<PAGE> 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:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMMERCIAL METALS COMPANY
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
DAVID M. SUDBURY
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
/ / 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 registrations 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:
COMMERCIAL METALS COMPANY
- - --------------------------------------------------------------------------------
(4) Date filed:
DECEMBER 7, 1994
- - --------------------------------------------------------------------------------
- - ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
PRELIMINARY COPY
COMMERCIAL METALS COMPANY
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
TELEPHONE (214) 689-4300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 26, 1995
The Annual Meeting of Stockholders of Commercial Metals Company, a Delaware
corporation ("Company"), will be held in the Alexandria Auditorium of the
INFOMART, 1950 Stemmons Freeway, Dallas, Texas, on January 26, 1995 at 10:00
a.m., Central Standard Time, for the following purposes:
(1) To elect four persons to serve as Class III directors until the
1998 Annual Meeting of Stockholders and until their successors are elected;
(2) To approve an amendment to the Restated Certificate of
Incorporation of the Company to increase the number of shares of Common
Stock authorized for issuance from 20,000,000 to 40,000,000 shares;
(3) To approve amendments to the Company's 1986 Stock Incentive Plan
(the "Plan") to increase by 750,000 the maximum number of shares that may
be available for issuance pursuant to the Plan and to establish a maximum
number of 50,000 shares which may be subject to grants of options, stock
appreciation rights or performance awards to any individual employee during
a single fiscal year of the Company.
(4) To approve the appointment of Deloitte & Touche as independent
auditors of the Company for the fiscal year ending August 31, 1995; and
(5) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record on November 28, 1994 are entitled to notice of
and to vote at the meeting or any adjournment or adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE
ON WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PROXIES
FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY
THEM. THE PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED IN FURTHER
COMMUNICATION.
By Order of the Board of Directors,
/s/ DAVID M. SUDBURY
DAVID M. SUDBURY
Vice President, Secretary
and General Counsel
Dallas, Texas
December , 1994
<PAGE> 3
PRELIMINARY COPY
COMMERCIAL METALS COMPANY
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
TELEPHONE (214) 689-4300
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 26, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Commercial Metals Company ("Company") for
use at the Annual Meeting of Stockholders of the Company to be held on January
26, 1995 and at any and all adjournments thereof. The approximate date on which
this Proxy Statement and accompanying proxy card are first being sent or given
to stockholders is December , 1994.
Shares represented by each proxy, if properly executed and returned to the
Company prior to the meeting, will be voted as directed, but if not otherwise
specified, will be voted for the election of the four Class III directors, for
approval of the proposal to amend the Company's Restated Certificate of
Incorporation (the "Certificate") to increase the number of shares of Common
Stock authorized for issuance from 20,000,000 to 40,000,000 shares, for approval
of amendments to increase by 750,000 the maximum number of shares available for
issuance under the Company's 1986 Stock Incentive Plan (the "Plan") and
establish a maximum of 50,000 shares that may be subject to option grants, stock
appreciation rights or performance awards to any individual employee under the
Plan during any fiscal year, and to ratify the appointment of Deloitte & Touche
as independent auditors, all as recommended by the Board of Directors. A
stockholder executing the proxy may revoke it at any time before it is voted by
giving written notice to the Secretary of the Company.
OUTSTANDING VOTING SECURITIES OF THE COMPANY
On November 28, 1994, the record date for determining stockholders entitled
to vote at the Annual Meeting, there were outstanding 15,172,706 shares of
Common Stock, par value $5.00 per share, not including 959,877 treasury shares.
Each share of such stock is entitled to one vote for each director to be elected
and upon all other matters to be brought to a vote by the stockholders at the
forthcoming Annual Meeting of Stockholders. The affirmative vote of a plurality
of the shares of Common Stock present or represented at the meeting is required
to elect the Class III directors. Approval of the proposal to amend the
Certificate requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock. Approval of the amendments to the Plan and
the ratification of the appointment of Deloitte & Touche require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
present or represented at the meeting. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum and have
the effect of a negative vote on the proposals to amend the Certificate, approve
the Plan amendments and ratify the appointment of Deloitte & Touche. Broker
non-votes have no effect on determining plurality.
<PAGE> 4
PRINCIPAL STOCKHOLDERS
As of November 28, 1994, the only persons, or groups of persons, known to
the Company's management believed to own beneficially 5% or more of the
Company's outstanding Common Stock were:
<TABLE>
<CAPTION>
TYPE OF OWNED PERCENT
NAME AND ADDRESS OWNERSHIP SHARES OF CLASS
------------------------------------------------------ ------------- -------- --------
<S> <C> <C> <C>
Jacob Feldman, Robert L. Feldman and Ralph E. Record 2,032,061 13.4%
Loewenberg, Trustees of The Jacob Feldman and Sara B.
Feldman Grantor Trust Dated September 24, 1985
Stemmons Center
7800 Stemmons Freeway
10th Floor
Dallas, Texas 75247
J. P. Morgan & Co. Incorporated Beneficially 1,351,495 8.9%
60 Wall Street
New York, NY 10260
(As reported on Schedule 13G dated
December 31, 1993)
Mitchell Hutchins Institutional Investors, Inc. Beneficially 1,142,266 7.5%
1285 Avenue of the Americas
New York, NY 10019
(As reported on Schedule 13G dated
February 7, 1994)
</TABLE>
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation divides the Board of
Directors into three classes. The term of office of the Class III directors
expires at this Annual Meeting of Stockholders. The Class I directors will serve
until the 1996 Annual Meeting of Stockholders, and the Class II directors will
serve until the 1997 Annual Meeting of Stockholders. Moses Feldman, Ralph E.
Loewenberg, Stanley A. Rabin and Marvin Selig, all of whom are currently
directors, will stand for election as Class III directors for three-year terms
of office expiring at the 1998 Annual Meeting and until their successors are
duly elected. Proxies cannot be voted for the election of more than four persons
to the Board at the meeting.
The proxies named in the accompanying form of proxy have been designated by
management. All nominees listed above are currently members of the Board of
Directors, each having been previously elected by the stockholders. Each nominee
has consented to being named in this Proxy Statement and to serve if elected. If
any nominee becomes unavailable for any reason, the shares represented by the
proxies will be voted for such person, if any, as may be designated by the Board
of Directors. However, management has no reason to believe that any nominee will
be unavailable.
