SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Under Rule 14a-12
SPS TECHNOLOGIES
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(Name of Registrant as Specified in Its Charter)
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(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)(1) 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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
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[graphic]
March 31, 2003
To our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
SPS Technologies, Inc. In honor of the Company's 100th anniversary, the
meeting will be held at the Company's manufacturing facility located at 301
Highland Avenue, Jenkintown, Pennsylvania 19046 at 10:00 a.m. on Tuesday,
April 29, 2003. A plant tour will be available to interested shareholders
after the conclusion of the meeting.
Details of the business to be conducted at the Annual Meeting are given in
the enclosed Proxy Statement. We will also present a report on the SPS
business results for the year 2002 and on other matters of current interest to
our shareholders.
Whether or not you attend the meeting, it is important that your shares be
represented and voted. We encourage you to read the enclosed Proxy Statement
and promptly execute and return your proxy card in the enclosed envelope or
vote your shares over the Internet or by telephone as indicated in the
enclosed instructions.
Sincerely,
/s/ John S. Thompson
John S. Thompson
Chief Executive Officer and President
Important
Please note that due to security procedures, you will be required to show a
form of picture identification to gain access to the Company's facility if you
plan to attend the Annual Meeting. We ask that you advise the Company of your
intention to attend the meeting by calling the Company's Investor Relations
Department at (215) 517-2001 or by sending an e-mail to ir@spstech.com.
Corporate Offices
Two Pitcairn Place
Suite 200
165 Township Line Road
Jenkintown
Pennsylvania 19046-2611
Phone (215) 517-2000
Fax (215) 517-2032
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SPS Technologies, Inc.
Two Pitcairn Place, Suite 200
165 Township Line Road
Jenkintown, Pennsylvania 19046
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Notice of Annual Meeting of Shareholders
The Annual Meeting of Shareholders of SPS Technologies, Inc. will be held on
Tuesday, April 29, 2003, at ten o'clock a.m., local time, at SPS Technologies,
Inc.'s manufacturing facility located at 301 Highland Avenue, Jenkintown,
Pennsylvania 19046, for the following purposes:
1. To elect two Class II directors for a term of three years; and
2. To transact such other business as may properly come before the meeting.
Record Date
The Board of Directors has fixed the close of business on March 11, 2003 as
the record date for the purpose of determining shareholders who are entitled
to notice of and to vote at the meeting.
By order of the Board of Directors,
James D. Dee
Secretary
March 31, 2003
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YOUR VOTE IS IMPORTANT
You are urged to mark, sign, date and promptly return your proxy card in the
enclosed envelope or vote your shares over the Internet or by telephone.
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Table of Contents
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Voting Procedures ........................................................ 1
Revocation of Proxy..................................................... 1
Cost of Soliciting Proxies.............................................. 1
Vote Required and Method of Counting Votes.............................. 1
Other Business.......................................................... 1
Ownership of Voting Securities ........................................... 2
Principal Beneficial Ownership ........................................ 2
Holdings of Executive Officers and Directors .......................... 3
Section 16(a) Beneficial Ownership Reporting Compliance .................. 4
Election of Directors* ................................................... 4
Class II - Nominees for a Three-Year Term ............................. 4
Class I - Directors with Terms Expiring in 2004 ....................... 5
Class III - Directors with Terms Expiring in 2005 ..................... 5
Board Meetings, Committees and Compensation of Directors ................. 6
Executive Compensation and Stock Option Committee ..................... 6
Directors Committee ................................................... 6
Audit Committee ....................................................... 7
Executive Compensation ................................................... 8
Summary Compensation Table ............................................ 8
Option Grants in Last Year Table ...................................... 9
Aggregated Option Exercises and Year-End Option Value Table ........... 9
Pension Benefits ......................................................... 10
Supplemental Executive Retirement Plan ................................ 10
Pension Plan Table .................................................... 10
Equity Compensation Plan Information ..................................... 11
Compensation of Directors ................................................ 12
Termination of Employment and Change of Control Arrangements ............. 12
Certain Relationships and Related Transactions ........................... 14
Audit Committee Report ................................................... 14
Independent Accountants and Related Fees ................................. 15
Compensation Committee Report on Executive Compensation .................. 16
Overview and Philosophy ............................................... 16
Executive Officer Compensation ........................................ 16
Chief Executive Officer Compensation .................................. 17
Common Stock Performance Graph ........................................... 18
Proposals of Shareholders ................................................ 19
*Bold indicates this year's proposals
Proxy Statement
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Voting Procedures
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This Proxy Statement and the enclosed proxy card are being furnished in
connection with the solicitation of proxies by the Board of Directors for use
at the Annual Meeting of Shareholders of SPS Technologies, Inc. ("Company"),
to be held on Tuesday, April 29, 2003, and at any adjournments or
postponements thereof. This Proxy Statement and the enclosed form of proxy are
first being mailed to shareholders on or about March 31, 2003.
Only record holders of Common Stock of the Company at the close of business on
March 11, 2003, are entitled to vote. Shareholders are requested to mark,
sign, date and return the enclosed proxy card in the envelope provided, or
submit your proxy by Internet or by telephone by following the instructions on
the proxy card. If you submit your proxy by Internet, you may incur costs
associated with electronic access, such as usage charges from Internet
providers and telephone companies. The Internet voting procedures are designed
to authenticate your identity, allow you to vote your shares, and confirm that
your instructions have been properly recorded. The Internet and telephone
voting facilities for shareholders of record will close at 11:00 P.M. Eastern
Standard Time on April 28, 2003. If you choose to mail your proxy card, we
have included a postage-paid envelope for your convenience. If you sign, date
and mail your proxy card without indicating how you want to vote, your proxy
will be voted as recommended by the Board of Directors.
The method by which you vote will not limit your right to vote at the annual
meeting if you later decide to attend in person.
Revocation of Proxy
If you later wish to revoke your proxy, you may do so by (1) sending a written
statement to that effect to the Secretary of the Company; (2) submitting a
properly signed proxy with a later date; (3) properly casting a new vote by
Internet or by telephone at any time prior to the closure of the Internet and
telephone voting facilities; or (4) by attending the meeting and voting in
person.
Cost of Soliciting Proxies
The Company will pay the cost of soliciting proxies and will reimburse
brokers, custodians, nominees and fiduciaries for the cost of forwarding
materials to beneficial owners. Directors, officers and employees may solicit
proxies, but they will not be specially compensated for such services.
Vote Required and Method of Counting Votes
o Number of Shares Outstanding. On March 11, 2003 there were issued and
outstanding 12,923,525 shares of Common Stock, par value $.50 per share.
Each share is entitled to one vote and, in the election of directors, has
cumulative voting rights. This means that shareholders have the right to
multiply the number of votes to which they may be entitled by the total
number of directors to be elected in the same election, and they may cast
the whole number of such votes for one nominee or may distribute them
among any two or more nominees. Proxy holders may vote for any or all of
the nominees. The Company intends to have the proxy holders exercise such
cumulative voting rights to elect the maximum number of nominees proposed
by the Board of Directors.
Unless otherwise directed, shares represented by proxies in the accompanying
form will be voted at the Annual Meeting or any adjournments or postponements
thereof FOR the election of the nominated directors as stated under the
heading "Election of Directors".
Other Business
The Company does not intend to bring any other matters before the meeting, and
we do not know of any additional proposals to be presented by others. However,
if any other matters properly come before the meeting, the persons named in
the accompanying proxy will vote on them in accordance with their best
1
judgment. Under the Company's By-laws, proposals of shareholders to be
presented at the meeting must be submitted in accordance with the procedures
summarized under the heading "Proposals of Shareholders."
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Ownership of Voting Securities
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Principal Beneficial Ownership
As of February 28, 2003, the Company knew the following persons to be the
principal beneficial owners of its voting securities:
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Name and Address Amount and Nature of Beneficial
of Beneficial Owner Ownership of Shares of Common Stock Percent of Class
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Gabelli Funds, LLC, 3,871,199(a) 29.9%
GAMCO Investors, Inc.,
Gabelli International Limited
Gabelli & Company, Inc.
