SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Sheffield Steel Corporation
(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:
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2) Aggregate number of securities to which transaction applies:
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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:
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5) Total fee paid:
------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
1) Amount previously paid: ______________________________________
2) Form, Schedule or Registration Statement No: 14A______________
3) Filing Party: ________________________________________________
4) Date Filed: __________________________________________________
July 31, 2000
Dear Stockholder,
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Sheffield Steel Corporation (the "Company") to be held at 12:00 p.m. on
Tuesday, August 29, 2000, at 220 North Jefferson, Sand Springs, Oklahoma.
At the Annual Meeting, seven persons will be elected to the Board of
Directors. The Board of Directors recommends the approval of each of these
persons. Such other business will be transacted as may properly come before the
Annual Meeting.
The accompanying Notice of Annual Meeting of Stockholders and Proxy Statement
describe the matters that will be presented at the Annual Meeting.
We hope you will be able to attend the Annual Meeting. Whether you plan to
attend the Annual Meeting or not, it is important that your shares are
represented. Therefore, you are urged promptly to complete, sign, date and
return the enclosed proxy card in accordance with the instructions set forth on
the card, whether or not you plan to attend the Annual Meeting in person. This
will ensure your proper representation at the Annual Meeting.
Sincerely,
/s/ Steven E. Karol
STEVEN E. KAROL
Chairman of the Board and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
SHEFFIELD STEEL CORPORATION
220 North Jefferson
Sand Springs, OK 74063
(918) 245-1335
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on August 29, 2000
To the Stockholders of Sheffield Steel Corporation:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Sheffield Steel
Corporation, a Delaware corporation (the "Company"), will be held on Tuesday,
August 29, 2000 at 220 North Jefferson, Sand Springs, Oklahoma, at 12:00 p.m.
for the following purposes:
1. To elect seven members to the Board of Directors to hold office until
the next annual meeting of Stockholders and until their successors are
duly elected and qualified.
2. To ratify the selection of KPMG LLP as independent auditors for the
fiscal year ending April 30, 2001.
3. To transact such other business as may be properly brought before the
Annual Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on July 17, 2000, as
the record date (the "Record Date") for the determination of Stockholders
entitled to notice of and to vote at the Annual Meeting and at any adjournments
thereof.
All Stockholders are cordially invited to attend the Annual Meeting in
person. Whether you plan to attend the Annual Meeting or not, you are requested
to complete, sign, date and return the enclosed proxy card as soon as possible
in accordance with the instructions on the proxy card. A pre-addressed, postage
prepaid return envelope is enclosed for your convenience. Holders of record of
the Common Stock as of the Record Date who do attend the Annual Meeting and wish
to vote in person may revoke their proxies.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dale S. Okonow
DALE S. OKONOW
Vice President and Secretary
Sand Springs, Oklahoma
July 31, 2000
SHEFFIELD STEEL CORPORATION
220 NORTH JEFFERSON
SAND SPRINGS, OKLAHOMA
918-245-1335
_______________________________
PROXY STATEMENT
_______________________________
GENERAL INFORMATION
This Proxy Statement is being furnished to stockholders in connection with
the solicitation by the Board of Directors of Sheffield Steel Corporation, a
Delaware corporation (the "Company"), of proxies, in the accompanying form, to
be used at the Annual Meeting of Stockholders to be held at 220 North Jefferson,
Sand Springs, Oklahoma, on Tuesday, August 29, 2000, at 12:00 p.m., and any
adjournments thereof (the "Meeting").
Where the Stockholder specifies a choice on the proxy as to how his or her
shares are to be voted on a particular matter, the shares will be voted
accordingly. If no choice is specified, the shares will be voted FOR the
election of the seven nominees for director named herein and FOR the
ratification of the selection of KPMG LLP as independent auditor. Any proxy
given pursuant to this solicitation may be revoked by the person giving it at
any time before its use by delivering to the Company a written notice of
revocation or a duly executed proxy bearing a later date. Any Stockholder who
has executed a proxy but is present and wishes to vote by ballot in person at
the Meeting may do so by revoking his or her proxy as described in the preceding
sentence. Shares represented by valid proxies in the form enclosed, received in
time for use at the Meeting and not revoked at or prior to the Meeting, will be
voted at the Meeting. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of the Company's common stock, par value $
.01 per share ("Common Stock"), is necessary to constitute a quorum at the
Meeting. No approval rights exist for any action proposed to be taken at the
Meeting.
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Meeting is required to approve each proposal, including
the election of directors. With respect to the tabulation of votes on any
matter, abstentions are treated as votes against a proposal, while broker non-
votes have no effect on the vote.
