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 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:
______________________________________________________________
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: ___________
[ ] 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, 2001
Dear Stockholder,
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Sheffield Steel Corporation (the "Company") to be held at 8:00 a.m. on
Tuesday, August 28, 2001, 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 28, 2001
To the Stockholders of Sheffield Steel Corporation:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Sheffield Steel
Corporation, a Delaware corporation (the "Company"), will be held on Tuesday,
August 28, 2001 at 220 North Jefferson, Sand Springs, Oklahoma, at 8:00 a.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, 2002.
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, 2001, 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/ Robert W. Ackerman
ROBERT W. ACKERMAN
Secretary
Sand Springs, Oklahoma
July 31, 2001
1
SHEFFIELD STEEL CORPORATION
220 NORTH JEFFERSON
SAND SPRINGS, OKLAHOMA 74063
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 28, 2001, at 8:00 a.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, 2001 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, 2001, the Company
had 3,408,675 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, 2001 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,
2001 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 94.7% 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, 2001
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 45.43%(c)(e)
HMK Enterprises, Inc.
800 South Street
Waltham, MA 02453
Jane M. Karol 1,614,364 45.43%(d)(e)
HMK Enterprises, Inc.
800 South Street
Waltham, MA 02453
Dale S. Okonow 73,828(f) 2.07%
Alton W. Davis 35,000(g) *
Robert W. Ackerman 33,750 *
Stephen R. Johnson 28,251(h) *
James P. Nolan - *
James E. Dionisio - *
Howard H. Stevenson - *
Robert Schaal - *
All current executive officers, directors, and
nominees of the Company as a group (10 persons) 3,399,590(i) 95.67%
* 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,
2001 was 3,408,675. 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, 2001, plus shares of Common
Stock subject to options held by such person at July 17, 2001 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 .32%, are owned of record by him. Mr. Karol also owns
74.5134 shares of the Class A common stock, $1.00 par value, of HMK (the
"HMK Class A Common Stock"), which shares constitute 49.8328 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 45.11%, 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 .32%, are owned of record by her. Ms. Karol also owns
74.5134 shares of HMK Class A Common Stock, which shares constitute
49.8328% 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 45.11%, 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 74.5134 shares of HMK Class
A Common Stock, constituting 49.8328% 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, 2001.
(g) Includes 35,000 shares, which Mr. Davis may acquire upon the exercise of
options within 60 days after July 17, 2001.
(h) Includes 28,251 shares, which Mr. Johnson may acquire upon the exercise
of options within 60 days after July 17, 2001.
(i) Includes an aggregate of 144,860 shares which may be acquired upon the
exercise of options within 60 days after July 17, 2001.
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 August 29, 2000
to elect Messrs. Karol, Ackerman, Okonow, Stevenson, Schaal, Nolan and Ms. Jane
Karol to the Board of Directors to serve until the next annual meeting of
Stockholders and until their respective successors have been elected and
qualified.
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 47 Chairman of the Board and Chief Executive Officer
James P. Nolan 48 President and Chief Operating Officer
Dale S. Okonow 44 Director
Robert W. Ackerman 62 Director
Jane M. Karol 39 Director
Howard H. Stevenson 60 Director
Robert Schaal 59 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 on the Board of Directors
for Allard Nazarian Group, Inc. and Stockeryale, 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. In addition, he is
co-founder and President of the Herbert M. Karol Cancer Foundation. 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
served as President and Chief Operating Officer of HMK from 1998 to March 2001.
Mr. Okonow currently serves as Chief Operating Officer of Sawyer Realty Holdings
Inc.
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 The Baupost Fund.
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 also
serves as Senior Associate Dean and Director of External Relations and as
Faculty Chair of the Latin American Advisory Group. He is the Chairman of the
Baupost Fund, a registered investment company, and also services as a director
on the Boards of Camp Dresser & McKee, Landmark Communications, Bessemer
Securities Corporations, and Terry Hinge and Hardware.
ROBERT SCHAAL. Mr. Schaal was Chairman and Chief Executive Officer of Gulf
States since February 1998 until September 2001. 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, 2001 there were
five 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 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 did not meet in the most recent fiscal year as there were no stock
options granted. The Stock Compensation Committee administers the Company's 1993
Employee, Director and Consultant Stock Option Plan. See "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-five 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 90% 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, 2001, 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 52 Vice President-Operations
James E. Dionisio 50 Vice President-Sales and Marketing
Stephen R. Johnson 49 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
2001, individual compensation information for: (i) the Company's Chief Executive
Officer (the "CEO") and (ii) the four other most highly compensated persons who
were serving as executive officers of the Company (other than the CEO) at the
end of fiscal 2001 whose salary and bonus earned during fiscal 2001 exceeded
$100,000 (collectively, the "named executive officers").
