SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 [Amendment No. ]
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or Rule 14a-12
TECHNITROL, INC.
- ---------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
TECHNITROL, INC.
- ---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
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2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11: (Footnote-1)
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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:
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
TECHNITROL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1996
The Annual Meeting of the Shareholders of Technitrol, Inc. (hereinafter
called the "Company"), will be held in the Clover Room, Hotel Atop The
Bellevue, Broad and Walnut Streets, Philadelphia, Pennsylvania, on Wednesday,
May 22, 1996, at 4:30 P.M., Eastern Daylight Saving Time, for the following
purposes:
(1) to nominate and elect three directors for a term of three years and
until their successors are elected and qualified:
(2) to consider and act upon the selection of KPMG Peat Marwick LLP as
the Company's independent public accountants for the year ending December 31,
1996; and
(3) to transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on March 8, 1996,
will be entitled to vote at the meeting.
By Order of the Board of Directors
Robert J. Citrino
Secretary
Philadelphia, Pennsylvania
April 15, 1996
SHAREHOLDERS ARE REQUESTED TO MARK, SIGN AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE ENVELOPE PROVIDED
TECHNITROL, INC.
1210 Northbrook Drive
Suite 385
Trevose, PA 19053
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, MAY 22, 1996
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Technitrol, Inc. (hereinafter called the
"Company") to be used in voting at the Annual Meeting of the Shareholders of
the Company to be held in the Clover Room, Hotel Atop The Bellevue, Broad and
Walnut Streets, Philadelphia, Pennsylvania, on May 22, 1996, at 4:30 P.M.,
Eastern Daylight Saving Time, or at any adjournment or adjournments thereof.
This Proxy Statement, the proxy and a copy of the Annual Report, including
Consolidated Balance Sheets for the years ended December 31, 1995 and 1994
and Consolidated Statements of Earnings and Retained Earnings of the Company
for the years ended December 31, 1995, 1994 and 1993, have been mailed to
each shareholder of record at the close of business on March 8, 1996, on or
before April 15, 1996. The Company's telephone number is 215-355-2900.
You are requested to mark, sign and complete the accompanying proxy and
return it in the envelope provided.
Proxies in such form, if duly signed and received in time for the
voting, will be voted in accordance with the directions of the shareholders.
The persons designated as proxies shall have the discretionary authority to
vote cumulatively for the election of Directors and distribute such votes
among the nominees standing for election (except as otherwise instructed by a
shareholder in the accompanying proxy) to assure the election of the nominees
of the Board of Directors. The giving of a proxy does not preclude the right
to vote in person should the person so desire and, as provided by the laws of
Pennsylvania, one may revoke the proxy by giving notice to the Secretary of
the Company in writing or in open meeting, but such revocation shall not
affect any vote previously taken.
The expense of soliciting proxies for the Annual Meeting, including the
cost of preparing, assembling and mailing the notice, proxy and Proxy
Statement, will be paid by the Company. The solicitation will be made by the
use of the mails, through brokers and banking institutions, and by officers
and regular employees of the Company. Proxies may be solicited by personal
interview, mail, telephone or telegraph.
Each holder of Common Stock of record at the close of business on March
8, 1996, is entitled to one vote per share so held on all matters that come
before the Annual Meeting except in the election for directors which shall be
by cumulative voting. In the election of directors, if a shareholder entitled
to vote wishes to exercise cumulative voting rights, he shall so indicate his
intention to the Chairman of the Annual Meeting prior to voting, multiply the
number of votes to which he may be entitled by the total number of directors
to be elected in the election and cast the whole number of such votes among
one or more candidates in such proportion as he desires. The candidates
receiving the highest number of votes, up to the number of directors to be
elected in the election, shall then be elected.
At the close of business on March 8, 1996, there were outstanding and
entitled to vote at the Annual Meeting 7,932,622 shares of Common Stock, the
only class of stock outstanding and entitled to vote at the Annual Meeting.
Proposal No. 1--Election of Directors
The Board of Directors is divided into three classes. The Directors in
Class II, Messrs. John E. Burrows, James M. Papada, III and James J.
Rafferty, Jr. are presently serving terms expiring in 1997. The Directors in
Class III, Messrs. Stanley E. Basara, Roy E. Hock and Edward M. Mazze are
presently serving terms expiring in 1998. The Directors in Class I, Messrs.
