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
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[ X ] Preliminary Proxy Statement
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[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
SIFCO Industries, Inc
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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[ X ] No fee required.
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0-11.
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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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[ ] Fee paid previously with preliminary materials.
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Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1. Amount Previously Paid: ______________________________________
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4. Date Filed: ___________________________________________________
970 EAST 64TH STREET, CLEVELAND, OHIO 44103
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
The 2002 Annual Meeting of Shareholders of SIFCO Industries, Inc. will
be held in the National City Bank auditorium (4th floor) of the National City
Center Annex Building, 1900 East 9th Street, Cleveland, Ohio, on January 29,
2002 at 10:30 a.m., to consider and vote upon proposals to:
1. Elect three (3) directors for a three-year term expiring in 2005
or, if Proposal 3 is adopted, for terms expiring at the 2003 Annual
Meeting.
2. Approve an amendment to the Company's code of regulations to
decrease the number of directors.
3. Approve amendments to the Company's code of regulations and
articles of incorporation to:
o declassify the board of directors so that each director would
stand for re-election on an annual basis; and
o eliminate cumulative voting rights of the Company's
shareholders.
4. Ratify the designation of Arthur Andersen LLP as the independent
auditors of the Company.
5. Consider and take action upon such other matters as may properly
come before the meeting or any adjournment thereof.
The holders of record of Common Shares at the close of business on
December 7, 2001, will be entitled to receive notice of and vote at the meeting.
The Company's Annual Report for the fiscal year ended September 30,
2001 is included with this Notice.
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENTS TO THE COMPANY'S
CODE OF REGULATIONS AND ARTICLES OF INCORPORATION ARE IN YOUR BEST INTEREST AND
UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THOSE PROPOSALS.
By order of the Board of Directors.
SIFCO Industries, Inc.
December 14, 2001 Carolyn J. Buller, Secretary
KINDLY FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ARE PRESENT AND VOTE IN PERSON AT THE MEETING, YOUR PROXY
WILL NOT BE USED.
970 EAST 64TH STREET, CLEVELAND, OHIO 44103
December 14, 2001
PROXY STATEMENT
GENERAL INFORMATION
The proxy that accompanies this statement is solicited by the board of
directors of SIFCO Industries, Inc. (the "Company") for use at the 2002 Annual
Meeting of the Shareholders of the Company to be held January 29, 2002, or at
any adjournment thereof. This proxy statement was first mailed on December 14,
2001 to shareholders of record on December 7, 2001.
Any shareholder giving a proxy for the meeting may revoke it before it
is exercised by giving a later dated proxy or by giving notice of revocation to
the Company in writing or at the 2002 Annual Meeting. However, the mere presence
at the 2002 Annual Meeting of the shareholder granting a proxy does not revoke
the proxy. Unless revoked by notice as above stated, the shares represented by
valid proxies will be voted on all matters to be acted upon at the 2002 Annual
Meeting. On any matter or matters with respect to which the proxy contains
instructions for voting, such shares will be voted in accordance with such
instructions. Abstentions will be deemed to be present for the purpose of
determining a quorum for the 2002 Annual Meeting, but will be deemed not voting
on the issues or matters as to which abstention is applicable. Brokers who have
not received voting instructions from beneficial owners generally may vote in
their discretion with respect to the election of directors and the ratification
of the auditors. Broker non-votes will not affect the outcome of any matter for
which the 2002 Annual Meeting is called.
The cost of solicitation of proxies in the form accompanying this
statement will be borne by the Company. Proxies will be solicited by mail or by
telephone or personal interview with an officer or regular employee of the
Company or by requesting brokers and other custodians, nominees and fiduciaries
to forward proxy soliciting material to the beneficial owners of shares held of
record by such brokers, custodians, nominees or fiduciaries, who will be
reimbursed by the Company for their expenses in so doing.
OUTSTANDING SHARES AND VOTING RIGHTS
The record date for determining shareholders entitled to vote at the
2002 Annual Meeting is December 7, 2001. As of October 31, 2001, the outstanding
voting securities of the Company were 5,129,633 Common Shares. Each Common
Share, exclusive of treasury shares, has one vote. The Company held (pending)
Common Shares in its treasury on the record date. The holders of a majority of
the Common Shares of the Company issued and outstanding, present in person or by
proxy, shall constitute a quorum for the purposes of the 2002 Annual Meeting.
Under the General Corporation Law of Ohio, if notice in writing is
given by any shareholder to the President or any Vice President or the Secretary
of the Company, not less than forty-eight hours before the time fixed for
holding the meeting, that the shareholder desires that the voting for election
of directors shall be cumulative, each shareholder will have cumulative voting
rights in the election of directors if notice of the meeting has been given at
least ten days before the meeting, and, if the ten days' notice has not been
given, not less than twenty-four hours before such meeting time, that the
shareholder desires that the voting at such election shall be cumulative,
provided that an announcement of the giving of such notice is made upon the
convening of the meeting by the Chairman of the Board or Secretary of the
Company or by or on behalf of the shareholder giving such notice. Cumulative
voting allows the shareholder to give one candidate a number of votes equal to
the number of directors to be elected multiplied by the number of shares held by
the shareholder, or distribute such number of votes among as many candidates and
in such manner as the shareholder deems advisable. In case of such notice, it is
intended that the persons named in the accompanying proxy will vote cumulatively
for all or such of the nominees hereinafter mentioned as they deem best.
