<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:
[ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
COMMERCIAL METALS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(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)(l) 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
COMMERCIAL METALS COMPANY
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
TELEPHONE (214) 689-4300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 22, 1998
The Annual Meeting of Stockholders of Commercial Metals Company, a Delaware
corporation ("Company"), will be held in the Horchow Auditorium, Dallas Museum
of Art, 1717 North Harwood, Dallas, Texas, on January 22, 1998 at 10:00 a.m.,
Central Standard Time. If you are planning to attend the meeting in person,
please check the appropriate space on the enclosed proxy card. A map is included
on the back cover of the attached Proxy Statement. The meeting will be held for
the following purposes:
(1) To elect four persons to serve as Class III directors until the
2001 Annual Meeting of Stockholders and until their successors are elected;
(2) To consider and act upon a proposal to amend the Company's General
Employees Stock Purchase Plan (the "Plan") to increase by 500,000 the
maximum number of shares that may be available for issuance pursuant to the
Plan;
(3) To approve the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending August 31, 1998; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record on November 24, 1997 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 5, 1997
<PAGE> 3
COMMERCIAL METALS COMPANY
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
TELEPHONE (214) 689-4300
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 22, 1998
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
22, 1998 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 5, 1997.
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 General Employees Stock Purchase
Plan to increase by 500,000 the maximum number of shares available for issuance
pursuant to the Plan and to ratify the appointment of Deloitte & Touche LLP 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, by subsequently executing
and delivering a proxy or by voting in person at the meeting (although attending
the meeting without executing a ballot or executing a subsequent proxy will not
constitute revocation of a proxy).
OUTSTANDING VOTING SECURITIES OF THE COMPANY
On November 24, 1997, the record date for determining stockholders entitled
to vote at the Annual Meeting, there were outstanding 14,826,324 shares of
Common Stock, par value $5.00 per share, not including 1,306,259 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, and the affirmative vote of a
majority of the shares of common stock present or represented at the meeting is
required to approve the amendment to increase by 500,000 the shares available
for issuance under the General Employee Stock Purchase Plan and to ratify the
appointment of Deloitte & Touche LLP. Abstentions and broker non-votes are
counted for purposes of determining the quorum and have the effect of a negative
vote on the proposals to approve the amendment to increase by 500,000 the shares
available for issuance under the General Employee Stock Purchase Plan and to
ratify the appointment of Deloitte & Touche LLP. Broker non-votes have no effect
on determining plurality.
\
<PAGE> 4
PRINCIPAL STOCKHOLDERS
As of the record date 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>
J. P. Morgan & Co. Incorporated Beneficially 1,248,466(1) 8.4%
60 Wall Street
New York, NY 1026
RCM Capital Management, L.L.C. Beneficially 832,700(2) 5.6%
RCM Limited L.P.
RCM General Corporation
Four Embarcadero Center
Suite 2900
San Francisco, CA 94111
</TABLE>
- ---------------
(1) Based on Amendment 8 to Schedule 13G dated December 31, 1996 which indicates
that J. P. Morgan & Co. Incorporated has sole voting power over 754,800
shares and sole dispositive power over 1,248,466 shares.
(2) Based on Schedule 13G dated February 7, 1997, which indicates the reporting
persons have sole voting power over 765,700 shares, sole dispositive power
over 825,700 shares and shared dispositive power over 7,000 shares. Dresdner
Bank AG of Frankfurt, Germany also filed a Schedule 13G dated February 7,
1997, which states RCM Capital Management, L.L.C. is a wholly owned
subsidiary and Dresdner has beneficial ownership of the Company's common
stock to the extent Dresdner may be deemed to have beneficial ownership of
securities beneficially owned by RCM Capital Management, L.L.C.
PROPOSAL I
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 1999 Annual Meeting of Stockholders, and the Class II directors will
serve until the 2000 Annual Meeting of Stockholders. Moses Feldman, Ralph E.
Loewenberg, Stanley A. Rabin and Marvin Selig are currently directors and will
stand for election as Class III directors for three-year terms of office
expiring at the 2001 Annual Meeting and until their successors are duly elected.