2
<PAGE> 5
The following table sets forth certain information about the directors. All
directors have been employed in substantially the same positions set forth for
at least the past five years except for Messrs. Eisenstat, Hirsch and Kammann.
For more than five years prior to September 23, 1993 Mr. Eisenstat had been a
director of and Executive Vice President and Secretary of Apple Computer, Inc.
Mr. Hirsch was named Chief Executive Officer of Centex Corporation in July,
1988, having been President since 1985 and was also named Chairman of the Board
and relinquished the position of President in July, 1991. Mr. Kammann retired
September 1, 1993 following thirty five years of service to the Company
culminating with his position as Vice President of the Company in charge of
international operations and Managing Director of Commercial Metals Holding AG,
a subsidiary of the Company. Mr. Kammann currently is a consultant to the
Company. Moses Feldman is employed as President of Commercial Manufacturing
Corporation, which is not affiliated with the Company.
NOMINEES
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY
OWNED PERCENT OF
SERVED AS DIRECTLY OR OUTSTANDING
NAME, PRINCIPAL DIRECTOR INDIRECTLY AS OF COMMON
OCCUPATION AND BUSINESS AGE SINCE NOVEMBER 28, 1994 STOCK
- - ----------------------------------------------- --- --------- ----------------- -----------
<S> <C> <C> <C> <C>
CLASS III -- TERM EXPIRES IN 1995
Moses Feldman 54 1976 219,732(1) 1.4%
President, Commercial Manufacturing
Corporation
Ralph E. Loewenberg 55 1971 --(2)
President, R. E. Loewenberg Capital
Management Corporation
Stanley A. Rabin 56 1979 183,567(3) 1.2%
President and Chief Executive Officer,
Commercial Metals Company
Marvin Selig 71 1964 85,500(3) *
President, CMC Steel Group
</TABLE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY
OWNED PERCENT OF
SERVED AS DIRECTLY OR OUTSTANDING
NAME, PRINCIPAL DIRECTOR INDIRECTLY AS OF COMMON
OCCUPATION AND BUSINESS AGE SINCE NOVEMBER 28, 1994 STOCK
- - ----------------------------------------------- --- --------- ----------------- -----------
<S> <C> <C> <C> <C>
CLASS I -- TERM TO EXPIRE IN 1996
A. Leo Howell 73 1977 88,094(3) *
Vice President, Commercial Metals Company;
President and Treasurer, Howell Metal Company
(subsidiary)
Laurence E. Hirsch 48 1991 1,333 *
Chairman of the Board of Directors
and Chief Executive Officer
Centex Corporation
CLASS II -- TERM TO EXPIRE IN 1997
Albert A. Eisenstat 64 1982 1,333 *
Retired former executive officer
and director -- Apple Computer, Inc.
Walter F. Kammann 69 1969 45,391(3) *
Consultant
Charles B. Peterson 81 1979 12,000 *
Investments
</TABLE>
- - ---------------
* Less than one percent.
3
<PAGE> 6
(1) Excluding 707,641 shares owned of record by the Feldman Foundation, of which
Moses Feldman and brothers Robert L. Feldman and Dr. Daniel E. Feldman, sons
of Jacob and Sara B. Feldman, are voting trustees.
(2) Ralph E. Loewenberg is one of three Trustees of The Jacob Feldman and Sara
B. Feldman Grantor Trust which owns 2,032,061 shares. See "Principal
Stockholders" at page 2. Jacob Feldman and Sara B. Feldman are beneficial
owners of these shares. Ralph E. Loewenberg disclaims any beneficial
interest as to such shares.
(3) Includes shares subject to options exercisable within sixty days by Mr.
Rabin of 16,000 shares, Mr. Selig of 12,666 shares, Mr. Howell of 8,666
shares and Mr. Kammann of 3,972 shares.
All directors and officers as a group beneficially own 2,976,045 shares or
20% of outstanding Common Stock including the Feldman Grantor Trust shares
discussed in footnote 2 above.
Marvin Selig is the brother of Clyde Selig, an executive officer. There are
no other family relationships among the directors, nominees and executive
officers.
None of the directors or nominees other than Messrs. Eisenstat and Hirsch
are directors of another public company. Mr. Eisenstat is a director of SunGard
Data Systems Inc. Mr. Hirsch is also a director of Centex Corporation and Envoy
Corporation.
ADDITIONAL INFORMATION RELATING TO THE BOARD OF DIRECTORS
Audit Committee. The Board of Directors has a standing Audit Committee
which provides the opportunity for direct communications between the independent
certified public accountants, the internal audit staff and the Board. The Audit
Committee meets with the certified public accountants and internal auditors
periodically to review their effectiveness during the annual audit program and
to discuss the Company's internal control policies and procedures. The members
of the Audit Committee are Messrs. Eisenstat (Chairman), Feldman, Loewenberg and
Peterson. Mr. Peterson was Chairman of the Audit Committee prior to July 18,
1994. During the fiscal year ended August 31, 1994, the Audit Committee met four
times to review the scope and results of the annual audit, to consider the
engagement of the Company's auditors for the fiscal year ending August 31, 1995,
and to review various matters with regard to financial controls and procedures.
Compensation Committee. The Board of Directors also has a standing
Compensation Committee that provides recommendations to the Board regarding
compensation for executive officers of the Company including issuance of stock
options. The Compensation Committee consists of Messrs. Loewenberg (Chairman),
Eisenstat, Moses Feldman and Peterson. Mr. Eisenstat became a member of the
Compensation Committee on January 27, 1994, and did not participate in any
committee meetings during fiscal 1994 since all occurred prior to his
appointment. The Compensation Committee may periodically and did during fiscal
1994, retain a consulting firm specializing in compensation matters to advise
the Compensation Committee. The Compensation Committee met three times during
the fiscal year ended August 31, 1994 to establish salaries and bonuses for
executive officers, to authorize the issuance of stock options, to review
retirement plans, compensation policies, and to review the Compensation
Committee's report on executive compensation for the prior fiscal year.
Executive Committee. The Executive Committee consists of Messrs. Howell
(Chairman), Rabin and Selig. Under the Company's Bylaws, the Executive Committee
is endowed, during the intervals between the meetings of the directors, with all
of the powers of the directors in the management and control of the business.
