1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY
(AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
COLD METAL PRODUCTS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
COLD METAL PRODUCTS, INC.
2200 Georgetown Drive, Suite 301
Sewickley, Pennsylvania 15143
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of Cold
Metal Products, Inc. will be held on July 19, 2001 at 9:00 o'clock a.m. at The
Union Club, 1211 Euclid Avenue, Cleveland, Ohio 44115, for the following
purposes:
1. To elect directors for a term of one year.
2. To consider, and if thought fit, to ratify the appointment of
auditors.
3. To transact such other business as may properly come before the
meeting.
These items are more fully described in the Proxy Statement on the
following pages. All Stockholders of record at the close of business on June 8,
2001 are entitled to vote at the meeting. Stockholders are reminded that shares
cannot be voted unless the enclosed Proxy Card is properly signed and returned
or other arrangements are made to have the shares represented at the Meeting.
HEIDI A. NAULEAU
Chairman
The Cold Metal Products, Inc. Annual Report, which includes financial
statements, is being mailed with this Notice of Meeting and Proxy Statement.
Kindly notify American Stock Transfer & Trust Company, 59 Maiden Lane, New York,
New York 10005, or by telephone at 212-936-5100, if you have not received it and
a copy will be sent to you.
3
COLD METAL PRODUCTS, INC.
PROXY STATEMENT
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of Cold
Metal Products, Inc., a New York corporation (the "Company") for use at the 2001
annual meeting of shareholders to be held on July 19, 2001 at 9:00 a.m. at The
Union Club, 1211 Euclid Avenue, Cleveland, Ohio 44115. Only shareholders of
record on June 8, 2001 will be entitled to vote at the meeting. On June 8, 2001,
the Company had 6,384,491 shares of Common Stock issued and outstanding.
The Company's principal executive offices are located at 2200 Georgetown
Drive, Suite 301, Sewickley, Pennsylvania 15143. This proxy statement and the
accompanying form of proxy are first being sent to shareholders on approximately
June 18, 2001.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before it is exercised. It may be revoked by
filing with the Secretary of the Company an instrument of revocation or by
presentation at the meeting of a duly executed proxy bearing a later date. It
may also be revoked by attendance at the meeting and election to vote in person.
Persons acting pursuant to the proxy solicited by the Board of Directors
will vote shares represented thereby (i) for the election of Raymond P. Torok,
R. Quintus Anderson, Heidi A. Nauleau, Wilbur J. Berner, Claude F. Kronk, Robert
D. Neary, and Peter B. Sullivan as directors of the Company, and (ii) to ratify
the appointment of Deloitte & Touche LLP as independent auditors of the Company
for the fiscal year ending March 31, 2002.
QUORUM AND VOTING PROCEDURES
A quorum consists of the presence at the meeting, in person or by proxy, of
holders of 3,192,246 shares of Common Stock. New York's Business Corporation Law
provides that, a quorum being present, nominees for the office of director are
to be elected by a plurality of votes cast at the meeting. Abstentions and
broker non-votes are counted in determining the existence of a quorum but are
not counted as votes cast for the election of directors or for the proposals as
to which the stockholder abstained or the broker withheld authority. R. Quintus
Anderson and Aarque Capital Corporation, a corporation controlled by R. Quintus
Anderson, Sondra R. Anderson and Heidi A. Nauleau (see "Nominees for Director")
together presently own 3,686,000 shares, approximately 57.7%, of the Company's
Common Stock, which will be voted for the election of the directors nominated,
and in favor of the proposal to ratify the appointment of Deloitte & Touche LLP
as auditors.
STOCKHOLDER PROPOSALS
Stockholder proposals, including nominations for the office of director,
may be submitted for inclusion in the Company's 2002 proxy material after the
2001 Annual Meeting, but no later than 5:00 p.m. Eastern Standard Time on May 1,
2002. Proposals must be in writing and sent by registered, certified or express
mail to: Office of the Secretary, Cold Metal Products, Inc., 2200 Georgetown
Drive, Suite 301, Sewickley, Pennsylvania 15143. Facsimile or other forms of
electronic submission will not be accepted. Management will carefully consider
all proposals and suggestions from stockholders. When in Management's judgment
adoption is clearly in the best interest of the Company and can be accomplished
without stockholder approval, the proposal will be implemented without inclusion
in the Company's proxy material.
SOLICITATION
The Company will bear the entire cost of preparing, assembling, printing
and mailing this proxy statement, the accompanying form of proxy and any
additional material which may be furnished to shareholders. Copies of all
solicitation materials will be furnished to brokerage houses, fiduciaries and
1
4
custodians to forward to beneficial owners of stock held in their names.
Solicitation of proxies will be made only by the use of the mail.
ELECTION OF DIRECTORS
At the Company's 2001 annual meeting of shareholders, it is intended that
the shares represented by the proxy solicited by the Board of Directors will be
voted, unless such authority is withheld, for the election of the seven nominees
for the office of director identified below. The Board of Directors, acting in
accordance with the By-Laws of the Company, has reduced the number of directors
constituting the full Board from eight to seven following the resignation of
Edwin H. Gott, Jr. from the office of director in fiscal 2001. Each nominee is
presently a director of the Company. The Directors elected will serve for the
ensuing fiscal year and until their successors have been elected. Should any of
the nominees for the office of director named below be unable to accept
nomination or election, which is not anticipated, persons acting under the proxy
will vote for the election of such other persons as the Board of Directors of
the Company may recommend.