6
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Fiscal Annual Compensation Awards
------------ ------------------------------------------------- ---------------
Name and Principal Position Year Salary Bonus Other # Options
- --------------------------------------- ------------ ----------------- ------------- ---------------- ---------------
Steven E. Karol 2001 $303,000 - - -
Chairman of the Board and CEO 2000 303,000 - - -
1999 303,000 - - -
James P. Nolan 2001 238,000 - - -
President and COO 2000 153,000 $48,000 $98,000(a) 60,000
1999 - - - -
Alton W. Davis 2001 191,000 - - -
Vice President-Operations 2000 175,000 9,000 - -
1999 175,000 31,500 - 10,000
James E. Dionisio 2001 176,000 - - -
Vice President-Sales 2000 108,000 5,000 65,000(a) 25,000
1999 - - - -
Stephen R. Johnson 2001 165,000 - - -
Vice President and 2000 165,000 8,000 - -
Chief Financial Officer 1999 165,000 36,300 - -
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Represents moving and related expenses for Messrs. Nolan and Dionisio.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted under the 1993 Stock Option Plan during fiscal
year 2001.
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, 2001 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 Ended Fiscal Year End
Acquired on Value ------------------------------ ----------------------------------
Exercise Realized(1) Exercisable Unexercisable Exercisable (2) Unexercisable
------------ ---------------- ------------- --------------- ------------------ ---------------
Steven E. Karol - - - - - -
Robert W. Ackerman 151,875 $3,016,238 - - - -
James P. Nolan - - - 60,000.000 - -
Alton W. Davis - - 35,000.000 - - -
James E. Dionisio - - - 25,000.000 - -
Stephen R. Johnson - - 28,250.500 - - -
(1) The value realized was based on an exercise price of $7.41 and a stock
price of $27.27.
(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 $2.82, as determined by
an appraisal as prescribed in the non-qualified and incentive agreements
entered into pursuant to the 1993 Stock Option Plan.
7
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,
2001. 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 ensure 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 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.
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, 2001, there were 336,140
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 Mr. Karol, 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.
8
PENSION PLAN
The Company maintains a retirement plan that is an Internal Revenue Code (the
"Code") qualified defined benefit pension plan (the "Pension Plan"). For
employees hired before May 1, 1988, 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, 24 years, and Mr. Davis, 4
years, Messrs. Nolan and Dionisio 1 year. Mr. Karol is excluded from the
Pension Plan.
The following table shows the projected annual pension benefits payable at
the normal retirement age of 65:
Annual Normal Pension Benefits for Years 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
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 $101,000 to certain of the Company's 401(k) plans for the year
ended April 30, 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of the end of fiscal 2001, 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. A
valuation allowance was established against this receivable as it is more likely
than not that this receivable will not be realized. 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.
9
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 $787 in fiscal year 2001, $861 in fiscal year 2000, and $817 in
fiscal year 1999. 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 $121 in fiscal year 2001, $213 in fiscal year 2000 and
$204 in fiscal year 1999.
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.
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, 2001 is $316,256
($200,000 principal amount and $116,256 of accrued interest). The notes bear
interest at an annual rate of 7.61%. The largest amount of indebtedness
outstanding during fiscal 2001 for each of Messrs. Ackerman and Lovingfoss was
$316,256.
Mr. Dale S. Okonow, 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, 2001 is
$165,738 ($100,000 principal amount and $65,738 of accrued interest). The note
bears interest at an annual rate of 7.61%. The largest amount of indebtedness
outstanding during fiscal 2001 for Mr. Okonow was $165,738.
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, 2001 is $110,481 ($66,660 principal amount and
$43,821 of accrued interest). The notes bear interest at an annual rate of
7.61%. The largest amount of indebtedness outstanding during fiscal 2001 for
each of Jane M. Karol and Joan L. Karol was $110,481.
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, 2001 is $110,513 ($66,680 principal amount
and $43,833 of accrued interest). The note bears interest at an annual rate of
7.61%. The largest amount of indebtedness outstanding during fiscal 2001 for
Mr. Karol was $110,513.