The close of business on July 17, 2000 has been fixed as the record date (the
"Record Date") for determining the Stockholders entitled to notice of and to
vote at the Meeting. As of the close of business on July 17, 2000, the Company
had 3,584,112 shares of Common Stock outstanding and entitled to vote. Holders
of Common Stock are entitled to one vote per share on all matters to be voted on
by Stockholders.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Solicitation of proxies by mail may be supplemented by telephone, telegram,
telex and personal solicitation by the directors, officers, or employees of the
Company. No additional compensation will be paid for such solicitation.
This Proxy Statement and the accompanying proxy are being mailed on or about
August 10, 2000 to all Stockholders entitled to notice of and to vote at the
Meeting.
The Company's Annual Report on Form 10-K for the fiscal year ended April 30,
2000 is being mailed to the Stockholders with this Proxy Statement, but does not
constitute a part hereof.
1
SHARE OWNERSHIP
HMK Enterprises, Inc. ("HMK") currently owns approximately 93.4% of the
issued and outstanding shares of Common Stock. HMK is a Massachusetts-based
privately-owned holding company engaged in manufacturing and service businesses.
The following table sets forth certain information as of July 17, 2000
concerning the ownership of Common Stock by each Stockholder known by the
Company to be the beneficial owner of more than 5% of its outstanding shares of
Common Stock, each current member of the Board of Directors, each executive
officer named in the Summary Compensation Table herein, and all current
directors, nominees, and executive officers as a group.
Shares Beneficially Owned (a)(b)
---------------------------------
Name and Address** Number Percent
- -------------------------------------------------- -------------------- ------------------------------
Steven E. Karol 1,614,397 43.40% (c)(e)
HMK Enterprises, Inc.
800 South Street
Waltham, MA 02453
Jane M. Karol 1,614,364 43.40% (d)(e)
HMK Enterprises, Inc.
800 South Street
Waltham, MA 02453
Robert W. Ackerman 185,625 4.99%
Dale S. Okonow 73,828 (f) 1.98%
Stephen R. Johnson 35,313 (g) *
Alton W. Davis 25,000 (h) *
James P. Nolan - *
James E. Dionisio - *
Howard H. Stevenson - *
Robert Schaal - *
All current executive officers, 3,548,527 (I) 95.39%
directors, and nominees of the
Company as a group (10 persons)
- --------------------------------------------------------------------------------
* Represents beneficial ownership of less than 1% of the Company's
outstanding shares of Common Stock.
** Addresses are given for beneficial owners of more than 5% of the
outstanding Common Stock only.
2
(a) The number of shares of Common Stock issued and outstanding on July 17, 2000
was 3,584,112. The calculation of percentage ownership for each listed
beneficial owner is based upon the number of shares of Common Stock issued
and outstanding at July 17, 2000, plus shares of Common Stock subject to
options held by such person at July 17, 2000 and exercisable within 60 days
thereafter. The persons and entities named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned by
them, except as otherwise noted.
(b) Beneficial ownership as reported in the table above has been determined in
accordance with Rule 13d-3 under the Exchange Act.
(c) Of the 1,614,397 shares of Common Stock beneficially owned by Mr. Karol,
11,272 shares or .30%, are owned of record by him. Mr. Karol also owns
74.7634 shares of the Class A common stock, $1.00 par value, of HMK (the
"HMK Class A Common Stock"), which shares constitute 50% of the issued and
outstanding shares of HMK Class A Common Stock. Of the 1,614,397 shares of
Common Stock beneficially owned by Mr. Karol, 1,603,125 shares, or 43.10%,
are deemed to be beneficially owned by Mr. Karol by virtue of his ownership
of such shares of HMK Class A Common Stock.
(d) Of the 1,614,364 shares of Common Stock beneficially owned by Ms. Karol
11,239 shares, or .30%, are owned of record by her. Ms. Karol also owns
74.7634 shares of HMK Class A Common Stock, which shares constitute 50% of
the issued and outstanding shares of HMK Class A Common Stock. Of the
1,614,364 shares of Common Stock beneficially owned by Ms. Karol, 1,603,125
shares, or 43.10%, are deemed to be beneficially owned by Ms. Karol by
virtue of her ownership of such shares of HMK Class A Common Stock.
(e) Each of Steven E. Karol and Jane M. Karol own 74.7634 shares of HMK Class A
Common Stock, constituting 50% of the issued and outstanding shares of HMK
Class A Common Stock in the aggregate. HMK Class A Common Stock is the only
class of voting stock of HMK issued and outstanding. For purposes of
determining beneficial ownership of Common Stock as reported in the
preceding table, ownership of any class of non-voting stock of HMK has not
been included.
