SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Steel Dynamics, Inc.
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[STEEL DYNAMICS, INC. (TM) LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2002
To our Stockholders:
TIME ................ 9:00 a.m., Fort Wayne time (EST)
Thursday, May 16, 2002
PLACE ............... Grand Wayne Center
John Whistler Ballroom
120 West Jefferson Boulevard
Fort Wayne, Indiana 46802
ITEMS OF BUSINESS ... (1) To elect twelve (12) Directors for a one-year term.
(2) To approve Ernst & Young LLP as our independent
auditors for the fiscal year ending December 31,
2002.
(3) To conduct other business properly raised before the
meeting and any adjournment or postponement of the
meeting.
RECORD DATE ......... You may vote if you were a stockholder of record
on March 26, 2002.
2001 ANNUAL REPORT .. Our 2001 Annual Report to Stockholders, which is not a
part of the proxy soliciting material, is enclosed.
PROXY VOTING ........ You will be able to vote in one of four ways:
(1) Mark, sign, date and return your proxy card in the
enclosed envelope.
(2) Call the toll-free telephone number on your proxy
card and follow the instructions for telephone
voting.
(3) Visit the web site shown on your proxy card and
follow the instructions for voting on the Internet.
You may always revoke your proxy before it is voted at the
meeting by following the instructions in the accompanying
proxy statement.
KEITH E. BUSSE
President and Chief Executive
Officer
April 16, 2002
TABLE OF CONTENTS
PAGE
Voting Information......................................................... 1
Governance................................................................. 2
Item 1 - Election of Directors............................................. 4
Information on Directors and Executive Officers............................ 6
Item 2 - Ratification of the Appointment of Independent Auditors........... 10
Report of the Compensation Committee and Board of Directors
on Executive Compensation ................................................ 11
Report of the Audit Committee.............................................. 13
Stockholder Return Performance Graph....................................... 14
STEEL DYNAMICS, INC.
6714 POINTE INVERNESS WAY, SUITE 200
FORT WAYNE, IN 46804
TELEPHONE: (260) 459-3553
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2002
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VOTING INFORMATION
PURPOSE
We are providing you with these proxy materials in connection with the
solicitation of proxies by our Board of Directors, to be voted at our 2002
Annual Meeting of stockholders. We will hold the meeting on May 16, 2002,
beginning at 9:00 a.m. Fort Wayne time (EST), in the John Whistler Ballroom of
the Grand Wayne Center, 120 West Jefferson Boulevard, Fort Wayne, Indiana 46802.
We are mailing this proxy statement and the enclosed proxy card beginning on
April 16, 2002. We are soliciting proxies from all our stockholders in order to
give all stockholders an opportunity to vote on matters to be presented at the
meeting even if they do not attend in person. In the following pages of this
proxy statement, you will find information on matters to be voted on at the
meeting or at any adjournment or postponement of the meeting.
WHO CAN VOTE
You are entitled to vote if you were a stockholder of record at the close of
business on March 26, 2002. If you are not present in person at the meeting,
your shares can be voted only if represented by a valid proxy.
SHARES OUTSTANDING
On March 26, 2002, there were 46,820,457 shares of common stock outstanding.
A list of stockholders entitled to vote at the meeting is available at our
corporate headquarters office and will also be available at the meeting. Each
share is entitled to one vote on each matter properly brought before the
meeting.
VOTING OF SHARES
Because most of you will not be able to attend the meeting in person, it is
important that your shares be represented by proxy. This year, we are offering
you a choice of how to vote by proxy:
- You may vote by mail in the traditional manner by marking,
signing, dating and returning your proxy card in the envelope
that we have enclosed.
- You may vote by telephone using the toll-free telephone number
and instructions shown on your proxy card.
- You may vote via the Internet by using the web site
information and instructions listed on your proxy card.
We anticipate that telephone and Internet voting will be available 24 hours a
day, 7 days a week. Both methods will prompt you on how to proceed and you will
be able to confirm that your instructions have been properly received and
recorded. For both of these methods, you will also need a control number, which
is noted on your proxy card. The telephone and Internet voting facilities will
close at 12:01 a.m. EST on May 16, 2002.
1
You may revoke your proxy at any time before it is voted at the meeting in
one of four ways:
- Notify our Corporate Secretary in writing before the meeting
that you wish to revoke your proxy.
- Submit another proxy with a later date.
- Vote by telephone or Internet on a later date.
- Vote in person at the meeting.
The method by which you give your proxy will not limit your right to vote at
the meeting if you later decide to attend in person. If you are not the record
owner and your shares are held in the name of a bank, broker or other holder of
record, however, you will need to obtain a proxy, executed in your favor from
that record holder, to be able to vote at the meeting.
The persons named as proxies will vote your shares at the meeting in
accordance with your instructions, unless you first revoke your proxy. If any
other matters are properly presented for consideration, including a motion to
adjourn or postpone the meeting to another time or place, the persons named as
proxies will also have discretion to vote on those matters according to the best
of their judgment. At the date this proxy statement was printed, we did not
anticipate that any other matters would be raised at the meeting. If you do not
indicate how your shares should be voted on a matter, the shares represented by
your proxy will be voted as the Board of Directors recommends.