The Executive Committee meets periodically between meetings of the Board of
Directors.
The Board of Directors does not have a nominating committee because the
Board as a whole functions in this capacity. During the fiscal year ended August
31, 1994 the entire Board of Directors met eight times, of
4
<PAGE> 7
which six were regularly scheduled meetings and two were special meetings. All
directors attended at least seventy-five percent or more of the meetings of the
Board of Directors of the Company and of the committees of the Board on which
they served.
Compensation of Non-employee Directors. Messrs. Eisenstat, Feldman, Hirsch,
Kammann and Peterson are paid a fee of $15,000 per year and $1,000 for each
board meeting or $500 for each committee meeting they attend. Chairmen of the
Audit and Compensation Committees received an additional payment of $1,000 per
year. Upon his retirement from employment by the Company and subsidiary on
September 1, 1993, Mr. Kammann and the Company entered into a three year
consulting agreement, providing for payment of 84,000 Swiss Francs
(approximately $63,000) per year plus reimbursement of expenses incurred in the
performance of consulting work for the Company. Mr. Loewenberg has waived his
right to receive fees and expense reimbursement customarily paid by the Company
to non-employee directors. No employees of the Company receive additional
compensation for serving as directors.
Mr. Jacob Feldman, a former executive officer and director retired from the
Company effective September 1, 1993, due to a disabling illness. In recognition
of his past service as a key employee for sixty one years and the lack of
coverage for Mr. Feldman under the Company's existing long term disability
program, the Board of Directors approved a payment to Mr. Feldman of $150,000
annually for a period of three years. Mr. Feldman is one of the Trustees and is
a beneficial owner of stock held by the Jacob Feldman and Sara B. Feldman
Grantor Trust which owns 13.4% of the Company's Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Company's Common Stock to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Based solely upon its review of the copies of such
forms received by it and written representations that no Form 5's were required
from reporting persons, the Company believes that all such reports were
submitted on a timely basis during the year ended August 31, 1994 with the
exception of a report on Form 4 filed 16 days late on May 26, 1994, by director
Charles B. Peterson to report the purchase of 2,000 shares of the Company's
common stock on April 26, 1994.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid during each of the last three fiscal years to the Company's Chief Executive
Officer and the four remaining most highly compensated executive officers of the
Company, based on salary and bonus earned during fiscal year 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ---------------------
FISCAL SALARY BONUS AWARDS OF STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTION/SARS(#)(1)(2) COMPENSATION($)
- - --------------------------- ------ ------- ------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Stanley A. Rabin 1994 395,000 415,000 12,000 17,610(3)
President and 1993 385,000 325,000 16,000 15,098
Chief Executive Officer 1992 375,000 200,000 16,000 11,727
Marvin Selig 1994 345,000 450,000 9,500 0(4)
President -- CMC 1993 335,000 375,000 12,666 0
Steel Group 1992 325,000 340,000 12,666 0
A. Leo Howell 1994 295,000 300,000 7,500 17,610(3)
Vice President; 1993 285,000 300,000 10,000 15,098
President and Treasurer 1992 275,000 300,000 8,666 11,727
Howell Metal Company
(Subsidiary)
Clyde P. Selig(5) 1994 265,186 324,873 8,311 4,653(4)
Executive Vice President 1993 257,500 292,477 11,068 0
CMC Steel Group 1992 252,500 259,000 11,274 0
Hugh M. Ghormley(6) 1994 259,882 293,756 7,820 17,610(3)
Executive Vice President 1993 252,350 252,180 10,400 15,098
CMC Steel Group 1992 245,000 231,000 10,493 11,727
</TABLE>
- - ---------------
(1) These awards are made under the Company's 1986 Stock Incentive Plan. The
exercise price for each share subject to these options is 100% of the
market value of such share on the date granted. Although the Plan provides
for the granting of stock appreciation rights (SARs), performance awards
and incentive stock options qualified under sec.422A of the Internal
Revenue Code, none have been made and each of the awards shown represent
stock options which do not qualify under sec.422A. The options are
exercisable two years from date of grant until the end of their ten-year
term. Options granted in fiscal years 1992 and 1993 have been adjusted to
reflect the 33 1/3% stock dividend of December 6, 1993.
(2) The listed executive officers held at fiscal year end restricted stock
awards granted October 30, 1989 and scheduled to vest on October 30, 1994,
in number (as adjusted for the December 6, 1993, stock dividend) and value
(calculated based on the closing price of the Company's common stock at
fiscal year end of $26.625 per share) as follows: Messrs. Rabin -- 11,600
($308,850); Marvin Selig -- 9,600 ($255,600); Howell -- 7,066 ($188,132);
Clyde Selig -- 7,025 ($187,067); Ghormley -- 6,366 ($169,495). Payments
equivalent to the cash dividend per share paid all stockholders are paid to
holders of restricted stock bonus awards.
(3) The amounts shown for each fiscal year represent the Company's contributions
to and forfeitures allocated to, the account of the recipient under the
Commercial Metals Companies Profit Sharing Plan, a defined contribution
plan. All of such amounts are fully vested in the recipient.
(4) Messrs. Marvin and Clyde Selig are eligible to participate in the profit
sharing plan of Structural Metals, Inc. They also participate in the
Structural Metals, Inc. Pension Plan. See "Pension Benefits" at page 8. Due
to limitations imposed by the Internal Revenue Code on maximum
contributions to and benefits from qualified retirement plans, no company
contribution or forfeitures were allocated to their profit sharing plan
accounts for 1992, 1993 and for 1994 with regard to Marvin Selig. Clyde
Selig's 1994 company contribution was limited to the amount shown.
(5) Clyde P. Selig is the beneficial owner of 77,663 shares of Common Stock
including 52,546 subject to options exercisable within sixty days, or less
than 1% of the outstanding Common Stock.
(6) Hugh M. Ghormley is the beneficial owner of 114,332 shares of Common Stock
including 16,093 subject to options exercisable within sixty days, or less
than 1% of the outstanding Common Stock.