Messrs. Feldman, Loewenberg, Rabin and Selig were previously elected by the
stockholders. 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 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 Albert A. Eisenstat, Walter F. Kammann
and Dorothy G. Owen. Mr. Eisenstat had been a director of and Executive Vice
President and Secretary of Apple Computer, Inc. until his retirement in
September 1993. From June 1996 until present Mr. Eisenstat has been a partner in
Discovery Ventures LLC, a venture capital fund. 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. For more than
five years prior to November, 1994, Ms. Owen had been Chairman of the Board of
Owen Steel Company, Inc. and affiliates which were acquired by merger with a
subsidiary of the Company in November, 1994.
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 24, 1997 STOCK
----------------------- ----- --------- ------------------ -----------
<S> <C> <C> <C> <C>
CLASS III -- TERM EXPIRES IN 1998
Moses Feldman 57 1976 188,399(1) 1.3%
President, AeroMed, Inc.
Ralph E. Loewenberg 58 1971 --(2)
President, R. E. Loewenberg Capital
Management Corporation
Stanley A. Rabin 59 1979 224,567(3) 1.5%
President and Chief Executive Officer,
Commercial Metals Company
Marvin Selig 74 1964 117,166(3) *
CMC Steel Group - Chairman and Chief Executive Officer
</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 24, 1997 STOCK
----------------------- ----- --------- ------------------ -----------
<S> <C> <C> <C> <C>
CLASS I -- TERM TO EXPIRE IN 1999
Laurence E. Hirsch 51 1991 1,333 *
Chairman of the Board and Chief Executive Officer,
Centex Corporation
A. Leo Howell 76 1977 101,284(3) *
Vice President, Commercial Metals Company;
President, Howell Metal Company
Dorothy G. Owen 62 1995 369,244 2.5%
Former Chairman of the Board - Owen Steel Company,
Inc.
CLASS II -- TERM TO EXPIRE IN 2000
Albert A. Eisenstat 67 1982 3,333 *
Partner, Discovery Ventures LLC
Walter F. Kammann 72 1969 39,425(3) *
Consultant
Charles B. Peterson 84 1979 10,000 *
Investments
</TABLE>
- ---------------
* Less than one percent.
3
<PAGE> 6
(1) Excluding 730,641 shares owned of record by the Feldman Foundation, of which
Moses Feldman is one of three voting trustees and 724,691 shares owned by
the Marital Trust under the Jacob Feldman Revocable Trust Indenture of which
Moses Feldman is one of four trustees.
(2) Ralph E. Loewenberg is one of two trustees of The Jacob Feldman and Sara B.
Feldman Grantor Trust which owns 3,240 shares and is one of four trustees of
the Marital Trust under the Jacob Feldman Revocable Trust Indenture which
owns 724,691 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 56,000 shares, Mr. Selig of 44,332 shares, Mr. Howell of 33,666
shares and Mr. Kammann of 2,500 shares.
As of November 24, 1997, all directors and officers as a group beneficially
own 1,595,676 shares or 10.8% of outstanding Common Stock including 350,719
shares subject to options exercisable within sixty days but excluding shares
owned by the Feldman Foundation, Marital Trust and Grantor Trust discussed in
footnotes 1 and 2 above.
Marvin Selig is the brother of Clyde P. 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., Business Objects S.A. and the Benham Group of Funds (part of
American Century Funds). Mr. Hirsch is also a director of Centex Corporation,
Centex Construction Products, Inc., Envoy Corporation and is a trustee of
Blackrock Assets Investors, a registered investment company.
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 Directors Eisenstat (Chairman), Feldman, Loewenberg,
Owen and Peterson. During the fiscal year ended August 31, 1997, 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, 1998, and to review various matters with regard to financial
controls, procedures and internal audit reports.