Gabelli Group Capital
Partners, Inc. and
Mario J. Gabelli
One Corporate Center
Rye, NY 10580-1434
Tinicum Investors, 2,005,472(b) 15.5%
RIT Capital Partners plc,
Putnam L. Crafts, Jr., and
Eric M. Ruttenberg
990 Stewart Avenue
Garden City, NY 11530
Wachovia Corporation 863,928(c) 6.7%
One Wachovia Center
Charlotte, NC 28288-0137
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(a) Based on information supplied by the named entities in a joint filing on
Schedule 13D dated June 3, 2002, with the Securities and Exchange
Commission, as updated by the named entities through February 28, 2003.
According to such information, the named entities held sole, shared or no
voting and dispositive power over the shares as follows: Gabelli Funds, LLC
- 528,500 shares (sole voting and dispositive power); GAMCO Investors, Inc.
- 3,241,099 (sole voting and dispositive power) and 84,500 shares (no
voting and sole dispositive power); Gabelli International Limited - 2,600
(sole voting and dispositive power); Gabelli & Company, Inc. - 500 shares
(sole voting and dispositive power), Gabelli Group Capital Partners, Inc. -
1,000 shares (sole voting and dispositive power). Mr. Mario J. Gabelli is
the majority stockholder of Gabelli Group Capital Partners, Inc. (the
ultimate parent company of Gabelli Funds, LLC and GAMCO Investors, Inc.)
and individually owns 13,000 shares (sole voting and dispositive power) of
the Company's Common Stock.
(b) Based on information supplied by the named entities in a joint filing on
Schedule 13D dated January 24, 1997, with the Securities and Exchange
Commission, as updated by the named entities through February 28, 2003.
According to such information, the named entities held sole, shared or no
voting and dispositive power over the shares as follows: Tinicum Investors
- 1,528,138 shares (sole voting and dispositive power); RIT Capital
Partners plc - 264,622 shares (sole voting and dispositive power); Putnam
L. Crafts, Jr. - 200,000 shares (sole voting and dispositive power); and
Eric M. Ruttenberg - 12,712 shares (sole voting and dispositive power).
Eric M. Ruttenberg, a director of the Company, is a general partner of
Tinicum Investors.
(c) Based on information supplied by the named entity in a filing on Schedule
13G dated February 12, 2003, with the Securities and Exchange Commission,
as updated by the named entities through February 28, 2003. According to
such information, the named entity held sole, shared or no voting and
dispositive power over the shares as follows: 32,000 shares (sole voting
and shared dispositive power); 800 shares (sole voting and sole dispositive
power); 823,500 shares (no voting and shared dispositive power); 7,580
shares (sole voting and no dispositive power); 48 shares (no voting
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and sole dispositive power). Wachovia Corporation filed the Schedule 13G
pursuant to Rule 13d-1(b)(1)(ii)(G), as the parent company of Wachovia
Securities, Inc. and Wachovia Bank, National Association. Wachovia
Securities, Inc. is an investment advisor for mutual funds or other
clients. The securities reported by Wachovia Securities, Inc. are
beneficially owned by such mutual funds or other clients. Wachovia Bank,
National Association holds the securities reported in a fiduciary capacity
for its customers.
Holdings of Executive Officers and Directors
The following table shows information pertaining to the voting securities of
the Company beneficially owned, as of February 28, 2003, by each director, by
the Chief Executive Officer and President and five other executive officers.
This information has been supplied by each of the individuals involved.
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Name of Individual Number of Shares Number of Shares Total Shares Percent of Class
or Number of with Direct Acquirable Within Beneficially If 1% or
Persons in Group Beneficial Ownership 60 Days Owned(a) More(b)
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Charles W. Grigg 172,099 170,282 342,381 2.61%
Richard W. Kelso 5,870 0 5,870 -
James F. O'Connor 6,708 1,522 8,230 -
Eric M. Ruttenberg 7,712 5,000 12,712(c) -
Raymond P. Sharpe 6,308 4,646 10,954 -
John S. Thompson 20,000 68,000 88,000 -
Harry J. Wilkinson 103,560 0 103,560 -
James W. Zug 5,137 0 5,137 -
Thomas S. Cross 681 12,700 13,381 -
James D. Dee 3,725 24,000 27,725 -
William M. Shockley 16,951 43,400 60,351 -
Margaret B. Zminda 748 12,000 12,748 -
All Directors and Executive
Officers as a Group (13 persons) 350,592 346,050 696,642 5.23%
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(a) Beneficial ownership for purposes of this Proxy Statement is defined in
accordance with the requirements of Rule 13d-3 under the Securities
Exchange Act of 1934, which provides that the beneficial owner of a
security includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or
shares voting power or investment power with respect to such security, or
has the right to acquire such voting power or investment power through the
exercise of an option, warrant or right within 60 days. The individuals
named in the table each exercise sole voting and dispositive power over the
shares beneficially owned by them, except for 11,500 shares held by Mr.
Grigg's spouse.
(b) For purposes of calculating the percentage of the outstanding shares of
Common Stock on February 28, 2003 for each listed person, the number of
shares of Common Stock includes shares that may be acquired by such person
within 60 days of February 28, 2003 through the exercise of vested stock
options.
(c) The indicated shares of Common Stock are beneficially owned directly by Mr.
Ruttenberg. Mr. Ruttenberg is a general partner of Tinicum Investors, a
Delaware partnership ("Investors"), that had direct beneficial ownership of
1,528,138 shares of Common Stock as of February 28, 2003. Based on
understandings with certain other beneficial owners of Common Stock
described in a Statement on Schedule 13D dated January 24, 1997, as updated
by the named entities through February 28, 2003, Mr. Ruttenberg and
Investors may be deemed to have indirect beneficial ownership of an
additional 464,622 shares of Common Stock beneficially owned directly by
such other beneficial owners as of February 28, 2003. Mr. Ruttenberg
disclaims beneficial ownership of any shares of Common Stock beneficially
owned directly by Investors or such other beneficial owners.
3
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Section 16(a) Beneficial Ownership Reporting Compliance
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Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, as well as persons who beneficially own more
than 10 percent of the Company's Common Stock, to file initial reports of
ownership and reports of changes in ownership of Common Stock of the Company
with the Securities and Exchange Commission. To the Company's knowledge, based
solely on a review of copies of such reports filed with the Company by its
directors, executive officers and known 10% beneficial owners, and on written
representations from such persons, the Company believes that all reports
required to be filed during, or with respect to, the fiscal year of the
Company ended December 31, 2002 were filed on a timely basis.
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Election of Directors
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The Company currently has eight directors serving in three classes, consisting
of two classes of three members each and one class of two members. The term of
office of one class will expire each year. Members of each class are elected
for terms of three years. If there is a vacancy in any class, the vacancy may
be filled by the Board of Directors for the balance of the term of the class
in which the vacancy exists.
The terms of office of the two Class II directors expire this year.
Accordingly, shareholders are being asked to elect two Class II directors who
will hold office until the 2006 Annual Meeting of Shareholders and until their
successors are duly elected and qualified. Unless you indicate otherwise, your
proxy will be voted in favor of the election of each of the nominees named
below for a three-year term. Should any nominee become unavailable for
election for any unforeseen reason, the Board of Directors or the Executive
Committee of the Board of Directors will determine how the proxies will be
voted. The two nominees who receive the highest number of votes cast at the
meeting will be elected as Class II directors.
Listed below are the names of, and certain other information regarding, the
two nominees for election as Class II directors, and the other six directors
who will be continuing in office following the meeting.
