SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FEDERAL SCREW WORKS
(Name of Registrant as Specified In Its Charter)
____________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $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:
_______________________________________________________________________
(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.: __________________________
3) Filing Party: __________________________________________________________
4) Date Filed: ____________________________________________________________
FEDERAL SCREW WORKS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is Hereby Given, that the Annual Meeting of Shareholders of
FEDERAL SCREW WORKS, a Michigan corporation, will be held at the offices of
the Company, 2400 Buhl Building, Detroit, Michigan 48226, on THURSDAY, OCTOBER
24, 1996 at 10:00 (Detroit time) in the forenoon of said day, for the
following purposes:
1. To elect two directors for a term of three years and until their
successors shall be duly elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business September 3, 1996 will
be entitled to notice of and to vote with respect to this solicitation.
By Order of the Board of Directors,
FEDERAL SCREW WORKS
W. T. ZurSchmiede, Jr., Secretary
Principal executive office:
2400 Buhl Building
Detroit, Michigan 48226
Detroit, Michigan
September 27, 1996
PLEASE FILL IN, SIGN AND MAIL PROMPTLY THE
ACCOMPANYING PROXY, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
This statement is furnished in connection with the solicitation of
Proxies being made by the Board of Directors of Federal Screw Works
(hereinafter designated the "Company"), to be used at the Annual Meeting of
Shareholders of the Company to be held on THURSDAY, OCTOBER 24, 1996 and at
any adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The meeting will be
held at the principal executive offices of the Company, 2400 Buhl Building,
Detroit, Michigan 48226.
The Company has only one class of securities, consisting at the close of
business on September 3, 1996 of 1,086,662 issued and outstanding shares of
common stock of the par value of $1.00 per share. Each of the 1,086,662 shares
is entitled to one vote at the Shareholders meeting. The common stock transfer
books will not be closed, but only Shareholders of record as of the close of
business September 3, 1996 will be entitled to receive notice of and to vote
with respect to this solicitation. The approximate date on which the proxy
statement and form of proxy are to be first sent or given to security holders
is September 27, 1996.
Execution and return of a Proxy will not in any way affect a
Shareholder's right to attend the meeting and to vote in person, and a
Shareholder giving a Proxy has the power to revoke it at any time before it is
exercised. Properly executed Proxies in the accompanying form, received in due
time, and not previously revoked, will be voted at the meeting, or any
adjournment thereof, as specified therein.
Election of Directors and Security Ownership of Management
The Company's Articles of Incorporation provide that the number of
Directors, as determined from time to time by the Board of Directors shall be
seven, which number may be increased or decreased from time to time, but not
to less than three. The Board of Directors has fixed the number of Directors
at seven. Further in accordance with the Articles, the Board of Directors is
divided into three classes, each class as equal in number as possible. At the
1996 Annual Meeting a total of two Directors is to be elected for a three-year
term and in each case until their successors are elected and qualified. Those
nominees are presently two of the Directors of the Company whose terms expire
at the meeting. Other Directors whose terms have not expired will continue in
office in accordance with their previous elections. The favorable vote of at
least two-thirds (2/3) of the issued and outstanding shares of common stock
will be required to elect Directors. An abstention by a Shareholder or a
Broker non-vote has the effect of a negative vote. Votes cast are counted by
two Inspectors of Election, one of which is the State Street Bank & Trust Co.,
the Company's Stock Transfer Agent. Management has nominated for election as
such two Directors the persons named in the following table, which sets forth
certain information as to each of the nominees and each Director whose term as
such will continue after the Annual Meeting. The persons named in the enclosed
form of Proxy will vote such Proxy for the election of such nominees. Although
management does not contemplate that any of the nominees will be unable to
serve, in the event that any nominee is unable to serve as Director at the
date of the Annual Meeting, the Proxy will be voted in such case for any other
nominee as may be designated by the present Board of Directors, or the Board
of Directors may appropriately reduce the number of Directors to be elected.
The names of such nominees, and of the Directors who will continue as such for
their respective terms, their principal occupations, the year in which each
first became a member of the Board of Directors of
1
the Company and their beneficial ownership of common stock of the Company as
of September 3, 1996 are as follows:
Amount and
Nature
of Beneficial
Ownership
as of
Name and Principal Term Director September 3, Percent
Occupation Expires Since 1996** of Class
-------------------------- ------- -------- -------------- --------
Nominees standing for election to term expiring
in 1999:
Dr. Thomas W. Butler, Jr.+
President, Thomas W. Butler & Associates, Inc.,
business consultants. Vice President, The Genlyte
Group, 1985 to 1987, manufacturer of lighting
systems. Dean, School of Engineering and Computer
Science, Oakland University, Rochester, Michigan,
1984 to 1985. Vice President, Engineering and less
Research, AMF Inc., manufacturers of leisure and than
industrial products, 1974 to 1984. Age 73. ...... 1996 1978 1,000 1%
Robert F. ZurSchmiede*
Vice President--Romulus Divisions, since 1986.