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 Directors Loewenberg (Chairman),
Eisenstat, Feldman, Hirsch and Peterson. The Compensation Committee may
periodically 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, 1997 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, 1997 the entire Board of Directors met eight times, of which six were
regularly scheduled meetings and two were special meetings. All directors
attended at least
4
<PAGE> 7
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. Directors Eisenstat, Feldman,
Hirsch, Kammann, Loewenberg, Owen and Peterson are paid a fee of $22,000 per
year and $1,200 for each board meeting or $600 for each committee meeting they
attended. Chairmen of the Audit and Compensation Committees receive an
additional payment of $1,500 per year. The directors are also reimbursed for
reasonable expenses of attending meetings. No employees of the Company receive
additional compensation for serving as a director. Upon his retirement from
employment by the Company and subsidiary on September 1, 1993, Mr. Kammann and
the Company entered into a consulting agreement, providing for payment of 84,000
Swiss Francs (approximately $60,000) per year plus reimbursement of expenses
incurred in the performance of consulting work for the Company.
Legal Proceedings. On April 30, 1996, the Company and its subsidiary
SMI-Owen Steel Company, Inc. (SMI-Owen) filed a lawsuit seeking to recover
approximately $2.4 million from an escrow fund created with a portion of the
purchase price in connection with the Company's November, 1994, acquisition of
Owen Steel Company, Inc. and affiliates (Owen Steel). The lawsuit seeks recovery
of a payment made by SMI-Owen to settle a claim in connection with a steel
supply and erection contract entered into prior to the acquisition by the
predecessor of SMI-Owen. The Company contends the claim was based on events
which occurred prior to the acquisition, and the Company is entitled to
reimbursement from the former Owen Steel stockholders for the claim settlement
under the terms of the escrow agreement. The Complaint alleges breach of
contract, breach of the covenant of good faith and fair dealing and seeks a
declaratory judgment and damages. Dorothy G. Owen, a director of the Company and
former stockholder of Owen Steel is one of four designated representatives of
former Owen Steel stockholders. The four representatives have filed an Answer
and Counterclaim denying the material allegations of the Company, alleging
various defenses and setting forth counterclaims for specific performance,
breach of contract, breach of fiduciary duty, breach of the covenant of good
faith and fair dealing and seeking a declaratory judgment and unspecified actual
and punitive damages. The Company has notified the representatives of the former
Owen Steel stockholders and the escrow agent of additional claims against the
escrow fund totaling approximately $3 million. The Company believes the
representatives of the former Owen Steel stockholders dispute liability as to
all of these claims. Ms. Owen has not attended or participated in that portion
of Board of Directors meetings during which these matters were considered.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Company's Common Stock to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Based solely upon its review of the copies of such
forms received by it or written representations that no Form 5's were required
from reporting persons, the Company believes that all such reports were
submitted on a timely basis during the year ended August 31, 1997 with the
exception of Form 5's to report the receipt of a stock option grant to Messrs.
Rabin, Marvin Selig, Howell, Clyde Selig and Ghormley as well as executive
officers Lawrence A. Engels, Harry J. Heinkele, William B. Larson, Murray R.