During fiscal 2001, the Company signed long-term notes payable to Mr. John F.
Lovingfoss, a former officer of the Company. The amounts of the notes total
$697,000 and are related to Mr. Lovingfoss' exercise of stock options at
retirement. The notes payable accrue simple interest at 5.78 and 6.45% and are
being paid in five annual installments that began July 4, 2000. The Company was
not able to make the annual installment due July 4, 2001 due to suspension of
payments to employees with respect to the exercise of stock options as a result
of the failure to pay in full the June 1, 2001 semi-annual installment on the
11.5% First Mortgage Notes due 2005.
10
During fiscal 2001, the Company signed a long-term note payable to Mr. Robert
W. Ackerman, a former officer of the Company. The amount of the note is
$1,152,000 and is related to Mr. Ackerman's exercise of stock options at
retirement. The note payable accrues simple interest at 5.98% and is being paid
in five annual installments that began December 1, 2000.
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 August 29, 2000
voted to elect Messrs. Karol, Ackerman, Okonow, Stevenson, Schaal, Nolan and Ms.
Jane Karol to serve until the next annual meeting of Stockholders and until
their respective successors have been elected and qualified.
* * * * * * * * * *
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.
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, 2002. 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
is expected to be present at the meeting, will have the opportunity to make a
statement, and will be available to respond to appropriate questions.
* * * * * * * * * *
11
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, 2002.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
AUDIT FEES
The aggregate fees billed for professional services rendered in connection
with the audit of the Company's annual financial statements and the reviews of
the financial statements included in the Company's 10-Q's for the 2001 fiscal
year were $127,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by KPMG LLP for the 2001 fiscal year in connection
with the Company's information system.
ALL OTHER FEES
The aggregate fees billed by KPMG LLP for all other services rendered were
$65,713.
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 2002, Stockholder proposals must be received, marked for the attention
of: Secretary, Sheffield Steel Corporation, P. O. Box 218, Sand Springs,
Oklahoma 74063, not earlier than January 1, 2002 and not later than April 30,
2002.
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/ Robert W. Ackerman
ROBERT W. ACKERMAN
Secretary
July 31, 2001
12
DETACH HERE
PROXY
SHEFFIELD STEEL CORPORATION
220 NORTH JEFFERSON
SAND SPRINGS, OKLAHOMA 74063
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, AUGUST 28, 2001
The undersigned hereby appoints Robert W. Ackerman and Dale S. Okonow, and
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them or either of them, to represent and to vote as designated
below all the shares of capital stock of Sheffield Steel Corporation (the
"Company"), held of record by the undersigned on July 17, 2001 at the Annual
Meeting of Stockholders to be held on Tuesday, August 28, 2001, at the offices
of the Company, located at 220 North Jefferson, Sand Springs, Oklahoma 74063,
and any adjournment or adjournments thereof (the "Annual Meeting").
If you do not plan to attend the meeting, please complete, sign and date the
proxy and return it without delay in the enclosed postage-prepaid envelope. If
you do attend the meeting in person, you may withdraw the proxy and vote
personally on each matter brought before the meeting.
- ------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
SHEFFIELD STEEL CORPORATION
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
DETACH HERE
[x] Please mark votes
as in this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2 IF
NO SPECIFIC DIRECTION IS MADE.
1. Election of Directors.
---------------------
To elect as Directors of the Company the following seven individuals:
(01) Robert W. Ackerman, (02) Jane M. Karol,
(03) Steven F. Karol, (04) Robert Schaal,
(05) Dale S. Okonow, (06) Howard H. Stevenson,
(07) James P. Nolan
FOR ALL [_] [_] WITHHELD FROM
NOMINEES ALL NOMINEES
[_] ______________________________________
For all nominees except as noted above
- --------------------------------------------------------------------------------
SHEFFIELD STEEL CORPORATION
- --------------------------------------------------------------------------------
2. Approval of Selection of Auditors
---------------------------------
To ratify as independent auditors KPMG LLP for FOR AGAINST ABSTAIN
the fiscal year ending April 30, 2002. [_] [_] [_]
3. General
-------
In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
Mark box at right for address change and note at left [_]
Please be sure to sign and date this Proxy.
Please sign exactly as your name(s) appear(s) hereon. All holders must sign.
When signing in a fiduciary capacity, please indicate full title as such. If a
corporation or partnership, please sign in full corporate or partnership name by
authorized person.
Signature: Date: Signature: Date:
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