(f) Includes 56,953 shares which Mr. Okonow may acquire upon exercise of options
within 60 days after July 17, 2000.
(g) Includes 28,251 shares which Mr. Johnson may acquire upon the exercise of
options within 60 days after July 17, 2000.
(h) Includes 25,000 shares which Mr. Davis may acquire upon the exercise of
options within 60 days after July 17, 2000.
(i) Includes an aggregate of 135,860 shares which may be acquired upon the
exercise of options within 60 days after July 17, 2000.
3
MANAGEMENT
DIRECTORS
- ---------
The Company's By-Laws provide for the Company's business to be managed by or
under the direction of the Board of Directors. Under the Company's By-Laws, the
number of directors is fixed from time to time by the Stockholders, and
directors serve in office until the next annual meeting of Stockholders and
until their successors have been elected and qualified.
Pursuant to the Company's By-Laws, the Stockholders voted on September 3,
1999 (i) to set the size of the Board of Directors at six members and (ii) to
elect Messrs. Karol, Ackerman, Okonow, Stevenson, Schaal and Ms. Jane Karol for
election at the Meeting to the Board of Directors to serve until the next annual
meeting of Stockholders and until their respective successors have been elected
and qualified. On March 7, 2000, pursuant to the Company's By-Laws, the members
of the Board of Directors elected Mr. James P. Nolan to serve on the Board of
Directors.
The names of the Company's current directors, nominees for director and
certain information about them are set forth below:
Name Age Position with the Company
- ------------------- ----- --------------------------------------------------
Steven E. Karol 46 Chairman of the Board and Chief Executive Officer
James P. Nolan 47 President and Chief Operating Officer
Dale S. Okonow 43 Vice President and Secretary
Robert W. Ackerman 61 Director
Jane M. Karol 38 Director
Howard H. Stevenson 59 Director
Robert Schaal 58 Director
STEVEN E. KAROL. Mr. Karol has been Chief Executive Officer of the Company
since June 1, 2000, a Director since 1981 and Chairman of the Board of Directors
since 1983. Mr. Karol is also Chairman of the Board of HMK, the parent company
of Sheffield Steel Corporation. Mr. Karol also serves as Chairman of the Board
of Directors of Gulf States Steel, Inc. of Alabama ("Gulf States") and is a
Director of Stocker and Yale, Inc.
Additionally, Mr. Karol has been a member of the Young Presidents'
Organization since 1978, served as International President from 1998-1999, and
currently holds a seat on the International Board of Directors. Mr. Karol is
also actively involved as a Board member of Tufts University, Vermont Academy,
the Boston Symphony Orchestra, and The Brain Tumor Society. Mr. Karol is the
brother of Jane M. Karol.
JAMES P. NOLAN. Mr. Nolan has been President and Chief Operating Officer
since September 1999. Prior to that, he was Vice President Operations of the
Bethlehem-Lukens Plate Division. Prior to that, he held various management
positions with Lukens Steel Corporation.
DALE S. OKONOW. Mr. Okonow has been Vice President and Secretary since 1988
and a Director since 1990. Prior to 1988, Mr. Okonow was an associate with the
law firm of Proskauer Rose Goetz & Mendelsohn in New York City. Mr. Okonow was
Vice President and General Counsel of HMK from 1988 to 1990 and served as Senior
Vice President and Chief Financial Officer of HMK from 1990 to 1998. Mr. Okonow
currently serves as President and Chief Operating Officer of HMK. Mr. Okonow
also serves as Vice-President, Secretary, and a Director of Gulf States.
4
ROBERT W. ACKERMAN. Mr. Ackerman has been a Director of the Company since
1992 and was President and Chief Executive Officer until September 1, 1999 and
Chairman and Chief Executive officer until June 1, 2000. From 1988 to 1992, Mr.
Ackerman was the President and Chief Executive Officer of Lincoln Pulp & Paper
Co., Inc. From 1986 to 1988, Mr. Ackerman taught in the Advanced Management
Program at the Harvard University Graduate School of Business Administration.
Mr. Ackerman serves as a Director of Gulf States, The Baupost Fund, and Atlantic
Investment Advisors, Inc.
JANE M. KAROL. Ms. Karol has been a Director since 1991. Ms. Karol is a
Director of HMK. Ms. Karol is also the sister of Steven E. Karol.