McClean, Bert Romberg and David M. Sudbury.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid during each of the last three fiscal years to the Company's Chief Executive
Officer and the four remaining most highly compensated executive officers of the
Company, based on salary and bonus earned during fiscal year 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------- ------------------
FISCAL SALARY BONUS AWARDS OF STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTION/SARS(#)(1) COMPENSATION($)
- ----------------------------------------- ------ ------- ------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Stanley A. Rabin......................... 1997 405,000 470,000 14,000 75,488(2)
President and 1996 405,000 545,000 50,000 91,444
Chief Executive Officer 1995 395,000 515,000 12,000 12,805
Marvin Selig............................. 1997 355,000 495,000 11,000 67,460(2)
CMC Steel Group - 1996 355,000 580,000 11,875 92,177
Chairman and Chief Executive Officer 1995 345,000 550,000 9,500 0
A. Leo Howell............................ 1997 305,000 350,000 8,500 56,120(2)
Vice President; President - 1996 305,000 335,000 9,375 61,495
Howell Metal Company 1995 295,000 305,000 7,500 12,805
Clyde P. Selig(3)........................ 1997 289,780 341,760 10,919 45,322(2)
Vice President; CMC Steel Group - 1996 281,335 397,523 11,491 65,481
President and Chief Operating Officer 1995 273,141 379,142 8,400 7,500
Hugh M. Ghormley(4)...................... 1997 283,250 314,720 10,110 47,952(2)
Vice President; CMC Steel Group - 1996 275,708 386,190 10,600 64,373
President - Fabrication Plants 1995 267,678 353,268 7,800 12,805
</TABLE>
- ---------------
(1) The 1995 and 1996 awards are made under the Company's 1986 Stock Incentive
Plan. The 1997 awards are under the Company's 1996 Long-Term 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 both Plans
provide 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 granted in
1997 are exercisable one half at one year from grant date and the second
half two years from grant date. The 1997 option grants expire seven years
from grant date. The options granted in 1996 and 1995 are exercisable two
years from date of grant until the end of their ten-year term with the
exception of options for 35,000 of the 50,000 awarded Mr. Rabin during
1996. Those 35,000 share options vest seven years from date of grant
subject to accelerated vesting of 10,000 shares two years from grant date,
10,000 shares three years from grant date and 15,000 shares four years from
grant date if the total return on the Company's stock exceeds the Standard
and Poor's Steel Industry Group Index cumulative return for related fiscal
years. The first 10,000 shares subject to accelerated vesting two years
from grant date did not vest because the condition precedent for vesting
was not achieved at 1997 fiscal year end. All options may vest earlier upon
a change in control of the Company as defined in the Plans.
(2) The compensation reported represents Company contributions to and
forfeitures allocated to the account of the recipient under the Commercial
Metals Companies Profit Sharing and 401(k) Plan or, in the case of Marvin
Selig and Clyde P. Selig, the Structural Metals, Inc. Profit Sharing and
401(k) Plan and contributions to the account of the recipient pursuant to
the Company's Benefit Restoration Plan (the "BRP"), a non-qualified plan
for certain executives of the Company and subsidiaries which was
implemented in fiscal year 1996. All of the amounts reported are fully
vested in the recipient. The compensation for the named executive officers
for fiscal year 1997 includes contributions pursuant to the BRP by the
Company into a trust for the benefit of the recipients in the following
amounts: Mr. Rabin - $62,490; Mr. Marvin Selig - $67,460; Mr.
Howell - $43,122; Mr. Clyde Selig - $37,822; and Mr. Ghormley - $34,954.
(3) Clyde P. Selig is the beneficial owner of 99,018 shares of Common Stock
including 67,039 subject to options exercisable within sixty days, or less
than 1% of the outstanding Common Stock.
(4) Hugh M. Ghormley is the beneficial owner of 136,812 shares of Common Stock
including 42,113 subject to options exercisable within sixty days, or less
than 1% of the outstanding Common Stock.
6
<PAGE> 9
The following table provides information on option grants in fiscal 1997 to
the executive officers included in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES
OPTIONS/SARS OF STOCK PRICE
GRANTED TO EXERCISE APPRECIATION FOR
EMPLOYEES OR BASE OPTION TERM($)(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......... 14,000 3.6 28.00 05/12/04 $159,583 $371,897
Marvin Selig............. 11,000 2.8 28.00 05/12/04 125,387 292,205
A. Leo Howell............ 8,500 2.2 28.00 05/12/04 96,890 225,795
Clyde P. Selig........... 10,919 2.8 28.00 05/12/04 124,464 290,053
Hugh M. Ghormley......... 10,110 2.6 28.00 05/12/04 115,242 268,563
Potential Future Commercial Metals Company Stock Price.......................... $39.40 $54.56
</TABLE>
- ---------------
(1) All options in the above table become exercisable in two equal installments,
one-half May 12, 1998 and one-half May 12, 1999, or earlier upon a change
of control of the Company as defined in the 1996 Long-Term Incentive Plan.
(2) The exercise price is the fair market value (mean of high and low sales
price) on the date of grant.