As of October 31, 2001, Janice Carlson and Charles H. Smith, III, 970
East 64th Street, Cleveland, Ohio 44103, owned, as Trustees, 2,002,947 Common
Shares representing 39.04% of the outstanding Common Shares of the Company, such
Common Shares having been deposited with them or their predecessors, as
Trustees, under a Voting Trust Agreement entered into as of February 1, 1997 and
extended to January 31, 2002. The Trustees under the Voting Trust Agreement
share voting control with respect to all such Common Shares.
The table below names the persons who are known by the Company to be
the beneficial owners of more than 5% of its outstanding Common Shares as of
September 30, 2001, the number of such Common Shares beneficially owned by, or
held in trust for, each such person (including their spouses and children who
live with them, if any) and the percentage of the outstanding Common Shares
which that number of shares constitutes.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Mrs. George D. Gotschall 656,972 (1) 12.81%
7425 Pelican Bay Boulevard, Marbella #606
Naples, Florida 34108
Charles H. Smith, Jr. 571,936 (1) 11.15%
4565 South Lake Drive
Boynton Beach, FL 33436
Dimensional Fund Advisors, Inc. 339,790 (2) 6.72%
(1) All shares owned by Mrs. G. D. Gotschall and C. H. Smith, Jr. are subject
to the Voting Trust Agreement described above.
(2) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios.")
In its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power over 339,790 Common Shares as of
September 30, 2001. The Portfolios own all Common Shares reported in this
statement, and Dimensional disclaims beneficial ownership of such
securities.
- 2 -
PROPOSAL TO DECREASE THE NUMBER OF DIRECTORS
The Company's code of regulations currently provides that the number of
directors of the corporation shall be not less than nine (9) nor more than
eleven (11). The board of directors is proposing that the code of regulations be
amended to decrease the authorized number of directors to be not less than six
(6) nor more than nine (9). Presently there are seven (7) active directors, down
from ten (10) active directors at the start of the 2001, due to the untimely
death of Mr. George D. Gotschall and the retirements of Dr. David V. Ragone and
Mr. William R. Higgins. Further, Messrs. Maurice Foley and Charles H. Smith, Jr.
have advised the Board that they will serve as members through the 2002 annual
meeting at which time they will retire, further reducing the board to five (5)
active members at that time. Therefore, the Company is nominating Mr. Michael
Lipscomb for election to the Board of Directors. The board has determined that
the Company could better meet its future needs in the context of ongoing
industry and market changes, and would be better served by reducing the size of
the board at this time. If passed, the board anticipates fixing the number of
directors at six (6).
VOTE REQUIRED
The affirmative vote of the holders of shares of stock of the Company
entitling them to exercise at least two-thirds of the Company's voting power is
required to adopt the proposed amendment. THE BOARD OF DIRECTORS OF SIFCO
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT OF THE COMPANY'S
CODE OF REGULATIONS TO DECREASE THE NUMBER OF DIRECTORS.
PROPOSAL TO PROVIDE FOR ANNUAL ELECTION OF DIRECTORS AND ELIMINATE CUMULATIVE
VOTING
The Company's code of regulations currently provides for a board of
directors divided into three classes each consisting of not less that three nor
more than four directors. The board of directors is proposing that the code of
regulations be amended to provide for annual elections so that each director's
term, including those elected at the 2002 Annual Meeting, would expire in 2003.
Each director whose term expires after 2003 has consented to the
declassification.
Supporters of classified boards of directors believe that staggered
boards help maintain continuity of experience and, as a result, may assist a
company in long-term strategic planning. However, classified boards like ours
have become increasingly unpopular with stockholders in recent years. The
Company's directors agree with this trend and feel that a non-classified board
of directors better enables shareholders to hold all directors accountable on an
annual basis, rather than over a three-year period. They also believe that the
existence of a classified board of directors may deter some tender offers or
substantial purchases of stock that might give stockholders the opportunity to
sell their shares at a price in excess of what they would otherwise receive.
- 3 -
In conjunction with providing for the annual election of directors, the
board of directors is proposing to eliminate cumulative voting rights. Under
General Corporation Law Governing Ohio, unless otherwise provided in a
corporation's articles, each shareholder has a right to vote cumulatively if
proper notice is given. The Company's articles of incorporation currently do not
alter these provisions of Ohio law. The board of directors is proposing the
elimination of such cumulative voting rights.
One of the principal results of cumulative voting is to make it more
likely that an individual or group of individuals, who own less than a plurality
of the voting stock, would be able to obtain representation on a board of
directors. Such an individual or group may have interests and goals which are
not consistent with, and might be in conflict with, those of a majority of
shareholders. The Company's board of directors believes that each director
should represent the interests of all shareholders, rather than the interests of
any special constituency.