HOWARD H. STEVENSON. Dr. Stevenson has been a Director since 1993. Since
1982, Dr. Stevenson has been Sarofim-Rock Professor of Business Administration
at the Harvard University Graduate School of Business Administration. He is
currently the Senior Associate Dean and Director of External Relations and he
was Senior Associate Dean and Director of Financial and Information Systems for
Harvard Business School from 1991 to 1994. Dr. Stevenson also serves as a
Director of the Boards of Camp Dresser & McKee, Landmark Communications, Gulf
States, the Baupost Fund, Bessemer Securities Corporation, and Terry Hinge and
Hardware.
Robert Schaal. Mr. Schaal has been Chairman and Chief Executive Officer of
Gulf States since February 1998. From 1996 until joining Gulf States, Mr.
Schaal was a consultant with Advent Management International. From 1994 until
1996, he was President and Partner with Universal Envirogenics, Inc. Mr. Schaal
was President of RSC Consulting for the years of 1993 and 1994. From 1967 until
1993, he held a variety of positions with Lukens Steel and was that company's
President from 1991 until 1993.
COMMITTEES OF THE BOARD OF DIRECTORS
MEETING ATTENDANCE. During the fiscal year ended April 30, 2000 there were
four meetings of the Board of Directors. Each director, during the period he or
she was a director, attended at least 75% of the meetings of the Board of
Directors except Jane Karol who attended less than 75%. Each member of a
committee, during the period he or she was a committee member, attended at least
75% of the meetings of each committee on which he or she served. In addition,
from time to time, the members of the Board of Directors and its committees
acted by unanimous written consent.
AUDIT COMMITTEE. The Audit Committee, which met once during the 2000 fiscal
year, has two members, Mr. Okonow and Mr. Ackerman. The Audit Committee reviews
the engagement of the Company's independent accountants, reviews annual
financial statements, considers matters relating to accounting policy and
internal controls and reviews the scope of the annual audit. The findings of
this committee are reviewed by the Board of Directors.
STOCK COMPENSATION COMMITTEE. The Stock Compensation Committee has three
members, Mr. Karol, Mr. Okonow and Mr. Ackerman. The Stock Compensation
Committee met once during fiscal 2000. The Stock Compensation Committee
administers the Company's 1993 Employee, Director and Consultant Stock Option
Plan. See "1993 Stock Option Plan".
COMPENSATION COMMITTEE. The Company does not have a standing Compensation
Committee. Recommendations concerning salaries and incentive compensation
(other than stock options) for employees of the Company (other than Mr. Nolan)
are made by Mr. Nolan and are reviewed by the Board of Directors.
Recommendations concerning Mr. Nolan's salary and incentive compensation (other
than stock options) are made by Mr. Karol and are reviewed by the Board of
Directors.
NOMINATING COMMITTEE. The Company does not have a standing Nominating
Committee.
5
ELECTION AND COMPENSATION OF DIRECTORS
Approximately ninety-three percent of the outstanding shares of the Company's
Common Stock is currently owned by HMK, which is in turn 100% owned by members
of the Karol family. Consequently, certain members of the Karol family together
beneficially own substantially all of the outstanding shares of the Company's
common stock and are able to determine the outcome of all matters required to be
submitted to stockholders for approval, including the election of directors.
Giving effect to the exercise of all of the Company's exercisable options, HMK
owns approximately 86% of the outstanding shares of the Company's Common Stock.
See "Share Ownership."
Dr. Stevenson and Mr. Schaal will receive an annual retainer of $4,000,
payable quarterly, and a meeting fee of $1,500 for each meeting of the Board of
Directors attended. The Company reimburses ordinary and necessary out-of-pocket
expenses incurred by any Director in connection with his or her services. In
addition, Directors of the Company are eligible to receive non-qualified stock
options under the Company's 1993 Employee, Director and Consultant Stock Option
Plan. As of April 30, 2000, no Director had been granted any stock options for
services as a Director of the Company.
EXECUTIVE OFFICERS
- ------------------
The names of, and certain information regarding, executive officers of the
Company who are not also directors, are set forth below. The executive officers
serve at the pleasure of the Board of Directors.
Name Age Position
- ------------------- ----- --------------------------------------------------
Alton W. Davis 51 Vice President-Operations
James E. Dionisio 49 Vice President-Sales and Marketing
Stephen R. Johnson 48 Vice President and Chief Financial Officer
ALTON W. DAVIS. Mr. Davis has been Vice President-Operations since August
1996. From 1986 to 1996, he was Vice President and General Manager of
Ameristeel's Jacksonville, Florida location. Prior to that, he held various
management positions with both Bayou Steel and Chaparral Steel.