Vice President and General Manager of the Romulus
Division, 1984 to 1986; Assistant General Manager
of the Romulus Division, 1983 to 1984; Assistant
Manufacturing Manager, Romulus Division, 1982 to
1983; Sales Representative for the Company, 1981
to 1982; Inventory Control Supervisor, Detroit and
Romulus Divisions, 1979 to 1981; Production
Foreman Big Rapids and Detroit Divisions, 1979.
Age 43. ......................................... 1996 1984 81,664(a) 7.5%
Directors continuing in office for their respective
terms:
Hugh G. Harness*
Business Consultant. President of the Company,
1985 through Jan. 1994. Executive Vice President,
1982 to 1985. Senior Vice President--Corporate
Development, 1976 to 1982. Vice President--
Corporate Development, 1975 to 1976. Member of
Harness, Dickey and Pierce law firm, Patent
Counsel to the Company, 1954 to 1975. Age 65. ... 1997 1965 106,122(b) 9.8%
John J. Slavin+
President of Professional Corporation law firm
since 1969. Since April 1992, Of Counsel to Dykema
Gossett PLLC law firm which provides legal
services to the Company. Age 75. ................ 1998 1965 15,233(c) 1.4%
F. D. Tennent+
Business Consultant. Senior Vice President--
Finance & Secretary of the Company, 1976 to 1986.
Treasurer, 1983 to 1986. Vice President-- less
Finance, Secretary-Treasurer of the Company, 1969 than
to 1976. Age 70. ................................ 1998 1978 1,000 1%
2
W. T. ZurSchmiede, Jr.*
Chairman of the Board & Chief Executive Officer
since 1978; Chief Financial Officer, Secretary
and Treasurer, since 1988. President of the
Company and Chief Executive Officer, 1970 to
1978. Age 70. ................................... 1998 1959 132,726(d) 12.2%
Thomas ZurSchmiede*
President of the Company, Feb. 1994. Vice
President--Big Rapids Division, 1988-1994; Vice
President--Corporate Development, 1984-1988;
Director of Corporate Development, 1983 to 1984;
General Manager, Votrax Division of the Company,
1983; Assistant to the President of the Company,
1981 to 1983. Age 45. ........................... 1997 1984 70,078(e) 6.4%
Executive Officers of the Company who are not
Directors:
J.M. O'Brien ........................................ 28,200 2.6%
Jeffrey M. Harness .................................. 29,558 2.7%
All Directors and Officers of the Company as a
group ............................................. 454,181 41.8%
<FN>
* Member of Executive Committee of the Company's Board of Directors.
+ Member of Audit Committee of the Company's Board of Directors.
- ----------------
NOTES:
** Numerical Key: (1) sole voting power (2) shared voting power
(3) sole investment power (4) shared investment power
(a)(1) 76,864 including 5,800 contingent shares as to which see Restricted
Stock Bonus Plans, page 10. (2) 4,800 (3) 71,064 (4) 4,800. Also includes
4,800 shares held as co-trustee for a niece and nephews which shares are
also attributable to Thomas ZurSchmiede, who shares the related voting and
investment powers. Also includes 27,300 shares for which Mr. ZurSchmiede is
custodian for his children, the beneficial ownership of which may be
attributable to Mr. ZurSchmiede. Mr. ZurSchmiede disclaims beneficial
ownership of all but 49,564 shares owned by him. Mr. ZurSchmiede is a son
of W. T. ZurSchmiede, Jr. The elimination of duplicate holdings reduces the
percentage of class to 7%.
(b)(1) 30,228 including 2,800 contingent shares as to which see Restricted
Stock Bonus Plans, page 10. (2) 10,900 (3) 27,428 (4) 10,900. Also includes
41,876 shares owned by Mr. Harness' wife, 22,118 shares owned by his
children and 1,000 shares owned by his mother, the beneficial ownership of
which may be attributable to Mr. Harness and 6,600 shares owned by the W.
T. ZurSchmiede, Sr. Foundation of which Mr. and Mrs. Harness and Mr.
ZurSchmiede, Jr. comprise the three Trustees. Mr. Harness disclaims
beneficial ownership of all but 30,228 shares owned by him and 4,300 shares
owned jointly with Mrs. Harness. 6,600 of the shares attributed to Mr.
Harness are also attributed to Mr. ZurSchmiede Jr., who shares the related
voting and investment power. Mr. Harness is Mr. ZurSchmiede, Jr.'s
brother-in-law. The elimination of duplicate holdings reduces percent of
class to 9.2%.
(c)(1) 15,233, (3) 15,233. Includes 10,733 shares owned by a family trust of
which Mr. Slavin is Trustee and 4,500 shares owned by his Professional
Corporation.