REQUIRED VOTE
The affirmative vote of a majority of the shares present in person or by
proxy and entitled to vote at the meeting is needed to elect directors, to
ratify the appointment of Ernst & Young LLP as independent auditors for the year
2002 and on any other matters that may properly come before the meeting. The
presence, in person or by proxy, of the holders of a majority of the shares
entitled to vote generally for the election of directors is necessary to
constitute a quorum at the meeting. Abstentions and broker "non-votes" are
counted as present and entitled to vote for purposes of determining the
existence of a quorum but will not be included in the vote totals with respect
to those matters.
COST OF PREPARING, MAILING AND SOLICITING PROXIES
We will pay all of the costs of preparing and mailing the proxy statement
and soliciting these proxies. We will ask brokers, dealers, banks, voting
trustees and other nominees and fiduciaries to forward the proxy materials and
our 2001 Annual Report to our beneficial owners on the record date. We will also
reimburse such brokers, dealers, banks, voting trustees and other nominees and
fiduciaries for their expenses incurred in sending proxies and proxy materials
to our beneficial owners. In addition to mailing proxy materials, our officers,
directors and employees may also solicit proxies in person, by telephone or
otherwise.
ANNUAL REPORT
We are including in this mailing a copy of our 2001 Annual Report to
Stockholders, including our financial statements for the required periods ended
December 31, 2001. The 2001 Annual Report is not, however, a part of this proxy
statement.
GOVERNANCE
Pursuant to Indiana's Business Corporation Law and our bylaws, our Board of
Directors manages our business, property and affairs.
During 2001, our Board of Directors consisted of 11 persons. Under our
bylaws, however, our Board of Directors may amend the bylaws to prescribe a
greater or lesser number of directors, and the Board has amended the bylaws to
provide for a twelfth board position for 2002. At the Annual Meeting, therefore,
12 directors will be elected, and each newly elected director will serve for a
one-year term until the 2002 Annual Meeting of stockholders.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held five regularly scheduled and special meetings
during 2001, and all directors attended at least 75% of the meetings of the
Board of Directors and of the various committees on which they served during
2001.
Our Board of Directors has an Audit Committee and a Compensation Committee.
The members of the committees are appointed annually by the Board.
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The Audit Committee
The Audit Committee consists of three members, all of them non-employee
directors. They are Joseph D. Ruffolo, Chair of the Committee, James E. Kelley
and Dr. Jurgen Kolb. The Audit Committee held five meetings during 2001. The
Audit Committee reviews our accounting policies, internal controls, financial
reporting practices, contingent risks and risk management strategies and plans,
and the services and fees of our independent auditors. In connection with these
reviews, the Audit Committee meets alone with our financial and legal personnel,
and with our independent auditors, who have free access to the Audit Committee
at any time. The Audit Committee recommends the selection of the independent
auditors to serve the following year in examining our accounts. The Audit
Committee also annually reviews the independence of our independent auditors as
a factor in these recommendations.
The Compensation Committee
The Compensation Committee consists of four members. Leonard Rifkin is Chair
of the Committee and the other three Committee members are John C. Bates, Joseph
D. Ruffolo and Richard J. Freeland. All are non-employee directors. The function
of the Compensation Committee is to meet with, receive and consider the
recommendations of our Chief Executive Officer, Keith E. Busse, with respect to
all senior management personnel and then make its recommendations with regard to
the compensation of senior management to the Board. All decisions regarding the
compensation of executive officers and directors are determined solely by the
full Board of Directors, and all directors participate in deliberations of the
Board on all matters, including the evaluation of executive officer performance.
During 2001, the full Board functioned as the Compensation Committee.
COMPENSATION COMMITTEE AND BOARD INTERLOCKS AND INSIDER PARTICIPATION
Leonard Rifkin, the Chair of our Compensation Committee, is the Chairman of
the Board of OmniSource Corporation, our exclusive steel scrap supplier. John C.
Bates, a member of our Compensation Committee, is the President and Chief
Executive Officer of Heidtman Steel Products, Inc., our largest purchaser of
manufactured steel products.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers to file initial reports of beneficial ownership of our
common stock and other equity securities, as well as reports of changes in
beneficial ownership. These individuals are required to provide us with a copy
of their required Section 16(a) reports as and when they are filed. Based on our
records and other information, we believe that all Securities and Exchange
Commission filing requirements applicable to our directors and executive
officers with respect to 2001 were met.
STOCKHOLDER PROPOSALS
Any stockholder satisfying the requirements of the Securities and Exchange
Commission's Rule 14a-8 and wishing to submit a proposal to be included in the
Proxy Statement for the 2003 Annual Meeting of stockholders must submit the
proposal in writing to our Corporate Secretary, at 6714 Pointe Inverness Way,
Suite 200, Fort Wayne, Indiana 46804, on or before November 30, 2002.
In addition, under our bylaws, any stockholder who has not submitted a
timely proposal for inclusion in next year's proxy statement but still wishes to
make a proposal at next year's annual meeting must deliver written notice to our
Corporate Secretary no later than 60 days nor more than 90 days prior to the
first anniversary of the record date for this year's annual meeting. Therefore,
for our 2003 Annual Meeting, if such a proposal is not delivered prior to
January 25, 2003, it may not be presented at the meeting at all. If a proposal
is made after December 26, 2002 and prior to January 25, 2003, we will retain
the discretion to vote proxies we receive with respect to any such proposals, so
long as we include in our next year's proxy statement advice on the nature of
any such proposal and how we intend to exercise our voting discretion, and so
long as the proponent does not provide us with a written statement within the
time frame determined under Securities and Exchange Commission Rule 14a-4(c)(1)
that the proponent intends to deliver his own proxy statement and form of proxy
with respect to that proposal. You may obtain a copy of the full text of the
bylaw provision by writing to our Corporate Secretary at 6714 Pointe Inverness
Way, Suite 200, Fort Wayne, Indiana 46804.
