciting Proxies will be borne by the Company. Proxies may
be solicited by mail, telegraph or telex, or by directors, officers and
regular employees of the Company in person or by telephone. The Company has
retained the services of Corporate Investor Communications, Inc. to assist in
the distribution of Proxy materials and to solicit Proxies from the banks,
brokers and nominees at a cost not to exceed $4,500 plus reasonable
out-of-pocket expenses. The Company will also reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding the Proxy Statement and the Annual Report to the
beneficial owners of common stock of the Company.
It is important that Proxies be returned promptly to assure that a
quorum of the Company's shares be represented at the Annual Meeting.
Shareholders whodo not expect to attend the meeting in person are urged to
execute and return, without delay, the enclosed form of Proxy in the
enclosed, stamped envelope.
By Order of the Board of
Directors
W. T. ZurSchmiede, Jr., Secretary
Detroit, Michigan
September 26, 1997
P.S. Although not a part of the Proxy soliciting material, a copy of the
Company's Annual Report for the fiscal year ended June 30, 1997 is
enclosed herewith.
14
[ Form of Proxy -- Front ]
FEDERAL SCREW WORKS
The undersigned hereby constitutes and appoints W.T. ZurSchmiede, Jr. and
F.D. Tennent or either of them, attorneys and proxies with full power of
substitution to vote at the Annual Meeting of Shareholders of Federal Screw
Works, to be held on Thursday, October 23, 1997, or at any adjournments
thereof.
The shares represented by this proxy will be voted as directed. Unless
authority is withheld, this proxy will be voted to elect as directors the
nominees shown.
Discretionary authority is hereby conferred as to any other matters as may
properly come before the meeting. The undersigned acknowledges receipt of the
Notice of Annual Meeting of Shareholders, the Proxy Statement dated September
26, 1997 and the Annual Report of Federal Screw Works to its shareholders for
the year ended June 30, 1997. The undersigned ratifies all that the proxies
or any of them or their substitutes may lawfully do or cause to be done by
virtue hereof and revokes all former proxies.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears on the books of the Company. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be
that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED?
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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[ Form of Proxy -- Back ]
/ X / PLEASE MARK VOTES
AS IN THIS EXAMPLE
For All With- For All
Nominees hold Except 2. To act in their discretion upon the transaction of
1. Election of Directors: / / / / / / such other business as may properly come before the
meeting.
Hugh G. Harness
Thomas ZurSchmiede
NOTE: If you do not wish your shares voted "For" a FEDERAL SCREW WORKS
particular nominee, mark the "For All Except" box
and strike a line through the nominee. Your
shares will be voted for the remaining Nominee.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date ____________ Mark box at right if address change has been noted
on the reverse side of this card. / /
Shareholder sign here ____________ Co-owner sign here _________
DETACH CARD DETACH CARD