(d)(1) 12,400 including 4,200 contingent shares as to which see Restricted
Stock Bonus Plans, page 10. (2) 6,600 (3) 8,200 (4) 6,600. Also includes
113,726 shares owned by Mr. ZurSchmiede's daughters and their spouses,
individually and as custodian for grandchildren, and 6,600 shares owned by
the W. T. ZurSchmiede, Sr. Foundation, of which he is a Trustee, the
beneficial ownership of all of which may be
3
attributable to Mr. ZurSchmiede. Mr. ZurSchmiede disclaims beneficial
ownership of all but 12,400 shares owned by him. 6,600 of the shares
attributed to Mr. ZurSchmiede are also attributed to Mr. Harness, who
shares the related voting and investment power. The elimination of
duplicate holdings reduces the percent of class to 11.6%.
(e)(1) 65,278 including 5,800 contingent shares as to which see Restricted
Stock Bonus Plans, page 10. (2) 4,800 (3) 59,478 (4) 4,800. Also includes
4,800 shares held as co-trustee for a niece and nephews which shares are
also attributable to Robert F. ZurSchmiede, who shares the related voting
and investment powers. Mr. ZurSchmiede disclaims beneficial ownership of
all but 65,278 owned by him. Mr. ZurSchmiede is a son of W. T. ZurSchmiede,
Jr. The elimination of duplicate holdings reduces the percentage of class
to 6%.
Security Ownership of Certain Beneficial Owners
The following table sets forth as of September 3, 1996 (except as
otherwise noted), information with respect to beneficial ownership of the
Company's common shares by any shareholder known to the Company to
beneficially own 5% or more of the Company's outstanding common shares.
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------- ----------------------- --------
Dimensional Fund Advisors Inc. (1) 73,500 6.76%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
FMR Corp. (2) 108,800 10.01%
82 Devonshire Street
Boston, Massachusetts 02109-3614
Robert F. ZurSchmiede (3) 81,664 7.5 %
Hugh G. Harness (3) 106,122 9.8 %
W.T. ZurSchmiede, Jr. (3) 132,726 12.2 %
Thomas ZurSchmiede (3) 70,078 6.4 %
<FN>
- ----------------
(1) Under date of February 7, 1996, the Company received a confirmation of
their holding from Dimensional Fund Advisors Inc., which advised the
Company as follows:
"Dimensional Fund Advisors Inc. ("Dimensional"), 1299 Ocean Ave.,
11th Floor, Santa Monica, California 90401, a registered investment
advisor, is deemed to have beneficial ownership of 73,500 shares of
Federal Screw Works stock as of December 31, 1995, all of which
shares are held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or in series of the
DFA Investment Trust Company, a Delaware business trust, or the DFA
Group Trust and the DFA Participating Group Trust, investment
vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of such shares."
(2) On August 23, 1996, the Company received confirmation in a telephone
conversation with the FMR Corp., advising the Company as follows:
"Pursuant to the instructions in Item 7 of Schedule 13G,
Fidelity Management & Research Company ("Fidelity"), 82 Devonshire
Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of
FMR Corp. and an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, is the beneficial owner of
108,800 shares or 10.01% of the common stock outstanding of Federal
Screw Works ("the Company") as a result of acting as investment
adviser to several investment companies registered under Section 8
of the Investment Company Act of 1940.
The ownership of one investment company, Fidelity Low-Priced
Stock Fund, amounted to 108,800 shares or 10.01% of the common stock
outstanding. Fidelity Low-Priced Stock Fund has its principal
business office at 82 Devonshire Street, Boston, Massachusetts
02109.
4
Edward C. Johnson 3d, FMR Corp., through its control of
Fidelity, and the Funds each has sole power to dispose of the
108,800 shares owned by the Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR
Corp., has the sole power to vote or direct the voting of the shares
owned directly by the Fidelity Funds, which power resides with the
Funds' Boards of Trustees. Fidelity carries out the voting of the
shares under written guidelines established by the Funds' Boards of
Trustees.
Edward C. Johnson 3d owns 24.9% of the outstanding voting common
stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. Various
Johnson family members and trusts for the benefit of Johnson family
members own FMR Corp. voting common stock. These Johnson family
members, through their ownership of voting common stock and the
execution of a family shareholders' voting agreement, form a
controlling group with respect to FMR Corp."
(3) The Company's mailing address may be used. The Nature of Beneficial
Ownership is set forth in the footnotes for this shareholder under
Election of Directors and Security Ownership of Management.
Compensation Committee Report
The Salary Compensation Committee of the Board of Directors ("Committee")
is composed of four senior Members of the Board. It is the primary responsibi-
lity of the Committee to monitor the Company's compensation policies and pro-
grams. The Committee recommends to the full Board the salaries of all elected
officers, the allocation of any cash bonus fund among elected officers and the
criteria applicable to the accrual of the cash bonus fund. The Committee is
responsible for the continuing study of executive compensation generally, so
that the Company may remain competitive in that regard. The three non-officer
Members of the Committee also comprise the Restricted Stock Bonus Committee
which recommends persons to receive restricted stock awards, the form and
amount of awards to be made, and the conditions under which awards are
restricted.