The board of directors is seeking to eliminate cumulative voting at
this time because the annual election of all directors will increase the ability
of shareholders with smaller shareholdings to elect a director to represent
their interests. In addition, cumulative voting is of less importance when the
Company's shareholders may replace any and all of the directors on an annual
basis if they are not satisfied with the Company's performance. Many companies
whose shares are publicly traded do not have cumulative voting for the election
of directors.
While providing for annual election of directors may enhance the
ability of a third party to influence a change in control of the Company,
eliminating cumulative voting may have the opposite result. The board has no
present intention of proposing additional amendments to the articles of
incorporation that would impact the ability of a third party to affect a change
in control of the Company. The amendment is not being recommended in response to
any specific effort, of which the Company is aware, to accumulate the Company's
Common Stock or to obtain control of the Company or its board of directors by
means of a solicitation in opposition to management or otherwise. In addition
the board's recommendation of the amendment is not part of a plan by management
to adopt a series of such amendments. The board is proposing the amendment at
this time because it believes it is in the best interests of the shareholders of
the Company for the reasons stated above.
VOTE REQUIRED
The affirmative vote of the holders of shares of stock of the Company
entitling them to exercise at least two-thirds of the Company's voting power is
required to adopt the proposed amendment. THE BOARD OF DIRECTORS OF SIFCO
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT OF THE CODE OF
REGULATIONS TO DECLASSIFY THE BOARD OF DIRECTORS AND THE AMENDMENT OF THE
ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING.
- 4 -
PROPOSAL TO ELECT THREE (3) DIRECTORS
The size of the board of directors is currently fixed at ten (10) and
classified into three classes. The term of office of one class of directors
expires in each year. The terms of office of Maurice Foley, Hudson D. Smith, and
J. Douglas Whelan will expire on the day of the 2002 Annual Meeting.
Proxies solicited hereunder granting authority to vote on the election
of directors will be voted for the election of Messrs. Michael S. Lipscomb,
Hudson D. Smith, and J. Douglas Whelan to serve for three-year terms ending in
2005, and until their respective successors are elected. If proposal 3 is
adopted, these nominees would be elected for a one-year term ending at the 2003
Annual Meeting, or until their respective successors are elected. Messrs. Hudson
D. Smith and J. Douglas Whelan currently serve as directors of the Company.
The nominees receiving the greatest number of votes shall be elected.
Although the Company does not contemplate that any of the nominees will be
unavailable for election, if a vacancy in the slate of nominees is occasioned by
death or other unexpected occurrence, it is currently intended that the
remaining directors will, by the vote of a majority of their number, designate a
different nominee for election to the Board at the 2002 Annual Meeting.
Nominees for election to the board of directors
MICHAEL S. LIPSCOMB, 55, has been Chairman, President and Chief Executive
Officer of Argo-Tech Corporation since 1994. Mr. Lipscomb joined TRW's
corporate staff in 1981 and was made Director of Operations for the
Power Accessories Division in 1985. He was named Vice President of
Operations when Argo-Tech was formed in 1986, becoming President in
1990 and Chairman in 1994. Mr. Lipscomb has served as a director of
Argo-Tech and AT Holdings Corporation since 1990.
HUDSON D. SMITH, 50, director of the Company since 1988. Mr. Smith has been
Treasurer of the Company since 1983 and President of SIFCO Forge Group
since 1998. Mr. Smith previously served as Vice President and General
Manager of SIFCO Forge Group from 1995 through 1997, General Manager of
SIFCO Forge Group's Cleveland Operations from 1989 through 1995 and
Group General Sales Manager of SIFCO Forge Group from 1985 through
1989.
J. DOUGLAS WHELAN, 62, director of the Company since 1995. Mr. Whelan retired
from his positions as President and Chief Operating Officer of
Wyman-Gordon Company, North Grafton, Massachusetts, and as a member of
that company's board of directors. He previously served from 1994
through 1997 as President of Wyman-Gordon Forgings, Houston, Texas and
from 1989 through 1994, as Vice President of Operations for the Cameron
Forged Products Division of Cooper Industries, Houston, Texas. From
1965 to 1989, Mr. Whelan served in a variety of executive, technical
and management positions with Cameron Iron Works.
- 5 -
Directors whose terms expire in 2004
RICHARD S. GRAY, 70, director of the Company since 1986 is retired. Mr. Gray was
President, Enterprise Development Inc., a cooperative venture with the
Weatherhead School of Management of Case Western Reserve University
from 1987 to 1999. Mr. Gray was director of The Center for Venture
Development from 1985 to 1987, and Senior Vice President of LTV Steel,
Cleveland, Ohio (primary steel manufacturer) from 1984 to 1985. He is a
director of Davey Tree Expert Company (tree care and line clearing).
THOMAS J. VILD, 67, director of the Company since 1994. Mr. Vild has been a
Management Consultant since 1990. Mr. Vild was an aerospace industry
analyst with the investment firm of Roulston Research from 1987 through
1990 and former Director of Market Analysis and Forecasting for the
Aircraft Components Group of TRW from 1978 to 1987. Prior to such time,
Mr. Vild served in a variety of management positions at TRW, Martin
Marietta Corporation and Gould, Inc.