6
<PAGE> 9
The following table provides information on option grants in fiscal 1994 to
the executive officers included in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT
ASSUMED ANNUAL
% OF TOTAL RATES
OPTIONS/SARS OF STOCK PRICE
GRANTED TO EXERCISE APPRECIATION FOR
EMPLOYEES OR BASE OPTION TERM($)(3)
OPTIONS/SARS IN FISCAL PRICE EXPIRATION ------------------
NAME GRANTED(#)(1) YEAR ($/SH)(2) DATE 5% 10%
- - -------------------------- ------------- ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Stanley A. Rabin.......... 12,000 4.2 27.61 12/23/03 208,354 528,020
Marvin Selig.............. 9,500 3.3 27.61 12/23/03 164,947 418,016
A. Leo Howell............. 7,500 2.6 27.61 12/23/03 130,221 330,221
Clyde P. Selig............ 8,311 2.9 27.61 12/23/03 144,302 365,698
Hugh M. Ghormley.......... 7,820 2.7 27.61 12/23/03 135,777 344,094
Potential Future Commercial Metals Company Stock Price.............................. $44.97 $71.61
</TABLE>
- - ---------------
(1) All options in the above table become exercisable December 23, 1995 or
earlier upon a change of control of the Company as defined in the 1986
Stock Incentive Plan.
(2) The exercise price is the fair market value (mean of high and low sales
price) on the date of grant.
(3) The dollar amounts in the last two columns are the result of calculations at
the 5% or 10% compound annual rates set by the SEC and are not intended to
forecast future appreciation of Commercial Metals Company stock.
The following table provides information concerning the exercise of options
during fiscal 1994 and unexercised options held as of August 31, 1994 for the
executive officers included in the Summary Compensation Table.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
SHARES AT FY-END(#)(1) FY-END($)(1)(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#)(1) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------- -------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stanley A. Rabin...... 8,891 168,095 16,000 28,000 131,250 102,750
Marvin Selig.......... 0 0 12,666 22,166 103,900 81,340
A. Leo Howell......... 0 0 8,666 17,500 71,088 64,219
Clyde P. Selig........ 0 0 52,546 19,379 694,509 71,078
Hugh M. Ghormley...... 20,034 188,214 16,093 18,220 148,812 66,788
</TABLE>
- - ---------------
(1) Amounts set forth in the table reflect the number and value of shares and
options only as no stock appreciation rights (SARs) have been awarded under
the Company's 1986 Stock Incentive Plan.
(2) The amounts shown represent the difference between the option price, which
was 100% of market value on the date of grant, and the fair market value of
the stock on the date of exercise.
(3) The amounts shown represent the difference between the closing price of
Company Common Stock on August 31, 1994 of $26.625, and the exercise price
of such options.
7
<PAGE> 10
PENSION BENEFITS
Substantially all employees of the Company and its domestic subsidiaries
with the exception of employees of Structural Metals, Inc., (SMI), participate
in the Commercial Metals Companies Profit Sharing Plan, a defined contribution
plan. The Company has no pension plan for the employees who participate in that
profit sharing plan. SMI maintains both a defined contribution profit sharing
plan (the SMI Profit Sharing Plan) and a defined benefit pension plan (the SMI
Retirement Plan). Substantially all of the approximately 750 employees of SMI
participate in the two SMI plans. The SMI Retirement Plan is a trusteed,
non-contributory plan qualified under the Internal Revenue Code. An employee is
100% vested under the plan after five years of service with no vesting prior to
that time. Normal retirement age is 65 with benefits payable at 55 through 64 on
a reduced basis. Benefit payments are based on a formula using the monthly
average of all compensation earned by the participant during the ten years prior
to retirement multiplied by 1.5%, multiplied by the number of years of credited
service. There is no offset for social security benefits. Employees may receive
a lump-sum distribution upon retirement or while employed after the attainment
of certain age and service requirements. Although Marvin Selig and Clyde Selig
participate in the SMI Retirement Plan, their benefit levels are limited as
required by Internal Revenue Code sec.415. For 1994 the maximum benefit under
Code sec.415 is $118,800 per year payable at age 65. In addition for purposes of
calculating benefits under the plan, compensation considered must be limited as
required by Internal Revenue Code sec.401(a)(17). For fiscal 1994 the
compensation limitation is $235,840. The following table shows estimated annual
benefit amounts which would be payable to participants in the SMI Pension Plan
at normal retirement (age 65) on a straight life annuity basis without
consideration of the Code limitations. At present, the Company has no
supplemental benefit plan to pay amounts in excess of such limitations.
Accordingly, the amounts shown in the table below may not reflect the actual
benefits payable under the SMI Retirement Plan.
<TABLE>
<CAPTION>
AVERAGE ESTIMATED ANNUAL PENSION FOR
FINAL REPRESENTATIVE YEARS OF CREDITED SERVICE
TEN-YEAR -------------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40 45 50
- - ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$300,000............... 67,500 90,000 112,500 135,000 157,500 180,000 202,500 225,000
$400,000............... 90,000 120,000 150,000 180,000 210,000 240,000 270,000 300,000
$500,000............... 112,500 150,000 187,500 225,000 262,500 300,000 337,500 375,000
$600,000............... 135,000 180,000 225,000 270,000 315,000 360,000 405,000 450,000
$700,000............... 157,500 210,000 262,500 315,000 367,500 420,000 472,500 525,000
$800,000............... 180,000 240,000 300,000 360,000 420,000 480,000 540,000 600,000
</TABLE>
Based on Clyde Selig's 31 years of service and present compensation levels,
upon retirement he would receive the maximum benefit presently permitted to be
paid by defined benefit plans of $118,800 annually based on a straight life
annuity election. In fiscal 1993 Marvin Selig, who has 48 years of service,
received a distribution equal to the present value of his accrued plan benefit
calculated as of the date of distribution. Marvin Selig will continue to accrue
additional benefits each year that he is employed by SMI to the extent the
Internal Revenue Code sec.415 limitation increases. These additional benefits
will be paid from the plan at the time he retires or upon his death. No other
executive officers of the Company are eligible to participate in the SMI
Retirement Plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is submitted by the Compensation Committee with respect to
compensation policies applicable to the Company's executive officers and with
respect to the basis for Mr. Rabin's compensation, as Chief Executive Officer,
for 1994. The Compensation Committee of the Board of Directors is comprised of
four non-employee directors, Messrs. Ralph E. Loewenberg (Chairman), Albert A.
Eisenstat, Moses Feldman and Charles B. Peterson.