(3) The dollar amounts in the last two columns are the result of calculations at
the 5% or 10% compound annual rates set by the SEC and are not intended to
forecast future appreciation of Commercial Metals Company stock.
The following table provides information concerning the exercise of options
during fiscal 1997 and unexercised options held as of August 31, 1997 for the
executive officers included in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
SHARES AT FY-END(#)(1) FY-END($)(1)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stanley A. Rabin........... 0 0 56,000 64,000 $ 548,680 $290,375
Marvin Selig............... 0 0 44,332 22,875 434,355 99,664
A. Leo Howell.............. 0 0 33,666 17,875 324,812 77,945
Clyde P. Selig............. 0 0 80,325 22,410 1,206,997 97,540
Hugh M. Ghormley........... 0 0 42,113 20,710 450,830 90,128
</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.
(2) The amounts shown represent the difference between the market value of
Company Common Stock on August 31, 1997 of $32.00, 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 either the Commercial Metals Companies Profit Sharing and 401(k) Plan or the
SMI-Owen Steel Company, Inc. Savings and Deferred Cash Plan, both defined
contribution plans. The Company has no pension plan for the employees who
participate in those two plans. SMI maintains both a defined contribution profit
sharing plan (the SMI Profit Sharing and 401(k) Plan) and a defined benefit
pension plan (the SMI Retirement Plan). Substantially all of the approximately
850 employees of SMI participate in the two SMI plans. Effective as of May 31,
1997, SMI terminated the SMI Retirement Plan. That Plan is fully funded and
benefit levels were enhanced for all participating employees in connection with
the termination. It is anticipated benefit distributions will be made in March
1998 to participants. Marvin Selig and Clyde Selig will receive distributions of
benefits under the Plan. It is presently estimated Marvin Selig, having received
a prior lump sum distribution in 1993 equal to the present value of his accrued
plan benefit as of that date, will receive a final lump sum distribution of
approximately $131,000. It is estimated Clyde Selig will receive a lump sum
distribution of approximately $1,224,000. Marvin Selig has 51 and Clyde Selig 34
years of service under the Plan. 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 eleven executive officers and
with respect to the basis for Mr. Rabin's compensation, as Chief Executive
Officer, for 1997. The Compensation Committee of the Board of Directors is
comprised of non-employee directors, Messrs. Ralph E. Loewenberg (Chairman),
Albert A. Eisenstat, Moses Feldman, Laurence E. Hirsch 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 net assets
and cash flow), the potential for future earnings growth, individual performance
contributions, group and division operating performance. The Committee
periodically utilizes a compensation consultant to review levels and practices
at comparable companies, particularly in the Company's core steel processing and
manufacturing businesses, but did not consider it necessary during 1997 because
of the consultant's work the prior year. The companies included in this review
include the S&P Steel Industry Group, as well as 10 additional companies in the
steel minimill or metals 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
shares subject to 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 considered necessary, and makes
decisions based on the business experience of each Compensation Committee
member.
CASH COMPENSATION
Base Salary. 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 eleven employees serving
as executive officers for each of the last three fiscal years including the CEO
have, in the aggregate, increased approximately $178,711 from
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<PAGE> 11
fiscal 1995 through fiscal 1997 or 3.14% on average for each of the last two
years. Fiscal year 1997 salary increases for all eleven executive officers,
including the CEO, aggregated approximately 2.6%. Fiscal year 1998 salaries for
executive officers will increase, in the aggregate, less than one percent.
Bonus. 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 1997, the second best year
for total earnings in the Company's history, yet a decrease from 1996's record
results, the aggregate bonus paid executive officers decreased approximately 12%
from the 1996 bonus amount. The Committee believes bonus levels have been
consistent with overall results which saw net earnings decrease approximately
16% in 1997 compared to 1996.
LONG-TERM COMPENSATION
Equity-Based. Given the relatively large number of employees receiving
stock option grants, the number of shares subject to 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 were allowed under the Company's 1986
Stock Incentive Plan, no such awards were made under that Plan. The Company's
1986 Stock Incentive Plan terminated, except as to awards previously granted, in
November 1996. The 1996 Long-Term Incentive Plan approved by stockholders in
last year's proxy statement will permit continued use of equity based long-term
incentives. The Compensation Committee believes equity-based incentives align
stockholder interest with compensation levels.