Thomas J. Flakoll, J. Barton Harrison and Graham Humes, are the Board of
Directors' nominees for election at this meeting and will, if elected, serve
terms expiring in 1999. These nominees were recommended to the Board of
Directors by the Nominating Committee on March 20, 1996.
Votes pursuant to the accompanying proxy will be cast equally, unless
otherwise indicated on the proxy, for the election of Messrs. Flakoll,
Harrison and Humes, provided that, as set forth above, the persons designated
as proxies shall have the discretionary authority to cumulate their votes.
However, each shareholder is allowed to vote his shares cumulatively in the
manner previously described and may indicate such intention on the enclosed
proxy. The three nominees are presently Directors of the Company. It is not
contemplated that any of Messrs. Flakoll, Harrison or Humes will be unable or
unwilling to serve as a Director, but should that occur, the Board of
Directors reserves the right to nominate another person in place of any one.
SECURITY OWNERSHIP OF CERTAIN PRINCIPAL OWNERS AND MANAGEMENT
Principal Owners
The following table sets forth as of December 31, 1995, the beneficial
ownership of those person known by the Company to be the beneficial owners of
more than 5% of the Company's outstanding Common Stock, the only class
authorized:
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
------------------------- -------------------- --------
Gordon Palmer, Jr. 996,300 (1) 12.71%
7147 Sabino Vista Circle Direct
Tucson, AZ 85750
Tinicum Investors Group 515,500 (2) 6.58%
990 Stewart Avenue Direct
Garden City, NY 11530
- -----------
(1) Mr. Palmer is one of the founders of the Company. For many years he was
an officer of the Company and served as a Director from 1947 until July
31, 1991. He has been retired since 1977.
(2) Group consists of Tinicum Investors which owns 337,185 shares
("Investors"), James H. Kasschau, an officer and director of Investors,
who owns 40,000 shares, and RIT Capital Partners plc, which owns 138,315
shares ("RIT"). With respect to said shares, RIT shares voting and
dispositive powers with J. Rothschild Capital Management Ltd.
("Capital"). Investors and Mr. Kasschau have the same address and RIT and
Capital are located at 15 St. James's Place, London SW1A INW, England.
Management
The following table sets forth as of March 8, 1996, the beneficial
ownership of the Company's Common Stock by all Directors and nominees, and
the Directors and officers of the Company as a group:
Amount and Nature of Percent
Name Beneficial Ownership of Class
- ------------------------------- -------------------- --------
J. Barton Harrison............. 83,270 Direct 1.05
Roy E. Hock.................... 273,095 Direct 3.44
James M. Papada, III........... 4,300 Direct .05
James J. Rafferty, Jr. ........ 54,540 Direct .69
Thomas J. Flakoll.............. 47,187 Direct .59
Edward M. Mazze................ 1,900 Direct .02
Graham Humes................... 21,000 Direct .26
Stanley E. Basara.............. 1,500 Direct .02
John E. Burrows, Jr. .......... 900 Direct .01
Directors and Officers as a
group (14 people)........... 512,189 6.46
DIRECTORS AND EXECUTIVE OFFICERS
Identification and Business Experience
The following table sets forth certain information with regard to each
person nominated for election or reelection to the Board (Messrs. Flakoll,
Harrison and Humes), each Director whose term will continue after the Annual
Meeting (Messrs. Basara, Burrows, Hock, Mazze, Papada and Rafferty) and the
executive officers of the Company.
Name Age Position
- -------------------------- ---- --------------------------------------
James M. Papada, III...... 47 Chairman of the Board
Thomas J. Flakoll......... 51 Chief Executive Officer and President
James J. Rafferty, Jr. ... 58 Vice President and Director
John L. Kowalski.......... 52 Vice President
Michael J. Kirchoff....... 51 Group Vice President
Albert Thorp, III......... 41 Vice President of Finance and Treasurer
Robert J. Citrino......... 63 Secretary
Drew A. Moyer............. 31 Corporate Controller
J. Barton Harrison........ 66 Director
Edward M. Mazze........... 55 Director
Graham Humes.............. 63 Director
Stanley E. Basara......... 62 Director
John E. Burrows, Jr. ..... 48 Director
Roy E. Hock............... 66 Director
There is no family relationship between any officers and/or Directors nor
are there any arrangements or understandings among any officers and/or
Directors and any other person(s) pursuant to which any such officer and/or
Director was or is to be selected as such.