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CLASS II - NOMINEES FOR A THREE-YEAR TERM
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Raymond P. Sharpe
Age: 54 Director since 1994
Mr. Sharpe has been Chief Executive Officer of Cookson Electronics, Inc., a
supplier of specialty chemicals, metals, printed circuit board laminates and
equipment to the printed circuit board fabrication and electronic assembly
market, since July of 1995. Mr. Sharpe was Executive Vice President of Cookson
America, Inc., and Chief Operating Officer of the Electronic Materials
Division from October of 1987 to June of 1995. He is also a director of
Cookson Group plc.
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James F. O'Connor
Age: 62 Director since 1997
Mr. O'Connor has been Managing Director of The Chartwell Company, a private
merchant and investment bank, since December of 1998. Mr. O'Connor was
Executive Director of Corporate Development for the BBA Group plc, serving the
aviation and materials technology markets worldwide, from September of 1994 to
December of 1998. He is also a director of PC Cox Holdings Ltd. and a trustee
of Blessed John XXIII Seminary.
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CLASS I - DIRECTORS WITH TERMS EXPIRING IN 2004
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Charles W. Grigg
Age: 63 Director since 1993
Mr. Grigg has been Chairman of the Board since December of 1993, and held the
titles of Chief Executive Officer of the Company from December of 1993 until
April of 2002, and President of the Company from April of 1997 until October
of 1999. Mr. Grigg was President and Chief Operating Officer of Watts
Industries, Inc., a manufacturer of valve products, from 1986 to 1993. He is
the Chairman of the Board and a director of Selkirk Americas, L.P. and a
director of Haskel International, Inc. He is also a Limited Partner of Tinicum
Capital Partners, L.P. and a General Partner of Tinicum Lantern LLC.
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Richard W. Kelso
Age: 65 Director since 1995
Mr. Kelso was President and Chief Executive Officer of PQ Corporation, a
global manufacturer of inorganic chemicals, high performance catalysts and
functional glass products, from January of 1991 until his retirement in
September of 2000.
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James W. Zug
Age: 62 Director since 2001
Mr. Zug was employed from 1964 until his retirement in July of 2000 as a
partner with PricewaterhouseCoopers LLP, the Company's independent
accountants. From July of 1998 until his retirement, he held the title of
Global Leader - Global Deployment for PricewaterhouseCoopers. From October of
1993 until June of 1998, Mr. Zug held the title of Managing Director -
International for Coopers and Lybrand. He also held the position of Audit
Engagement Partner from 1994 through 1998. Mr. Zug serves on the Board of
Directors of the Philadelphia Orchestra Association, the Kimmel Center for the
Performing Arts, Amkor Technology, Inc., Stackpole, Ltd., Episcopal Academy,
the Brandywine Fund, Inc. and the Brandywine Blue Fund, Inc. He is also a
member of the Board of Governors of the Merion Golf Club.
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CLASS III - DIRECTORS WITH TERMS EXPIRING IN 2005
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Harry J. Wilkinson
Age: 65 Director since 1986
Mr. Wilkinson was President and Chief Operating Officer of the Company from
June of 1987 to March of 1997. He retired from the Company in March of 1998.
Mr. Wilkinson is a director of Phillips Screw Company and Flexible Circuits,
Inc.
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Eric M. Ruttenberg
Age: 47 Director since 1991
Mr. Ruttenberg has been General Partner of Tinicum Investors, an investment
management company, since December of 1994. He has been the Managing Member of
the general partner of Tinicum Capital Partners, L.P., a private investment
partnership, since 1998. He is a director of Environmental Strategies
Corporation, Haynes Holdings, Inc., Haskel International, Inc., and Selkirk
Americas, L.P. He is also a trustee of Mount Sinai Medical Center and St.
Paul's School.
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John S. Thompson
Age: 55 Director since 2000
Mr. Thompson has been Chief Executive Officer and President of the Company
since April of 2002, and held the title of President and Chief Operating
Officer from October of 1999 until April of 2002. Mr. Thompson was employed
from 1975 until 1999 with BTR PLC, a diversified engineered products company,
and was a member of BTR PLC's Board of Directors and Executive Committee. From
1993 until October of 1999, he held the title of President & Chief Executive
of BTR, Inc., the U.S. holding company of BTR PLC.
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Board Meetings, Committees and Compensation of Directors
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During 2002, the Company's Board of Directors held six meetings. Additionally,
during 2002, the Executive Compensation and Stock Option Committee held three
meetings, the Directors Committee held one meeting, and the Audit Committee
held five meetings.
Executive Compensation and Stock Option Committee
The Executive Compensation and Stock Option Committee is composed of Messrs.
Sharpe (Chairman), O'Connor, Ruttenberg and Zug. The primary functions of the
Executive Compensation and Stock Option Committee are to:
o Fix the salaries and other compensation of all officers and key executives
of the Company other than the Chairman, Chief Executive Officer and the
President of the Company (whose compensation is fixed by the Board of
Directors);
o Evaluate the Company's executive compensation programs to ensure that they
remain effective in attracting and retaining managerial talent; and
o Administer certain of the Company's executive incentive compensation and
stock option plans, including the granting of awards as provided in those
plans.
Directors Committee
The Directors Committee is composed of Messrs. Kelso (Chairman), O'Connor,
Ruttenberg, Sharpe and Wilkinson. The primary functions of the Directors
Committee are to:
o Nominate candidates for election to the Board of Directors;
o Recommend nominees for service on its standing committees;
o Review programs for senior management succession;
o Make recommendations to the Board on matters of directors' compensation,
benefits, retirement and tenure policy; and
o Consider nominees for director recommended by shareholders.
6
The Directors Committee will consider shareholder nominations in accordance
with the Company's By-laws. To be considered, notice of a nomination must be
received at least 60 days before the date of the relevant Annual Meeting of
Shareholders. The notice must include:
o The name and address of the nominating shareholder;
o A representation that the shareholder is entitled to vote at the meeting
and intends to appear in person or by proxy at the meeting;
o The name, age, business and residence addresses and principal occupation
of the proposed nominee;
o A description of any and all arrangements or understandings between the
shareholder and each proposed nominee;
o Any other information that would be required by the Securities and
Exchange Commission to be included in a Proxy Statement soliciting proxies
for the election of the proposed nominee; and
o The signed consent of each proposed nominee to serve as a director if
elected.
The Board may require any proposed nominee to furnish other information
reasonably required to determine the proposed nominee's eligibility and
qualifications to serve as a director. Under Pennsylvania law, to be eligible,
a nominee must be an individual 18 years of age or older. Factors relevant to
a nominee's qualifications would include:
o Experience or lack thereof in managing business enterprises;
o Service on other boards of directors;
o Potential or actual conflicts of interest;
o Expertise in a field related to the Company's business;
o Criminal record; and
o Other similar information.
If the Board (after affording the shareholder a reasonable opportunity to cure
any deficiency in the original notice) determines that an individual was not
proposed in accordance with the By-laws, then such individual would not be
eligible for nomination and election as a director. If a nominee is determined
to have been properly proposed by a shareholder, and the Directors Committee
determines not to nominate the person, the shareholder proposing such person
may nominate the candidate at the meeting. The Company will furnish a copy of
its By-laws specifying the requirements for nominations for director to any
shareholder without charge upon written request to the Secretary of the
Company.
Audit Committee
The Audit Committee of the Board of Directors is composed of Messrs. Zug
(Chairman), Kelso, O'Connor and Sharpe. The primary functions of the Audit
Committee are to:
o Meet periodically with the Company's management, internal auditors and
independent accountants to review with each whether they are properly
discharging their respective responsibilities; and
o Make recommendations to the Board of Directors to select and retain the
Company's independent accountants, to establish the scope of their
accounting services and to approve related fees.
In 2002, all of the directors attended more than 75% of the aggregate of the
meetings of the Board and the committees of the Board on which they served.
7
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Executive Compensation
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The following table sets forth, for the Company's fiscal years ended December
31, 2000 through 2002, the total annual and long-term compensation of the
Chief Executive Officer and President and the five other most highly
compensated executive officers of the Company serving in such capacity as of
December 31, 2002 (the "Named Officers").