Retirement Benefits. The Company has no defined benefit pension plans with
the exception of the SMI Retirement Plan which terminated in May, 1997. (See
Pension Benefits at page 8.) The Company's only long-term compensation
retirement plans are now defined contribution profit sharing and 401(k) plans.
As the result of concern about limitations mandated by federal tax law and
regulations which have adversely impacted defined contribution plan retirement
benefits of more highly compensated employees, including executive officers, the
Board in 1996 approved the Benefit Restoration Plan ("BRP"). The BRP is a non-
qualified plan in which certain executives subject to reduced benefits,
participate. Following each year-end the Company contributes to a trust created
under the BRP an amount equal to the additional contribution which the
participant would have received under the Company sponsored profit sharing plan
had the participant's compensation not been reduced for purposes of calculating
the Company's profit sharing or 401(k) contribution. Payments made to the BRP
for the benefit of participants, including executive officers, vest under the
same terms and conditions as the relevant profit sharing and 401(k) plan. The
Compensation Committee believes this means of restoring a reasonable level of
retirement benefits for executive officers and other key employees is an
important element in the Company's long-term compensation program.
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 office group. Mr. Rabin's salary
for fiscal 1997 remained the same as his 1996 salary, $405,000. Mr. Rabin's
salary, as well as that of eight of the eleven executive officers, will not be
increased for fiscal 1998. Given the Company's reduced level of profitability in
1997, Mr. Rabin's 1997 cash bonus was decreased approximately 14% from 1996.
An option grant to purchase 14,000 shares at fair market value on grant
date was made to Mr. Rabin on May 12, 1997. During the prior two years, Mr.
Rabin had received options for 62,000 shares. The Committee determined that
rather than the entire number of shares subject to the option vesting two years
from the date
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<PAGE> 12
of grant, the vesting schedule for most options granted in recent years, all
options granted in 1997 would vest in two equal installments, one year and two
years from grant date. The duration of all options granted during 1977 was also
shortened from the previous term of ten to seven years.
CONCLUSION
The Compensation Committee believes that current total compensation
arrangements are reasonable and competitive. The Compensation and Executive
Committee believe fiscal year 1997 compensation for executive officers is
consistent with current compensation philosophy and reflects corporate
performance. The Compensation Committee continues to monitor 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. This limitation has not
impacted the Company to date and the Committee believes it unlikely in the short
term that the limitation will affect the Company. 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.
COMPENSATION COMMITTEE
Ralph E. Loewenberg (Chairman)
Albert A. Eisenstat
Moses Feldman
Laurence E. Hirsch
Charles B. Peterson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
Messrs. Loewenberg, Eisenstat, Feldman, Hirsch 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 730,641 shares of the
Company's Common Stock. Director Moses Feldman and brothers, Robert L. Feldman
and Dr. Daniel E. Feldman, are trustees of the Feldman Foundation.
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<PAGE> 13
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, 1992 and ending
August 31, 1997, with the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500") and the Standard & Poor's Steel Industry Group Index (the "S&P Steel
Group"). Each index assumes $100 invested at the close of trading August 31,
1992 and reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period Commercial Metals
(Fiscal Year Covered) Company S&P 500 S&P Steel Group
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 167.17 115.21 141.89
1994 160.72 121.52 196.09
1995 172.81 147.58 148.29
1996 187.48 175.22 127.87
1997 194.73 246.21 164.17
</TABLE>
11
<PAGE> 14
PROPOSAL II
PROPOSED AMENDMENT TO THE GENERAL EMPLOYEES STOCK PURCHASE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
The Board of Directors believes that investment by employees in the Common
Stock of the Company through the General Employee's Stock Purchase Plan ("Plan")
has in the past and will continue in the future to emphasize the mutuality of
interests which exist between employees and owners of the Company. Management is
of the opinion that the Plan creates incentive, promotes employee morale and
helps to attract and retain desirable personnel. The Board of Directors has,
therefore, concluded that it will be in the best interests of stockholders to
continue to stimulate employee savings and investment through the Plan. To that
end, the Board of Directors recommends the adoption of an amendment which will
authorize the reservation of an additional 500,000 shares of Common Stock for
sale to employees under the Plan.