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ITEM 1 - ELECTION OF DIRECTORS
Our stockholders will elect 12 directors at the 2002 Annual Meeting. The
individuals listed below have been nominated by the Board of Directors. Each
director, if elected, will serve until our 2003 Annual Meeting of Stockholders,
until a qualified successor director has been elected, or until he resigns or is
removed by the Board.
We will vote your shares as you specify on the enclosed proxy card, or by
telephone or Internet. If you do not specify how you want your shares voted, we
will vote them FOR the election of all of the nominees listed below. If
unforeseen circumstances (such as death or disability) make it necessary for us
to substitute another person for any of the nominees, we will vote your shares
FOR that other person. We do not anticipate that any nominee will be unable to
serve. Following the meeting, the Board of Directors may, however, increase the
size of the Board and fill any resulting vacancy or vacancies until the 2003
Annual Meeting of stockholders.
If you wish your shares voted for some but not all of the nominees, you may
so indicate when you vote your proxy.
Following is the age, principal occupation during the past five years, and
certain other information for each of the 12 director nominees.
DIRECTOR NOMINEES
KEITH E. BUSSE, AGE 59
DIRECTOR SINCE 1993
President, Chief Executive Officer and a director, and President and Chief
Executive Officer and a director of Iron Dynamics, Inc., our wholly-owned
subsidiary. Prior to 1993, for a period of twenty-one years, Mr. Busse
worked for Nucor Corporation, where he last held the office of Vice
President. Mr. Busse is a director of Tower Financial Corporation, a
publicly held bank holding company.
MARK D. MILLETT, AGE 42
DIRECTOR SINCE 1993
Vice President and General Manager of our Flat Roll Division and a director,
and Vice President and a director of our Iron Dynamics subsidiary. Prior to
1993, Mr. Millett worked for Nucor Corporation, which he joined in 1982.
RICHARD P. TEETS, JR., AGE 46
DIRECTOR SINCE 1993
Vice President and General Manager of our Structural Division and a
director. Prior to 1993, Mr. Teets worked for Nucor Corporation, which he
joined in 1987.
TRACY L. SHELLABARGER, AGE 45
DIRECTOR SINCE 1994
Vice President of Finance and Chief Financial Officer and a director and
Vice President of Finance and Chief Financial Officer for our Iron Dynamics
subsidiary. From 1987 to 1994, Mr. Shellabarger worked for Nucor
Corporation.
LEONARD RIFKIN, AGE 71
DIRECTOR SINCE 1994
Mr. Rifkin has been the Chairman of the Board (since 1996) and Chief
Executive Officer and a director of OmniSource Corporation (scrap metal
recycling) since 1959. OmniSource is our exclusive supplier of steel scrap.
Mr. Rifkin is a director of Tower Financial Corporation, a publicly held
bank holding company. Mr. Rifkin is a member of our Compensation Committee.
JOHN C. BATES, AGE 58
DIRECTOR SINCE 1994
Mr. Bates is the President and Chief Executive Officer and a director of
Heidtman Steel Products, Inc. (steel service centers), which he joined in
1963, and for which he has served as its President and Chief Executive
Officer and a director since 1969. Heidtman Steel is our largest customer
for our manufactured steel products. Mr. Bates is a member of our
Compensation Committee.
DR. JURGEN KOLB, AGE 59
DIRECTOR SINCE 1996
Dr Kolb was a member of the executive board of Salzgitter, AG, a German
Steelmaker, and from 1986 to 2001, served as its Director of Sales, before
retiring in 2001. Dr. Kolb is also a director of our Iron Dynamics
subsidiary. Dr. Kolb is a member of our Audit Committee.
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JOSEPH D. RUFFOLO, AGE 60
DIRECTOR SINCE 1999
Mr. Ruffolo has been a principal in Ruffolo Richard LLC, a business and
financial consulting firm, since 1994. Prior to that, Mr. Ruffolo was the
President and Chief Executive Officer of North American Van Lines, Inc. Mr.
Ruffolo is a director of Tower Financial Corporation, a publicly held bank
holding company. Mr. Ruffolo is also a member and chairman of our Audit
Committee and a member of our Compensation Committee.
NAOKI HIDAKA, AGE 47
DIRECTOR NOMINEE
Mr. Hidaka is Senior Vice President and General Manager of the Chicago
office and General Manager of the Rolled Steel and Ferrous Raw Materials
Division of Sumitomo Corporation of America. Prior to that, from June 1998
to March 2001, Mr. Hidaka was Vice President and Chief Financial Officer of
Auburn Steel Company, Inc., and from March 1998 to May 1998, Deputy General
Manager of Steel Business Planning and Investment, and from May 1995 to
February 1998 was Manager, Plate Export with Sumitomo Corporation of Japan.
Sumitomo Corporation of America is a customer of Steel Dynamics' flat rolled
steel products and is also a licensee of our Iron Dynamics subsidiary's
ironmaking technology.