NOMINEES FOR DIRECTOR
R. Quintus Anderson, age 70, has served as Chairman of the Executive
Committee of the Board of Directors since 1998, when he retired from the Office
of Chairman of the Board of Directors. Mr. Anderson and Aarque Capital
Corporation, a corporation controlled indirectly by Mr. Anderson, his wife,
Sondra R. Anderson, and his daughter, Heidi A. Nauleau, the Chairman of the
Company's Board of Directors, together own approximately 57.7% of the shares of
Common Stock of the Company. Aarque Capital Corporation is one of a group of
privately-held corporations, known as the Aarque Companies, which are owned by
Aarque, L.P., a limited partnership established by the Anderson family, and
which are in businesses unrelated to the business of the Company. Mr. Anderson
holds a Bachelor of Engineering degree from Princeton University and was granted
a post-graduate fellowship at the Sloane School of Industrial Management at the
Massachusetts Institute of Technology. Since his discharge as a lieutenant from
the U.S. Navy in 1957, Mr. Anderson has managed, operated and acquired
businesses related principally to the metal fabrication industry. Mr. Anderson
is a former trustee of Northwestern Mutual Life Insurance Company and a director
of Oneida Ltd.
Wilbur J. Berner, age 69, has served as a Director of the Company since
1980. Mr. Berner was the Treasurer of the Company from 1980 to 1994. On May 1,
1996, Mr. Berner retired from his positions as President of Aarque Management
Corporation, one of the Aarque Companies which provides management services to
other members of the group, and as Secretary and Treasurer of Aarque Capital
Corporation. He had also previously served as Vice President of Aarque Steel
Corporation, and presently serves as a Director and Treasurer of the Chautauqua
Lake Association. Prior to joining The Aarque Companies, Mr. Berner was
Secretary and Treasurer of Dahlstrom Corporation, a metal forming enterprise in
Jamestown, New York. He began his career as a staff auditor with Ernst & Young.
Mr. Berner holds a B.S. degree in accounting from the University of Buffalo.
Claude F. Kronk, age 69, was Vice Chairman and Chief Executive Officer of
J&L Specialty Steel, Inc. Previously he was President and Chief Executive
Officer of J&L Specialty Steel, having held that office since its incorporation
in 1986. From 1957 until 1986, Mr. Kronk was employed by the Specialty Steel
Division of LTV Steel Company, serving as President of that division from 1984
until 1986. Mr. Kronk is a graduate of Ohio Wesleyan University. Mr. Kronk has
served as a Director of the Company since March of 1994.
Heidi A. Nauleau, age 44, is Chairman of the Company and a Director, having
been elected to those positions in 1998 and 1993, respectively. Mrs. Nauleau is
Chairman of The Aarque Companies, having been elected to that position in 1996.
Mrs. Nauleau joined The Aarque Companies in 1981 as Assistant to the Chairman
and was appointed Vice President/Europe in 1984. From 1987 until 1992, she was
manager of a subsidiary of Aarque Steel Corporation. Prior to joining The Aarque
Companies in 1981, from 1979 until 1981, Mrs. Nauleau served as a research
associate for Berndtsen International Ltd. Mrs. Nauleau is the daughter of R.
Quintus Anderson. She is a graduate of the University of Pennsylvania.
2
5
Robert D. Neary, age 67, was Co-Chairman of Ernst & Young until his
retirement in 1993, having held that office since 1984. Mr. Neary served Ernst &
Young in various capacities since his admission to the partnership in 1966,
including service as Vice Chairman of Accounting and Auditing from 1975 to 1984.
Mr. Neary is Chairman of the Board of Trustees of Armada Funds and a director of
Commerce Metals Company and Strategic Distribution, Inc. He also is Chairman of
the American Institute of Certified Public Accountants Quality Control Inquiry
Committee and Co-Chairman of the Great Lakes Theater Festival and a trustee of
the Greater Cleveland Salvation Army and University of Michigan Club of
Cleveland. Mr. Neary is a graduate of the University of Michigan. He has served
as a Director of the Company since March of 1994.
Peter B. Sullivan, age 56, is President of PB Sullivan & Company, a
registered investment advisor and licensed securities broker based in Jamestown,
New York. Prior to founding his own company, Mr. Sullivan was Vice
President/Office Manager with Merrill Lynch, Pierce, Fenner and Smith, Inc.
where he worked for 17 years. Mr. Sullivan is a Director of the Erie Insurance
Company of New York, a trustee of the YMCA of Jamestown and the State University
of New York at Fredonia College Foundation, as well as the Ralph C. Sheldon
Foundation. He holds a Bachelor of Science degree in Economics and a Masters in
Business Management degree from Miami University. Mr. Sullivan has served as a
Director of the Company since October of 1994.
Raymond P. Torok, age 54, has served as President and Chief Executive
Officer of Cold Metal Products since October of 1998. He is also a Director of
the Company. Prior to joining Cold Metal Products, he served as President and
Chief Executive Officer of Philadelphia Gear Corporation from 1994 to 1998. From
1968 to 1994, Mr. Torok was employed by Aluminum Company of America (Alcoa). Mr.
Torok is a graduate of John Carroll University and received his Masters of
Business Administration from Butler University.