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Summary Compensation Table
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Annual Compensation Long-Term Compensation
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Awards Payouts
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Other Securities
Annual Underlying All Other
Compen- Restricted Options Long-Range Compen-
Name and Salary Bonus sation Stock Granted Incentive Bonus sation
Principal Position Year ($)(1) ($)(2) ($)(3) ($)(4) (#) ($)(5) ($)(6)
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John S. Thompson 2002 500,000 187,500 6,000 0 30,000 0 4,712
Chief Executive Officer 2001 420,000 0 7,000 0 20,000 0 2,622
and President 2000 400,000 110,160 6,000 0 15,000 0 2,622
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Charles W. Grigg 2002 300,000 112,500 38,257 0 5,000 0 1,374,504
Chairman 2001 617,400 0 35,801 0 20,000 0 1,744,114
2000 588,000 194,275 31,715 0 15,000 0 2,059,069
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William M. Shockley 2002 300,000 75,000 0 0 15,000 0 305,842
Vice President, Chief 2001 300,000 0 0 0 10,000 0 105,733
Financial Officer 2000 285,000 62,786 0 0 6,000 0 190,572
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James D. Dee 2002 190,000 41,563 0 0 3,000 0 744
Vice President, General 2001 190,000 0 0 0 3,000 0 499
Counsel and Secretary 2000 175,000 33,075 0 0 3,000 0 40,579
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Thomas S. Cross 2002 141,000 26,438 0 0 2,500 0 363
Vice President, Human 2001 141,000 0 0 0 2,500 0 800
Resources 2000 134,000 22,150 0 0 2,500 0 509
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Margaret B. Zminda 2002 141,000 26,438 0 0 2,500 0 835
Treasurer, Assistant 2001 141,000 0 0 0 2,500 0 68,749
Secretary and Director, 2000 134,000 22,150 0 0 2,500 0 335
Investor Relations
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(1) Amounts shown include deferrals (where applicable) by the Named Officers
under the Company's Executive Deferred Compensation Plan.
(2) Amounts shown reflect cash payments to the Named Officers under the
Company's Management Incentive Plan.
(3) Amounts shown include directors' fees for 2002 through 2000, respectively
as follows: for Mr. Grigg - $6,000, $7,000 and $6,000 and for Mr. Thompson
- $6,000, $7,000 and $6,000. Amounts shown also reflect, for Mr. Grigg,
interest accrued in excess of 120% of the applicable federal long-term rate
with respect to the Company's Executive Deferred Compensation Plan.
(4) As of December 31, 2002 the value of restricted shares held by the Named
Officers was as follows: Mr. Grigg $110,841 (4,667 shares); Mr. Shockley
$23,512 (990 shares); Mr. Dee $10,854 (457 shares); Mr. Cross $2,137 (90
shares) and Ms. Zminda $5,842 (246 shares). The restricted shares are
valued using a fair market value of $23.75 per share, which represents the
closing market price of the stock on December 31, 2002. Mr. Thompson held
no restricted shares as of December 31, 2002.
(5) Amounts shown reflect cash payments to the Named Officers under the
Company's Long Range Incentive Plan.
8
(6) Amounts shown include payments by the Company on behalf of the Named
Officers for term-life insurance. Amounts shown also reflect compensation
from the exercise of stock options for Messrs. Grigg and Shockley in 2002,
2001 and 2000, respectively, of $1,367,592 (53,000 shares) and $305,002
(14,000 shares) for the year 2002; $1,737,202 (45,704 shares) and $104,911
(3,000 shares) for the year 2001; and $2,052,157 (57,407 shares) and
$189,863 (6,000 shares) for the year 2000. Mr. Dee received compensation
from the exercise of stock options in 2000 of $40,125 (2,000 shares). Ms.
Zminda received compensation from the exercise of stock options in 2001 of
$68,391 (3,000 shares). Mr. Thompson and Mr. Cross did not receive
compensation from the exercise of stock options in 2002, 2001 or 2000.
The following tables provide information concerning the number and value of
option grants during the last year and the number and value of options to
purchase the Company's Common Stock held by each of the Named Officers as of
December 31, 2002. All options outstanding were granted under the SPS 1988
Long Term Incentive Stock Plan or pursuant to contractual agreements with the
employee at 100% of the fair market value of the Company's Common Stock on the
date of grant. The vesting provisions of the options are determined by the
Executive Compensation and Stock Option Committee.
- -----------------------------------------------------------------------------------------------------------------------------------
Option Grants in Last Year Table
- -----------------------------------------------------------------------------------------------------------------------------------
Potential
Realizable
Value at Assumed
Annual Rates of
Stock
Price Appreciation
for
Individual Grants Option Term
- -----------------------------------------------------------------------------------------------------------------------------------
% of Total
Options
Number of Granted to
Securities All
Underlying Employees Exercise
Options in Last Price Expiration
Name Granted Year ($/Sh) Date 5%($) 10%($)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
John S. Thompson 30,000 18.87% 34.435 Feb. 12, 2012 649,680 1,646,416
- -----------------------------------------------------------------------------------------------------------------------------------
Charles W. Grigg 5,000 3.15% 34.435 Feb. 12, 2012 108,280 274,403
- -----------------------------------------------------------------------------------------------------------------------------------
William M. Shockley 15,000 9.44% 34.435 Feb. 12, 2012 324,840 823,208
- -----------------------------------------------------------------------------------------------------------------------------------
James D. Dee 3,000 1.89% 34.435 Feb. 12, 2012 64,968 164,642
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas S. Cross 2,500 1.57% 34.435 Feb. 12, 2012 54,140 137,201
- -----------------------------------------------------------------------------------------------------------------------------------
Margaret B. Zminda 2,500 1.57% 34.435 Feb. 12, 2012 54,140 137,201
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregated Option Exercises and Year-End Option Value Table
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Value of Unexercised
Unexercised "In-the-Money"
Options at Options at Year-End
Year-End ($)(1)
Number of
Shares Dollar
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
John S. Thompson -- -- 55,000/85,000 --
- -----------------------------------------------------------------------------------------------------------------------------------
Charles W. Grigg 53,000 1,367,592 155,482/46,000 641,800/ 0
- -----------------------------------------------------------------------------------------------------------------------------------
William M. Shockley 14,000 305,002 35,200/35,800 20,150/ 0
- -----------------------------------------------------------------------------------------------------------------------------------
James D. Dee -- -- 20,200/9,800 --
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas S. Cross -- -- 10,600/8,900 --
- -----------------------------------------------------------------------------------------------------------------------------------
Margaret B. Zminda -- -- 10,100/7,400 --
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Unexercised options are valued using a fair market value of $23.78 per
share which represents the average trading price of the Company's stock on
December 31, 2002.
9
- --------------------------------------------------------------------------------
Pension Benefits
- --------------------------------------------------------------------------------
Supplemental Executive Retirement Plan
The following table shows the amount of annual straight life annuity benefits
that a Named Officer, with the exception of Mr. Cross and Ms. Zminda, would
receive commencing at age 65 for the years-of-service indicated under the
Company's Supplemental Executive Retirement Plan as amended and restated
effective July 31, 2001 (SERP). The SERP is a non-qualified unfunded plan in
which an enhanced retirement benefit is accrued based upon the participant's
final five-year average pensionable earnings and years-of-service. Such amount
would be reduced by amounts payable from (i) the Company's Retirement Income
Plan (RIP), a qualified cash balance plan in which the benefit is determined
by Company contribution credits based on age and years-of-service, and
interest credits based on one-year Treasury rates; (ii) the Benefit
Equalization Plan (BEP), a non-qualified unfunded plan which makes up
retirement benefit reductions under the RIP due to ceilings established by the
Internal Revenue Code and/or reductions due to participation in the Executive
Deferred Compensation Plan; and (iii) primary social security benefits.