Mr. Hock has been a Director since 1967 and was elected Chief
Executive Officer in 1976, a position which he held until September 30,
1995. He held the office of President from 1973 through November 1985 and
from July 1987 to March 1994. Mr. Hock was Chairman of the Board of
Directors from May 21, 1976 until December 31, 1995.
Mr. Papada was President and Chief Operating Officer of Hordis
Brothers, Inc., a privately-held glass fabricator from February 1983 until
December 1987. Commencing December 1987, Mr. Papada became a partner in the
law firm of Stradley, Ronon, Stevens & Young LLP, where he had been a
partner prior to his joining Hordis. Stradley, Ronon, Stevens & Young LLP
is counsel to the Company. Mr. Papada is also a Director of Para-Chem
Southern, Inc. and has been a Director of the Company since 1983. Mr.
Papada was elected Chairman of the Board of the Company effective
January 1, 1996.
Mr. Flakoll has been a Director since 1984. He was elected President
in March 1994 and Chief Executive Officer in October 1995. He had
previously served as Vice President from March 1985 until March 1994. He
was General Manager of the Components Division from May 1980 until April
1990. Prior to joining the Company, Mr. Flakoll held positions with the
Fermont Division of Dynamics Corporation of America as Director of
Operations and as Director of Engineering and with Bowmar Instrument
Corporation as Director of Manufacturing and Director of Engineering.
Mr. Rafferty has held the office of President of Advanced Metallurgy
from 1976 through 1985 and from July 1987 to the present time. He was
appointed Vice President and Director of Technitrol in 1984, President in
1985, and Vice President in 1987. Previously, Mr. Rafferty held positions
with Dietrich Industries, Blairsville Division, as Division Manager, and
with National Aluminum Products as Vice President of Production.
Mr. Kirchoff was elected Group Vice President in January of 1995.
Previously, he was employed by Victoreen, Inc. from 1986 to 1993, serving
as President and Chief Executive Officer since 1988. Prior to that, he was
employed in various capacities by EG&G Ortec, Inc. from 1972 to 1986,
including General Manager, Materials Analysis Division from 1981 to 1985
and then Vice President, Marketing and Sales, to 1986.
Mr. Kowalski was elected a Vice President in September 1995. He is in
charge of the Electronic Components Segment and also holds the position of
President of Pulse Engineering, Inc. Mr. Kowalski has held the position of
President of the Fil-Mag Group since January 1994 and General Manager of
the Components Division from April 1990 to October 1995. Prior to his
employment at Technitrol, he held various engineering positions at
Honeywell, General Electric and Varian.
Mr. Thorp was elected to the offices of Vice President of Finance and
Treasurer in May 1995. Mr. Thorp joined the Company in August 1989 and was
elected Corporate Controller in September 1989. From February 1986 until
August 1989, he was Controller of the Medical Packaging Division of PM
Company. Prior to that, he was Plant Controller for Centacor, Inc. from
November 1984 until February 1986. Mr. Thorp is a Certified Public
Accountant.
Mr. Citrino served in the capacity of Controller for over ten years
and has been employed by the Company since 1967. He served as Treasurer
from March 1983 to May 1995. He currently serves as Secretary.
Mr. Moyer joined the Company in October 1989 and was elected Corporate
Controller in May 1995. Prior to his election as Corporate Controller, he
served as the Company's Corporate Accountant and Internal Auditor. Mr.
Moyer was employed by Ernst & Young LLP from 1986 to 1989 and is a
Certified Public Accountant.
Mr. Harrison has been a Director since 1966 and served as Secretary
from 1975 to 1977 and from February 1983 to May 1995. He was President of
Extracorporeal, Inc., a manufacturer of medical devices, from October 1977
until October 1982 and currently is a Director of Steel Plant Equipment
Corporation.
Dr. Mazze was elected a Director of the Company in November 1985. In
July 1993, Dr. Mazze was appointed Dean, The Belk College of Business
Administration, The University of North Carolina at Charlotte and Professor
of Marketing. Prior to that, he was Professor of Marketing and
International Business at Temple University and was formerly the Dean of
the School of Business and Management at Temple. From 1975 to 1979, he was
Dean of the W. Paul Stillman School of Business at Seton Hall University.
Dr. Mazze also serves as a management and marketing consultant. He is a
Trustee of Delaware Valley College of Science and Agriculture.