Directors whose terms expire in 2003
JEFFREY P. GOTSCHALL, 53, director of the Company since 1986 and Chairman of the
Board since 2001. Mr. Gotschall has been Chief Executive Officer of the
Company since 1990 and President of the Company since 1989. Mr.
Gotschall previously served the Company from 1986 to 1990 as Chief
Operating Officer, from 1986 through 1989 as Executive Vice President
and from 1985 through 1989 as President of SIFCO Turbine Component
Services. Mr. Gotschall is also a director of National Processing, Inc.
(credit and debit processing service).
CHARLES H. SMITH, JR., 80, director of the Company since 1941 and Chairman of
the Board of the Company from 1970 to 2001. Mr. Smith previously served
the Company as its Chief Executive Officer from 1943 until 1983. Mr.
Smith is a former Chairman of the Board of the Chamber of Commerce of
the United States. He served as a member of the governing body of the
International Labor Organization from 1975 to 1978 and served as the
United States employer delegate to the ILO from 1975 to 1992.
STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND NOMINEES
The following table sets forth as of October 31, 2001, the number of
Common Shares of the Company beneficially owned by each director and officer
and all directors and officers as a group, according to information furnished
to the Company by such persons:
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
---- ------------------------ ----------------
Charles H. Smith, Jr. (2)(3) 571,936 11.15%
Hudson D. Smith (1)(2)(3)(4) 138,090 2.69%
Jeffrey P. Gotschall (1)(2)(3)(4) 132,100 2.58%
Tim Crean (1) 167,743 3.27%
Richard S. Gray 11,500 *
J. Douglas Whelan 8,000 *
Maurice Foley 4,000 *
Frank Cappello (1) 3,750 *
Thomas J. Vild 1,000 *
All Directors and Officers as a Group 1,038,119 20.24%
- 6 -
*Common Shares owned are less than one percent of class.
(1) Unless otherwise stated below, the shares owned are owned of record by that
person who has sole voting and investment power as to those shares. A
portion of the total number of shares for the following persons and group
represents shares which could be acquired within 60 days of the date of
this Proxy Statement by exercise of stock options: Tim Crean, 118,750
shares; Jeffrey P. Gotschall, 6,250 shares; Hudson D. Smith, 4,250 shares;
Frank Cappello, 3,750 shares; and all directors and officers as a group,
134,250 shares.
(2) Includes in the cases of Messrs. J. P. Gotschall, H. D. Smith and C. H.
Smith, Jr. shares owned by their spouses and any minor children or in trust
for them, their spouses and their lineal descendants.
(3) Includes Voting Trust Certificates issued by the Voting Trust described
above representing an equivalent number of Common Shares held by such Trust
as follows: Mr. J. P. Gotschall-- 125,859; Mr. C. H. Smith, Jr.-- 571,936;
and Mr. H. D. Smith-- 132,515.
(4) Mr. J. P. Gotschall is the nephew of Mr. C. H. Smith, Jr. Mr. H. D. Smith
is the son of Mr. C. H. Smith, Jr.
ORGANIZATION AND COMPENSATION OF THE BOARD OF DIRECTORS
The Company's board of directors held four (4) regularly scheduled
meetings during the last fiscal year. The board of directors' standing
committees are the Audit, Compensation, and Governance Committees.
The functions of the Audit Committee are to determine the scope of the
audit, to discuss any special problems that may arise during the course of the
audit and to review the audit and its findings for the purpose of reporting to
the board of directors. The Audit Committee, currently composed of Messrs. Gray
(Chairman), Foley and Vild held two (2) meetings during the last fiscal year.
The function of the Compensation Committee is to review and recommend
the compensation of directors and officers of the Company, including the
granting of stock options and the number of shares which should be subject to
each option so granted. The Compensation Committee, currently composed of
Messrs. Whelan (Chairman) and Foley, held three (3) meetings during the last
fiscal year.
The function of the Governance Committee, which was established in July
2001, is to recommend candidates for the board of directors and address issues
relating to senior management performance and succession and, to the composition
and procedures of the board. The Governance Committee is currently composed of
Messrs. Gotschall, Foley, Whelan and Gray. The Governance Committee will
consider shareholder nominations for directors at any time. Any shareholder
desiring to have a nominee considered by the Governance Committee should submit
such recommendation in writing to a member of the Governance Committee or the
Secretary of the Company. The Governance Committee did not hold any formal
meetings during the last fiscal year; however, its function was fulfilled during
sessions of the full board of directors.