- -----------------------------------------------------------------------------------------------------------------------------------
Pension Plan Table
- -----------------------------------------------------------------------------------------------------------------------------------
Years of Service
- -----------------------------------------------------------------------------------------------------------------------------------
Average Base 15 or More
Salary for Five-Year 5 Years 10 Years Years
Period Preceding Retirement Service Service Service
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
$150,000 30,000 60,000 90,000
200,000 40,000 80,000 120,000
250,000 50,000 100,000 150,000
300,000 60,000 120,000 180,000
350,000 70,000 140,000 210,000
400,000 80,000 160,000 240,000
450,000 90,000 180,000 270,000
500,000 100,000 200,000 300,000
550,000 110,000 220,000 330,000
600,000 120,000 240,000 360,000
Mr. Cross' estimated total annual life annuity payable from the Company's RIP
and BEP (as described above) at the normal retirement age of 65 is $67,800. He
will reach age 65 in June of 2016, at which time he would have 41 years of
service.
Ms. Zminda's estimated total annual life annuity payable from the Company's
RIP and BEP (as described above) at the normal retirement age of 65 is
$80,100. She will reach age 65 in November of 2023, at which time she would
have 40 years of service.
As of December 31, 2002, the years of credited service for the Named Officers
were as follows: Mr. Grigg - 19; Mr. Thompson - 27; Mr. Shockley - 11; Mr. Dee
- - 14; Ms. Zminda - 19; Mr. Cross - 28.
For Mr. Grigg, years-of-service includes service with Watts Industries, Inc.
Mr. Grigg's straight life annuity benefit payable at age 65 will be reduced by
benefits payable under the Watts Industries, Inc. Supplemental Employees
Retirement Plan.
For Mr. Thompson, years-of-service includes service with BTR, Inc. Mr.
Thompson's straight life annuity benefit payable at age 65 will be reduced by
benefits payable under the BTR, Inc. Qualified Salaried Pension Plan.
10
- --------------------------------------------------------------------------------
Equity Compensation Plan Information
- --------------------------------------------------------------------------------
The following table summarizes information, as of December 31, 2002, relating
to equity compensation plans of the Company pursuant to which grants of
options, restricted stock, restricted stock units or other rights to acquire
shares may be granted from time to time.
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Securities
remaining available for
Number of Securities to Weighted-average future issuance under
be issued upon exercise exercise price of equity compensation plans
of outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
Plan Category (a) (b) (3) (c)
- -----------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by security
holders (1) 1,041,405 $35.71 329,475
- -----------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved by security
holders (2) 60,000 $39.68 87,561
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,101,405 $35.93 417,036
- -----------------------------------------------------------------------------------------------------------------------------------
(1) This plan is the SPS 1988 Long Term Incentive Stock Plan.
(2) This includes the SPS Restricted Stock Award Plan and SPS Non-Qualified
Stock Option Grants. The Restricted Stock Award Plan is used solely for the
issuance of the restricted shares related to incentive compensation awards
earned under the Company's Long-Range Incentive Plan. Non-Qualified Stock
Option Grants are utilized for grants of stock options to employees
pursuant to agreements entered into at the time of the employee's hiring by
the Company.
(3) Weighted average exercise price of outstanding options exclude restricted
shares of common stock.
11
- --------------------------------------------------------------------------------
Compensation of Directors
- --------------------------------------------------------------------------------
Each director who is not an employee of the Company receives an annual
retainer of $17,000 plus a fee of $1,000 for each meeting of the Board of
Directors or one of its committees he attends. Each director who is an
employee of the Company receives a fee of $1,000 for each meeting of the Board
of Directors he attends. On May 2, 1995 each non-employee director received a
restricted share award in the amount of $25,000, or 1,530 shares, based upon
the fair market value of the Company's Common Stock on that date of $16.3438
per share. Mr. Kelso, who was appointed as a director on October 24, 1995,
received a pro rata restricted share award in the amount of $22,500, based
upon the number of months remaining until May 2, 2000, in accordance with the
SPS 1988 Long Term Incentive Stock Plan, or 1,140 shares based upon the fair
market value of the Company's Common Stock on October 24, 1995 of $19.7188 per
share. On February 10, 1997 each non-employee director received a restricted
share award in the amount of $25,000, or 740 shares, based upon the fair
market value of the Company's Common Stock on that date of $33.9063 per share.
Mr. Wilkinson, who became an outside director on March 1, 1997, received a pro
rata restricted share award in the amount of $40,416, based upon the number of
months remaining until May 2, 2000 and February 10, 2002, in accordance with
the SPS 1988 Long Term Incentive Stock Plan, or 1,270 shares based upon the
fair market value of the Company's Common Stock on March 3, 1997 of $31.8236
per share. Mr. O'Connor, who was elected as a director on April 29, 1997,
received a pro rata restricted share award in the amount of $38,750, based
upon the number of months remaining until May 2, 2000 and February 10, 2002,
in accordance with the SPS 1988 Long Term Incentive Stock Plan, or 1,170
shares based upon the fair market value of the Company's Common Stock on April
29, 1997 of $33.1197 per share. On May 2, 2000 each
non-employee director received a restricted share award in the amount of
$25,000, or 791 shares, based upon the fair market value of the Company's
Common Stock on that date of $31.5938 per share. Mr. Zug, who was elected as a
director on April 30, 2001, received a pro rata restricted share award in the
amount of $23,750, based upon the number of months remaining until February
10, 2002 and May 2, 2005, in accordance with the SPS 1988 Long Term Incentive
Stock Plan, or 490 shares based upon the fair market value of the Company's
Common Stock on April 30, 2001 of $49.025 per share. On April 30, 2002 each
non-employee director received a restricted share award in the amount of
$25,000, or 647 shares, based upon the fair market value of the Company's
Common Stock on that date of $39.14 per share. The restrictions on each award
lapse on 20% of the shares each year on the anniversary date of the award for
the succeeding five years. After five years, no restrictions remain.
A director who is not a participant in any of the Company's qualified
retirement plans and who retires (i) at or after age 70 with 5 or more years
of service, or (ii) at or after age 65 with 10 or more years of service, will
receive annually during his lifetime an amount equal to the annual retainer in
effect as of the date of his retirement. A director who retires at or after
age 65 but before age 70 with less than 10 years of service will receive
annually a pro rata amount.
A non-employee director may elect to receive discounted options in lieu of all
or a portion of his annual retainer under the SPS 1988 Long Term Incentive
Stock Plan. The number of options granted is determined by the amount of
retainer he elects to receive in discounted price options divided by the
difference between the fair market value of the Company's Common Stock at the
time of grant less, for each option, the par value per share of fifty cents.
The options are granted at the beginning of June each year. The director must
pay fifty cents per option at the time of exercise.
- --------------------------------------------------------------------------------
Termination of Employment and Change of Control Arrangements
- --------------------------------------------------------------------------------
The Company has entered into the following agreements and arrangements with
the Named Officers:
1) The Company has entered into an Executive Severance Agreement ("Agreement")
with each of the Named Officers. The Agreement provides that if a
"triggering termination" of employment occurs within three years after a
"change of control" of the Company (as defined in the Agreement), then the
employee is entitled to receive within 15 days after the employee's
termination date, among other benefits, cash in an amount equal to two times
the sum of the employee's annual base salary plus two times the incentive
bonus awards earned by or allocated to the employee in the previous fiscal
year under the Company's
12
Management Incentive Plan (MIP) and Long Range Incentive Plan (LRIP). A
"triggering termination" generally includes a termination of employment
initiated by the Company for any reason other than a disability qualifying
the employee for benefits under the Company's Long Term Disability Plan, or
for "cause" (as defined in the Agreement), or by the employee for certain
reasons set forth in the Agreement.