RICHARD J. FREELAND, AGE 65
DIRECTOR SINCE 2000
For more than twenty-five years, Mr. Freeland has been the President and
Chief Executive Officer of Pizza Hut of Fort Wayne, Inc. and six affiliated
companies that own and operate approximately 41 Pizza Hut franchised
restaurants in Indiana and Ohio. Mr. Freeland is a member of our
Compensation Committee.
JAMES E. KELLEY, AGE 83
DIRECTOR SINCE 2000
For more than twenty years, Mr. Kelley has been the Chairman of Kelley
Automotive, Inc. and various affiliated companies that own and operate
approximately 18 franchised auto dealerships in Indiana and Georgia. In
addition, Mr. Kelley is the owner of Jim Kelley Leasing and Kelley Cars,
Inc., fleet automobile and truck leasing companies; Midwest Auto Parts, a
wholesale supplier of car and truck parts; Consolidated Airways, a fixed
base operator at Fort Wayne International Airport; and Kelley Grain Co. and
Trans Oil Ltd., a seed and grain enterprise operating in the Republic of
Moldova. Mr. Kelley is also a member of our Audit Committee.
PAUL B. EDGERLEY, AGE 46
DIRECTOR NOMINEE
FORMER DIRECTOR (1994-1999)
Mr. Edgerley has been Managing Director of Bain Capital, Inc. (venture
capital) since May 1993 and, from 1990 to 1993, a general partner of Bain
Venture Capital. He is also a director of Sealy Corporation, Anthony Crane
Rental LP and Walco International, Inc.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSED ELECTION
OF ALL OF THE DIRECTORS DESCRIBED IN THIS PROXY STATEMENT.
5
INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows how much Steel Dynamics, Inc common stock the
directors, director nominees, the Named Executive Officers, and all directors,
nominees and executive officers as a group beneficially owned as of March 21,
2002. The Named Executive Officers include the Chief Executive Officer and the
four next most highly compensated executive officers based upon compensation
earned during 2001.
BENEFICIAL OWNERSHIP AS
OF MARCH 21, 2002
-----------------------
CURRENT SHARES
BENEFICIAL SUBJECT PERCENT
NAME HOLDINGS TO OPTIONS+ TOTAL OWNED*
---- -------- ----------- ----- ------
NAMED EXECUTIVE OFFICERS
Keith E. Busse(1) ....... 1,232,848 57,536 1,290,384 2.7%
Mark D. Millett(2) ...... 1,076,805 43,154 1,119,959 2.4%
Richard P. Teets, Jr.(3). 1,137,254 43,154 1,180,408 2.5%
Tracy L. Shellabarger(4). 286,001 43,154 329,155 0.7%
John W. Nolan(5) ........ 28,992 32,367 61,359 0.1%
OTHER DIRECTORS OR
NOMINEES
Leonard Rifkin(6) ....... 753,162 5,525 758,687 1.6%
John C. Bates(7) ........ 2,995,642 5,525 3,001,167 6.4%
Dr. Jurgen Kolb(8) ...... -- 5,525 -- --
Naoki Hidaka(9) ......... 353,750 1,451 353,750 0.8%
Joseph D. Ruffolo(10) ... 4,000 5,525 9,525 --
Richard J. Freeland(11) . 1,000 5,525 6,525 --
James E. Kelley(12) ..... 7,229 5,525 12,754 --
Paul B. Edgerley(13) .... 1,273,707 -- 1,273,707 2.7%
DIRECTORS AND EXECUTIVE . 9,150,390 253,966 9,404,356 20.0%
OFFICERS AS A GROUP
(13 PERSONS)
+ Represents options exercisable within 60 days.
* Assumes exercise of all stock options (for 253,966 shares) exercisable
within 60 days, with a corresponding increase in the number of outstanding
shares from 46,860,569 on the record date to 47,114,535.
(1) President and Chief Executive Officer and a director, and President and
Chief Executive Officer and a director of Iron Dynamics, Inc., our
wholly-owned subsidiary. Includes 12,848 shares, of which 4,283 are not yet
vested, received during 2001 pursuant to our Amended and Restated Officer
and Manager Cash and Stock Bonus Plan. Also includes 608 shares of common
stock held by Mr. Busse's son, with respect to which Mr. Busse disclaims
beneficial ownership.
(2) Vice President and General Manager of our Flat Roll Division and a director,
and Vice President and a director of Iron Dynamics, Inc., our wholly-owned
subsidiary. Includes 12,848 shares, of which 4,283 are not yet vested,
received during 2001 pursuant to our Amended and Restated Officer and
Manager Cash and Stock Bonus Plan.
6
(3) Vice President and General Manager of our Structural Division and a
director. Includes 12,848 shares, of which 4,283 are not yet vested,
received during 2001 pursuant to our Amended and Restated Officer and
Manager Cash and Stock Bonus Plan. Also includes 8,000 shares of common
stock owned by Mr. Teets' spouse, with respect to which Mr. Teets disclaims
beneficial ownership.
(4) Vice President of Finance and Chief Financial Officer and a director and
Vice President of Finance and Chief Financial Officer of our Iron Dynamics
subsidiary. Includes 11,306 shares, of which 3,769 are not yet vested,
received during 2001 pursuant to our Amended and Restated Officer and
Manager Cash and Stock Bonus Plan. Also includes 80,600 shares of common
stock held by Mr. Shellabarger's spouse, and 4,800 shares owned by Mr.
Shellabarger's spouse for the benefit of Mr. Shellabarger's minor children,
with respect to all of which Mr. Shellabarger disclaims beneficial
ownership.