OVERALL OBJECTIVES AND STRATEGY
In determining total compensation levels for executive officers, the
Company's Compensation Committee evaluates, primarily on a subjective basis,
Company financial results (including profit before taxes, return on
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<PAGE> 11
net assets and cash flow), the potential for future earnings growth, individual
performance contributions, group and division operating performance. The
Committee has also, in the prior year, reviewed officer compensation levels and
practices at comparable companies, particularly in the Company's core steel
processing and manufacturing businesses but did not do so for fiscal 1994 since
there was little probability of significant change in one year. The companies
included in this prior review include the S&P Steel Industry Group, as well as
10 additional companies in the steel minimill industry.
In 1980 the Company adopted an executive total compensation strategy that
places a significant portion of annual cash bonus at risk. This strategy
combines competitive base salaries, the opportunity for above average annual
cash bonuses, and long-term equity incentive opportunities. Because of the
relatively large number of employees receiving option grants, the number of
options granted to executive officers has been limited and is less than the
levels at the comparable companies described above. The annual focus of the
Company's executive compensation strategy is consistent with the highly cyclical
nature of the Company's business, which is characterized by wide periodic swings
in steel and metal prices. The Compensation Committee reviews information
prepared or compiled by the Company, confers with independent executive
compensation consultants when it considers necessary, and makes decisions based
on the business experience of each Compensation Committee member.
With respect to the executive officers of the Company's Steel Group other
than Marvin Selig, the Executive Committee of the Board performs the functions
of the Compensation Committee in setting total annual cash compensation
including establishing base salaries and bonus payments.
CASH COMPENSATION
Executive officers are compensated within salary ranges that generally are
competitive with ranges for similar positions in companies of comparable size
and complexity to the Company. The actual salary of each officer is based on
individual contribution and is in keeping with the Company's total compensation
strategy described above. Salaries of the ten executive officers including the
CEO have, in the aggregate, increased approximately $168,000 for the two year
period from fiscal 1992 through fiscal 1994 or slightly less than 3.5% on
average for each of the last two years. Individual increases ranged from zero to
5.25%. For fiscal 1995 the majority of the executive officers salaries will not
increase from fiscal 1994. Fiscal year 1995 salary increases for all executive
officers, including the CEO, aggregate less than $18,000.
In addition the Compensation Committee recommends to the Board of Directors
annual cash bonuses for executive officers of the Company, based upon the
compensation strategy described above. For fiscal 1994 results, a strong
performance year for the Company, the total bonus paid executive officers
increased by approximately 29% over the 1993 bonus amount. Similarly, the 1993
bonus pool for executive officers was approximately 43% above the 1992 bonus
pool. The Committee believes bonus levels have been consistent with earnings
which have doubled in two years and increased approximately 20% in 1994 compared
to 1993.
EQUITY-BASED COMPENSATION
Given the relatively large number of employees receiving stock option
grants, grants to executive officers have been substantially below levels at the
comparable companies described above. Separate option share pools for corporate
employees and each operating group and division are established annually
pursuant to a formula based on total salaried employee counts for the previous
year, and cash flow, total assets and return on net assets for the preceding
five years. An additional option pool for Executive Committee members is also
established, which has been generally 10%-20% of the total shares set aside for
all participants. Annual grants are made from pools based on a subjective
evaluation of each executive's responsibilities, sustained performance
contributions and ability to influence long-term growth and profitability.
Although stock appreciation rights and performance awards are allowed under the
Company's 1986 Stock Incentive Plan, no such awards have been made to date.
While restricted stock awards were granted in the past to key employees
including executive officers, the last awards being made October 30, 1989, the
Key Employee Restricted Stock Bonus Plan terminated on January 30, 1990, except
as to awards then outstanding. Therefore, no future awards will be made under
the Plan, and the last awards vested on October 30, 1994.
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<PAGE> 12
CEO COMPENSATION
Mr. Rabin's salary is set annually within the range approved by the
Compensation Committee, which is based on similar positions in the comparable
companies described above. Mr. Rabin's annual bonus is based on the same factors
considered for other members of the executive officer group. Mr. Rabin's salary
was not increased for fiscal 1995 and will remain $395,000. Given the Company's
strong 1994 overall profitability, Mr. Rabin's 1994 cash bonus was increased
$90,000 from 1993 levels to $415,000.
A stock option grant to purchase 12,000 shares at fair market value on
grant date also was made to Mr. Rabin on December 23, 1993. This grant was made
after review of stock options previously granted to Mr. Rabin which have been in
the same amount each of the past two years (before adjustment for the December
6, 1993 33 1/3% stock dividend) and is consistent with the Company's equity
based compensation strategy.
CONCLUSION
The Compensation Committee believes that current total compensation
arrangements are reasonable and competitive. The Compensation and Executive
Committee believe fiscal year 1994 compensation for executive officers is
consistent with current compensation philosophy and reflects corporate
performance. The Compensation Committee is studying the anticipated federal tax
treatment to the Company and executive officers of various payments and
benefits, and in particular the limitations on deductibility of compensation
under Section 162(m) of the Internal Revenue Code. The Committee believes it
unlikely in the short term that the limitation will affect the Company but is
considering various alternatives to preserving the deductibility of compensation
to the extent reasonably practicable and consistent with overall objectives of
the compensation strategy; however, the Committee may not in all circumstances
limit executive compensation to that which is deductible under Section 162(m) of
the Internal Revenue Code. The Compensation Committee shall continue to monitor
and administer compensation programs for executive officers of the Company.
<TABLE>
<S> <C>
EXECUTIVE COMMITTEE COMPENSATION COMMITTEE
A. Leo Howell Ralph E. Loewenberg
Stanley A. Rabin Albert A. Eisenstat
Marvin Selig (member since January 27, 1994)
Moses Feldman
Charles B. Peterson
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
Messrs. Loewenberg, Eisenstat, Moses Feldman and Peterson are the members
of the Compensation Committee.
The Company has historically made charitable contributions of a portion of
consolidated earnings, generally totalling 5% or less to various charitable
entities, including the Feldman Foundation, a private charitable foundation
exempt from federal income tax under Internal Revenue Code sec.501(c)(3). The
Feldman Foundation is the record and beneficial owner of 707,641 shares of the
Company's Common Stock. Director Moses Feldman, Robert L. Feldman and Dr. Daniel
E. Feldman, sons of Jacob Feldman, are Trustees of the Feldman Foundation.
The Feldman Foundation retained R. E. Loewenberg Capital Management
Corporation ("Capital Management"), a registered investment advisor, to serve as
an investment advisor for the twelve months ended August 31, 1994, as well as
the current year. The Feldman Foundation compensates Capital Management on the
basis of a percentage of total assets under management, the same basis for which
Capital Management is compensated for like services by unrelated third parties.