- 7 -
In fiscal 2001, each director (other than directors who are employed by
the Company) received an annual retainer fee of $12,000 and an attendance fee of
$1,000 per Board meeting, $1,000 per Committee meeting for meetings held on a
day other than the day of a Board meeting and $500 per Committee meeting for
meetings held on the day of a Board meeting. Committee chairmen received an
additional $2,000 annual retainer for such service.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
received for each of the three previous fiscal years for the Company's Chief
Executive Officer and the three other executive officers of the Company:
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------------------------------- ------------------------
NAME & OPTION LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS PAYOUTS ($) COMPENSATION
(3) (1)
- ----------------------------------------------------------------------------------------------------------
Jeffrey P. Gotschall 2001 259,992 106,000 5,000 -0- 3,120
President & CEO 2000 260,442 32,000 10,000 76,984 3,120
1999 261,498 61,000 -0- -0- 3,120
- ----------------------------------------------------------------------------------------------------------
Timothy V. Crean 2001 185,543 94,458 10,000 -0- -0-
Executive Vice President 2000 174,332 58,091 10,000 159,506 -0-
1999 179,804 61,162 55,000 -0- -0-
- ----------------------------------------------------------------------------------------------------------
Frank A. Cappello 2001 141,004 58,000 10,000 -0- 1,260
Vice President & CFO 2000(2) 85,483 19,000 5,000 -0- -0-
- ----------------------------------------------------------------------------------------------------------
Hudson D. Smith, Treasurer 2001 113,376 11,199 5,000 -0- 1,320
2000 113,376 3,574 6,000 199,312 1,320
1999 110,000 2,109 -0- -0- 1,320
- ----------------------------------------------------------------------------------------------------------
(1) Represents amounts contributed by the Company as matching contributions
with respect to U.S. employees pursuant to the Company's Employee Thrift
Plan, a defined contribution plan.
(2) Represents amounts since February 21, 2000, date on which officer was
hired.
(3) Represents final distributions from the Company's Phantom Stock Plan.
- 8 -
OPTION GRANTS
Set forth below is information on grants of stock options pursuant to
the company's 1998 Stock Option Plan during the fiscal year ended September 30,
2001 to the executive officers named in the Summary Compensation Table.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
- ------------------------------------------------------------------------------------- ----------------------
% OF TOTAL
OPTIONS/ OPTIONS GRANTED EXERCISE
NAME SARS TO EMPLOYEES IN OR BASE EXPIRATION 5% ($) 10% ($)
GRANTED FISCAL YEAR PRICE DATE
# ($/SHARE)
- -----------------------------------------------------------------------------------------------------------
Jeffrey P. Gotschall 5,000 7% 5.16 11/8/2005 16,222 41,111
- -----------------------------------------------------------------------------------------------------------
Timothy V. Crean 10,000 13% 4.69 11/8/2010 29,495 74,747
- -----------------------------------------------------------------------------------------------------------
Hudson D. Smith 5,000 7% 5.16 11/8/2005 16,222 41,111
- -----------------------------------------------------------------------------------------------------------
Frank A. Cappello 10,000 13% 4.69 11/8/2010 29,495 74,747
- -----------------------------------------------------------------------------------------------------------
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below, for each individual named in the Summary Compensation
Table, is information relating to such person's exercise of stock options during
the fiscal year ended September 30, 2001 and ownership of unexercised stock
options at September 30, 2001.
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN
UNDERLYING UNEXERCISED THE MONEY OPTIONS AT
SHARE OPTIONS AT YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------
Jeffrey P. Gotschall -0- -0- 2,500 12,500 -0- -0-
- -----------------------------------------------------------------------------------------------------------
Timothy V. Crean -0- -0- 100,000 45,000 25,250 -0-
- -----------------------------------------------------------------------------------------------------------
Hudson D. Smith -0- -0- 1,500 9,500 -0- -0-
- -----------------------------------------------------------------------------------------------------------
Frank A. Cappello -0- -0- 1,250 13,750 -0- -0-
- -----------------------------------------------------------------------------------------------------------
- 9 -
PENSION PLAN
The amounts stated in the foregoing Summary Compensation Table do not
include amounts paid by the Company for purposes of funding the Company's
non-contributory pension plan. Messrs. J. P. Gotschall, F. A. Cappello, and H.
D. Smith participate on the same basis as other salaried employees in a
qualified, non-contributory pension plan known as SIFCO Industries, Inc.
Salaried Retirement Plan (the "Retirement Plan"). Mr. T. V. Crean participates
in the SIFCO Turbine Components Limited Pension Plan (the "STCL Plan"), which is
described later in this section.
The Summary Compensation Table includes both base salary and incentive
compensation. Benefits payable under the Retirement Plan are calculated using
only base salary. Under the terms of the Retirement Plan, the amount of normal
annual retirement benefit payable to a participating employee is generally based
upon years of service with the Company prior to normal retirement date, "final
average earnings" (average basic salary during the 60 consecutive month period,
within the 120 month period preceding retirement, during which the total amount
of basic salary was the highest) and average Social Security covered
compensation. For an employee retiring with 25 years of service or less, the
benefit is equal to 2.144% of final average earnings minus .625% of average
Social Security covered compensation multiplied by years of service up to 25
years. If an employee has more than 25 years of service at retirement, the
benefit is increased by 1.25% of final average earnings multiplied by his years
of service in excess of 25 years. The amount so determined is payable in the
form of a single life annuity or a lump sum payment. Under the Internal Revenue
Code, the maximum annual benefit payable under the Retirement Plan to covered
employees is limited to $140,000 per year for 2001. In addition, the maximum
amount of final average earnings used to compute benefits under the Retirement
Plan is limited by the Internal Revenue Code. Therefore, in response to such
limitations, the Company established a non-qualified Supplemental Executive
Retirement Plan ("SERP") to provide covered employees with a benefit amount
equal to what they would have been entitled to receive under the Retirement Plan
if no such limitations existed.