Executive Compensation Policy
The base salaries of the executive officers of the Company are based on
the Company's performance and the executive's contribution to the operational
success of the Company as a whole, particularly in view of the very demanding
conditions in the automotive industry. There were no increases in base salary
in fiscal 1995 or fiscal 1996. Fiscal 1996 did result however in a further
superior operating result which permitted the Company to increase its extra
cash divided to $0.80 per share payable to its shareholders in October, 1996.
The Compensation Committee will continue its evaluation of each executive's
performance under the Company's highly competitive circumstances, as well as
the Company's performance, including improving production efficiencies with
emphasis on quality and parts requiring high technology. While the
Compensation Committee takes into consideration the factors mentioned above,
the Committee does rely to a large degree upon subjective (rather than
objective) standards and evaluations to determine executive compensation.
The Compensation Committee will continue to emphasize the Company's
long-term performance and increases in shareholder value, will support a bonus
incentive program based on the financial performance of the Company, and will
offer meaningful and competitive retirement and supplemental benefits that are
consistent with the Company's objective of rewarding and retaining key
employees.
The Cash Bonus Plan described in footnote (1) to the Summary
Compensation Table on page 7 was adopted in 1989, and is a less generous
version of a similar plan in place for many years prior to 1989. The Plan is
structured in such a way that no bonus amount is accrued in any fiscal year
unless earnings exceed a base amount equal to eight percent of beginning of
the year shareholders' equity.
CEO Compensation
The Compensation of the Chief Executive Officer is fixed by the full
Board of Directors (other than the CEO), after considering recommendations of
the Compensation Committee. The Committee reviews the performance of the CEO
and makes recommendations consistent with the objectives, performance, and
results mentioned above. The Committee engages and consults with outside
compensation consultants, and considers overall competitive compensation
arrangements of other automotive industry suppliers as well as a broad
5
range of companies, some of which may not be comparable to the Company for
Performance Graph purposes. The Committee does not however specifically link
remuneration of the CEO solely to quantitative measures of performance because
of the extremely competitive automotive markets served by the Corporation.
In determining the CEO's compensation, the Committee further considers
the Company's improvement, on an operating basis, of its financial position,
improvement in its financial structure, and improvement in shareholder value.
As with the other executives, factors considered by the Committee in its
recommendation to the full Board of the CEO's compensation are generally
subjective.
The CEO's long-term bonus plan, set forth in the 1995 proxy statement,
the amount under which the CEO could earn out under the plan depending on
certain performance goals set forth for the fiscal years 1995 and 1996, was
not successfully met. This was due to a strike in one of the Company's
divisions and a strike at one of the Company's major customers. No bonus was
paid out under such plan. The Committee will continue studies of CEO incentive
programs.
Compensation Committee
Thomas W. Butler, Jr.
John J. Slavin
F. D. Tennent
W. T. ZurSchmiede, Jr.
Compensation Committee Interlocks and Insider Participation
One Member of the Committee, W.T. ZurSchmiede, Jr., is an officer of the
Company; one, the Committee Chairman, F.D. Tennent, is a former officer; and
one, John J. Slavin, is Of Counsel to Dykema Gossett PLLC which regularly
provides legal services to the Company. There are no "interlocks" as defined
by the Securities and Exchange Commission.