Upon a "triggering termination", the employee will also be entitled to
receive the appreciated value of all the employee's stock options
outstanding and unexercised as of the termination date (whether or not
vested), any unpaid salary, all incentive bonus awards payable to, earned by
or allocated to the employee under the MIP and LRIP, and all amounts
deferred by the employee under any incentive plan and under the Company's
Executive Deferred Compensation Plan. The employee will also receive two
additional years of credited service under each of the Company's RIP, BEP
and SERP, and will, for two years, continue to receive certain insurance
benefits on a cost-sharing basis. The employee's benefits from BEP and SERP
are payable in a lump sum within 15 days after the termination date. Any
restrictions remaining on restricted shares that may have been awarded to
the employee lapse, and the employee will own such shares free and clear of
any Company-imposed restriction. Any non-competition agreements (including
non-compete provisions of the MIP) terminate; however, the employee will
continue to be bound by the confidentiality provisions of the Agreement.
Each Agreement provides for payment of additional compensation to the
employee to offset any adverse effect of payments under the Agreement
determined to be "excess parachute payments," as defined in the Internal
Revenue Code.
2) The Company has a Senior Executive Severance Plan (SESP), under which each
of the Named Officers would receive certain compensation and benefits in the
event of termination of employment with the Company, without a change of
control, for any reason other than for "cause" (as defined in the SESP) or a
disability which qualifies the participant for benefits under the Company's
Long-Term Disability Plan, or if initiated by the participant, upon the
occurrence of certain events described in the SESP. Upon such termination,
the participant is entitled to receive (among other benefits) the base
salary in effect before the termination date for a period of up to 12
months, all bonuses earned under the MIP for completed and uncompleted (pro
rata) periods, under the LRIP for completed periods and all amounts deferred
under the Company's Executive Deferred Compensation Plan. The participant
will remain on the Company's payroll for up to 12 months, during which time
any employee benefits to which the participant was entitled prior to the
termination will continue, and the participant will be entitled to Company-
paid professional outplacement services. Restrictions on restricted shares,
if any, issued to the participant lapse. If the participant is employed by a
competitor of the Company without the Company's consent, the ongoing
benefits described above cease as of the date of such employment. If the
participant is employed on a full-time basis by an entity other than a
competitor, the ongoing benefits cease either as of the date of such
employment or six months, whichever is later. In the event an employee
receives a payment under an Executive Severance Agreement, no payment under
the SESP will be made. The SESP provides that the plan shall not be
terminated or amended to reduce or eliminate the benefits granted to certain
employees, including the Named Officers. The SESP further provides for
additional compensation to the participant if any plan payment is subject to
an excise or similar tax under the Internal Revenue Code.
13
- --------------------------------------------------------------------------------
Certain Relationships and Related Transactions
- --------------------------------------------------------------------------------
In connection with the Company's Rights Offering of the Company's Common Stock
which concluded in December of 1994 (the "Rights Offering"), the Company
entered into a Registration Rights Agreement with certain Purchasers and
Investors1. In accordance with the terms of such Agreement, the Purchasers and
Investors could require the Company to cause shares of Common Stock
beneficially owned by them to be registered for public sale under the
Securities Act. This Agreement expired on December 31, 2002. The Company's
Board of Directors has since approved the grant of new registration rights to
the Purchasers and Investors for an additional five year period provided the
Purchasers and Investors pay the expenses of such registration. The Company
expects to enter into a written agreement with the Purchasers and Investors
evidencing such grant early in the second quarter of 2003. Pursuant to that
agreement, the Purchasers and Investors will have the right to require the
Company to register for resale by them up to 10% of the outstanding shares of
the Company's Common Stock.
On February 6, 2001, SPS-AAA Aircraft Supply, LLC acquired all of the
outstanding shares of AAA Aircraft Supply, Inc. and changed the name of the
company to AAA Aircraft Supply, LLC ("AAA"). Harry J. Wilkinson, a director of
the Company, is a director and a shareholder of AAA, owning 5% of the AAA
shares acquired on the same terms as the Company acquired its shares. The
Company is the majority shareholder of AAA, owning 86.25% of the AAA shares.
Mr. Wilkinson has received distributions from AAA as follows: 2001 -- $42,000
on July 27, 2001, and $58,000 on December 18, 2001; 2002 -- $25,000 on December
11, 2002, for total distributions of $125,000 representing a partial
distribution of his pro rata share of AAA's earnings.
- ---------------
(1) Tinicum Enterprises, Inc., Tinicum Investors, RUTCO Incorporated, Tinicum
Foreign Investments Corporation, Tinicum Associates, G.P., Putnam L.
Crafts, Jr. and James H. Kasschau (collectively, the "Purchasers"), and RIT
Capital Partners plc, J. Rothschild Capital Management Limited and St.
James's Place Capital plc (collectively, the "Investors"). See "Ownership
of Voting Securities" for more recent information on the Affiliated Group
as herein defined. Eric M. Ruttenberg, a director of the Company, is an
"affiliate" (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended) of certain of the Purchasers.
- --------------------------------------------------------------------------------
Audit Committee Report
- --------------------------------------------------------------------------------
The responsibilities of the Audit Committee of the Board of Directors of the
Company are set forth in the charter of the Audit Committee, which was
approved by the Company's Board of Directors. A copy of the charter was filed
with the Securities and Exchange Commission in connection with the filing of
the Company's Proxy Statement for the 2002 Annual Meeting.
As set forth in the charter, the Audit Committee's primary responsibilities
include the following:
o The Committee is charged with monitoring the preparation of quarterly and
annual financial reports by the Company's management, including
discussions with management and the Company's independent accountants
about draft annual financial statements and key accounting and reporting
matters;
o The Committee is responsible for matters concerning the relationship
between the Company and its independent accountants, including
recommending their appointment or removal; reviewing the scope of their
audit services and related fees, as well as any other services being
provided to the Company; and determining whether the independent
accountants are independent (based in part on the annual letter provided
to the Company pursuant to Independence Standards Board Standard No. 1);
and
o The Committee oversees management's implementation of effective systems of
internal controls, including review of policies relating to legal and
regulatory compliance, ethics and conflicts of interests; and review of
the activities and recommendations of the Company's internal audit
program.
The Board has made a determination that the Directors who serve on the Audit
Committee satisfy the requirements of the New York Stock Exchange as to
independence, financial literacy and experience.
The Committee has implemented procedures to ensure that during the course of
each fiscal year it devotes the attention that the Committee deems necessary
or appropriate to each of the matters assigned to it under the Committee's
charter. In carrying out its responsibilities, the Committee met five times
during fiscal 2002.
14
In overseeing the preparation of the Company's financial statements, the
Committee met with both management and the Company's independent accountants
to review and discuss the financial statements prior to their issuance and to
discuss significant accounting issues. Management advised the Committee that
the financial statements were prepared in accordance with generally accepted
accounting principles, and the Committee discussed the statements with both
management and the independent accountants. The Committee's review included
discussion with the independent accountants of matters required to be
discussed pursuant to Statement on Auditing Standards No. 61 (Communication
with Audit Committees).
With respect to the Company's independent accountants, the Committee, among
other things, discussed with PricewaterhouseCoopers LLP matters relating to
its independence, including the written disclosures made to the Committee as
required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees).
Finally, the Committee continued to monitor the scope and adequacy of the
Company's internal audit program, including proposals for adequate staffing
and strengthening internal procedures and controls where appropriate.
On the basis of these reviews and discussions, the Committee recommended to
the Board of Directors that the Board approve the inclusion of the Company's
audited financial statements in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, for filing with the Securities and
Exchange Commission.
In accordance with the rules of the Securities and Exchange Commission, the
foregoing information, which is required by paragraphs (a) and (b) of
Regulation S-K Item 306, shall not be deemed to be "soliciting material" or
"filed" with the Commission or subject to the Commission's regulation 14A,
other than as provided in Item 306, or to the liabilities of section 18 of the
Securities Exchange Act of 1934, except to the extent that the Company
specifically requests that the information be treated as soliciting material
or specifically incorporates it by reference into a document filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
Members of the Audit Committee - James W. Zug (Chairman); Richard W. Kelso;
James F. O'Connor; and Raymond P. Sharpe.