COMPENSATION OF DIRECTORS
Each of Messrs. Kronk, Neary, Sullivan and Berner are paid $15,000 annually
for their service as Directors, including service on committees of the Board of
Directors, and $1,000 for each meeting of the Board of Directors or a committee
of the Board of Directors which he attends. Pursuant to a Non-Employee
Directors' Incentive Plan (the "Plan"), adopted by the Company and approved by
the Company's shareholders on March 3, 1994 and amended by the shareholders on
July 20, 1995, each director who is not a salaried employee of the Company may
elect to receive his annual compensation in the form of cash or Common Stock and
may elect to defer receipt until a specified period after his resignation or
retirement or certain other events, such as a sale or merger of the Company.
Under the Plan, an accounting of compensation deferred as stock by any electing
Director is maintained in a Bookkeeping Reserve (Stock) Account, and any cash
dividends declared on shares of Common Stock are awarded to the Bookkeeping
Reserve (Stock) Account in the form of additional units (priced at the fair
market value of the Common Stock on the declaration date for such dividend)
proportionate to the number of units in the Director's account multiplied by the
cash dividend per share. As of March 31, 2001, Mr. Sullivan had 5,685.6520 units
and Mr. Berner had 2,014.1701 units in their respective Bookkeeping Reserve
(Stock) Accounts. Pursuant to the Plan, Messrs. Sullivan and Kronk have elected
to defer receipt of their fiscal 2002 annual compensation. Sixty thousand shares
of Common Stock are reserved for issuance pursuant to elections under the Plan.
Pursuant to the Plan, Edwin H. Gott, Jr. was issued 16,991 shares of Common
Stock corresponding to the number of units in his Bookkeeping Reserve (Stock)
Account on the effective date of his resignation during fiscal 2001. Directors
who are salaried employees or officers of the Company receive no separate
compensation for their service as Directors, but are reimbursed for expenses
incurred in connection with attendance at meetings.
In addition, under the Plan, all directors of the Company who are not
salaried employees are granted, in connection with the beginning of their
initial term, an option to purchase 10,000 shares of Common Stock. These options
are granted at the fair market value on the date of the grant which is presently
fixed by the Plan as July 1 following initial appointment or election and are
exercisable after three years or upon certain specified events, such as a sale
or merger of the Company. Pursuant to the provisions of the Plan, on March 21,
1994, Messrs. Berner, Kronk and Neary were each granted options to purchase
10,000 shares of Common Stock at $10.00 per share and, on July 1, 1995, each of
Messrs. Gott and Sullivan received options to
3
6
purchase 10,000 shares of Common Stock at the exercise price of $6.875 per
share. One hundred thousand shares of Common Stock are reserved for option
grants under the Plan. Additionally, pursuant to the Plan, non-employee
directors are eligible for awards of options, in addition to options grantable
at the beginning of their terms, grantable in the discretion of a committee of
directors not eligible to receive options under the Plan, and exercisable at no
less than the fair market value of the stock on the date of the grant and no
less than six months from the date of the grant. On July 20, 1995, each of
Messrs. Berner, Kronk and Neary was granted options to purchase 5,000 shares of
Common Stock at the exercise price of $6.125 per share. On July 25, 1996, each
of Messrs. Gott and Sullivan was granted options to purchase 5,000 shares of
Common Stock at the exercise price of $5.75 per share.
In September of 1998, Heidi A. Nauleau succeeded R. Quintus Anderson in the
executive position of Chairman of the Board of Directors of the Company. Since
that time Mr. Anderson has served as Chairman of the Company's Executive
Committee, a position which in the fiscal year ended March 31, 2001, did not
involve full time employment by the Company. In that capacity, during the fiscal
year ended March 31, 2001 Mr. Anderson received cash compensation in the amount
of $180,000, and received $25,800 under the Company's defined benefit pension
plan. When Mrs. Nauleau succeeded Mr. Anderson as Chairman, the Company
established a supplemental executive retirement plan for him. Funding of its
obligations under that plan by the Company resulted in a pretax charge of $.5
million during the fiscal year ended on March 31,1999. The plan contemplates
benefits payable over a fifteen year period, but in view of his continued
service as Chairman of the Executive Committee and the compensation he receives,
he and the Company have agreed to defer the commencement of the benefit, no
portion of which was paid in the fiscal year most recently ended.
BOARD MEETINGS AND COMMITTEES
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors has an Audit Committee, consisting of
Messrs. Neary (Chair), Sullivan and Berner. On May 23, 2001, the Company's Audit
Committee adopted a revised written charter for the Audit Committee, a copy of
which is annexed as an appendix to this proxy statement. The members of the
Audit Committee are independent as independence is defined in the American Stock
Exchange Listing standards. The Audit Committee makes recommendations to the
Board of Directors regarding selection and employment of the Company's
independent accountants and, working with the Company's internal accounting
staff and independent accountants, monitors and reviews the Company's accounting
and control procedures. During the fiscal year ended March 31, 2001, the Audit
Committee met five times; the Committee also met in May, 2001.