JAMES E. DIONISIO. Mr. Dionisio has been Vice President-Sales and Marketing
since September 1999. From 1995 to 1999, he was Vice President-Sales and
Marketing for Rocky Mountain Steel (formerly CF & I Steel Corporation). Prior
to that, he held various positions with CF & I Steel Corporation.
STEPHEN R. JOHNSON. Mr. Johnson has been Vice President and Chief Financial
Officer since February 1996. From 1977 to 1996, Mr. Johnson held various
positions with the Company including the position of Vice President-
Administration and Treasurer since 1991 and Vice President-MIS and Business
Planning since 1984.
EXECUTIVE COMPENSATION
The following Summary Compensation Table includes, for the fiscal year ended
2000, individual compensation information for: (i) the Company's Chief Executive
Officer (the "CEO") and (ii) each of the other most highly compensated persons
who were serving as executive officers of the Company (other than the CEO) at
the end of fiscal 2000 whose salary and bonus earned during fiscal 2000 exceeded
$100,000 (collectively, the "named executive officers").
6
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Annual Compensation Awards
Fiscal ------------------------------------- ---------
Name and Principal Position Year Salary Bonus Other # Options
- --------------------------- ---- ------ ----- ----- ---------
Steven E. Karol 2000 $303,000 - - -
Chairman of the Board and CEO 1999 303,000 - - -
1998 303,000 $ 47,000 - -
Robert W. Ackeman (a) 2000 275,000 14,000 - -
President and CEO 1999 275,000 49,500 - -
1998 275,000 107,000 - -
James P. Nolan 2000 153,000 48,000 $98,000(b) 60,000
President and COO 1999 - - - -
1998 - - - -
Dale S. Okonow 2000 175,000 - - -
Vice President and Secretary 1999 175,000 - - -
1998 175,000 - - -
Alton W. Davis 2000 175,000 9,000 - -
Vice President-Operations 1999 175,000 31,500 - 10,000
1998 175,000 68,000 - -
James E. Dionisio 2000 108,000 5,000 65,000(b) 25,000
Vice President-Sales 1999 - - - -
1998 - - - -
Stephen R. Johnson 1999 165,000 8,000 - -
Vice President and 1999 165,000 36,300 - -
Chief Financial Officer 1998 150,000 58,000 - -
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Mr. Ackerman was President and CEO until September of 1999. He was
Chairman of the Board and CEO from September 1999 until June 1, 2000.
(b) Represents moving and related expenses for Messrs. Nolan and Dionisio.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to for Option Term (2)
Options Employees In Exercise or ---------------
Name Granted (1) Fiscal Year Base Price 5% 10%
- ---- ----------- ----------- ---------- -- ---
Steven E. Karol - - - - -
Robert W. Ackerman - - - - -
James P. Nolan 60,000 61% $ 34.87 $ 3,357,000 $11,571,000
Dale S. Okonow - - - - -
Alton W. Davis - - - - -
James E. Dionisio 25,000 25% 34.87 1,339,000 4,581,000
Stephen R. Johnson - - - - -
(1) All the options were granted under the 1993 Stock Option Plan. The options
granted to the named executive officers during 2000 are incentive and non-
qualified stock options. Mr. Nolan's options vest on September 1, 2002 and
Mr. Dionisio's options vest on September 20, 2002.
(2) The option terms are 10 years for incentive stock options and 20 years for
non-qualified stock options.
7
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table provides information regarding the number of options
exercised and the number of outstanding stock options as of April 30, 2000 and
the values of "in-the-money" options, which values represent the positive spread
between the exercise price of any such option and the fiscal year-end value of
the Company's Common Stock.
Number of Securities Value of the
Underlying Unexercised in-the-
Unexercised Options Money Options at
Shares at Fiscal Year End Fiscal Year End
Acquired on Value ------------------ ---------------
Exercise Realized(1) Exercisable Unexercisable Exercisable (2) Unexercisable
------------ ---------------- ------------- --------------- ------------------- ---------------
Steven E. Karol - - - - - -
Robert W. Ackerman 50,625 $1,582,491 151,875.000 - $4,243,782 -
James P. Nolan - - - 60,000.000 - $28,800
Dale S. Okonow - - 56,953.125 - 1,591,418 -
Alton W. Davis - - 25,000.000 10,000.000 370,750 48,707
James E. Dionisio - - - 25,000.000 - 12,000
Stephen R. Johnson 7,062 193,941 28,250.500 - 658,266 -
(1) The value realized was based on an exercise price of $7.41 and a stock
price of $34.87.