6
Executive Compensation
The following table sets forth information with respect to the
compensation paid by the Company during the Company's last three fiscal years,
to (i) the Chief Executive Officer of the Company and (ii) each of the four
highest compensated executive Officers of the Company whose compensation
exceeded $100,000.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------- Restricted
Other Annual Stock All Other
Name and Principal Position Year Salary Bonus(1) Compensation (2) Awards (3) Compensation (4)
--------------------------- ---- -------- ----------- ---------------- ------------ ----------------
W. T. ZurSchmiede, Jr. ...... 1996 $295,000 $181,000 $42,200 0 $13,575
Chairman of the Board and 1995 295,000 320,000 32,900 0 11,993
Chief Executive Officer, 1994 279,250 140,000 63,550 0 7,281
Chief Financial Officer,
Secretary and Treasurer
Thomas ZurSchmiede .......... 1996 290,000 181,000 0(2) 0 27,648
President and C.O.O. 1995 290,000 180,000 43,200 0 11,040
1994 227,873 140,000 0 0 2,622
Robert F. ZurSchmiede ....... 1996 240,000 181,000 0(2) 0 19,507
Vice President -- 1995 240,000 180,000 39,000 0 8,300
Romulus Divisions 1994 201,500 130,000 0 0 1,366
J. M. O'Brien ............... 1996 240,000 181,000 43,732 0 26,123
Vice President -- 1995 240,000 180,000 43,600 0 11,657
Sales and Marketing 1994 201,500 130,000 0 0 1,319
Jeffrey M. Harness .......... 1996 210,000 202,000(1) 33,327 0 11,533
Vice President -- Chelsea 1995 210,000 80,000 34,600 0 3,551
and Brighton Divisions 1994 169,166 80,000 0 0 991
<FN>
- ----------------
(1) A Cash Bonus Plan, the eligible participants in which are the Officers of
the Company, was adopted for the fiscal year ended June 30, 1989, and has
been in effect each subsequent year. The bonus fund is subject to
discretionary award by the Board to those eligible participants
recommended to the Board by the Chief Executive Officer and the Salary
Compensation Committee. Any accrued bonus fund not awarded may be carried
forward for award in the current or subsequent years. Under the Plan no
allocation is made to the bonus fund in any fiscal year in which pre-tax
earnings fail to exceed a base amount equal to eight (8%) percent of
beginning of the year shareholders' equity. In any year that pre-tax
earnings exceed the base amount, an allocation is made to the bonus fund
calculated as a percentage of pre-tax earnings, the percentage being equal
to the sum of one (1%) percent plus .04 of 1% for each $10,000 that
pre-tax earnings exceed the base amount. The maximum percentage allowable
is 9-1/2%. For the fiscal year ended June 30, 1996, the base amount was
$2,476,571, the percentage allowance was 9-1/2% and the fund allocation
was $866,000 all of which was awarded by the Board. The Plan has been
continued for the fiscal year to be ended June 30, 1997, with the base
amount of pre-tax earnings required for allocation being increased to
$2,712,063 as a result of a $2,943,652 increase in shareholders' equity.
Pre-tax earnings is defined to exclude the effect of FAS 106. For Jeffrey
M. Harness, the amount shown for 1996 includes $60,000 deferred from the
fiscal 1995 bonus fund, and awarded in fiscal 1996.
(2) The amount shown for each officer in 1996 includes special payments to
assist them in obtaining life insurance in lieu of the Company undertaking
such expense directly, and gross-up payments for tax liabilities on such
insurance premium payments, at each officer's effective tax rate, as
follows: W. T. ZurSchmiede, Jr., $22,385 (premium), $19,815 (tax liability
gross-up); J. M. O'Brien, $23,200 and $20,532; Jeffrey M. Harness, $18,180
and $15,147. No payment for insurance premiums is shown for Robert F.
ZurSchmiede or Thomas ZurSchmiede in fiscal 1996; the due date for
insurance premium payments for
7
1996 and thereafter was changed by the insurance carrier to fall on
birthdays; consequently their premium payments will be in November, 1996,
and January, 1997, respectively, and will be set forth in the 1997 proxy
statement.
(3) Subject to the contingencies of death, or retirement under the Company's
Salaried Employees' Retirement Plan, the Restricted Stock Bonus Plans
require that each Participant "earn out" awarded shares over a period
which extends to the earlier of ten years or the Participant's normal
retirement date. During the period of restriction, the certificates
representing the shares are deposited with the Company. The dividend paid
to shareholders of the Company is paid on these shares. At June 30, 1996,
the aggregate number and market value (at the then amount of $26.00/share)
of unvested restricted shares of Company common stock held by each of the
named executive Officers were: W. T. ZurSchmiede, Jr., 4,200 shares valued
at $109,200; Robert F. ZurSchmiede, 5,800 shares valued at $150,800;
Thomas ZurSchmiede, 5,800 shares valued at $150,800; J. M. O'Brien, 5,800
shares valued at $150,800; and Jeffrey M. Harness, 4,000 shares valued at
$104,000. No restricted stock awards were made in the 1994, 1995, or 1996
fiscal years.
(4) The amounts shown consist of the Company-paid portion of the premiums on
additional term life insurance, and cash payments, including tax
liabilities, to compensate each officer for the reduction in the Company's
Salaried Pension Plan contribution for 1996 due to certain Internal Revenue
Service regulations, as follows: W. T. ZurSchmiede, Jr., $13,575 (term
insurance); Thomas ZurSchmiede, $3,363 (term insurance) and $24,321
(pension reduction and related tax-liability compensation); Robert F.