Ralph E. Loewenberg, a director of the Company, is the President and majority
owner of Capital Management. Capital Management also
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<PAGE> 13
provides investment advisory services to Jacob Feldman, Sara Feldman, Dr. Daniel
E. Feldman and Robert L. Feldman, all on the same basis for which it renders
like services to unrelated third parties.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return of the Company's
Common Stock during the five year period beginning August 31, 1989 and ending
August 31, 1994, with the S&P 500 Index and the S&P Steel Group Index. Each
index assumes $100 invested at the close of trading August 31, 1989 and
reinvestment of dividends.
(GRAPH)
<TABLE>
<CAPTION>
Commercial S&P Steel
Measurement Period Metals Industry
(Fiscal Year Covered) Company S&P 500 Group
--------------------- ---------- ------- ---------
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 90.57 95.01 71.22
1991 96.20 120.58 86.10
1992 115.43 130.13 88.91
1993 192.98 149.93 126.16
1994 185.53 156.99 174.35
</TABLE>
PROPOSAL TO ADOPT AN AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
On November 21, 1994, the Board of Directors adopted a resolution to amend
the Company's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock, par value $5 per share, from 20,000,000 to
40,000,000 shares and to propose such an amendment to be voted on by the
stockholders at the upcoming annual meeting. The Board of Directors strongly
recommends the adoption by the stockholders of such an amendment.
The purpose to be accomplished by the adoption of the proposed amendment to
the Company's Certificate of Incorporation is to provide the Board of Directors
flexibility in declaring and paying stock dividends, making future acquisitions
in exchange for the Company's Common Stock, raising additional capital and other
corporate purposes. On November 28, 1994, there were 15,172,706 shares issued
and outstanding, excluding 959,877 shares in the Company's treasury. In addition
the Company has in existence a General Employee Stock Purchase Plan and 1986
Stock Incentive Plan pursuant to which certain employees are eligible to acquire
approximately 2,147,090 shares of Common Stock of the Company reserved for
issuance thereunder. Historically, the Board of Directors of the Company has
declared and paid stock dividends when, in the discretion of the Board, the
earnings, the business prospects and the cash requirements of the Company
permitted. For example, stock dividends of 33 1/3% each were paid to
stockholders in fiscal
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<PAGE> 14
years 1986, 1989 and 1994. In addition, the Company has on occasion acquired the
assets or stock of other related businesses in exchange for Common Stock of the
Company. While no stock dividend or acquisition for stock is presently proposed
or contemplated, the Board of Directors of the Company believes it is essential
that the Company increase its authorized Common Stock in order to vest with the
Board sufficient flexibility to meet these needs and demands of the Company in
the future.
The holders of shares of Common Stock do not have preemptive rights to
subscribe to additional shares. The affirmative vote of the holders of a
majority of the issued and outstanding shares of Common Stock is required for
the adoption of the proposed amendment.
PROPOSED AMENDMENTS TO THE 1986 STOCK INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
The Board of Directors adopted, and at the 1987 Annual Meeting of
Stockholders the stockholders approved, the 1986 Stock Incentive Plan (the
"Plan"). The Company believes that the Plan increases the proprietary interest
of employees in the success of the Company, as well as attracts new and retains
present key employees. The provisions of the Plan are summarized below.
DESCRIPTION OF AMENDMENTS
The Board of Directors is submitting for stockholder approval two
amendments to the Plan adopted by the Board subject to stockholder approval. The
first amendment provides for an increase in the total number of shares of
Company Common Stock that may be issued pursuant to the Plan of 750,000 from
2,222,221 shares to 2,972,221 shares. The second amendment establishes a limit
of 50,000 shares that may be subject to options, stock appreciation rights or
performance awards to any individual during a single fiscal year.
The Plan as initially approved by stockholders on January 22, 1987, set the
maximum number of shares subject to the Plan at 500,000. This was increased by
166,666 to 666,666 as a result of the 33 1/3% stock dividend of December, 1988.
On January 25, 1990 and January 23, 1992 stockholders approved amendments to
increase by 600,000 and 400,000, respectively, the maximum number of shares
subject to the Plan. The December 1993, 33 1/3% stock dividend resulted in an
adjustment to increase the number of shares subject to the Plan from 1,666,666
to 2,222,221. As of November 28, 1994, shares subject to 921,349 options have
been exercised and in connection therewith, 136,598 shares were surrendered in
payment of the option price and are available for future issuance under the
Plan, 1,238,713 shares are subject to options granted but not yet exercised of
which 604,539 are exercisable within sixty days and options for 93,067 shares
have been forfeited and are available for future issuance, leaving 198,757
shares available for future grants.
The Plan presently contains no limit on the number of shares that may be
subject to options, stock appreciation rights or performance awards to any
individual. The proposed amendment would establish a limit of 50,000 per fiscal
year to any individual. In practice the largest number granted to any individual
in any year since the inception of the Plan was 32,000 to Mr. Rabin in fiscal
1988. The proposed limit is anticipated to comply with final regulations under
Section 162(m) of the Internal Revenue Code thereby enabling the Company to
receive a federal income tax deduction for all compensation under the Plan
received by executive officers.
The Board of Directors is submitting these amendments for stockholder
approval to enable the Company to continue to offer options, stock appreciation
rights and performance awards under the Plan and to receive, to the maximum
extent permitted, a tax deduction for all compensation earned under the Plan. If
these amendments to the Plan are not approved by the stockholders, the Plan will
otherwise remain in effect.
GENERAL DESCRIPTION OF THE PLAN
The Plan provides for the granting of (i) options which are intended to
qualify for special tax treatment under particular provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), as in effect from time to time
(including but not limited to incentive stock options), (ii) options which are
not intended to so
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<PAGE> 15
qualify (non-qualified stock options), (iii) stock appreciation rights in
respect of any outstanding options, (iv) performance awards or (v) combinations
of the foregoing.