(2) The value of unexercised in-the-money options at fiscal year end assumes a
fair value value for the Company's Common Stock of $35.35, as determined by
an appraisal as prescribed in the non-qualified and incentive agreements
entered into pursuant to the 1993 Stock Option Plan.
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
The following is a report of the Board of Directors regarding actions taken
with respect to executive compensation during the fiscal year ended April 30,
2000. Compensation policies and annual compensation applicable to the Company's
executive officers are the responsibility of and established by the Board of
Directors. Recommendations concerning salaries and incentive compensation (other
than stock options) for employees of the Company (other than Mr. Nolan) are made
by Mr. Nolan and are reviewed by the Board of Directors. The Board of
Directors' overall policy regarding compensation of the Company's executive
officers is to provide salary levels and compensation incentives that attract
and retain qualified individuals in key positions; that recognize individual
performance and the Company's performance; and that support the Company's
overall strategic plan. The principal components of executive compensation are
salary, bonus and stock options.
Base Salary. Base salary levels for the Company's executive officers,
including the Chief Executive Officer, is based on the expertise and
responsibility that the position requires; management experience; subjective
judgment of the Board of Directors as to the value of the executive's past
contribution and potential future contribution to the profitability of the
business; and consideration of the compensation of competing companies.
Bonuses. The Company has an Executive Bonus Plan designed to recognize
individual performance and the Company's performance.
Stock Options. The Board believes that stock ownership by executive
officers is important to insure that executives have a continuing stake in the
long term success of the Company. On September 15, 1993, the Board of Directors
adopted the 1993 Employee, Director and Consultant Stock Option Plan. On
January 5, 1999 the stockholders of the Company amended the 1993 Employee,
Director, and
8
Consultant Stock Option Plan (as amended, the "Stock Option Plan") to allow for
an appraisal to review the formula used to calculate the fair value of the
equity of the Company.
1993 STOCK OPTION PLAN
The Stock Option Plan provides for the grant of incentive stock options to
key employees of the Company and non-qualified stock options to key employees,
directors and consultants of the Company. A total of 580,000 shares of Common
Stock, which would represent approximately 14.9% of the Company's Common Stock
on a fully diluted basis, have been reserved for issuance under the Stock Option
Plan upon the exercise of options. At April 30, 2000, there were 404,735
options outstanding. The options that have been granted to the executive
officers are incentive and non-qualified and vest three years from the grant
date. The Stock Option Plan is administered by the Stock Compensation
Committee.
EXECUTIVE INCENTIVE PLAN
Each of the named executive officers, excluding Messrs. Karol and Okonow, is
eligible to receive bonus compensation under the Company's Executive Bonus Plan
(the "Incentive Plan"). The Incentive Plan provides that (i) in the event that
actual pre-tax profit for any fiscal year equals or exceeds budgeted pre-tax
profit for such year, participants in the Incentive Plan will be paid a bonus
ranging from 30% to 50% of such participant's base salary and (ii) in the event
that actual pre-tax profit for any fiscal year does not meet budgeted pre-tax
profit for such year, by less than 20%, the Company's Board of Directors may, at
its discretion, (A) establish a bonus pool of up to 20% of the total base pay of
all participants in the Incentive Plan and (B) award bonus payments from such
bonus pool, if any, to participants in the Incentive Plan. Such bonus payments,
if any, are to be based upon (x) the individual performance of such participant,
(y) the performance of such participant's department and (z) such participant's
contribution to the Company's overall performance. Bonuses, if any, are required
to be paid within 90 days after the Company's fiscal year end.
PENSION PLAN
The Company maintains a retirement plan that is an Internal Revenue Code (the
"Code") qualified defined benefit pension plan (the "Pension Plan"). At normal
retirement date (age 65 or completion of 30 years of service), a participant is
paid a pension equal to the sum of: (a) the product of the participant's years
of plan service from September 1, 1981 through December 31, 1984 and 1.25% of
his average monthly compensation (up to $12,500), determined over the
participant's highest five consecutive years; and (b) the product of the
participant's years of plan service after January 1, 1985, and .9% of his
average monthly compensation (up to $12,500) as defined above. The normal form
of pension is a lifetime annuity with a 50% survivor pension for any surviving
spouse. Optional forms of payment are available and are actuarially equivalent
to a lifetime annuity without surviving spouse benefits. The Pension Plan also
provides for early retirement benefits on an actuarially reduced basis for
participants who reach age 55 with at least 10 years of service. Vested
retirement benefits are available for participants who are terminated with at
least five years of plan service. Although the pension is reduced to the extent
of any profit sharing retirement annuity provided by discretionary contributions
under the Sheffield Steel Corporation Thrift and Profit Sharing Plan (the
"Profit Sharing Plan") no such discretionary contributions have been made to the
Profit Sharing Plan.