The Company's Board of Directors also has a Human Resource Committee, which
performs the functions of a compensation committee. The Human Resource Committee
presently consists of Messrs. Kronk (Chair), Neary and Sullivan, each of whom is
an outside director. In addition, Mr. Anderson, Chairman of the Executive
Committee of the Board of Directors, serves the committee in an ex-officio, non-
voting capacity. The Human Resource Committee is responsible for considering and
making recommendations to the Board of Directors on the annual compensation of
all officers of the Company, including salary, bonus, stock options and stock
appreciation rights and other awards to be made under the Company's existing
compensation plans. With respect to compensation for the fiscal year ended March
31, 2001, the Human Resource Committee met twice.
The Board of Directors held a total of four meetings during the fiscal year
ended March 31, 2001. During the fiscal year, each incumbent director attended
at least seventy-five percent (75%) of the meetings of the Board of Directors
and all meetings of the Committees of the Board of Directors that were held
during the periods for which each such director served on the Board of Directors
or on a Committee. The Company has no standing Nominating Committee.
4
7
AUDIT COMMITTEE REPORT(1)
In accordance with its charter attached to this proxy statement, the Audit
Committee assists the Board of Directors in fulfilling its responsibility for
oversight of the quality and integrity of the accounting, auditing and reporting
practices of the Company.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the year ended March 31, 2001 with the Company's
management, and Deloitte & Touche LLP, the Company's independent accountants.
The Audit Committee also has discussed with Deloitte & Touche LLP the
matters required to be discussed by Statement on Auditing Standards No. 61, as
amended by Statement on Auditing Standards No. 90, and, with and without
management present, discussed and reviewed the results of the independent
accountants' audit of the financial statements and the overall quality of the
Company's financial reporting.
The Audit Committee also has received the written disclosures from Deloitte
& Touche LLP required by Independence Standards Board Standard No. 1 and the
Audit Committee has discussed with Deloitte & Touche LLP the independence of
that firm. The Audit Committee considered whether the non-audit services
provided by Deloitte & Touche LLP to the Company are compatible with maintaining
the independence of that firm.
Based on the review and discussions 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 year
ended March 31, 2001 for filing with the Securities and Exchange Commission. The
Audit Committee also recommended to the Board of Directors that Deloitte &
Touche LLP be appointed as independent accountants for the Company for the year
ending March 31, 2002.
Robert D. Neary, Chairman
Wilbur J. Berner
Peter B. Sullivan
---------------
(1) This Report is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, whether made
before or after the date hereof and irrespective of any general
incorporation language in any such filing.
5
8
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended March 31, 2001, March 31, 2000 and March 31, 1999, of the following
individuals (collectively, the "Named Executive Officers"): (i) all individuals
serving as the Company's Chief Executive Officer for the fiscal year ended March
31, 2001; and (ii) the four most highly compensated executive officers of the
Company other than the Chief Executive Officer who were serving as executive
officers on March 31, 2001.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION: ALL OTHER
------------------------------ STOCK OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDED (#)(2) ($)(3)
--------------------------- ---- ------- ------- -------------- ------------
Raymond P. Torok 2001 292,500 70,000 -- 84,300(4)
President and Chief 2000 267,500 256,000 -- 2,800
Executive Officer 1999 110,800(5) 100,000 400,000 100,000(4)
Joseph C. Horvath 2001 174,500 30,000 -- 62,500(6)
Vice-President and 2000 127,500(7) 139,000 20,000 55,700(6)
Chief Financial Officer
Heidi A. Nauleau 2001 121,500 70,000 -- 6,100
Chairman 2000 120,000 120,000 -- 6,000
1999 120,000 -- -- 4,225
Paul H. Eagle(8) 2001 140,000 15,000 -- 82,900(9)
Vice-President,
Commercial
Paul M. Hoppe 2001 102,400 25,000 -- 81,600(10)
Vice-President of 2000 78,100 112,700 -- 3,900
Manufacturing 1999 73,400 19,300 -- 3,700
---------------
(1) No Named Executive Officer received a perquisite or other personal benefit
in excess of the lesser of $50,000 or 10% of such individual's salary plus
annual bonus, except as set forth in the footnotes below.
(2) There were no restricted stock awards or long-term incentive plan payouts
to any Named Executive Officer for any of the fiscal years identified. On
October 22, 1998, the Company granted Mr. Torok an option pursuant to the
1994 Incentive Program, as amended, to purchase 200,000 shares of the
Common Stock of the Company at an exercise price of $3.00 per share, the
fair market value of the Common Stock on the date of the grant. At the same
time, the Company granted Mr. Torok an option separate from the 1994
Incentive Program to purchase an additional 200,000 shares of the Company's
Common Stock, also at $3.00 per share. The options granted to Mr. Torok on
October 22, 1998 become exercisable in increments of one-third of the total
number of shares covered by the grants, on October 22, 1999, 2000 and 2001,
and expire ten years after the date of the grant. On July 1, 1999, the
Company granted Mr. Horvath an option pursuant to the 1994 Incentive
Program, as amended, to purchase 20,000 shares of the Common Stock of the
Company at an exercise price of $2.69 per share, the fair market value of
the Common Stock on the date of the grant. The option granted to Mr.
Horvath becomes exercisable after July 1, 2002, and expires ten years after
the date of the grant.
(3) Except as otherwise noted, consists of Company contributions under its
401(k) Plan, pursuant to which the Company matches amounts of compensation
which an employee elects to defer under the Plan, up to the lesser of 5% of
the employee's salary or the maximum amount allowed under the Internal
Revenue Code.