When the Plan was adopted in 1968, 40,000 shares of Common Stock were
reserved for issuance thereunder. In 1973, 1976, 1980, 1988 and 1993,
stockholders approved amendments, respectively, to increase the number of shares
available by 35,000, 50,000, 125,000, 300,000 and 500,000. The number of shares
authorized under the Plan has also increased as a result of the application of
the anti-dilution provisions of the Plan and the eleven stock dividends paid by
the Company since inception of the Plan. Since adoption a total of 1,323,817
shares have been issued to employees of the Company pursuant to the Plan. During
calendar year 1996, 1,529 employees completed purchases of 152,660 shares of
which all but 900 were issued in January, 1997. As of September 30, 1997,
subscriptions were outstanding to purchase an additional 138,080 shares during
1997. If all of these outstanding subscriptions are completed and none are
canceled, there will remain only 144,413 shares reserved under the Plan for
future purchase by employees. The adoption of the amendment reserving an
additional 500,000 shares will bring the total shares available under the Plan
for sales to employees in the future to 644,413.
All terms and conditions of the Plan, which are summarized below, will
remain unchanged.
ELIGIBILITY AND PURCHASE PRICE. Each employee with at least one year's
continuous service with the Company, a subsidiary or a predecessor company on
January 1 of each year is eligible to participate, except that officers may
participate only with approval of the Plan Committee. Approximately 6,000
employees are estimated to be eligible to participate in the Plan. Eligible
employees may continue to participate during each succeeding year. Each eligible
employee in December of each year may elect to purchase, within the limits to be
prescribed each year by the Purchase Plan Committee, 10 to 200 shares of Common
Stock of the Company at 50% to 90% of market value. Market value is the average
of the mean of the highest and lowest prices of one share of the Company's
Common Stock on the New York Stock Exchange -- Consolidated Tape, or such other
reporting services as the Purchase Plan Committee may select, for each of the
first ten days in December during which the New York Stock Exchange is open for
business. In the absence of reported sales on any day the most recent previous
day for which sales were reported shall be used in calculating the ten day
average. During the past several years, including 1997 and 1998, the percentage
of the purchase price paid by employees was established by the Committee at 75%.
CONTRIBUTIONS. Each participating employee pays his contribution by
substantially equal payroll deductions over a period of one year beginning with
the employee's first payroll period after January 1 of each year. Employees are
not given periodic reports on the status of their accounts; however, employees
may obtain information as to the amount and status of their accounts at any time
upon written request to their payroll department or the Company Secretary. Upon
completion of the employee's deductions or payments, the Company contributes
from current net income or accumulated earned surplus the remaining percentage
of the market value of such shares. Within 30 days after full payment therefor,
a certificate for the shares purchased is delivered to the participating
employee.
WITHDRAWAL, CANCELLATION AND TERMINATION. Until final payment, the
employee, at his option, may cancel his purchase and in such event is refunded
his entire contribution to date without interest. In the event that an employee
fails to pay an installment not previously deducted from his gross pay within 10
days after its due date without making other arrangements satisfactory to the
Company for discharging his indebtedness,
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<PAGE> 15
such action is deemed equivalent to a notice of cancellation and his entire
contribution is refunded. Should the employee leave the Company for any reason
other than retirement or death prior to completing payment for the shares, his
entire contribution is refunded. In the event of retirement or death of the
employee prior to completing payment for the shares, the employee or his estate,
as the case may be, within the 90 days following such retirement or death, may
elect (a) to receive in cash the employee's entire contribution, (b) to receive
a certificate for such number of full shares as the contribution will purchase
at the subscription price, or (c) by payment of the balance due to receive a
certificate for the full number of shares which the employee was entitled to
purchase under the subscription.