Mr. Humes was elected a Director of the Company in November 1986,
effective February 1987. He is currently a principal of Compass Capital
Advisors, Inc. He was General Director (CEO) of CARESBAC-St. Petersburg, in
St. Petersburg, Russian Federation, from June 1993 to May 1995. He was a
Senior Vice President and a Director of Legg Mason Wood Walker, Inc. from
March 1987 through June 1993. From 1974 through February 1987, he was a
Senior Vice President of Mellon Bank (East), N.A. and Manager of the
Corporate Finance Group. He is a Director of Brunschwig & Fils, Inc. and a
Director of Big Sky Foods, Inc., in St. Petersburg, Russia.
Mr. Basara was elected as a Director of the Company in September 1993.
Mr. Basara was President and Chief Operating Officer of Panasonic
Broadcasting Systems Company from 1987 to 1995. From June 1982 through
1986, he was President of Thompson-CSF, Inc. From 1956 to 1981, he was
employed by RCA Corporation, his last position being Division Vice
President and General Manager of RCA's Broadcast Systems Division.
Mr. Burrows was elected a Director of the Company in May 1994.
Currently, he is the President and Chief Executive Officer of SPI Polyols,
a global producer of specialty chemicals for the food, pharmaceutical and
personal care industries. Prior to joining SPI, he was Vice President-North
America of Quaker Chemical Corporation. From 1973 until his appointment at
Quaker Chemical Corporation in March 1990, he held various management
positions at FMC Corporation, the most recent being Division Manager,
Marine Colloids, a biotech and food specialty chemical operation with sales
in 75 countries and plants in Europe, the U.S. and the Philippines.
Committees
The Board of Directors of the Company has an Audit Committee, an
Executive Compensation Committee and a Nominating Committee, the members of
which are non-employee Directors. The current members of such Committees
are: Audit -- Messrs. Burrows, Humes and Mazze; Executive Compensation --
Messrs. Basara, Harrison and Mazze; Nominating Committee -- Messrs. Basara,
Harrison, and Hock. During the year ended December 31, 1995, the Board held
six regular and three special meetings. The Audit and Executive
Compensation Committees held three and four meetings, respectively. The
Nominating Committee held no meetings. No director attended fewer than 75%
of the aggregate of Board meetings and Committee meetings of which such
Director was a member.
The function of the Executive Compensation Committee is to review and
recommend to the Board the broad plan of key executive compensation, and
implementation thereof, to review the performance and corporate objectives
of the Chief Executive Officer and Chief Operating Officer, to review the
Company's pension plan and investment performance thereof and to undertake
special assignments as made by the Board.
The main function of the Audit Committee is to assist the Board in
fulfilling its fiduciary responsibilities relating to corporate accounting
and reporting practices, including recommendation of the firm to be
employed as independent auditors, consultation with the independent auditor
regarding the plan, scope and cost of the audit and non-audit functions, if
any; consultation and review with the independent auditor of its report
(including accounting practices and principles, adjustments and required
disclosure) and management letter; periodic consultation (outside of
management's presence) with the independent auditor regarding the adequacy
of internal controls; review of internal audit reports and review of the
total insurance program for adequacy.
The Board of Directors established a Nominating Committee at its
meeting on November 20, 1995. The functions of this Committee include the
review and recommendation of individuals for election as Directors of the
Company and the review of criteria for selecting Directors. In carrying out
its responsibilities for recommending candidates to fill vacancies on the
Board and in recommending a slate of Directors for election by the
shareholders at the Annual Meeting, the Committee will not consider
nominees recommended by security holders. Security holders may nominate
persons to serve as Directors at the Company's Annual Meeting.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth information about the compensation of
the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company for services in all
capacities to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Annual Long-Term Compensation All Other
Compensation (1) Restricted Stock Plan Awards Compensation (3)
------------------------ ---------------------------- ----------------
Fiscal
Name and Principal Position Year Salary Bonus Shares (2) Value
- --------------------------- ------ -------- -------- ---------- -------
Roy E. Hock 1995 $230,000 $125,000 -- $ -- $92,817
Chairman of the Board 1994 207,000 100,000 1,830 27,221 37,033
1993 187,000 58,000 2,700 31,500 15,524
Thomas J. Flakoll, Chief 1995(4) 190,000 100,000 1,690 44,151 49,782
Executive Officer and 1994 161,800 87,000 1,680 24,990 37,574
President 1993 141,000 47,000 2,070 24,150 23,634
James J. Rafferty, Jr. 1995 161,000 42,000 830 21,684 34,913
Vice President 1994 150,000 70,000 1,440 21,420 9,772
1993 143,000 47,000 2,400 28,000 22,199
John L. Kowalski 1995(4) 155,000 90,000 1,380 36,053 2,970
Vice President 1994 125,000 76,000 1,740 25,883 3,051
1993 108,500 40,000 1,500 17,500 2,804
Michael J. Kirchoff 1995 145,080 63,000 1,010 26,386 2,048
Group Vice President
(Hired 1/2/95)
(1) None of the five officers received other annual compensation exceeding
the lesser of $50,000 or 10% of salary and bonus during the years 1993,
1994 and 1995.