(4) Consists of $8,500 in Company contributions under its 401(k) plan, $19,300
in reimbursement of club fees/dues to Mr. Torok, and $56,500 in relocation
expense for which Mr. Torok was reimbursed in
6
9
connection with the commencement of his employment by the Company.
(Aggregate reimbursed relocation expenses amounted to $156,500 of which
$100,000 was accrued and disclosed as compensation to Mr. Torok in the
fiscal year ended March 31, 1999.) In April 2000, the Company also advanced
Mr. Torok a loan in the amount of $370,000 for construction of a new
residence, which Mr. Torok repaid in June 2000 together with 10% annual
interest of $6,167.
(5) Mr. Torok was elected President and Chief Executive Officer of the Company
effective October 22, 1998. The figure shown represents that portion of Mr.
Torok's annual base salary that was paid to him during the fiscal year
ended March 31, 1999.
(6) Consists of $8,500 in Company contributions under its 401(k) plan, $21,200
in reimbursement of club fees/dues to Mr. Horvath, and $32,800 in
relocation expense for which Mr. Horvath was reimbursed in connection with
the commencement of his employment by the Company. (Aggregate reimbursed
relocation expense amounted to $82,800 of which $50,000 was accrued and
disclosed as compensation to Mr. Horvath in the previous fiscal year.)
During the fiscal year ended March 31, 2001, the Company also loaned Mr.
Horvath the sum of $60,000 (corresponding to the equity in his unsold prior
residence) which loan remained outstanding as of March 31, 2001 and is
accruing interest at an annual rate of prime plus 1%.
(7) Mr. Horvath commenced employment with the Company effective July 1, 1999.
The figure shown represents that portion of Mr. Horvath's base salary that
was paid to him during the fiscal year ended March 31, 2000.
(8) Commenced employment with the Company effective April 1, 2000.
(9) Consists of $6,400 in Company contributions under its 401(k) plan and
$76,500 in estimated relocation expenses for which the Company agreed to
reimburse Mr. Eagle and which were accrued on the books of the Company for
the fiscal year ended March 31, 2001.
(10) Consists of $5,100 in Company contributions under its 401(k) plan and
$76,500 in estimated relocation expenses for which the Company agreed to
reimburse Mr. Hoppe and which were accrued on the books of the Company for
the fiscal year ended March 31, 2001.
DEFINED BENEFIT PENSION PLAN
Salaried employees of the Company are eligible to participate in a funded,
non-contributory defined benefit pension plan maintained by the Company. The
following table shows the estimated, approximate annual pension payable upon
normal retirement (at or after age 65 or after 30 or more years of service) in
2001 under the pension plan to an employee with the indicated years of service
and final average compensation, before reductions for social security and
pension payments by predecessor employer, Jones & Laughlin.
YEARS OF SERVICE
FINAL AVERAGE --------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------- ------- ------- -------- -------- --------
$100,000 $22,500 $30,000 $ 37,500 $ 45,000 $ 52,500
125,000 28,125 37,500 46,875 56,250 65,625
150,000 33,750 45,000 56,250 67,500 78,750
175,000 39,375 52,500 65,625 78,750 91,875
200,000 45,000 60,000 75,000 90,000 105,000
225,000 50,625 67,500 84,375 101,250 118,125
250,000 56,250 75,000 93,750 112,500 131,250
275,000 61,875 82,500 103,125 123,750 144,375
300,000 67,500 90,000 112,500 135,000 157,500
"Final average compensation" is averaged over the five years that are
within the final ten years of employment that produce the highest amount. The
compensation of employees used to compute the pension described above is total
compensation, exclusive of reimbursed travel and relocation expenses, profit
sharing and similar distributions, overtime, Company-paid insurance (whether or
not taxable) and benefits under the
7
10
Company's Special Incentive Compensation Plan, until actually distributed or
made available, but including any salary reduction contributions made by the
employee to the Company's 401(k) Plan. Under the Internal Revenue Code, for
years after 1988, pensionable earnings are limited to $200,000 per year,
adjusted each year after 1989 to reflect inflation. Thus, the limits for years
1989-1993 were $200,000, $209,200, $222,220, $228,860 and $235,840,
respectively. Beginning in 1994 and continuing through 1996, pensionable
earnings were limited to a flat $150,000; as of January 1997, the limit was
increased to $160,000; and as of January 2000 the limit was increased to
$170,000.
The estimated years of service credited to each of the Named Executive
Officers is as follows: Raymond P. Torok, 2; Joseph C. Horvath, 1; Heidi A.
Nauleau, 8; Paul H. Eagle, 1; and Paul M. Hoppe, 26. In 1997 it was determined
that, pursuant to the terms of the Plan, Mrs. Nauleau was entitled to
participate from the inception of her employment by the Company.
HUMAN RESOURCE COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Human Resource Committee of the Board of Directors ("The Committee")
oversees and administers the executive compensation including base salaries,
bonuses and other compensation matters of the Company.
The Committee is comprised exclusively of non-employee Directors and one
non-voting, ex-officio Director who is also the Chairman of the Executive
Committee of the Board of Directors. All Directors are invited to attend Human
Resource Committee meetings.
The Committee's composition is reviewed annually. On July 28, 2000, the
Board of Directors reappointed Mr. Claude F. Kronk as Chairman of the Human
Resource Committee. Also appointed were Messrs. Edwin H. Gott, Jr. and Peter B.