Subject to the adjustment provisions described below, the number of shares
of Common Stock which are available under the Plan if the amendments are
approved shall not exceed in the aggregate 2,972,221 shares. Shares covered by
options that terminate or expire unexercised, and shares forfeited under
performance awards, will remain available for purposes of the Plan. Full-time
salaried employees of the Company, including employees who are directors of the
Company, or any of its subsidiaries are eligible for selection as participants
in the Plan.
The Compensation Committee of the Company's Board of Directors administers
the Plan. The Compensation Committee must consist of at least three members of
the Board of Directors who have not been eligible to receive options or awards
under any Company stock plan for at least one year prior to commencing service
on the Compensation Committee. The Board of Directors designates the members of
the Compensation Committee, who serve on the Compensation Committee until they
are replaced by the Board. The Compensation Committee has full power and
authority to select the employees to be granted awards under the Plan, to
interpret and construe the Plan and to establish and amend rules and regulations
for the administration of the Plan.
The Compensation Committee may make appropriate adjustments in the number
of shares covered by outstanding options, stock appreciation rights or
performance awards, applicable option prices and the maximum number of shares
which may be issued pursuant to the Plan to reflect any stock dividend, share
division or combination, recapitalization, merger, consolidation or
reorganization of or by the Company.
The Plan may be amended or discontinued by the Board without the approval
of stockholders. No awards under the Plan will be made after November 23, 1996.
Stock Options. In general, the Plan contemplates the granting of two types
of options to purchase Common Stock of the Company. One type of option is
intended to qualify under particular provisions of the Code, including but not
limited to incentive stock options. The second type of option would not be
intended to qualify under the Code (non-qualified stock options). A combination
of the two would be permitted.
Each grant will specify the number of shares of Common Stock to which it
pertains and an option price not less than the fair market value per share of
the Company's Common Stock on the date of grant (and for certain recipients of
incentive stock options, 110% of fair market value). The option price is payable
by the optionee at the time of exercise in cash or by exchanging previously
acquired shares of the Company's Common Stock, with a fair market value equal to
the option price, or by a combination of these payment methods. Successive
grants may be made to the same person whether or not any option previously
granted remains unexercised. Each option agreement will specify any period or
periods of continuous employment that might be required before the option
becomes exercisable, provided that no option will be granted for a term of more
than ten years.
The exercise of options, which are intended to qualify under the Code as
incentive stock options shall be subject to a $100,000 calendar year limit based
on the fair market value of the Common Stock at the time the option was granted.
Except as stated, and without regard to the proposed amendment to establish a
50,000 limit per fiscal year, there is no restriction in the current Plan on the
number of options that may be granted to any person. Options (and related stock
appreciation rights as described below) are not transferable otherwise than by
will or the laws of descent and distribution and during the lifetime of the
optionee may be exercised only by the optionee.
The Plan provides that in the event of a "Change in Control" of the
Company, all options and any stock appreciation rights outstanding for at least
six months will become 100% vested, immediately exercisable and may be cashed
out at the Compensation Committee's discretion. Change in Control is defined as
the acquisition of 20% or more of the Company's stock, the merger or
consolidation of the Company, the sale of all or substantially all of the
Company's assets, or certain changes in the Company's Board of Directors.
13
<PAGE> 16
The proceeds from the sale of Common Stock issued upon exercise of options
granted under the Plan will be added to the working capital of the Company and
used for general corporate purposes.
Stock Appreciation Rights. The Plan provides for the grant of stock
appreciation rights in conjunction with any option granted pursuant to the Plan,
as determined by the Compensation Committee. Stock appreciation rights permit an
optionee to elect to exercise stock appreciation rights in lieu of exercising
all or a portion of the option and, at the option of the Compensation Committee,
to receive cash or shares of Common Stock of the Company or a combination of
cash and shares equal in value to the excess of the fair market value of the
option shares over the option exercise price of such option shares on the date
the stock appreciation rights are exercised. No stock appreciation right will be
exercisable except at a time when the related option is exercisable. The
exercise of a stock appreciation right will reduce the number of shares
available for award under the Plan and under the related option on a
share-for-share basis. Stock appreciation rights may be amended, suspended or
terminated at the discretion of the Compensation Committee.
For example, if an optionee holds options which include related stock
appreciation rights to purchase 1,000 shares of the Company's Common Stock under
the Plan that are currently exercisable at $15 per share and the market price of
the Company's Common Stock is $25 per share, the optionee may either exercise
the option by paying the Company $15,000 or may elect to exercise the stock
appreciation right and, at the discretion of the Compensation Committee, receive
either $10,000 or 400 shares of the Company's Common Stock or a combination of
cash and shares.
Performance Awards. Performance awards of Common Stock may be made without
additional consideration from time to time by the Compensation Committee.
Performance awards are contingent upon the achievement over a period of not less
than one year of such Company, division, subsidiary, group or other objectives
as shall be established by the Compensation Committee at the time of the grant.
Such objectives may be revised by the Compensation Committee to reflect
significant, unforeseen events or changes in circumstances. Upon a Change in
Control, the shares of Common Stock awarded under the Plan shall be deemed fully
vested.
At November 28, 1994, the Company had approximately 500 employees eligible
to participate in the Plan, of which 366 employees held options granted under
the Plan. At November 28, 1994, a total of 1,238,713 shares of Common Stock were
issuable upon exercise of outstanding and unexercised options granted under the
Plan of which 604,539 are exercisable within sixty days. The options granted
under the Plan outstanding at November 28, 1994, expire on dates ranging between
October 28, 1997 and December 23, 2003, and have a weighted average exercise
price of $19.67 per share.
FEDERAL INCOME TAX CONSEQUENCES
Non-qualified Options. The granting of a non-qualified stock option will
not result in federal income tax consequences to either the Company or the
optionee. However, upon exercise of such option, the optionee will realize
ordinary income measured by the excess of the then fair market value of the
shares acquired over the option price. The Company will be entitled to a
deduction for a corresponding amount. For purposes of determining gain or loss
realized upon a subsequent sale or exchange of such shares, the optionee's tax
basis will be the sum of the option price paid and the amount of ordinary
income, if any, recognized by the optionee. All options issued to date under the
Plan have been non-qualified options.
Incentive Stock Options. No federal income tax consequences will result to
either the Company or an optionee when an incentive stock option is granted or
timely exercised (except as described in the second subsequent paragraph), but
only when the stock received under the option is sold or otherwise disposed of.