(2) At December 31, 1995, the aggregate shares held under the Restricted
Stock Plans and value thereof was as follows:
Shares Value
------ --------
Mr. Hock.................. 6,030 $137,183
Mr. Flakoll............... 5,850 133,088
Mr. Rafferty.............. 9,240 210,210
Mr. Kowalski.............. 8,920 202,930
Mr. Kirchoff.............. -- --
Dividends are paid on shares held under the Restricted Stock Plans.
Shares in 1993 are adjusted to reflect the 200% stock dividend
effective September 18, 1994. See footnote 3 concerning Mr. Hock's
shares.
(3) Includes cash received upon vesting of Restricted Stock Plan awards
previously granted, Company's contribution under the 401(k) Retirement
Savings Plan, and term life insurance premiums paid. For the year 1995,
the aggregate sums reported above are specifically identified as
follows:
Cash under
Restricted Stock Plans 401(k) Plan Term Life Insurance
---------------- ------------ ------------------------
Mr. Hock....... $89,327 $2,250 $240
Mr. Flakoll.... 46,812 2,250 720
Mr. Rafferty... 32,183 2,250 480
Mr. Kowalski... -- 2,250 720
Mr. Kirchoff... -- 1,088 960
All of Mr. Hock's shares vested on December 31, 1995 upon his
retirement and, in connection therewith, he received a cash award of
$89,327.
(4) Effective October 1, 1995, Mr. Flakoll's salary was increased to
$220,000 and Mr. Kowalski's salary was increased to $185,000.
Retirement Plan
The Company maintains a defined benefit pension plan which provides
retirement benefits to employees of the Company and its subsidiaries who
are not covered by a collectively bargained agreement providing retirement
benefits from other plans. The Company makes contributions annually to the
plan based upon the annual salary (excluding bonuses) of each participant
and certain actuarial calculations. The following table sets forth as to
the Company's defined benefit pension plan the annual benefits payable upon
retirement to persons with specified final average salaries and years of
credited service classification. The information assumes that the person
retires at age 65 or older and selects a single life annuity payment:
Years of Credited Service
--------------------------------------------
Final Average Salary 10 Years 20 Years 30 Years 40 Years
-------------------- -------- -------- -------- --------
$ 50,000 ........... $ 6,000 $12,000 $18,000 $18,000
100,000 ............ 13,700 27,500 41,200 41,200
150,000 ............ 21,400 42,900 64,300 64,300
The officers named above and their respective years of credited
service are as follows:
Officers Years of Credited Service
------------------- -------------------------
Mr. Hock .......... 36
Mr. Flakoll ....... 15
Mr. Rafferty ...... 20
Mr. Kowalski ...... 5
Mr. Kirchoff ...... 1
Their annual salaries covered by the plan during the year ended
December 31, 1995, did not exceed $150,000 each, the maximum allowable
amount for qualified pension plans in 1995.
Under federal law, an employee's benefits under a qualified pension
plan, such as the Company's pension plan outlined above, are limited to
certain maximum amounts. Effective January 1, 1994, the Company adopted a
supplemental retirement plan which supplements, on an unfunded basis, the
benefits of any participant in the qualified pension plan in an amount by
which any participant's benefits are limited by law. The amount of the
annual salaries of Messrs. Hock, Flakoll, Rafferty and Kowalski covered by
this supplemental plan during the year ended December 31, 1995, were
$80,000, $40,000, $11,000 and $5,000, respectively.
Restricted Stock
In 1981, the Board of Directors and the Shareholders of the Company
approved the adoption of an Incentive Compensation Plan. The plan provides
that the Committee administering the plan (the "Committee") has the
authority and flexibility to develop and implement forms of incentive
compensation for executive employees and key employees of each of the
operating divisions and subsidiaries of the Company.