Sullivan. Mr. R. Quintus Anderson, Chairman of the Executive Committee, was also
appointed to The Committee as a non-voting, ex-officio member. Following Mr.
Gott's resignation from the Board of Directors, Mr. Robert D. Neary was
appointed to the Human Resource Committee.
COMPENSATION POLICY
The Committee's responsibility to the Company is to maintain a compensation
structure that attracts and retains qualified individuals for employment and
reflects the interests of the Company's shareholders. The benchmarks used by The
Committee come not only from peer companies but also from companies of similar
size in many industries.
The Board of Directors has charged the Human Resource Committee with the
following responsibilities:
1. Annual review of the base compensation of key executive officers.
2. Annual evaluation of the performance of the key executive officers.
3. Annual determination of incentive-based pay for key executive officers.
4. Review of the plan for management succession.
COMPENSATION PHILOSOPHY
Compensation of the Company's executive management is composed of a base
salary and an incentive-based cash bonus. The Committee's philosophy is based on
the principle that remuneration should be closely tied to the performance of the
Company. A substantial portion of executive compensation is, therefore,
incentive compensation based on the financial performance of the Company.
Base Salary. Base salaries are set using comparable company data.
Comparisons are made with companies in similar industries as well as companies
of similar size. Salaries are reviewed annually and
8
11
adjusted accordingly. Salaries may also be adjusted to reflect outstanding
contribution to the financial success of the enterprise.
Incentive-Based Bonus. The Company's incentive-based bonus plan is
reviewed annually. In the past fiscal year, the company followed an economic
value added philosophy. The Committee has charged the Chief Executive Officer
with setting the parameters of the economic value added plan for management. The
Chief Executive Officer presents the bonus calculation for key employees to the
Human Resource Committee for approval.
Performance in relation to objectives is measured with respect to each
fiscal year.
CHIEF EXECUTIVE'S COMPENSATION
SEC regulations require the Human Resource Committee to discuss its
philosophy for compensation matters relating to the Chief Executive Officer.
Raymond P. Torok was hired as Chief Executive Officer of the Company in
October, 1998. In addition to the base salary and incentive cash bonus
previously described, Mr. Torok was awarded options to purchase 400,000 shares
of the common stock of the Company. The award of a significant number of options
is in line with the Company's philosophy that remuneration should be tied to the
financial performance of the Company.
MEETINGS OF THE HUMAN RESOURCE COMMITTEE
The Human Resource Committee met three times during the fiscal year, on May
24, 2000, October 16, 2000, and January 18, 2001. All directors were invited to
attend the meetings.
The May 24, 2000 meeting of The Committee focused on issues relating to
bonus recommendations presented by Mr. Torok; corporate policies governing equal
employment opportunity, family medical leave and travel and relocation were also
reviewed.
The October 16, 2000 meeting of The Committee focused on review of the
Chief Executive Officer's performance.
At the January 18, 2001 meeting of The Committee, Amy Elsea and Duane
Wykoff, executive employees of the Company, presented an overview of a proposed
compensation and annual review methodology.
Claude F. Kronk, Chairman
Robert D. Neary
Peter B. Sullivan
R. Quintus Anderson ex officio
9
12
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the Standard & Poor's MidCap 400 Index and a
composite peer group of the following intermediate processors of flat rolled
steel: Gibraltar Steel Corporation, Huntco Inc., Olympic Steel, Shiloh
Industries, Inc., and Steel Technologies, Inc. The comparison, which assumes an
initial investment of $100 and reinvestment of dividends, commences on March 31,
1996 and continues through the next five fiscal years of the Company, ending on
March 31, 2001.
COMPARISON OF 5 YEAR CUMULATIVE RETURN
ASSUMES INITIAL INVESTMENT OF $100
COLD METAL PRODUCTS, INC. S & P MIDCAP 400 PEER GROUP
------------------------- ---------------- ----------
MAR 31, 1996 100 100 100
MAR 31, 1997 95.35 110.62 108.53
MAR 31, 1998 83.72 164.86 123.99
MAR 31, 1999 32.56 165.59 75.48
MAR 31, 2000 64.45 228.67 65.72
MAR 31, 2001 25.33 213.68 47.53
10
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND CERTAIN BUSINESS RELATIONSHIPS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of March 31, 2001 by (i) each
Director, (ii) each Named Executive Officer, (iii) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock and (iv) all Directors and Executive Officers as a group.
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ ---------- --------
R. Quintus Anderson (3)(4)(6)............................... 3,736,000 58.1
Raymond P. Torok (2)(4)..................................... 276,668 4.2
Heidi A. Nauleau (2)(4)(5).................................. 13,750 .2
Wilbur J. Berner (4)(6)(7).................................. 35,000 .5
Claude F. Kronk (4)(6)...................................... 33,000 .5
Robert D. Neary (4)(6)...................................... 25,000 .4
Peter B. Sullivan (4)(6)(7)................................. 25,000 .4
Joseph C. Horvath........................................... 1,000 *
Paul H. Eagle............................................... 0 *
Paul M. Hoppe............................................... 7,800 .1
All Directors and Executive Officers as a group
(13 persons) (3).......................................... 4,165,718 61.3
OTHERS
FMR Corp (8)................................................ 537,500 8.4
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc. (9).......................... 400,000 6.3
100 E. Pratt Street
Baltimore, MD 21202
Dimensional Fund Advisors Inc. (10)......................... 332,600 5.2
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
---------------
(1) The named shareholders have sole voting and investment power with respect
to all shares shown as being beneficially owned by them, except as
otherwise indicated.