Gain or loss at the time of sale is measured by the difference between the
option price and the proceeds of the sale. If shares acquired on exercise of an
incentive stock option are disposed of prior to the expiration of one year from
the date of exercise or two years from the date of grant, the optionee will
generally be subject to ordinary income tax to the extent of the difference
between the sales price and the exercise or purchase price or, if less, the
difference between the fair market value of the shares on the date of exercise
and the option price, and the Company will be entitled to a corresponding tax
deduction at that time.
14
<PAGE> 17
Under the Tax Reform Act of 1986, the 60% deduction for capital gains was
eliminated for all tax years beginning in 1987. Effective January 1, 1987, all
capital gains are taxed as ordinary income. Therefore, the disposition of shares
acquired on exercise of incentive stock options will result in ordinary income
to the extent of the difference between the tax basis and the sales price.
Although an optionee will not realize ordinary income upon the exercise of
an incentive stock option, the excess of the fair market value of the shares
acquired at the time of exercise over the option price constitutes an item of
"tax preference" within the meaning of Section 57 of the Code, and thus may
result in the optionee's being subject to the "alternative minimum tax" pursuant
to Section 55 of the Code.
Stock Appreciation Rights. No federal income tax consequences will result
to either the Company or the optionee upon the grant of stock appreciation
rights. Upon exercise of stock appreciation rights by an optionee the amount of
any cash received and the fair market value of any shares of Common Stock
received will be taxable to the optionee as ordinary income, and the Company
ordinarily will be entitled to a corresponding deduction. The tax basis of any
Common Stock received will be its fair market value on the exercise date. The
Section 16(b) deferral described above would be applicable to any shares
received by an officer of the Company upon exercise of a stock appreciation
right.
Performance Awards. There will be no federal income tax consequences to
the Company or the recipient of a performance award at the time of grant.
Ordinary income will be recognized by the employee upon the receipt of shares of
Common Stock pursuant to the achievement of the performance award objectives,
and the Company will be entitled to a corresponding deduction.
Withholding. Withholding of federal taxes at applicable rates will be
required in connection with ordinary income realized by an optionee by reason of
the exercise of stock options, stock appreciation rights or the receipt of
shares under performance awards granted pursuant to the Plan. Accordingly,
provisions satisfactory to the Company will have to be made either for such
withholding or payment by the optionee in lieu thereof.
VOTE REQUIRED
The affirmative vote of the holders of a majority of Common Stock present
or represented at the meeting is required to adopt the amendments to the Plan.
The Board of Directors recommends a vote FOR the approval of the amendments to
the Plan.
RATIFICATION OF APPOINTMENT OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
The Board of Directors has appointed Deloitte & Touche as the independent
auditors of the Company for the fiscal year ending August 31, 1995, subject to
stockholder ratification. Representatives of Deloitte & Touche are expected to
be present at the meeting with the opportunity to make a statement if they so
desire and to be available to respond to appropriate questions.
GENERAL
The Annual Report to Stockholders covering fiscal year 1994 has been mailed
to stockholders with this mailing or previously. The Annual Report does not form
any part of the material for the solicitation of proxies.
Pursuant to the rules of the Securities and Exchange Commission, a proposal
to be presented by a stockholder at the Company's 1996 Annual Meeting must be
received by the Company at its principal executive offices no later than August
, 1995.
The expense of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies personally or by telephone or telegram. The Company
will request brokers, dealers or other nominees to send proxy material to and
obtain proxies from their principals and the Company will, upon request,
reimburse such persons for their reasonable expenses.
15
<PAGE> 18
OTHER BUSINESS
Management knows of no other matter that will come before the meeting.
However, if other matters do come before the meeting, the proxy holders will
vote in accordance with their best judgment.
By Order of the Board of Directors,
/s/ DAVID M. SUDBURY
DAVID M. SUDBURY
Vice President, Secretary
and General Counsel
December , 1994
16
<PAGE> 19
Commercial Metals Company
7800 Stemmons
Dallas, Texas 75247
Notice of 1995 Annual Meeting
Proxy Statement
(LOGO)
(LOGO) Printed on recycled paper
<PAGE> 20
PRELIMINARY COPY
PROXY
COMMERCIAL METALS COMPANY
7800 Stemmons Freeway
Dallas, Texas 75247
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Shareholder(s) of Commercial Metals Company hereby appoint(s)
A. Leo Howell, Stanley A. Rabin and Marvin Selig, or any of them as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote and act for the undersigned at the 1995 Annual Meeting of
Shareholders of Commercial Metals Company to be held on Thursday, January 26,
1995 at 10:00 a.m., Central Standard Time at the Alexandria Auditorium of the
INFOMART, 1950 Stemmons Freeway, Dallas, Texas, and any adjournment,
continuation, or postponement thereof, according to the number of votes which
the undersigned is now, or may then be, entitled to cast, hereby revoking any
proxies heretofore executed by the undersigned for such meeting.
All powers may be exercised by a majority of said proxy holders or substitutes
voting or acting on, if only one votes and acts then by that one. The
undersigned instructs such proxy holders or their substitutes to vote as
specified below on the proposals set forth in the Proxy Statement.
PLEASE MARK, DATE AND SIGN THIS PROXY ON REVERSE SIDE
<PAGE> 21
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. /X/ Please mark
IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED your votes
FOR PROPOSALS 1, 2, 3, 4 AND 5. as this
___________________
COMMON
NOMINEES: Moses Feldman, Ralph E. Loewenberg, Stanley A. Rabin, Marvin Selig
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.
- - --------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
except as marked to the to vote for all nominees
contrary listed
/ / / /
2. AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION.
FOR AGAINST ABSTAIN
/ / / / / /
3. AMENDMENTS TO THE 1986 STOCK INCENTIVE PLAN.
FOR AGAINST ABSTAIN
/ / / / / /
4. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE AS INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING AUGUST 31, 1995.
FOR AGAINST ABSTAIN
/ / / / / /
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THIS MEETING.
Dated ____________________________, 19__
________________________________________
Signature
________________________________________
Second Signature If Held Jointly
When shares are held by joint tenants,
both should sign. When signing as
attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in the
partnership name by authorized person.
PLEASE MARK, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