ZurSchmiede, $1,151 and $18,356; J. M. O'Brien, $1,469 and $24,654; Jeffrey
M. Harness, $961 and $10,572.
8
Comparative Performance Graph
The graph below compares the cumulative total shareholder return on the
common stock of the Company for the last five fiscal years with the cumulative
total return on the S&P 500 Index and a Peer Group over the same period
(assuming initial investment of $100 in the Company's common stock, the S&P
500 Index and the Peer Group, and reinvestment of all dividends).
COMPARISON OF 5 YEAR TOTAL RETURN
FEDERAL SCREW WORKS, S&P 500 INDEX & A PEER GROUP
[ PERFORMANCE CHART GRAPHIC APPEARS HERE ]
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Federal Screw Works .. 100 148 174 199 275 336
S&P 500 Index ........ 100 113 129 131 165 208
Peer Group ........... 100 130 136 137 145 225
<FN>
(1) Four companies included in the self-determined Peer Group in the Company's
1995 Proxy Statement (Elco Industries, Hi-Shear Industries, Inc., Medalist
Industries, Inc., and RB&W Corporation) are no longer publicly-traded
companies as a result of stock purchase, merger, going-private or similar
transactions. The Peer Group for the graph shown above included the three
remaining companies from the 1995 Peer Group (Chicago Rivet & Machine Co.,
Penn Engineering & Manufacturing Corp., and SPS Technologies) and four new
companies (SPX Corp., Simpson Industries, Inc., Park Ohio Industries,
Inc., and Hastings Mfg. Co.) to replace those which are no longer publicly
traded.
In determining the Peer Group, the Company selected primarily automotive
suppliers, companies which may be considered generally comparable in size
or larger, with similar labor markets, are direct or partial competitors
to the Company, are primarily metal working companies, and have a steady
record of earnings. The index is weighted based upon the beginning of
period market capitalization values.
Certain Relationships and Related Transactions
Mr. Hugh G. Harness took early retirement as President and C.O.O. of the
Company effective February 1, 1994. Mr. Harness agreed to perform consulting
services for the Company for eight years with compensation for those services
commencing in 1994 at $130,200 with annual reductions of $5,000 a year to
9
$95,200 in 2001. Mr. Harness' retirement supplement reported in previous Proxy
Statements as in the monthly amount of $3,333, was increased to $4,000,
payable for 120 months, commencing at his retirement. Mr. Harness'
participation in the Cash Bonus Plan, reported in prior Proxy Statements, was
terminated. Restricted shares of Company stock unvested as of June 30, 1996 in
the number of 2,800 shares valued at $72,800 will continue to vest in
accordance with the vesting schedules provided for in the grants.
Restricted Stock Bonus Plans
The Board of Directors adopted a Restricted Stock Bonus Plan in 1979,
and an Employee Restricted Stock Bonus Plan in 1983, for allocation of
restricted shares of the Company's common stock to officers and other
employees of the Company in recognition of their past contributions, and to
encourage their future contributions, to the profitability of the Company.
Allocations of restricted shares to individual employees are recommended to
the Board by the Restricted Stock Bonus Committee, taking into consideration
evaluations by management. Among the factors considered by the Committee are
improvement in earnings, the Company's performance in relation to others in
its field of business, the results of the particular Division of the Company
in which an individual is employed, the performance of individual employees
and such other factors as the Committee may deem relevant. The Plan is
administered by the Restricted Stock Bonus Committee of the Board, none of the
members of which are employees of the Company or eligible to receive such
awards. No bonus shares were awarded during fiscal 1996. See further note 3 to
the Summary Compensation Table, page 8.
Retirement Supplement
W. T. ZurSchmiede, Jr. in 1986 entered into an agreement with the Company
pursuant to which he has earned out supplemental retirement benefits for 120
months after retirement by remaining in the Company's employ until age 65. The
Company may terminate such payments if, at any time, the employee shall fail or
refuse to provide advice and counsel to the Company when reasonably requested
to do so. The monthly supplement provided for Mr. ZurSchmiede, Jr. is $4,166,
the monthly disability is $3,332 and the death benefit is $333,000. Mr.
ZurSchmiede Jr.'s supplement is fully funded by charges to operations in prior
years.
Salaried Pension Plan
The Company maintains a Salaried Pension Plan, which covers all salaried
employees. The remuneration covered by the Plan is salary only. The
approximate years of credited service for the officers named in the Summary
Compensation Table are: W. T. ZurSchmiede, Jr., 29, Robert F. ZurSchmiede, 18,
Thomas ZurSchmiede, 15; J. M. O'Brien, 21; Jeffrey M. Harness, 16. The maximum
salary taken into account in calculating plan benefits is limited to $55,000,
in order to comply with requirements of the Internal Revenue Code. Company
contributions are computed on an actuarial basis which provides for fixed
benefits in the event of retirement at a specific age or after a specified
number of years of service. Contributions by the Company are, therefore, made
to the Plan in the aggregate and the amount of the contribution, payment, or
accrual in respect of a specified person is not and cannot readily be
separately or individually calculated by the regular actuaries for the Plan.
The following table illustrates representative retirement benefits at the
maximum levels for various service periods for employees under the Plan.