Pursuant to the authority granted it under the plan, the Committee
adopted a Restricted Stock Plan (the "Restricted Plan I"), pursuant to
which shares of restricted stock may be awarded to executive employees, at
no cost to such employee. These shares may not be sold, pledged, or
otherwise disposed of until the restriction period set forth in Restricted
Plan I (the "Restricted Period") has ended. During the Restricted Period,
the executive must remain in the employ of the Company, except for normal
retirement, or early retirement with the Committee's permission. In the
event that the executive ceases to be an employee of the Company during the
Restricted Period, then ownership of the shares reverts to the Company.
At such times as the shares are issued to an executive pursuant to
Restricted Plan I, the Committee determines performance targets
(the"Performance Target"). The Performance Target must be achieved by the
executive, if at all (but subject to the provision set forth below), at any
time on or before the third anniversary of the date of the issuance of
shares under Restricted Plan I (the "Performance Date"). The Restricted
Period related to the shares issued to each executive from time to time
expires upon the earlier of the seventh anniversary of the issuance of such
shares or the Performance Date. Restricted Plan I also provides that the
Committee can determine, at the Performance Date, that a Performance Target
has been partially achieved and may then modify the number of shares as to
which the Restricted Period has ended. If the executive dies or becomes
totally disabled after shares have been issued to him or her, Restricted
Plan I provides in some instances for the early termination of the
Restricted Period, and allows, in other instances, for the early
termination of the Restricted Period at the discretion of the Committee.
In 1984, the Board of Directors adopted a second restricted stock plan
("Restricted Plan II") under the Incentive Compensation Plan. Restricted
Plan II is designed to enable the Company to obtain and retain the services
of qualified employees, and to reward and motivate them, by providing them
with the opportunity to acquire shares of the Company's Common Stock. Under
the Restricted Plan II, shares of restricted stock may be awarded not only
to executive employees, but also to key employees of each of the operating
divisions and subsidiaries of the Company.
Under Restricted Plan II, shares of Common Stock may be awarded to
eligible employees, from time to time, at no cost to such employees. The
shares may not be sold, pledged or otherwise disposed of until the
restricted period set forth in Restricted Plan II has ended. During the
restricted period (five years), the shares remain physically in the
possession of the Company. If the employee resigns or has employment
terminated by the Company for cause prior to the end of the restricted
period, the shares are returned to the Company. Upon death, total
disability or retirement on the normal retirement date prior to the
expiration of the restricted period, the restrictions will be released. If
an employee elects early retirement or had employment terminated other than
for cause, the employee shall be entitled to pro rata vesting, and the
Committee has the power to adjust the effective award.
Under both Restricted Plan I and Restricted Plan II (collectively, the
"Plans"), the executive at the Performance Date or the eligible employee
upon vesting of the shares awarded, receives as additional compensation, an
amount of cash equal to the lesser of (1) the amount (calculated at the
highest individual Federal income tax rate, including surcharge) necessary
to pay Federal income taxes on such shares and additional cash
compensation, and (2) 165% of the market value of the shares as of the date
of the initial award by the Committee, all calculated on the number of
shares for which the applicable restricted period has ended.
During 1995, the Committee issued an aggregate amount of 7,280 shares
of the Company's Common Stock to seven officers of the Company under Plan
II. During the year ended December 31, 1995, the Company expensed
$1,517,000 in the aggregate for all participants under the Plan.
The shareholders of the Company have previously authorized 600,000
shares for use under the Incentive Compensation Plan and the two Plans
described herein. As of December 31, 1995, 197,945 shares remain available
for future grant.
Compensation of Directors
Non-employee Directors are paid an annual retainer of $10,000 (except
for Committee Chairmen who are paid $12,000) plus $1,000 for each Board
Meeting attended and $750 for each Committee meeting attended. Under a
Deferred Compensation Plan for non-employee Directors, all or part of the
annual fees may be deferred at the election of the Directors.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION POLICIES
The Company's executive compensation program is administered by the
Executive Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of three outside directors. Upon
recommendation by the Committee, all issues pertaining to executive
compensation are submitted to the full Board of Directors for approval.
Compensation Philosophy: The purpose of the Company's executive
compensation program is to help the Company achieve its mission and goals
by attracting, motivating, and retaining key executives of high caliber and
good potential. Pay opportunities will be competitive for average
performance, and above average pay will be provided for superior
performance. Variable components of pay will be a significant element of
compensation and will be variable on the basis of performance. They are not
to be considered entitlements.