(5) Vice President of Marketing. Includes 5,319 shares, of which 1,773 are not
yet vested, received during 2001 pursuant to our Amended and Restated
Officer and Manager Cash and Stock Bonus Plan.
(6) Director. Includes 6,000 shares of common stock held by Mr. Rifkin's spouse,
with respect to which he disclaims beneficial ownership. Shares in option
column represent stock options, fully vested or exercisable within 60 days,
issued to Mr. Rifkin pursuant to our stockholder approved Non-Employee
Director Stock Option Plan.
(7) Director. Consists of all shares of common stock held of record by Centaur,
Inc., HS Processing and Heidtman Steel Products, Inc., of which Mr. Bates is
the President and Chief Executive Officer. Shares in option column represent
stock options, fully vested or exercisable within 60 days, issued to Mr.
Bates pursuant to our stockholder approved Non-Employee Director Stock
Option Plan.
(8) Director. Shares in option column represent stock options, fully vested or
exercisable within 60 days, issued to Dr. Kolb pursuant to our stockholder
approved Non-Employee Director Stock Option Plan.
(9) Director. Consists of all shares held of record by Sumitomo Corporation of
America that Mr. Hidaka may be deemed to beneficially own due to his
relationship with that entity. Mr. Hidaka, however, disclaims beneficial
ownership of these shares. Shares in option column represent stock options,
fully vested or exercisable within 60 days, issued to Mr. Hidaka pursuant to
our stockholder approved Non-Employee Director Stock Option Plan.
(10) Director. Includes 1,000 shares held in Mr. Ruffolo's retirement plan. Also
includes 1,000 shares held by Mr. Ruffolo's spouse, with respect to which he
disclaims beneficial ownership. Shares in option column represent stock
options, fully vested or exercisable within 60 days, issued to Mr. Ruffolo
pursuant to our stockholder approved Non-Employee Director Stock Option
Plan.
(11) Director. Shares in option column represent stock options, fully vested or
exercisable within 60 days, issued to Mr. Freeland pursuant to our
stockholder approved Non-Employee Director Stock Option Plan.
(12) Director. Shares in option column represent stock options, fully vested or
exercisable within 60 days, issued to Mr. Kelley pursuant to our stockholder
approved Non-Employee Director Stock Option Plan.
(13) Director nominee. Mr. Edgerley beneficially owns 67,207 of these shares.
The balance of 1,206,500 shares are owned by Brookside Capital Partners
Fund, L.P. over which Mr. Edgerley may be deemed to share voting or
dispositive power. Mr. Edgerley disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
OTHER PRINCIPAL STOCKHOLDERS
The following table, as of March 21, 2002, discloses the only stockholders
that we know to be a beneficial owner of more than 5% of our common stock.
NAME AND ADDRESS AMOUNT OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Salzgitter AG 6,222,874 13.2%
38223 Salzgitter
Germany
General Electric Capital Corporation 4,310,000 9.1%
1600 Summer Street, 5th Floor
Stamford, CT 06927
Heidtman Steel Products, Inc. 2,995,642 6.4%
HS Processing
Centaur, Inc.
640 Lavoy Road
Erie, MI 48133
7
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation we paid for services rendered for 1999, 2000 and 2001 for our Chief
Executive Officer and our other 4 most highly compensated executive officers
whose salary and bonus amount exceeded $100,000. The amounts shown include
compensation for services rendered in all capacities.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS
------------------- -----------------------
OTHER RESTRICTED
ANNUAL STOCK SECURITIES ALL OTHER
NAME AND FISCAL SALARY(1) BONUS(2) COMPENSATION AWARDS(3) UNDERLYING COMPENSATION(5)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) OPTIONS(4) ($)
---- ------- ------- ------ ------ ------ ------
Keith E. Busse 2001 400,000 -- -- 13,415 8,021
President and Chief 2000 375,000 752,219 201,153 16,051 24,528
Executive Officer 1999 337,500 592,903 -- 10,306 17,051
Mark D. Millett 2001 270,000 -- -- 10,062 3,672
Vice President 2000 250,000 502,293 134,102 12,038 19,631
1999 212,500 374,011 -- 7,730 12,851
Richard P. Teets, Jr. 2001 270,000 -- -- 10,062 3,581
Vice President 2000 250,000 502,293 134,102 12,038 19,909
1999 212,500 374,011 -- 7,730 12,851
Tracy L. Shellabarger 2001 235,000 -- -- 10,062 3,476
Vice President and 2000 220,000 442,310 118,010 12,038 19,954
Chief Financial Officer 1999 184,000 324,065 -- 7,730 12,764
John W. Nolan 2001 145,000 -- -- 7,547 3,190
Vice President 2000 138,000 209,361 55,518 9,029 19,488
1999 130,000 172,685 -- 5,798 14,973
1 Represents Base Salary compensation.
2 Represents cash portion of Annual Bonus amount payable under our Amended and
Restated Officer and Manager Cash and Stock Bonus Plan
3 Represents stock portion of Annual Bonus amount payable under our Amended
and Restated Officer and Manager Cash and Stock Bonus Plan. One-third of the
common stock issued pursuant to this plan vests and becomes non-forfeitable
immediately upon issuance, another third vests and becomes non-forfeitable
one year after issuance, and the balance of one-third vests and becomes
non-forfeitable two years after issuance.