The estimated annual retirement benefit under the combined Plans for
each participant is based upon the assumption that base salary will remain
unchanged until the normal retirement age of 65 is reached, and that likewise
the provisions of the Retirement Plan with respect to those retirement benefits
will remain unchanged. The following table shows estimated combined annual
benefits payable upon retirement under the Retirement Plan and the SERP:
Years of Service
- ---------------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ---------------------------------------------------------------------------------------------------
$ 50,000 12,591 16,789 20,986 24,111 27,236
75,000 20,631 27,509 34,386 39,073 43,761
100,000 28,671 38,229 47,786 54,036 60,286
150,000 44,751 59,669 74,586 83,961 93,336
200,000 60,831 81,109 101,386 113,886 126,386
250,000 76,911 102,549 128,186 143,811 159,436
300,000 92,991 123,989 154,986 173,736 192,486
- 10 -
The payments by the Company to fund the benefits under the Retirement
Plan and SERP are actuarially determined. The estimated annual benefits payable
upon retirement and projected years of credited service to retirement are as
follows: Mr. J. P. Gotschall -- $177,682 (39.8 years); Mr. F. A. Cappello --
$59,697 (23.6 years); and Mr. H. D. Smith -- $72,560 (42.5 years). Total pension
expense related to the Retirement Plan for fiscal year 2001 was $329,850.
Mr. T. V. Crean participates in the STCL Plan. This is a contributory
plan for employees of the Company's Irish subsidiary, SIFCO Turbine Components
Limited ("STCL"). Under the STCL Plan, the employee and STCL each pay 50% of
retirement benefits. Other costs such as life insurance are borne by STCL.
Under the terms of the STCL Plan, the amount of normal annual
retirement benefits payable to a participating employee is generally based upon
years of service with STCL prior to normal retirement date, "final pensionable
salary" (average basic salary during the period of 36 consecutive months
preceding retirement) and average government pension. The benefit is 1/60th of
final pensionable salary for each year of service, subject to a maximum of 40
years, minus 1 1/2 times the single person's annual rate of government
retirement pension. Years of service for senior managers who will have completed
at least ten years service may be augmented. The additional cost is paid by
STCL.
The payments by STCL and employees to fund the benefits under the STCL
Plan are actuarially determined. The current dollar value of estimated annual
benefits payable (in Irish pounds) upon retirement and projected years of
credited service to retirement for Mr. T. V. Crean is $120,924 (40 years). Total
pension expense for the Retirement Plan for fiscal year 2001 was $161,000.
EMPLOYEES' THRIFT PLAN
The amounts stated in the Summary Compensation Table include amounts
contributed and expensed by the Company under the SIFCO Industries, Inc.
Employees' Thrift Plan. This Plan is a qualified 401(k) plan for salaried U.S.
employees and was established in 1981 to encourage savings among employees. By
the terms of this Plan, all salaried U.S. employees are permitted to contribute
up to 16% of their pay, including wages, overtime pay and any commissions
received, up to a maximum amount of $10,500 in calendar year 2001, to a trust
fund. Under the Plan, the Company matches 60% of the first 2% of pay
contributed.
Employee contributions may be invested in one or more of four funds: an
equity fund, an international equity fund, a balanced fund and a government
money market fund. Company matching contributions are made in Company shares.
For employees with less than three full years of service, one-half of the
amounts contributed by the Company are automatically vested. The remaining 50%
becomes fully vested after three full years of service. Amounts contributed by
the Company for employees with three or more full years of service vest
immediately. All amounts in the fund credited to an employee are payable in cash
or stock upon the employee's death, retirement or permanent disability.
- 11 -
EMPLOYMENT AGREEMENTS
During fiscal 2000, the Company entered into agreements with certain
key executives of the Company in order to protect the Company and such key
executives in the event of a change in control of the Company. The purpose of
these agreements is to reinforce and encourage the continued attention and
dedication of these executives to their assigned duties without distraction in
the face of (i) solicitations by other employers and (ii) the potentially
disturbing circumstances arising from the possibility of a change in control of
the Company. To that end, the Executive Employment Agreements obligate the
Company to provide certain severance benefits, described below, to any of these
officers whose employment is terminated under certain circumstances. Such
benefits for Messrs. H. D. Smith and F. A. Cappello include a payment equal to a
maximum of 200% of the employee's annual compensation, continuation of insurance
coverage for up to 24 months following termination, and accelerated vesting of
existing stock options and certain retirement benefits.
REPORT OF THE COMPENSATION COMMITTEE
The Company's compensation of its executive personnel has three
components: base salary, cash incentive compensation and non-cash incentives
(stock options).