Years of service for purposes of the Pension Plan with respect to the named
executive officers are as follows: Mr. Johnson, 23 years, and Mr. Davis, 3
years. Messrs. Nolan and Dionisio have not been with the Company a full year.
Messrs. Karol and Okonow are excluded from the Pension Plan.
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The following table shows the projected annual pension benefits payable at
the normal retirement age of 65:
Annual Normal Pension Benefits for Years of Service Shown
Annual ---------------------------------------------------------
Base Salary 15 20 25 30 35
------------ ------- ------- ------- ------- -------
$100,000 $13,500 $18,000 $22,500 $27,000 $31,500
125,000 16,875 22,500 28,125 33,750 39,375
150,000 20,250 27,000 33,750 40,500 47,250
170,000 and above 22,950 30,600 38,250 45,900 53,550
THRIFT AND PROFIT SHARING PLAN
The Company's Profit Sharing Plan is a Code-qualified defined contribution
plan which permits its employees to elect "after-tax" payroll deductions between
4% and 14% of compensation. The Profit Sharing Plan also provides for
additional discretionary contributions by the Company, which would be allocated
according to compensation ratios and, to the extent permitted by the Code,
according to compensation in excess of the FICA taxable wage base.
Discretionary Company contributions are forfeited by terminated employees with
less than five years of service. Discretionary contributions would offset
pensions under the Pension Plan described above, but no discretionary Company
contributions have been made to the Profit Sharing Plan. The Company has filed
with the Internal Revenue Service its intention to terminate the Profit Sharing
Plan and is awaiting a response.
401(k) RETIREMENT PLAN
The Company also sponsors plans which permit eligible employees of the
Company to defer compensation to the extent permitted by Section 401(k) of the
Code (the "401(k) Plans"). The 401(k) Plans permit, but do not require,
discretionary Company contributions. The Company made contributions of
approximately $131,000 to certain of the Company's 401(k) plans for the year
ended April 30, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of the end of fiscal 2000, HMK owed an aggregate of $2.7 million to the
Company. Of that amount, $2.2 million was related to certain tax attributes
allocated to the Company pursuant to a Tax Sharing Agreement with HMK. The
remaining $0.5 million relates to the Company's advance of funds to HMK to
secure a letter of credit needed for the insurance program of the Company's
Joliet facility.
HMK provides management and business services to the Company, including, but
not limited to, financial, marketing, executive personnel, corporate
development, human resources, and limited legal services. Management fees
charged were $720 in 1998, $817 in 1999, and $861 in 2000. In addition, the
Company purchases general liability, workers' compensation and other insurance
through Risk Management Solutions, a wholly-owned subsidiary of HMK, that
provides risk management services. These risk management services include;
procuring and maintaining property and casualty insurance coverage; reviewing
and recommending alternative financing methods for insurance coverage;
identifying and evaluating risk exposures, and preparing and filing proof of
loss statements for insured claims. Total fees paid for insurance services were
$142 in 1998, $204 in 1999 and $213 in 2000.
In September 1992, certain of the Company's officers, directors and members
of the Karol family purchased an aggregate of 5% of the issued and outstanding
shares of the Company's Common Stock in exchange for an aggregate of $250,000
cash and $1,000,000 in non-recourse promissory notes secured by pledges of such
stock. The non-recourse promissory notes evidencing each such shareholders'
indebtedness bear simple interest at an annual rate of 7.61% and become due on
February 1, 2007 or on such earlier date upon the occurrence of certain events
as stated in the notes.
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Each of Robert W. Ackerman, former President and Chief Executive Officer and
a Director of the Company, and John F. Lovingfoss, former Vice President-Sales
and Marketing of the Company, purchased 33,750 shares of the Company's Common
Stock in exchange for $50,000 in cash and a non-recourse promissory note with an
original principal balance of $200,000. The aggregate amount of indebtedness
owed to the Company by each of such individuals as of April 30, 2000 is $316,256
($200,000 principal amount and $116,256 of accrued interest). The largest amount
of indebtedness outstanding during fiscal 2000 for each of Messrs. Ackerman and
Lovingfoss was $316,256.