4 Represents the number of shares covered by options granted under our
stockholder approved Amended and Restated 1996 Incentive Stock Option Plan,
all of which are exercisable within 60 days.
5 Represents our matching contributions under our Retirement Savings Plan,
contributions under the Profit Sharing Plan, and life insurance premiums.
Excludes perquisites and other personal benefits unless the aggregate amount
of such compensation exceeds the lesser of either $50,000 or 10% of the
total of the annual salary and bonus reported for such Named Executive
Officer.
8
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
POTENTIAL
REALIZABLE VALUE
AT
ASSUMED ANNUAL
SECURITIES RATES OF STOCK
UNDERLYING % OF TOTAL PRICE
OPTIONS OPTIONS EXERCISE APPRECIATION
GRANTED GRANTED TO OR FOR OPTION TERM*
(# OF EMPLOYEES BASE PRICE EXPIRATION ------------------
NAME SHARES) in 2001 ($/Sh) Date 5%($) 10% ($)
---- --------- ------- ------ ---- ------ -------
Keith E. Busse.......... 5,678 0.89% 14.09 5/21/2006 22,103 48,843
7,737 1.22% 10.34 11/21/2006 22,103 48,841
Mark D. Millett......... 4,259 0.67% 14.09 5/21/2006 16,579 36,636
5,803 0.91% 10.34 11/21/2006 16,578 36,632
Richard P. Teets, Jr. .. 4,259 0.67% 14.09 5/21/2006 16,579 36,636
5,803 0.91% 10.34 11/21/2006 16,578 36,632
Tracy L. Shellabarger... 4,259 0.67% 14.09 5/21/2006 16,579 36,636
5,803 0.91% 10.34 11/21/2006 16,578 36,632
John W. Nolan........... 3,194 0.50% 14.09 5/21/2006 12,434 27,475
4,353 0.68% 10.34 11/21/2006 12,435 27,479
* The dollar amounts in these columns are the result of calculations prescribed
by the Securities and Exchange Commission and are not intended to forecast
future appreciation of our common stock. The real value of the options in this
table depends upon the actual changes in the market price of Steel Dynamics,
Inc.'s common stock during the applicable period.
AGGREGATED OPTION EXERCISES IN 2001 AND FISCAL YEAR-END VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END YEAR-END
SHARES (#) ($)
ACQUIRED ----------------------- ---------------------
ON VALUE EXER- UNEXER- EXER- UNEXER-
EXERCISE REALIZE CISABLE CISABLE CISABLE CISABLE
NAME (#) ($) (#) (#) ($) ($)
----------------------- ------ ----- ------ ----- ------ -----
Keith E. Busse ........ -- -- 49,799 7,737 26,325 9,826
Mark D. Millett ....... -- -- 37,351 5,803 19,743 7,370
Richard P. Teets, Jr... -- -- 37,351 5,803 19,743 7,370
Tracy L Shellabarger... -- -- 37,351 5,803 19,743 7,370
John W. Nolan ......... -- -- 28,014 4,353 14,808 5,528
DIRECTOR COMPENSATION
Director fees of $3,000 per Board meeting and $1,500 per committee meeting
are payable to each non-employee director. In addition, each Non-Employee
Director participates in our stockholder approved Non-Employee Director Stock
Option Plan, under which each such person on May 21 and November 21 of each year
(each such date defined as a "Grant Date") is automatically granted on each such
date a nonstatutory stock option, exercisable within five years from the date of
grant, to purchase shares of our common stock equal to the number of whole
shares, rounded up or down, calculated by dividing a grant value, currently set
at $15,000, by the fair market value of our common stock on each such Grant
Date. The purchase price of stock covered by an option granted pursuant to the
Director Plan is to be 100% of the fair market value of such shares on the day
the option is granted. Options are not exercisable until they become vested, and
full vesting
9
in an optionee will occur six months after each Grant Date. If an optionee
ceases to be a director, for whatever reason, no further grants of options are
to be made to that optionee. If an optionee ceases to be a director for any
reason other than death, any portion of an option that is then vested but has
not been exercised may be exercised at any time prior to its scheduled
expiration date.
The Director Plan is administered by the Board of Directors, with power and
authority to construe provisions of the Director Plan, to determine all
questions thereunder, to accelerate the vesting or exercise of an option, and to
adopt and amend such rules and regulations as it may deem desirable. The
Director Plan is intended to comply in all respects with the provisions of Rule
16b-3 under the Securities Exchange Act of 1934.
EMPLOYMENT AGREEMENTS
We have employment agreements with Keith E. Busse, our Chief Executive
Officer, Mark D. Millett, Vice President and General Manager of our Flat Roll
Division, Richard P. Teets, Jr., Vice President and General Manager of our new
Structural Division, and Tracy L. Shellabarger, Vice President of Finance and
Chief Financial Officer. Effective January 1, 2000, each of these employment
agreements has an initial two year term that is automatically extended annually
for an additional year unless, no less than 90 days prior to year-end, either
party gives written notice to the other of an intention not to renew. If,
without cause, any of these officers' employment is either terminated within the
two year term or is not extended for the contemplated additional rolling one
year period, that officer is entitled to receive a lump sum severance payment,
in lieu of any and all claims under the remaining term of his employment
agreement, in cash, equal to two years of his then existing Base Salary,
together with a pro rata annual bonus payment under our Amended and Restated
Officer and Manager Cash and Stock Bonus Plan, when calculated, to the date of
termination or non-extension (for that year). If the termination or
non-extension is for cause, then such officer would not be entitled to receive
any severance or bonus payment. If the officer voluntarily terminates his
employment, he would not be entitled to any severance payment but would be
entitled to receive a pro rata annual bonus payment to the date of termination
or non-extension. If employment is terminated due to disability or death, we
will continue paying that officer or his estate, as the case may be, the
prescribed Base Salary during the remainder of the two year term, except that in
the case of disability such payments will be reduced to the extent of any
benefits paid by workers' compensation or under any state disability benefit
program or under any other disability policy maintained by us. Under their
employment agreements, each of these officers is paid a Base Salary, which is
reflected in the "Salary" column in the Summary Compensation Table in this proxy
statement, in addition to which each such officer is entitled to participate in
our Amended and Restated Officer and Manager Cash and Stock Bonus Plan, our 1996
Incentive Stock Option Plan, our Profit Sharing Plan and our Retirement Savings
Plan.