(2) Is a Director and an Executive Officer of the Company.
(3) Includes 3,662,500 shares of Common Stock owned of record by Aarque Capital
Corporation, which was founded by R. Quintus Anderson. Mr. Anderson,
together with his spouse, is deemed to be the beneficial owner of such
shares for purposes of the reporting requirements of the Securities
Exchange Act of 1934, but Mr. Anderson disclaims that he is, in fact, the
beneficial owner of such shares, which are owned indirectly by Aarque L.P.,
a limited partnership established by the Anderson family. The address of
Mr. Anderson and Aarque Capital Corporation is 20 West Fairmount Avenue,
Lakewood, New York 14750.
(4) Pursuant to grants under the Company's 1994 Incentive Program, the
following Directors or Named Executive Officers have presently exercisable
options to purchase the following numbers of shares of the Company's Common
Stock at the exercise price of: (i) $10 per share: Mrs. Nauleau -- 7,500;
Mr. Hoppe -- 5,000; (ii) $5.75 per share: Mr. Anderson -- 50,000; Mrs.
Nauleau -- 3,750; Mr. Hoppe -- 2,500; (iii) $3.00 per share: Mr.
Torok -- 133,334. In addition, as approved by the Company's shareholders at
the 1999 Annual Meeting, Mr. Torok has a presently exercisable option
separate from the 1994 Incentive Program to purchase an additional 133,334
shares of common stock at the price of $3.00 per share. Pursuant to grants
under the Company's Non-Employee Directors'
11
14
Incentive Plan each of Messrs. Kronk, Neary and Berner has a presently
exercisable option to purchase 10,000 shares of the Company's Common Stock
at the exercise price of $10 per share, and a presently exercisable option
to purchase 5,000 shares of the Company's Common Stock at the exercise
price of $6.125 per share. Also pursuant to grants under the Company's
Non-Employee Directors' Incentive Plan, Mr. Sullivan has a presently
exercisable option to purchase 10,000 shares of the Common Stock of the
Company at the exercise price of $6.875 per share, and 5,000 shares of the
Common Stock of the Company at $5.75 per share. Beneficial ownership shown
includes all shares covered by presently exercisable options issued to
Directors or Officers of the Company.
(5) Excludes shares owned by Aarque Capital Corporation or R. Quintus Anderson.
Mrs. Nauleau is the daughter of Mr. Anderson. She disclaims beneficial
ownership of shares owned by Aarque Capital Corporation or Mr. Anderson.
(6) Is a Director of the Company.
(7) Excludes shares deferred under the Non-Employee Directors' Incentive Plan,
which shares are not beneficially owned by the named shareholders.
(8) According to a Schedule 13G/A, Fidelity Low-Price Stock Fund, an investment
company affiliated with FMR Corp. owned 441,100 or 6.926% of Company's
outstanding shares on December 31, 2000. FMR Corp. and its affiliates have
the power to direct the disposition of 537,500 shares but do not have the
sole power to vote any shares of the Company's Common Stock.
(9) According to a Schedule 13G/A, these securities are owned by T. Rowe Price
Small-Cap Value Fund, Inc., which T. Rowe Price Associates, Inc. (Price
Associates) serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities.
(10) According to a Schedule 13G, Dimensional Fund Advisors Inc. (Dimensional),
an investment advisor, furnishes investment advice to four investment
companies registered under the Investment Company Act of 1940, and serves
as investment manager to certain other commingled group trusts and separate
accounts, which collectively own 332,600 shares. Dimensional disclaims
beneficial ownership of these securities.
* Less than 0.1%.
RATIFICATION OF AUDITORS
The Board of Directors of the Company has appointed the firm of Deloitte &
Touche LLP ("Deloitte & Touche"), independent accountants, to be the Company's
auditors for the fiscal year ending March 31, 2002 and recommends to
stockholders that they vote for ratification of the appointment. Deloitte &
Touche has served in this capacity for the fiscal year ended March 31, 2001 and
for each fiscal year of the Company since its incorporation in 1980. A
representative of Deloitte & Touche will be present at the meeting and will have
an opportunity to make a statement and be available to respond to appropriate
questions.
The appointment of auditors is approved annually by the Board of Directors.
Ratification of the appointment of Deloitte & Touche by stockholders is not
required by law. However, as a matter of policy, the appointment of Deloitte &
Touche is submitted to the stockholders for ratification. The decision of the
Board of Directors is based upon recommendation of the Audit Committee which
approves in advance the audit scope, types of non-audit services, and the
estimated fees for the coming year.
12
15
The aggregate fees billed for professional services rendered to the Company
by Deloitte & Touche LLP for the fiscal year were as follows:
AUDIT FEES
For the audit of the Company's annual financial statements for the fiscal
year ended March 31, 2001 and the reviews of the financial statements included
in the Company's Forms 10-Q for the fiscal year ended March 31, 2001: $141,185.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For financial information system design and implementation for the fiscal
year ended March 31, 2001: $0.