- --------------------------------------------------------------------------------
Independent Accountants and Related Fees
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, the Company's independent accountants for the year
2002, has been selected to continue for the year 2003. Representatives of
PricewaterhouseCoopers are expected to be present at the Annual Meeting. They
will be provided the opportunity to make a statement at the meeting if they
desire to do so and to respond to appropriate questions.
The aggregate fees billed to the Company for professional services rendered
for the year 2002 were as follows:
o Audit Fees $538,200
o Financial Information Systems Design
and Implementation Fees None
o Actuarial Services Fees $191,900
o All Other Fees $422,497
----------
TOTAL $1,152,597
Audit Fees include fees for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2002, and the reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for fiscal 2002. "All Other Fees" represents the aggregate fees billed for all
other services rendered by PricewaterhouseCoopers LLP for fiscal 2002,
including advice and compliance services related to tax and other matters. The
Audit Committee of the Board of Directors has determined that the provision of
the services provided by the Company's accountants is compatible with
maintaining the independence of PricewaterhouseCoopers LLP.
15
- --------------------------------------------------------------------------------
Compensation Committee Report on Executive Compensation
- --------------------------------------------------------------------------------
Overview and Philosophy
The Executive Compensation and Stock Option Committee of the Board of
Directors ("Compensation Committee") is composed entirely of outside directors
and is responsible for developing and making recommendations to the Board with
respect to the Company's executive compensation policies. In addition, the
Compensation Committee annually recommends to the full Board the compensation
to be paid to the Chairman and the Chief Executive Officer and President, and
determines the compensation of each of the other executive officers and Group
Presidents of the Company. The Compensation Committee is free to engage and
consult with outside compensation consultants as it sees fit and generally has
access to independent compensation data.
The objectives of the Company's executive compensation program are to:
o Emphasize long-term performance and increases in shareholder value.
o Provide base compensation and benefit levels that are competitive with
those in the markets in which the Company competes for executive
personnel.
o Reward executives for the achievement of short-term and long-term
financial goals and the enhancement of shareholder value.
o Support a performance-oriented environment by providing incentive
compensation that changes in a consistent and predictable way with both
the financial performance of the Company and management performance in
support of strategic objectives.
o Provide a long-term and career-oriented compensation environment.
o Offer meaningful and competitive retirement and supplemental benefits that
are consistent with the Company's objective of retaining key employees.
The executive compensation program provides a compensation package that is
competitive with those offered by similar companies. The Company periodically
reviews the competitive practices of companies in the fabricated metals,
durable goods manufacturing and other industries, as well as with a broader
group of companies of comparable size and complexity. Actual compensation
levels may be greater or less than average competitive levels in surveyed
companies based upon annual and long-term Company performance as well as
individual performance. The Compensation Committee uses its discretion to set
executive compensation at levels warranted in its judgment by external,
internal and individual circumstances.
Executive Officer Compensation
Executive officer compensation is comprised of base salary, annual cash
incentive compensation, long-term incentive compensation in the form of stock
options, long-range restricted stock incentive compensation, specific benefits
designed to provide remuneration for career service, and various benefits,
including medical, life insurance and savings plans generally available to
employees of the Company.
o Base Salary
Base salary levels for the Company's executive officers are competitively set
relative to certain companies in the fabricated metals, durable goods
manufacturing and other industries as well as other comparable companies. In
determining salaries, the Compensation Committee also takes into account
individual experience, performance and specific expertise beneficial to the
Company.
o Incentive Compensation
The Company's incentive programs are intended to provide incentives to achieve
financial and individual objectives, and to reward exceptional performance.
The Management Incentive Plan is the Company's annual incentive program for
executive officers and key managers. The purpose of the plan is to provide a
direct financial incentive in the form of an annual cash bonus to executives
for the attainment of annual financial
16
and individual goals. Threshold, target and maximum goals for total Company
and individual business unit performance are set by the Compensation Committee
at the beginning of each fiscal year. The Long Range Incentive Plan is the
Company's three-year incentive program for executive officers and key
managers. The purpose of the Plan is to provide a direct financial incentive
in the form of a restricted share award under the SPS Restricted Stock Award
Plan to executives for the attainment of long-range financial goals of the
Company.
o Equity-Based Compensation
The equity-based compensation component of the Company's executive
compensation program is oriented toward the achievement of increasing
shareholder value over the long term. This component of the program - the SPS
1988 Long Term Incentive Stock Plan - provides for grants of stock options
which align the executives' awards with future shareholder gains. These grants
enable executives to develop and maintain a significant, long-term ownership
position in the Company's Common Stock.
o Executive Benefits
The benefit component of executive compensation is designed to provide
executives with adequate and meaningful retirement benefits that are
reflective of the benefits offered in comparable companies, and which
encourage career-service orientation of the Company's executives. In contrast,
other benefits such as perquisites are rigidly controlled and minimized. The
amount of such perquisites, as determined in accordance with rules of the
Securities and Exchange Commission relating to executive compensation, did not
exceed 10% of salary for fiscal 2002.
Chief Executive Officer Compensation
The compensation of the Chief Executive Officer and President (CEO) is fixed
by the full Board of Directors (other than the CEO) consistent with the
practices described above. Factors considered by the Board of Directors in
deciding the compensation of the CEO include the CEO's experience, the CEO's
performance and the compensation of chief executive officers at other
comparable companies. Effective January 1, 2003, Mr. Thompson's annual base
salary was increased by the Board of Directors from $500,000 to $550,000. The
Board believes this amount to be competitive with companies of similar size
and complexity. For the year 2003, Mr. Thompson has a 100% incentive
opportunity under the Company's Management Incentive Plan and a 10% incentive
opportunity under the Company's Long Range Incentive Plan.
Members of the Executive Compensation and Stock Option Committee - Raymond P.
Sharpe (Chairman); James F. O'Connor; Eric M. Ruttenberg and James W. Zug.
17
- --------------------------------------------------------------------------------
Common Stock Performance Graph
- --------------------------------------------------------------------------------
The graph set forth below shows the cumulative shareholder return (i.e. price
change plus reinvestment of dividends) of the Company's Common Stock during
the five-year period ended December 31, 2002, as compared to the Standard &
Poor's ("S&P") Small Cap 600 Index, the S&P 500 Index and the S&P Small Cap
600 Aerospace and Defense Sub-Industry Index. In prior years, the Company
utilized the S&P Diversified Manufacturing Index as its peer index, however,
this index is no longer available.
COMPARISON of FIVE-YEAR CUMULATIVE TOTAL RETURN for
SPS, the S&P SMALL CAP 600 INDEX, the S&P SMALL CAP AEROSPACE
AND DEFENSE SUB-INDUSTRY INDEX and the S&P 500 INDEX
(see NOTES 1-3 BELOW)
SPS S&P 600 S&P 500 Aerospace
------- -------- -------- ---------
1997 100 100 100 100
1998 129.8 98.72 128.58 121.91
1999 73.21 110.98 155.63 67.88
2000 125.64 124.03 141.47 72.05
2001 80.04 132.14 124.65 66.8
2002 54.44 93.78 97.1 53.93
Notes:
(1) Total return assumes reinvestment of dividends.
(2) The above graph assumes $100 was invested on December 31, 1997 in SPS
Technologies, Inc. Common Stock, the
S&P Small Cap 600 Index, the S&P Small Cap 600 Aerospace and Defense Sub-
Industry Index and the S&P 500 Index. The values shown on the graph are as
of the end of each period indicated. Raw data for the S&P Small Cap 600
Index, S&P Small Cap 600 Aerospace and Defense Sub-Industry Index and the
S&P 500 Index is supplied by S&P.
(3) In previous years, the Company has compared the return on its Common Stock
to the S&P 500 Index. However, the S&P Small Cap 600 contains companies
with comparable market capitalization to that of SPS and SPS is a component
of the S&P Small Cap 600. Going forward, the Company will utilize the S&P
Small Cap 600 as the broad equity market index for the purposes of this
graph.