All Named Executive Officers receive major medical and long-term disability
benefits. Mr. Nolan receives term life insurance equal to his Base Salary and
Messrs. Busse, Millett, Teets and Shellabarger receive term life insurance equal
to twice their Base Salaries.
ITEM 2 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Ernst & Young LLP as independent auditors to conduct our annual audit
for the year 2002, subject to stockholder approval. Ernst & Young LLP conducted
the annual audit for 2001. If a majority of the shares voting does not approve
of the appointment, the Board of Directors will reconsider the appointment. It
is believed that representatives of Ernst & Young LLP will be present at the
meeting and will have an opportunity to make a statement if they desire. They
will also be available at the meeting to respond to appropriate questions from
stockholders.
The affirmative vote of the holders of a majority of our shares of common
stock represented at the meeting and entitled to vote on this matter will be
necessary for ratification of our appointment of Ernst & Young LLP as our
independent auditors for the year 2002
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR 2002.
10
NOTWITHSTANDING ANYTHING TO CONTRARY SET FORTH IN ANY OF OUR PREVIOUS
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS
PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORTS AND THE PERFORMANCE
GRAPH ON PAGE 16 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS,
NOR SHALL THEY BE DEEMED TO BE SOLICITING MATERIAL OR DEEMED FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
REPORT OF THE COMPENSATION COMMITTEE AND
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Our executive compensation program is administered directly by our Board of
Directors, with advice from our Compensation Committee. During 2001, our
Compensation Committee consisted of four non-employee directors, Leonard Rifkin,
Chair of the Committee, Joseph D. Ruffolo, John C. Bates and Richard J.
Freeland. The Compensation Committee receives recommendations from our Chief
Executive Officer, Keith E. Busse, regarding all executive officers, meets and
discusses goals, objectives, and job performance, as well as compensation
issues, with Mr. Busse, and then makes its recommendations to the Board of
Directors. All compensation decisions are made by our full Board of Directors.
During 2001, our entire Board of Directors functioned as the Compensation
Committee.
Our executive compensation program is based upon the following principles:
- Base salaries should be competitive with the level of salaries paid to
officers in comparable companies with comparable responsibilities.
- Variable compensation should be related to our financial performance.
- Long-term compensation, in the form of stock options, directly links
officers' rewards to stock price appreciation.
Our executive compensation program consists primarily of Base Salary, Annual
Bonus awards (payable in cash and, if applicable, in our restricted stock), and
grants of stock options. We believe that executive compensation should reflect a
substantial incentive component, thus aligning our philosophy of executive
compensation with the culture and compensation philosophy that characterizes the
rest of our work force. We also believe that stock option incentives play a
major rule in aligning executive compensation with long-term stockholder
interests. The total compensation for each of our executive officers consists of
both cash and non-cash compensation. The cash compensation component consists of
both Base Salary and the cash portion of any Annual Bonus applicable under our
Amended and Restated Officer and Manager Cash and Stock Bonus Plan, as amended,
and the non-cash component consists of stock options and, depending upon our
profitability, the stock bonus portion of the Annual Bonus, if any, payable
under that Plan.
BASE SALARY
We establish the Base Salary for each executive officer during the final
month of each fiscal year for the following fiscal year. Increases in Base
Salary are determined on the basis of individual performance and level of
responsibility. The Board evaluates and reviews the performance of and
determines the Base Salary of our Chief Executive Officer, Mr. Busse, and, upon
the recommendation of the Compensation Committee, reviews the performance of and
determines the Base Salary of each of the other executive officers, commensurate
with each such officer's individual contributions to our success.
ANNUAL BONUS
The officers' Annual Bonus is a performance-based bonus driven by the level
of our total profitability. Upon recommendation from our Chief Executive Officer
and from our Compensation Committee, our full Board of Directors annually
determines who will participate.
The Annual Bonus is determined under our Amended and Restated Officer and
Manager Cash and Stock Bonus Plan. This Plan, which was originally adopted by
our Board and approved by our stockholders in October 1996, was amended,
restated and re-approved by our stockholders at our 2000 Annual Meeting.
Pursuant to the authority granted by our stockholders at that time, our Board of
Directors in February 2001 extended our Amended and Restated Officer and Manager
Cash and Stock
11
Bonus Plan for an additional two years, through October 21, 2003.
For 2001, there were no Annual Bonuses payable to the Named Executive
Officers as a result of our profitability level.