Mr. Dale S. Okonow, Vice President, Secretary and a Director of the Company
purchased 17,125 shares of the Company's Common Stock in exchange for $25,000
in cash and a non-recourse promissory note with an original principal balance of
$100,000. The aggregate amount of indebtedness owed to the Company by Mr. Okonow
as of April 30, 2000 is $158,128 ($100,000 principal amount and $58,128 of
accrued interest). The largest amount of indebtedness outstanding during fiscal
2000 for Mr. Okonow was $158,128.
Each of Jane M. Karol, a Director of the Company and Joan L. Karol, mother of
each of Jane M. Karol and Steven E. Karol, Directors of the Company, purchased
11,239 shares of the Company's Common Stock in exchange for $16,665 in cash and
a non-recourse promissory note with an original principal balance of $66,660.
The aggregate amount of indebtedness owed to the Company by each of such
individuals as of April 30, 2000 is $105,408 ($66,660 principal amount and
$38,748 of accrued interest). The largest amount of indebtedness outstanding
during fiscal 2000 for each of Jane M. Karol and Joan L. Karol was $105,408.
Steven E. Karol, Chairman of the Board of Directors and Chief Executive
Officer of the Company, purchased 11,272 shares of the Company's Common Stock in
exchange for $16,670 in cash and a non-recourse promissory note with an original
principal balance of $66,680. The aggregate amount of indebtedness owed to the
Company by Mr. Karol as of April 30, 2000 is $105,438 ($66,680 principal amount
and $38,758 of accrued interest). The largest amount of indebtedness outstanding
during fiscal 2000 for Mr. Karol was $105,438.
During fiscal 2000, Mr. John F. Lovingfoss, a former officer of the Company,
signed a short-term note payable to the Company. The amount of the note is
$422,000 and is related to Mr. Lovingfoss' exercise of stock options at
retirement. The full recourse notes are secured by Common Stock of the Company
and are due at various dates over the next year.
ELECTION OF DIRECTORS
NOTICE ITEM 1
Under the Company's By-Laws, the number of directors is fixed from time to
time by the Stockholders, and directors serve in office until the next annual
meeting of Stockholders and until their successors have been elected and
qualified.
Pursuant to the Company's By-Laws, the Board of Directors on September 3,
1999 voted to elect Messrs. Karol, Ackerman, Okonow, Stevenson, Schaal, and Ms.
Jane Karol to serve until the next annual meeting of Stockholders and until
their respective successors have been elected and qualified. On March 7, 2000,
pursuant to the Company's By-Laws, the members of the Board of Directors elected
Mr. James P. Nolan to serve on the Board of Directors.
* * * * * * * * * *
Unless authority to vote for any of the nominees named above is withheld, the
shares represented by the enclosed proxy will be voted FOR the election as
directors of such nominees. In the event that any nominee shall become unable
or unwilling to serve, the shares represented by the enclosed proxy will be
voted for the election of such other person as the Board of Directors may
recommend in his or her place. The Board has no reason to believe that any
nominee will be unable or unwilling to serve.
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The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Meeting is required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MESSRS. KAROL,
NOLAN, OKONOW, ACKERMAN, STEVENSON, AND SCHAAL, AND MS. KAROL AS DIRECTORS.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
APPROVAL OF SELECTION OF AUDITORS
NOTICE ITEM 2
The Company's Board of Directors has selected KPMG LLP to conduct the annual
audit of the financial statements of the Company for the fiscal year ending
April 30, 2001. KPMG LLP has no financial interest, direct or indirect, in the
Company, and does not have any connection with the Company except in its
professional capacity as an independent auditor. A representative of KPMG LLP
will be present at the meeting, will have the opportunity to make a statement,
and will be available to respond to appropriate questions.
* * * * * * * * * *
Unless authority to vote for the ratification of KPMG LLP as the Company's
independent auditors is withheld, the shares represented by the enclosed proxy
will be voted FOR ratification. In the event that the selection is not
ratified, the Board of Directors will reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE SELECTION
OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 2001.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
NOTICE ITEM 3
The Board of Directors knows of no other business that will be presented to
the Meeting. If any other business is properly brought before the Meeting, it
is intended that proxies in the enclosed form will be voted in respect thereof
in accordance with the judgment of the persons voting the proxies.
Stockholder Proposals
To be considered for presentation at the Annual Meeting of Stockholders to be
held in 2001, Stockholder proposals must be received, marked for the attention
of: Vice President and Secretary, Sheffield Steel Corporation, P. O. Box 218,
Sand Springs, Oklahoma 74063, not earlier than January 1, 2001 and not later
than April 30, 2001.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED TO FILL
OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE.
By order of the Board of Directors:
/s/ Dale S. Okonow
DALE S. OKONOW
Vice President and Secretary
July 31, 2000
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