Average Salary During Annual Normal Retirement Benefits
The Final Ten Years For Years of Credited Service
of Service Indicated(1)
--------------------- -------------------------------------
15 20 25 30
------- ------- ------- -------
$55,000 ...................... $15,675 $20,900 $26,125 $26,125
<FN>
- ----------------
(1) Payable on a Life and 10 Year Certain basis. Life Only Option is not
available under the Plan. For married participants, however, the form of
benefit payment is the qualified 50% or 100% Joint and Survivor Annuity,
unless another form is elected. Benefits are increased actuarially for
late retirement. The benefit amounts set forth are not subject to any
reduction for Social Security benefits.
The amount payable to Plan participants may not be less than their June 30,
1995 accrued benefit. The estimated annual accrued benefits effective as of
June 30, 1995 are: Jeffrey M. Harness, $15,576; J. M.
10
O'Brien, $26,244; Robert ZurSchmiede, $22,800; Thomas ZurSchmiede, $21,492.
W. T. ZurSchmiede, Jr. elected to receive his plan benefit in a single lump
sum payment on July 1, 1995.
401K Savings Plan
The Company adopted, effective September 1, 1993, a 401(k) tax deferred
savings plan. This plan is available to all eligible employees, essentially
all full time, non-organized employees. The plan is non-contributory, that is,
the Company does not match any portion of the employees' contributions. The
Company does, however, bear the costs of administering the plan, which are
expected to be about $12,500 per year. Employees may contribute up to 20% of
their annual compensation, but not more than the maximum amount permitted
under the Internal Revenue Code. Comerica Bank is the Trustee of the plan.
Contributions are invested in one or more of six no-load mutual funds
sponsored by Comerica Bank, and two Fidelity mutual funds, as selected by each
employee.
Board of Directors and Committees
Directors who are employees of the Company receive no compensation in
addition to their salaries and benefits received as employees. Directors who
are not employees of the Company are paid quarterly a retainer fee of $4,500
for all services as a Director. In addition, the Chairman of the Audit
Committee receives $750 quarterly and the Chairman of the Salary Compensation
Committee receives $750 quarterly. Each Director is a party to an agreement
with the Company under which it confirms to him the indemnity provided for
Directors under the Michigan Business Corporation Act and secures that
undertaking by providing for relating bank Letters of Credit, Trusts or other
arrangements.
To attract, retain and motivate service on the Company's Board of
Directors, the Company has a retirement plan for Directors who are not also
employees of the Company. A Director who has served at least five years on the
Board of Directors is entitled to a retirement benefit beginning as of the
first day of the fiscal quarter next following the date of termination of his
or her directorship. The benefit will be paid quarterly for a period of time
equal to the years of Board service of the Director but not to exceed fifteen
years (10 years if the recipient is not the Director or his spouse) and will
be in the amount of the quarterly base retainer fee being paid to the Director
at the time of his or her termination as a Director or the above quarterly
retainer whichever is greater. Directors who are former employees of the
Company but who have at least one year of service on the Board as a
non-employee of the Company will be entitled to the same benefits as if all of
their Board service had been as a non-employee. The plan will be funded
pursuant to the terms of a so-called Rabbi trust created September 13, 1995.
The trust is irrevocable, but in the event all benefits payable under the plan
have been paid, all amounts remaining in the trust would be returned to the
Company. In the event of the insolvency (as defined in the trust agreement) of
the Company, all amounts held in trust would be subject to the claims of the
Company's creditors.
During the fiscal year ended June 30, 1996, the Board of Directors held
eight meetings. The Company has standing Audit, Salary Compensation, Finance
and Restricted Stock Bonus Committees but does not have a standing Nominating
Committee or any Committee performing similar functions.
The Audit Committee, comprising Messrs. Tennent (Chairman), Butler (Vice
Chairman) and Slavin, held two meetings during the year. Generally, the Audit
Committee recommends to the full Board the engagement or discharge of the
independent public accountants to be appointed for the Company; reviews the
proposed scope of the annual audit and the findings of the independent public
accountants upon completion of the annual audit; reviews the independence of
the public accountants and considers the range of their audit and non-audit
fees; reviews with the independent public accountants and with appropriate
corporate personnel the adequacy of internal procedures and controls and
monitors the Company's published policies on management integrity.
The Finance Committee, comprising Messrs. ZurSchmiede, Jr. (Chairman),
Harness and Tennent, held two meetings during the year. The Committee studies
and makes recommendations to the Board concerning fundamental financial
policies of the Company with particular reference to the incurring of material
corporate debt and material capital expenditures.
11
The Salary Compensation Committee comprising Messrs. Tennent (Chairman),
Butler (Vice Chairman), Slavin and ZurSchmiede, Jr., held one meeting during
the year. The Committee recommends the salaries of all elected officers,
including bonuses, and is responsible for the continuing study of executive
compensation, so that the Company may remain competitive in that regard.