Based on a consideration of CEO salaries in manufacturing companies of
comparable size, and in view of uncertainty in the aerospace industry, the
Compensation Committee continued Mr. Gotschall's annual salary at $260,000 at
the start of the fiscal 2002 year.
The Company has incentive plans for each business unit and for the
corporate headquarters staff. The SIFCO Forge Group's incentive plan is a
gainsharing plan for all employees of the Group based on 10% of operating
profits, subject to certain adjustments.
Members of the other business units share in compensation pools equal
to 10% of the unit's operating profits, subject to certain adjustments. Each
pool is allocated by the applicable business unit manager among the participants
in the plan in the general proportion that each participant's salary bears to
the aggregate salaries of all participants, with individual awards subject to
salary caps.
Members of the corporate staff earned incentives from a pool equal to
3% of profits before tax, subject to certain adjustments. Mr. Gotschall's cash
incentive for fiscal 2001 was $106,000.
During fiscal 2001, options on 77,000 shares were awarded to
participants in the Company's 1998 Long-Term Incentive Plan, including awards of
5,000 shares to Mr. J. P. Gotschall; 10,000 shares to Mr. T. V. Crean; 5,000
shares to Mr. H. D. Smith; and 10,000 shares to Mr. F. A. Cappello.
Compensation Committee
J. Douglas Whelan, Chair
Maurice Foley
- 12 -
PERFORMANCE GRAPH
Set forth below is a graph comparing the price performance of the
Company's Common Shares to the price performance of the S&P Composite - 500
Stock Index and the S&P Aerospace/Defense Group. The graph assumes that the
value of the investment in the Common Shares, the S&P Composite - 500 Stock
Index and the S&P Aerospace/Defense Group was $100 on September 30, 1996.
COMPARISON OF FIVE-YEAR PRICE PERFORMANCE OF
SIFCO INDUSTRIES, INC., S&P 500 INDEX
AND S&P AEROSPACE/DEFENSE GROUP
SIFCO Stock Price Vs.
S&P 500 and S&P Aerospace/Defence
SIFCO S&P 500 S&P
Quarter Ended Stock Index Aerospace
09/96 100.0% 100.0% 100.0%
03/97 118.8% 110.2% 102.4%
09/97 207.5% 137.8% 122.1%
03/98 228.8% 160.3% 119.2%
09/98 125.0% 148.0% 89.6%
03/99 76.3% 187.2% 83.4%
09/99 70.0% 186.6% 90.7%
3/00 58.8% 218.0% 75.2%
9/00 58.1% 209.0% 118.7%
3/31/01 46.0% 168.8% 111.3%
9/30/01 46.0% 152.8% 110.8%
- 13 -
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviewed and discussed the audited financial
statements of the Company for the fiscal year ended September 30, 2001, with the
Company's management and with the Company's independent accountants, Arthur
Andersen LLP. The Audit Committee also discussed with Arthur Andersen LLP the
matters required to be discussed by Statement of Auditing Standards No. 61
(Communication with Audit Committees).
The Audit Committee received the written disclosures and the letter
from Arthur Andersen LLP required by Independence Standards Board Standard No. 1
and the Audit Committee discussed the independence of Arthur Andersen LLP with
that firm.
Effective as of May 2, 2000, the Audit Committee adopted a written
charter and the board of directors of the Company has adopted that charter.
Based upon the Audit Committee's review and discussion noted above, the
Audit Committee recommended to the board of directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2001.
Audit Committee
Richard S. Gray, Chair
Maurice Foley
Thomas J. Vild
AUDIT FEES
Fees paid to Arthur Andersen LLP for the audit of the Company's annual
financial statements and for review of the financial statements included in the
Company's forms 10-Q for the year ended September 30, 2001 were $147,000.
ALL OTHER FEES
Fees paid to Arthur Andersen LLP for all services other than those
described above were $92,900, including accounting and SEC reporting related
consultation services of $42,100 and tax related services of $50,900.
- 14 -
PROPOSAL FOR APPROVAL OF DESIGNATION OF AUDITORS
The accounting firm of Arthur Andersen LLP has been the Company's
independent accountants and auditors and has audited the accounts of the Company
and its consolidated subsidiaries for a number of years. The board of directors
has chosen that firm to audit the accounts of the Company and its consolidated
subsidiaries for the fiscal year ending September 30, 2002, subject to the
approval of the shareholders for which the affirmative vote of a majority of the
Common Shares present and voting at the 2002 Annual Meeting (in person or by
proxy) is required. Arthur Andersen LLP has advised the Company that neither the
firm nor any of its members or associates has any direct or indirect financial
interest in the Company or any of its affiliates other than as auditors. The
board of directors recommends ratification of the selection of Arthur Andersen
LLP as independent auditors of the Company for the year ending September 30,
2002.