ALL OTHER FEES
For services rendered to the Company, other than the services described
above, for the fiscal year ended March 31, 2001: $70,006.
The Audit Committee has considered whether the provision of non-audit
services by Deloitte & Touche LLP is compatible with maintaining the
independence of that firm.
OTHER BUSINESS
The Board of Directors is not aware of any matters, other than (i) the
election of directors, and (ii) the ratification of the appointment of
independent auditors, to come before the annual meeting. If any matter not
mentioned in this proxy statement is properly brought before the meeting, the
persons named in the proxy solicited by the Board of Directors will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
By Order of the Board of Directors
HEIDI A. NAULEAU
Chairman
13
16
APPENDIX
COLD METAL PRODUCTS, INC.
AUDIT COMMITTEE CHARTER
This charter shall be reviewed, updated and approved annually by the Board
of Directors.
ROLE AND INDEPENDENCE
The Audit Committee of the Board of Directors assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and reporting practices of the corporation and other such
duties as directed by the Board. The membership of the Committee shall consist
of as least three directors who are generally knowledgeable in financial and
auditing matters, including at least one member with accounting or related
financial management expertise. Each member shall be free of any relationship
that, in the opinion of the Board, would interfere with his or her individual
exercise of independent judgment, and shall meet the director independence
requirements for serving on audit committees as set forth in the corporate
governance standards of the American Stock Exchange. The Committee is expected
to maintain free and open communication (including private executive sessions at
least annually) with the independent accountants and the management of the
corporation. In discharging this oversight role, the Committee is empowered to
investigate any matter brought to its attention, with full power to retain
outside counsel or other experts for this purpose.
The Board of Directors shall appoint one member of the Audit Committee as
Chairperson. He or she shall be responsible for leadership of the Committee,
including preparing the agenda, presiding over the meetings, making Committee
assignments and reporting to the Board of Directors. The Chairperson will also
maintain regular liaison with the CEO, CFO, and the lead independent audit
partner.
RESPONSIBILITIES
The Audit Committee's primary responsibilities include:
- Recommending to the Board the independent accountant to be selected or
retained to audit the financial statements of the corporation. In so
doing, the Committee will request from the auditor a written affirmation
that the auditor is in fact independent, discuss with the auditor any
relationships that may impact the auditor's independence, and review any
non-audit services provided by the independent auditor.
- Overseeing the independent auditor relationship by discussing with the
auditor the nature and rigor of the audit process, receiving and
reviewing audit reports, and providing the auditor full access to the
Committee (and the Board) to report on any and all appropriate matters.
- Reviewing the audited financial statements and discussing them with
management and the independent auditor. These discussions shall include
consideration of the quality, not just the acceptability, of the
company's accounting principles and disclosure practices as applied in
its financial reporting, including review of estimates, reserves and
accruals, review of judgmental areas, review of audit adjustments whether
or not recorded and such other inquiries as may be appropriate. Based on
the review, the Committee shall make its recommendation to the Board as
to the inclusion of the company's audited financial statements in the
company's annual report on Form 10-K.
- Reviewing with management and the independent auditor the quarterly
financial information prior to the company's filing of Form 10-Q. This
review may be performed by the Committee or its Chairperson.
- Discussing with management and the auditors the quality and adequacy of
the company's internal controls.
- Discussing with management the status of pending litigation, taxation
matters and other areas of oversight to the legal and compliance area as
may be appropriate.
- Reporting Audit Committee activities to the full Board and issuing
annually a report to be included in the proxy statement (including
appropriate oversight conclusions) for submission to the shareholders.
- Review accounting and financial human resources and succession planning
within the company.
17
8888
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
COLD METAL PRODUCTS, INC.
PROXY FOR 2001 ANNUAL MEETING OF STOCKHOLDERS - JULY 19, 2001
The undersigned stockholder of Cold Metal Products, Inc. (the "Company") hereby
revokes all previous proxies and appoints Raymond P. Torok, Joseph C. Horvath
and Heidi A. Nauleau or any one of them who acts, with full power of
substitution, Proxies and Attorneys-in-Fact, on behalf of and in the name of the
undersigned, to vote and otherwise represent all of the shares registered in the
name of the undersigned at the 2001 Annual Meeting of Stockholders of the
Company to be held on July 19, 2001, at The Union Club, 1211 Euclid Avenue,
Cleveland, Ohio 44115 or any adjournment thereof, with the same effect as if the
undersigned were present and voting such shares, on the following matters and in
the following manner:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
18
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
COLD METAL PRODUCTS, INC.
JULY 19, 2001
Please Detach and Mail in the Envelope Provided
A [X] PLEASE MARK YOUR
VOTES AS INDICATED
IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND FOR PROPOSAL 2.
FOR WITHHELD
1. Election of [ ] [ ] NOMINEES: R. Quintus Anderson
Directors Heidi A. Nauleau
Wilbur J. Berner
For, except vote withheld from the following Claude F. Kronk
nominee(s): Robert D. Neary
Peter B. Sullivan
____________________________________________ Raymond P. Torok
FOR AGAINST ABSTAIN
2. Ratification of appointment of [ ] [ ] [ ]
Independent Accountants.
Change of [ ]
Address/comments
and note at left
I plan to [ ] I do not plan [ ]
attend the to attend the
meeting meeting
SIGNATURES(S)_____________________________________ DATE ________________, 2001
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.