GENERAL. No employee may sell, assign, transfer, pledge or otherwise
dispose of or encumber his right to participate in the Plan or his interest in
any share to be issued upon payment of the amount due, and no employee has
rights as a Stockholder until payment for the shares has been completed and a
certificate therefor issued.
The Plan will be continued from year to year until all of the shares of
Common Stock reserved for the purposes of the Plan have been subscribed for and
sold. However, the Company reserves the right to amend, modify, suspend, revoke
or terminate the Plan or any part thereof at any time, provided that no such
action may increase the maximum number of shares which may be sold pursuant to
the Plan; change the manner of determining the sales price; or, without the
written consent of the employee, materially or adversely affect the rights of
any employee under any effective purchase application.
In the event of stock splits, stock dividends, redemptions and other
similar changes in the capitalization of the Company, appropriate adjustments
reflecting such action are made in the number and price of shares covered by the
Plan and by outstanding purchase agreements.
The proceeds received by the Company from the sale of shares to employees
under the Plan are added to the working capital of the Company and used for
general corporate purposes.
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 AMENDMENT TO THE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO
THE PLAN.
PROPOSAL III
RATIFICATION OF APPOINTMENT OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
The Board of Directors has appointed Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending August 31, 1998,
subject to stockholder ratification. Representatives of Deloitte & Touche LLP
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.
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<PAGE> 16
GENERAL
The Annual Report to Stockholders covering fiscal year 1997 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 1999 Annual Meeting must be
received by the Company at its principal executive offices no later than August
11, 1998.
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.
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 5, 1997
14
<PAGE> 17
[COMMERCIAL METALS LOGOTYPE AND ADDRESS]
Notice of Annual Meeting
Proxy Statement
DIRECTIONS TO COMMERCIAL METALS COMPANY ANNUAL MEETING
OF STOCKHOLDERS, JANUARY 22, 1998, 10:00 A.M., HORCHOW AUDITORIUM
DALLAS MUSEUM OF ART
1717 NORTH HARWOOD
DALLAS, TEXAS
THE DALLAS MUSEUM OF ART IS LOCATED IN THE ARTS DISTRICT ON THE NORTH SIDE OF
DOWNTOWN DALLAS BETWEEN HARWOOD STREET AND ST. PAUL STREET. COMING FROM THE
EAST, EXIT WOODALL RODGERS FREEWAY AT ST. PAUL, GO THROUGH THE INTERSECTION, AND
TURN LEFT INTO THE DRIVEWAY. FROM THE WEST, EXIT AT FIELD/GRIFFIN, TAKE THE
FIRST RIGHT AND LOOP BACK TO THE WOODALL RODGERS ACCESS ROAD. TRAVEL EAST UP THE
ACCESS ROAD AND TURN RIGHT ON ST. PAUL, THEN LEFT INTO THE MUSEUM DRIVEWAY.
VALET PARKING WILL BE PROVIDED.
[MAP FOR ANNUAL MEETING]
[COMMERCIAL METALS LOGO]
<PAGE> 18
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 1998 Annual Meeting of
Stockholders of Commercial Metals Company to be held on Thursday, January 22,
1998 at 10:00 a.m., Central Standard Time in the Horchow Auditorium, Dallas
Museum of Art, 1717 North Harwood, 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 or, 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
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FOLD AND DETACH HERE
<PAGE> 19
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER, IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED FOR PROPOSALS 1,2,3 AND 4.
Please mark your votes
as indicated in this example /X/
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
except as marked to to vote for all nominees
the contrary listed
/ / / /
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 provided below.
----------------------------------------------------------------------------
2. APPROVAL OF THE AMENDMENT AUTHORIZING 500,000 SHARES FOR ISSUANCE UNDER THE
GENERAL EMPLOYEES STOCK PURCHASE PLAN.
FOR AGAINST ABSTAIN
/ / / / / /
3. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING AUGUST 31, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
I PLAN TO ATTEND THE MEETING. / /
Dated , 19
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Signature
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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.
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FOLD AND DETACH HERE