Representatives of Arthur Andersen LLP are expected to be present at
the 2002 Annual Meeting with the opportunity to make a statement if they desire
to do so and to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
A shareholder who intends to present a proposal at the 2003 Annual
Meeting, and who wishes to have the proposal included in the Company's proxy
statement and form of proxy for that meeting, must deliver the proposal to the
Company no later than August 16, 2002. Any shareholder proposal submitted other
than for inclusion in the Company's proxy materials for the 2003 Annual Meeting
must be delivered to the Company no later than October 30, 2002 or such proposal
will be considered untimely. If a shareholder proposal is received after October
30, 2002, the Company may vote in its discretion as to the proposal, all of the
Common Shares for which it has received proxies for the 2003 Annual Meeting.
OTHER MATTERS
The management does not know of any other matters which will come
before the meeting. In case any other matter should properly come before the
meeting, it is the intention of the persons named in the enclosed proxy to vote
in accordance with their best judgment.
By order of the Board of Directors
Carolyn J. Buller, Secretary
December 14, 2001
- 15 -
EXHIBIT A
PROPOSED AMENDMENT TO THE AMENDED CODE OF REGULATIONS
[THE AMENDED CODE OF REGULATIONS ARE TO BE AMENDED BY DELETING THE FIRST
SENTENCE OF PARAGRAPH ONE (1) OF ARTICLE VIII - DIRECTORS, AND INSERTING IN
PLACE THEREOF THE SENTENCE SET FORTH BELOW.]
The Company shall have a board of directors of not less that six (6)
nor more than nine (9) persons as may be determined by the affirmative vote of
the holders of record of shares of the stock of the Company entitling them to
exercise a majority of the voting power of the Company at an annual or special
meeting called for the purpose of electing directors, and when so fixed such
number shall continue to be the authorized number of directors until changed by
the shareholders by a vote of the aforesaid or by the directors as hereinafter
provided.
[THE AMENDED CODE OF REGULATIONS ARE TO BE AMENDED BY DELETING PARAGRAPH TWO (2)
OF ARTICLE VIII - DIRECTORS, AND INSERTING IN PLACE THEREOF THE PARAGRAPH SET
FORTH BELOW.]
At each annual meeting of shareholders, all directors will be elected
for a one-year term.
PROPOSED AMENDMENT TO THE AMENDED ARTICLES OF INCORPORATION.
[THE AMENDED ARTICLES OF INCORPORATION ARE TO BE AMENDED BY ADDING THE ARTICLE
SET FORTH BELOW.]
No holder of shares of the Corporation shall be entitled to vote
cumulatively in the election of directors of the Company.
- 16 -
SIFCO INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JEFFREY P. GOTSCHALL and HUDSON D. SMITH, and
each of them, the proxies of the undersigned to vote the shares of the
undersigned at the Annual Meeting of the Shareholders of SIFCO Industries, Inc.,
to be held on January 29, 2002, and at any and all adjournments thereof, upon
proposals to:
(1) ELECT THREE (3) DIRECTORS. To elect the following persons for a three-year
term expiring in 2005 or, if proposal 3 is adopted, for a term expiring at
the 2003 Annual Meeting:
Michael S. Lipscomb Hudson D. Smith J. Douglas Whelan
|_| FOR all nominees listed above |_| WITHHOLD AUTHORITY
(except as noted below) To vote for all nominees
(INSTRUCTIONS: If you wish to withhold authority to vote for any individual
nominee, write that nominee's name in the space
below.)_______________________________________________________________
______________________________________________________________________
(2) AMEND THE COMPANY'S CODE OF REGULATIONS to decrease the number of
Directors.
|_| FOR |_| AGAINST |_| ABSTAIN
(3) AMEND THE COMPANY'S CODE OF REGULATIONS to declassify the Board of
Directors and AMEND THE COMPANY'S ARTICLES OF INCORPORATION to eliminate
cumulative voting rights of the Company's shareholders.
|_| FOR |_| AGAINST |_| ABSTAIN
(4) RATIFY THE DESIGNATION OF ARTHUR ANDERSEN LLP as independent auditors of
the Company.
|_| FOR |_| AGAINST |_| ABSTAIN
(5) Consider and take action upon such other matters as may properly come
before the meeting or any adjournment thereof.
|_| GRANT AUTHORITY |_| WITHHOLD AUTHORITY
(Continued on other side)
(Proxy--continued from other side)
Proxy No. Shares
IF NO INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES FOR DIRECTORS, FOR THE AMENDMENT TO THE COMPANY'S CODE OF REGULATIONS
TO DECREASE THE NUMBER OF DIRECTORS, FOR THE AMENDMENT TO THE COMPANY'S CODE OF
REGULATIONS TO DECLASSIFY THE BOARD OF DIRECTORS AND THE AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING RIGHTS OF THE
COMPANY'S SHAREHOLDERS, FOR THE PROPOSAL TO RATIFY THE DESIGNATION OF
INDEPENDENT AUDITORS AND, IN THE DISCRETION OF THE PROXIES, ON SUCH OTHER
BUSINESS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT.
Dated: _________________________
________________________________
________________________________
NOTE: The signature of this proxy should
correspond with the name (or names), as
shown hereon, in which your stock is
registered. Where stock is registered
jointly in the name of two or more
persons, all should sign.