Components of Compensation: The executive compensation program
consists of base salary, discretionary cash bonuses and awards under the
Restricted Stock Plans. Base salary and potential bonus ranges are
established annually following comparison of the Company and each of its
operating units with surveys of other manufacturing companies of similar
size and complexity. Though utilizing several different surveys, the
Committee relies principally on The National Executive Compensation Survey
published annually by the Management Association of Illinois. In order to
achieve some balance between short term and long term business objectives
of the Company, the cash bonus is weighted two-thirds by performance
criteria relating to the current business year and one-third by criteria
relating to future business considerations. The weighting for stock awards
is reversed with the emphasis on longer term business development and
strategic plans.
Administration in 1995:
Salaries. In determining 1995 executive salaries, the Committee began
by considering the previously established salary ranges for each position
and each executive's relationship to the mid-point of his range in light of
his tenure with the Company and years in the current position. Next, it
noted the performance of each individual operating unit against its sales,
operating profit and return on employed capital projections and the
personal performance of each operating unit's senior executive relative to
stated goals and challenges which arose during the year. Finally, the
Committee noted the Company's strong performance in 1994 with net earnings
from operations increasing 106.9%, net earnings from operations per share
increasing 105.4% and return on shareholder's equity which increased to
17.2% in 1994. The Committee also noted that the 1994 total return (with
reinvestment of cash dividends) to its shareholders amounted to 38.6%. 1995
executive salary increases averaged 14%.
In considering the 1995 salary increase for Mr. Hock, then Chief
Executive Officer (CEO), the Committee considered the various factors set
forth above as well as the significantly improved profitability of the
Company, its enhanced prospects for future growth and his continued
outstanding leadership. It was noted that his 1995 salary only raised him
to the mid-point of the CEO Salary Range notwithstanding his thirty-five
years of service with the Company. Mr. Hock stepped down as CEO on
September 30, 1995, and Mr. Flakoll was elected CEO and his salary was
raised to $220,000 annually, effective October 1, 1995. In raising his
salary, the Committee took into consideration his fifteen years of service
with the Company, his new responsibilities as CEO as well as his
outstanding performance during the first nine months of 1995.
Cash Bonuses. The current business criteria, mentioned above, include
sales, profits, profits as a percentage of sales, return on employed
capital, cost reduction, quality, customer services and individual
performance. The future business criteria include new product/program
development, new market development, management succession/development,
acquisitions and similar items. The values assigned to each may vary
depending upon the business plans and strategic objectives of each
operating unit and were negotiated at the beginning of 1995. Achievement of
most of the criteria is measured by objective historical information and
numerical data, while some involve subjective judgments. The Committee
retains the prerogative to modify on a uniform basis the results obtained
in light of the Company's overall results and business conditions existing
at the time of its decision. As calculated under the executive compensation
program, 1995 executive cash bonuses totaled $1,441,000, or 41.1%, of 1995
aggregate executive salaries. The Committee noted the Company's outstanding
performance in 1995 with net earning from operations increasing 34.5%, net
earnings per share increasing 24.3% and return on shareholders equity which
increased to 20.4% in 1995. The Committee also noted that 1995 total return
(with reinvestment of cash dividends) to its shareholders amounted to
71.4%. In view of the foregoing factors, the Committee decided not to
exercise its prerogative to modify the cash bonuses as otherwise
calculated.
Stock Awards: Through the Company's Restricted Stock Plans, the
Committee has endeavored to motivate management through stock ownership.
For example, most of the named executive officers are significant
shareholders in the Company and are thus presumably motivated to act on
behalf of all shareholders to optimize overall Company performance. As
previously mentioned, the weighting of the performance criteria for stock
awards is based mostly on long term business development and plans. This is
appropriate since awards under Restricted Plan I vest in seven years, but
may vest in the third year if preset performance goals are attained. Awards
under Restricted Stock Plan II vest in five years. For purposes of the
Summary Compensation Table, awards are valued at the current market price
on the date of the grant.
For the year 1995, the Committee based its awards on the levels of
performance attained and elected to not exercise its prerogative to modify
the number of shares earned. The Committee believes it is in the best
interest of the Company's shareholders to encourage, promote and reward
sound long term business plans and strategies.
In evaluating Mr. Flakoll's bonus and stock award as CEO for 1995, the
Committee took into account: the Company's overall financial performance in
1995; the extent of the Company's progress in assimilating prior
acquisitions; the relative performance of each of the Company's
subsidiaries and divisions in a year of operating in a very competitive
economy; the progress made by Mr. Flakoll in achieving the goals which he
established with the Committee in early 1995; and, the level of bonus and
stock awards received by the executive officers and executives of the
Company's subsidiaries and divisions. The Committee believes that Mr.