STOCK OPTION PLAN
In October 1996 and as amended pursuant to stockholder approval at our 2001
Annual Meeting, our Board of Directors adopted and the stockholders approved the
1996 Incentive Stock Option Plan, which covers all of our and our wholly-owned
subsidiaries' full-time employees (approximately 676 employees as of December
31, 2001), including Officers, Managers, supervisors, professional staff, and
hourly employees.
Under the 1996 Plan, we award automatic semi-annual stock options to all
such employees, in different dollar equivalent amounts, by position category,
based upon the fair market value of our common stock on each semi-annual grant
date, with an exercise price equal to the same fair market value on the grant
date (110% of the fair market value in case of any 10% stockholder). Options
issued under the Plan become exercisable six months after the date of grant and
must be exercised no later than five years thereafter.
OTHER COMPENSATION
Profit Sharing Plan
We have established a Profit Sharing Plan for eligible employees, including
the Named Executive Officers, which is a "qualified plan" for federal income tax
purposes. Under the Profit Sharing Plan, we annually allocate to Profit Sharing
Plan participants (the "profit sharing pool") an amount equal to 5% of our
pre-tax profits. The profit sharing pool is used to fund the Profit Sharing
Plan, as well as a separate cash profit sharing bonus that is paid to employees
in March of the following year. The amount allocated to our Chief Executive
Officer, for 2001 pursuant to the Profit Sharing Plan was $1,567.
Retirement Savings Plan
We have also established a Retirement Savings Plan for eligible employees,
which is also a "qualified plan" for federal income tax purposes. Generally,
employees may contribute on a pre-tax basis up to 8% of their eligible
compensation, and we match employee contributions in an amount based upon our
return on assets, with a minimum match of 5% and a maximum match of 50%, subject
to certain applicable tax law limitations. The amount we contributed in respect
to our Chief Executive Officer, Keith E. Busse, for 2001 pursuant to the
Retirement Savings Plan was $870.
12
REPORT OF THE AUDIT COMMITTEE
We have an Audit Committee composed of three "independent" directors, as
that term is defined by applicable National Association of Securities Dealers
listing standards. Each of these members is financially literate, and at least
one of them has accounting or related financial management expertise, as the
Board interprets those terms. A written charter approved by the Board of
Directors governs the Audit Committee.
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed and discussed the audited financial statements in the Annual Report
with management, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
The Committee also reviewed and discussed with the independent auditors, who
are responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee under generally accepted auditing standards. The Audit
Committee also discussed with Ernst & Young LLP the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communications with Audit
Committees), as amended by Statement on Auditing Standards No. 90 (Audit
Committee Communications). In addition, the Committee has discussed with the
independent auditors the auditors' independence from management and the Company,
including the matters in the written disclosures and the letter from Ernst &
Young LLP required by Independence Standards Board Standard No. 1 and considered
the compatibility of nonaudit services with the auditors' independence. The
Audit Committee believes that the fees paid for nonaudit services during 2001
are compatible with Ernst & Young's independence.
The Company paid the following fees to its independent auditors for services
related to fiscal 2001:
Audit Fees: Audit fees paid by Steel Dynamics to Ernst & Young for
professional services rendered for the annual audit of our 2001 financial
statements and the review of our interim financial statements included in our
Quarterly Reports on Forms 10-Q during the year ended December 31, 2001, totaled
approximately $157,200.
Financial Systems Design and Implementation Fees: There were no fees by
Ernst & Young related to our financial systems design and implementation during
2001.
All Other Fees: In addition to the foregoing fees, Steel Dynamics paid Ernst
& Young an aggregate of $110,500 for all other services rendered during 2001. Of
this amount, $72,400 consisted of fees for audit related services, including
fees related to financings.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the company's financial reporting. In reliance on the reviews
and discussions referred to above, the Audit Committee recommended to the Board
(and the Board has approved) that the audited financial statements be included
in the Annual Report on Form 10-K for the year ended December 31, 2001, for
filing with the Securities and Exchange Commission.
The Audit Committee held five meetings during fiscal year 2001.
13
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on our common stock with the cumulative total return of companies on the
NASDAQ Stock Market - US Index and the Standard & Poor's Iron and Steel Index
for the limited period of November 22, 1996 (the first day of trading on NASDAQ
National Market System following our initial public offering of our common
stock) and the last trading day prior to December 31, 2001, and assumes the
reinvestment of dividends (of which there were none).
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG STEEL DYNAMICS,INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S&P IRON & STEEL INDEX
[BAR GRAPH]
STEEL DYNAMICS INC
Cumulative
Total Return
---------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
STEEL DYNAMICS, INC. 100.00 83.66 61.44 83.34 57.52 60.71
NASDAQ STOCK MARKET 100.00 150.67 260.18 681.69 761.95 363.66
(U.S.)
S & P IRON & STEEL 100.00 90.83 80.10 76.38 52.86 42.68
* 100 invested on 12/31/96 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
Copyright (c) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm
14
OTHER MATTERS
We do not intend to bring any other matters before the Annual Meeting, nor
are we aware of any other matters that are to be properly presented to the
Annual Meeting by others. In the event that other matters do properly come
before the Annual Meeting or any adjournments thereof, it is the intention of
the persons named in the Proxy to vote such Proxy in accordance with their best
judgment on such matters.
By Order of the Board of Directors
Keith E. Busse
President and Chief Executive Officer
Fort Wayne, Indiana
April 16, 2002
15