18
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Proposals of Shareholders
- --------------------------------------------------------------------------------
Under the Company's By-laws, notice of any proposal to be presented by any
shareholder at a meeting must be received by the Secretary of the Company not
less than 60 days in advance of the meeting. The notice must include the
following:
o Text of the proposal to be presented;
o A brief written statement of the reasons why the shareholder favors the
proposal;
o The name and address of record of the proposing shareholder;
o A representation that the shareholder is entitled to vote at the meeting
and intends to appear at the meeting, in person or by proxy;
o The number of shares of stock beneficially owned by the shareholder; and
o Any material interest of the shareholder in the proposal (other than as a
shareholder).
A copy of the Company's By-laws specifying these requirements will be
furnished to any shareholder without charge upon written request to the
Secretary.
Under the rules of the Securities and Exchange Commission, shareholders
wishing to submit proposals for inclusion in the Proxy Statement of the Board
of Directors for the Annual Meeting of Shareholders to be held in 2004 must
submit such proposals so as to be received at the office of the Secretary, SPS
Technologies, Inc., Two Pitcairn Place, Suite 200, 165 Township Line Road,
Jenkintown, PA 19046, no later than December 2, 2003. The Company's ability to
exercise discretionary voting authority with respect to shareholder proposals
will be subject to certain requirements of the Securities and Exchange
Commission. At the time of the preparation of these proxy materials, the Board
of Directors of the Company does not know of any other matter to be presented
for action at the Annual Meeting of Shareholders. If any other matters should
properly come before the meeting, the proxy holders have discretionary
authority to vote their shares on any such matters according to their best
judgment.
By order of the Board of
Directors,
James D. Dee
Secretary
March 31, 2003
- --------------------------------------------------------------------------------
Upon written request to the Secretary, SPS Technologies, Inc., Two Pitcairn
Place, Suite 200, 165 Township Line Road, Jenkintown, PA 19046, the Company
will provide, without charge, to any shareholder solicited hereby, a copy of
its Annual Report on Form 10-K, including the financial statements and the
schedules thereto.
- --------------------------------------------------------------------------------
19
Mark Here
for Address |_|
Change or
Comments
PLEASE SEE REVERSE SIDE
1. ELECTION OF DIRECTORS:
VOTE FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to to vote for all
the contrary) nominees listed
|_| |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.)
Nominees:
CLASS II: 01 James F. O'Connor, 02 Raymond P. Sharpe
DISCRETION IS GRANTED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING
By checking the box to the right, I consent to future delivery of
annual reports, proxy statements, prospectuses and other materials and
shareholder communications electronically via the Internet at a
webpage which will be disclosed to me. I understand that the Company
may no longer distribute printed materials to me from any future |_|
shareholder meeting until such consent is revoked. I understand that I
may revoke my consent at any time by contacting the Company's transfer
agent, Mellon Investor Services LLC, Ridgefield Park, NJ and that
costs normally associated with electronic delivery, such as usage and
telephone charges as well as any costs I may incur in printing
documents, will be my responsibility.
The undersigned hereby revokes any proxy heretofore given for said meeting and
ratifies and confirms all that the name proxies shall do by virtue hereof. The
undersigned has received the Notice of said meeting including the Proxy
Statement and the 2002 Annual Report.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership , please sign in partnership name by authorized person.
Signature(s)_____________________________________________ Date____________, 2003
- --------------------------------------------------------------------------------
^ Detach here from proxy voting card. ^
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11PM Eastern Time
the day prior to annual meeting day.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
- ------------------------------ ----------------------------- ---------------------
Internet Telephone Mail
http://www.eproxy.com/st 1-800-435-6710
Use the Internet to vote your Use any touch-tone telephone Mark, sign and date
proxy. Have your proxy card in to vote your proxy. Have your your proxy card
hand when you access the web proxy card in hand when you and
site. You will be prompted to OR call. You will be prompted to OR return it in the
enter your control number, enter your control number, enclosed postage-paid
located in the box below, to located in the box below, and envelope.
create and submit an then follow the directions
electronic ballot. given.
- ------------------------------ ----------------------------- ---------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the Internet at: http://www.spstech.com
[LOGO] SPS TECHNOLOGIES, INC. PROXY
SPS TECHNOLOGIES Jenkintown, PA 19046
Solicited on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints John S. Thompson and
William M. Shockley or either of them, proxies, with full power of substitution,
to represent and to vote as specified on the reverse side hereof all of the
shares of Common Stock that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of SPS Technologies,
Inc. to be held at the Company's facility located at 301 Highland Avenue,
Jenkintown, Pennsylvania, on Tuesday, April 29, 2003 at 10:00 a.m., local time,
and any adjournments or postponements thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED,
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR IN THE MANNER STATED IN THE PROXY
STATEMENT.
Please vote using the instructions on the reverse side hereof.
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
^ Detach here from proxy voting card. ^
YOUR VOTE IS IMPORTANT TO US.
Mark Here
for Address
Change or |_|
Comments
PLEASE SEE REVERSE SIDE
1. ELECTION OF DIRECTORS:
VOTE FOR WITHHOLD
all nominees listed AUTHORITY
(except as marked to to vote for all
the contrary) nominees listed
|_| |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.)
Nominees:
CLASS II: 01 James F. O'Connor, 02 Raymond P. Sharpe
DISCRETION IS GRANTED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING
By checking the box to the right, I consent to future delivery of
annual reports, proxy statements, prospectuses and other materials and
shareholder communications electronically via the Internet at a
webpage which will be disclosed to me. I understand that the Company
may no longer distribute printed materials to me from any future
shareholder meeting until such consent is revoked. I understand that I |_|
may revoke my consent at any time by contacting the Company's transfer
agent, Mellon Investor Services LLC, Ridgefield Park, NJ and that
costs normally associated with electronic delivery, such as usage and
telephone charges as well as any costs I may incur in printing
documents, will be my responsibility.
Please sign exactly as your name appears at left.
Signature_______________________________________________ Date_____________, 2003
- --------------------------------------------------------------------------------
^ Detach here from proxy voting card. ^
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through April 18, 2003.
Your telephone or Internet vote authorizes the Trustee to vote your shares in
the same manner as if you marked, signed and returned your proxy card.
- ------------------------------ ----------------------------- ---------------------
Internet Telephone Mail
http://www.eproxy.com/st 1-800-435-6710
Use the Internet to vote your Use any touch-tone telephone Mark, sign and date
proxy. Have your proxy card in to vote your proxy. Have your your proxy card
hand when you access the web proxy card in hand when you and
site. You will be prompted to OR call. You will be prompted to OR return it in the
enter your control number, enter your control number, enclosed postage-paid
located in the box below, to located in the box below, and envelope.
create and submit an then follow the directions
electronic ballot. given.
- ------------------------------ ----------------------------- ---------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the Internet at: http://www.spstech.com
[LOGO] SPS TECHNOLOGIES, INC.
SPS TECHNOLOGIES Savings and Investment Plan
Voting Instruction Card for 2003 Annual Meeting
Solicited on Behalf of the Board of Directors
This is a ballot for voting the shares of SPS Technologies, Inc. Common
Stock held in your SPS Technologies, Inc. Savings and Investment Plan account.
Vanguard Fiduciary Trust Company, as Trustee of the Plan, will vote all shares
held in your account as specified on the reverse side hereof at the Annual
Meeting of Shareholders of SPS Technologies, Inc. to be held on April 29, 2003.
Your vote must be received on or before April 18, 2003 in order to be counted.
Your voting instructions will be kept confidential.
THE TRUSTEE WILL VOTE YOUR SHARES AS DIRECTED OR, IF NO DIRECTION IS
INDICATED, WILL VOTE YOUR SHARES FOR THE NOMINEES FOR DIRECTOR IN THE MANNER
STATED IN THE PROXY STATEMENT. IF YOU DO NOT VOTE, THE TRUSTEE WILL NOT VOTE
YOUR SHARES.
Please vote using the instructions on the reverse side hereof.
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
^ Detach here from proxy voting card. ^
YOUR VOTE IS IMPORTANT TO US.