Flakoll's overall compensation is fair and reasonable.
In determining the final bonus of Mr. Hock, the retired CEO, the
Committee recognized his thirty-six years of outstanding service to the
Company and the strong financial performance of the Company in 1995. In
view of his retirement, no stock award was made.
No member of the Committee is an employee of the Company or any of its
subsidiaries. Mr. Harrison was formerly the Secretary of the Company and
performed the functions of that office until May 1995 on a per diem basis
as an independent contractor, spending approximately seventy days annually.
Compensation Committee: J. Barton Harrison (Chairman), Stanley E.
Basara, Edward M. Mazze.
COMPARISON OF EIGHT-YEAR CUMULATIVE TOTAL RETURN
The following graph and table show a eight-year comparison of total
shareholder returns for the Company, AMEX Market Value Index and Dow Jones
Electrical Components & Equipment Industry Group Index.
COMPARISON OF 8-YEAR CUMULATIVE TOTAL RETURN
1987 1988 1989 1990 1991 1992 1993 1994 1995
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Technitrol, Inc. $100.00 $151.96 $211.96 $131.41 $158.67 $155.86 $189.12 $262.20 $449.43
AMEX Market Value Index $100.00 $117.54 $145.19 $118.34 $151.74 $153.34 $183.27 $166.57 $210.57
Dow Jones Electrical
Components & Equipment
Industry Group Index $100.00 $198.73 $125.73 $115.11 $144.63 $144.88 $157.70 $164.20 $214.71
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<FN>
Assumes $100 invested on December 31, 1987, and reinvestment of dividends.
Proposal No. 2 -- Selection of Auditors
Shareholders will be asked to approve the selection of KPMG Peat Marwick
LLP as independent auditors for the Company and its subsidiaries for the
fiscal year ending December 31, 1996. KPMG Peat Marwick LLP has advised that
it does not have any direct financial interest or any material indirect
financial interest in the Company or its subsidiaries, and during the past
three years has not had any connection with the Company or its subsidiaries
in any capacity other than as auditors and providing tax advice and
preparation of tax returns for the Company. A representative of the firm will
be present at the meeting to answer questions by shareholders concerning the
accounts of the Company and, if such representative so desires, he will have
the opportunity to make a statement.
The affirmative vote of a majority of the shares entitled to vote at the
meeting is required for approval of selection of auditors.
SHAREHOLDERS PROPOSALS
In order to be considered for inclusion in the proxy materials for the
1997 Annual Meeting, shareholders proposals must be received by the Company
by December 20, 1996. Any change in this date will be communicated to
shareholders in a timely fashion.
OTHER MATTERS
The Board of Directors does not know of any other matters to come before
the meeting. However, if any additional matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy
to vote in accordance with their judgment on such matters.
By order of the Board of Directors
Robert J. Citrino
Secretary
April 15, 1996
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PROXY CARD
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
TECHNITROL, INC.
1996 ANNUAL MEETING PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas J. Flakoll and Robert J. Citrino
as Proxies and attorneys-in-fact, each with the power of substitution, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of the Company held of record by the undersigned on
March 8, 1996, at the Annual Meeting of Shareholders to be held on
May 22, 1996 or any adjournment thereof.
1. ELECTION OF DIRECTORS
Thomas J. Flakoll
J. Barton Harrison
Graham Humes
[ ] For [ ] Withhold [ ] For All Except
INSTRUCTION: To withold authority to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
___________________________________________________________________________
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the
Company's independent auditors for the year commencing January 1, 1996.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN AND IN ACCORDANCE WITH THE PROXY STATEMENT. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR
PROPOSAL 2 AND IN ACCORDANCE WITH THE INSTRUCTIONS OF THE BOARD OF
DIRECTORS ON ALL OTHER MATTERS.
Please sign this Proxy exactly as name appears on this card. When shares
are held by joint tenants, both should sign. When signing as attorney,
trustee or guardian or other fiduciary capacity please give full title as
such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership please sign in Partnership name
by authorized person.
Please be sure to sign and date this Proxy in the box below.
DATE ____________________________
___________________________________________________________________________
Stockholder sign above-----Co-holder (if any) sign above
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Detach above card, sign, date and mail in postage paid envelope provided.
TECHNITROL, INC.
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PLEASE ACT PROMPTLY
SIGN, DATE, & MAIL PROXY CARD TODAY
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