The Restricted Stock Bonus Committee, comprising Board members who are
not employees of the Company and not eligible for any stock award pursuant to
the Plan (Messrs. Tennent, Chairman, Butler and Slavin), administers the
Company's Restricted Stock Bonus Plan. The Committee recommends the persons
who are to receive such awards, the form and amount of awards to be made to
each person and the conditions under which awards are restricted. The
Restricted Stock Bonus Committee did not meet during the year.
Relationship with Independent Public Accountants
The Board of Directors has reappointed Ernst & Young as independent
accountants to audit the financial statements of the Company for the current
fiscal year. One or more members of the firm of Ernst & Young are expected to
be present at the Annual Meeting of Shareholders, will be available to respond
to appropriate questions, and will be afforded the opportunity to make a
statement.
Compliance With Section 16(a) of the Exchange Act
Under Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors and its executive officers and persons who own more than
ten percent of the Company's equity securities are required to report
ownership of the Company's common stock and any changes in that ownership to
the Securities and Exchange Commission and to furnish to the Company copies of
all Section 16(a) forms they file. Based solely on review of the copies of
such forms furnished to the Company, and written representations of its
directors and executive officers, the Company believes that during the fiscal
year ended June 30, 1996 those filing requirements were met.
Concerning Other Matters Which May Come Before the Meeting
At the meeting, reports will be received from the Officers of the
Company relative to the operation, management and conduct of the Company
during the fiscal year ended June 30, 1996, but it is not contemplated that
there will be any vote in respect of any of said matters. Management is not
aware of any other matters to be presented for action at the meeting, and it
is not intended to bring any other matters before the meeting, except those
specifically set forth above. However, should any other matters requiring the
vote of the Shareholders arise, the persons named in the enclosed form of
Proxy will vote such Proxy according to their best judgment.
Proposals for 1997 Annual Meeting
Shareholder proposals pursuant to Rule 14(a)(8) promulgated under the
Securities Exchange Act of 1934 must be received by the Company no later than
May 31, 1997 in order to be included in the Company's Proxy Statement and Form
of Proxy for that meeting. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating
to shareholders' proposals.
Concerning Expenses of Proxies Solicitation
The cost of soliciting Proxies will be borne by the Company. Proxies may
be solicited by mail, telegraph or telex, or by directors, officers and
regular employees of the Company in person or by telephone. The Company has
retained the services of Corporate Investor Communications, Inc. to assist in
the distribution of Proxy materials and to solicit Proxies from the banks,
brokers and nominees at a cost of not to exceed $4,500 plus reasonable
out-of-pocket expenses. The Company will also reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding the Proxy Statement and the Annual Report to the
beneficial owners of common stock of the Company.
12
It is important that Proxies be returned promptly in order that a quorum
of the Company's shares be represented at the Annual Meeting. Shareholders who
do not expect to attend the meeting in person are urged to execute and return,
without delay, the enclosed form of Proxy in the enclosed, stamped envelope.
By Order of the Board of Directors
W. T. ZurSchmiede, Jr., Secretary
Detroit, Michigan
September 27, 1996
P.S. Although not a part of the Proxy soliciting material, a copy of the
Company's Annual Report for the fiscal year ended June 30, 1996 is
enclosed herewith.
13
[ Form of Proxy -- Front ]
FEDERAL SCREW WORKS
The undersigned hereby constitutes and appoints Hugh G. Harness and Thomas
ZurSchmiede or either of them, attorneys and proxies with full power of
substitution to vote at the Annual Meeting of Shareholders of Federal Screw
Works, to be held on Thursday, October 24, 1996, or at any adjournment or
adjournments thereof.
The shares represented by this proxy will be voted as directed. Unless
authority is withheld, this proxy will be voted to elect as directors the
nominees shown.
Discretionary authority is hereby conferred as to any other matters as may
properly come before the meeting. The undersigned acknowledges receipt of the
Notice of Annual Meeting of Shareholders, the Proxy Statement dated September
27, 1996 and the Annual Report of Federal Screw Works to its shareholders for
the year ended June 30, 1996. The undersigned ratifies all that the proxies
or any of them or their substitutes may lawfully do or cause to be done by
virtue hereof and revokes all former proxies.
PLEASE VOTE, DATE, AND SIGN ON THE OTHER SIDE AND
RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
[ Form of Proxy -- Back ]
/ X / PLEASE MARK VOTES
AS IN THIS EXAMPLE
With- For All
For hold Except 2.) To act in their discretion upon the transaction of
1.) Election of Directors: / / / / / / such other business as may properly come before the
meeting.
Thomas W. Butler, Jr.
Robert F. ZurSchmiede
If you do not wish to direct the voting of your shares FEDERAL SCREW WORKS
for a particular nominee, mark the "For All Except" box
and strike a line through the Nominee(s) name. Your
shares will be voted for the remaining Nominee(s).
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date ____________ Mark box at right if address change has been noted
on the reverse side. / /
Shareholder sign here ____________ Co-owner sign here _________
DETACH CARD DETACH CARD