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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K/A*
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
--------------------- ---------------------
COMMISSION FILE NUMBER 1-6117
SOUTHDOWN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
LOUISIANA 72-0296500
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1200 SMITH STREET
SUITE 2400
HOUSTON, TEXAS 77002-4486
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 650-6200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $1.25 per share New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- ----
As of January 31, 1997, the number of shares of common stock outstanding was
23.6 million. As of such date, the aggregate market value of voting stock held
by nonaffiliates, based upon the closing price of these shares on the New York
Stock Exchange, Inc. was approximately $1.47 billion.
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* Amendment filed on April 27, 1998 to supply information required by Part III
of Form 10-K because definitive proxy materials will not be filed with the
Securities and Exchange Commission within 120 days of the end of the fiscal
year ended December 31, 1997.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) IDENTIFICATION OF DIRECTORS:
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DIRECTORS: SERVED AS
DIRECTOR
PRINCIPAL CONTINUOUSLY COMMITTEE
NAME AND AGE OCCUPATION (1) SINCE MEMBERSHIPS
- ------------ ---------- ------------------ -----------
CLASS I
(Term expires 1998)
<S> <C> <C> <C>
K. L. Huger, Jr. [69] Vice President of Canal Barge 1977 Nominating
Company, Inc., a marine towing Finance & Audit
company, New Orleans, Louisiana
David J. Tippeconnic [58] President and Chief Executive 1996 Compensation &
Officer of CITGO Petroleum Benefits
Corporation, Tulsa, Oklahoma (2) Nominating
V. H. Van Horn III [59] Retired, Houston, Texas (3) 1988 Compensation &
Benefits
Nominating
Steven B. Wolitzer [45] Managing Director, Lehman 1993 Finance & Audit
Brothers Inc., an investment Nominating
banking firm, New York, New
York
CLASS II
(Term expires 1999)
Frank J. Ryan [66] Private Investor, Allentown, 1993 Compensation &
Pennsylvania (4) Benefits
Nominating
Whitson Sadler [57] President and Chief Executive 1996 Compensation &
Officer of Solvay America, Inc., Benefits
Houston, Texas (5) Finance & Audit
Conflict of Interest
J. Bruce Tompkins [48] Executive Vice President and Chief 1998
Operating Officer of the Company
(6)
Ronald N. Tutor [58] President and Chief Executive 1992 Finance & Audit
Officer of Tutor-Saliba Corporation, Nominating
a construction company, Sylmar,
California (7)
</TABLE>
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<TABLE>
<CAPTION>
CLASS III
(Term expires 2000)
<S> <C> <C> <C>
Clarence C. Comer [50] President and Chief Executive 1986
Officer of the Company (8)
Robert G. Potter [59] President, Chief Executive Officer 1996 Compensation &
and director of Solutia Inc., a Benefits
refiner and marketer of chemical Nominating
products, St. Louis, Missouri (9) Conflict of Interest
Robert J. Slater [60] President, Jackson Consulting, Inc. 1993 Compensation &
a private consulting and investment Benefits
company specializing in advising Finance & Audit
basic industries, New Canaan, Conflict of Interest
Connecticut (10)
</TABLE>
(1) Unless indicated otherwise in this table or under the caption "(b)
Identification of executive officers" below, the individuals named in
the table have held their positions for more than five years.
(2) Mr. Tippeconnic has been President and Chief Executive Officer of
CITGO Petroleum Corporation since July 1997. CITGO is a refiner and
marketer of petrochemicals and other industrial products. From 1995
to 1997, Mr. Tippeconnic was President and Chief Executive Officer of
UNO-VEN Company. For more than five years prior to his retirement in
1994, Mr. Tippeconnic served in various executive positions with the
Phillips Petroleum Company.
(3) For more than five years prior to his retirement in January 1996, Mr.
Van Horn was President, Chief Executive Officer and a director of
National Convenience Stores Incorporated, an operator of convenience
stores.
(4) Since 1990, Mr. Ryan has been a private investor and prior to that
time was President and Chief Operating Officer of Air Products and
Chemicals, Inc., a manufacturer of industrial gases and chemicals.
Mr. Ryan was elected Chairman of the Board of the Company effective
March 16, 1995.
(5) Solvay America, Inc. is a United States subsidiary of Solvay S.A., a
major European chemical company headquartered in Brussels, Belgium.
(6) Mr. Tompkins was appointed by the Board of Directors of the Company
as a director in March 1998 and will stand for election by the
shareholders at the 1998 Annual Meeting.
(7) Mr. Tutor is also a director of Perini Corporation, a company engaged
in general construction and real estate development.
(8) Mr. Comer is also a director of Consolidated Graphics, Inc., a
company engaged in commercial and financial printing.
(9) For more than five years prior to assuming his position with Solutia,
Mr. Potter was the Executive Vice President and Advisory Director of
Monsanto Company, a diversified chemical and manufacturing company
located in St. Louis, Missouri. Mr. Potter is also a director of
Stepan Co., a manufacturer of specialty and intermediate chemicals.
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(10) Mr. Slater is also a director of First Industrial Realty Trust, Inc.,
an owner and operator of industrial real estate.
(b) IDENTIFICATION OF EXECUTIVE OFFICERS:
EXECUTIVE OFFICERS:
The following list sets forth the names, ages and offices of the present
executive officers of the Company serving until the 1998 annual meeting of the
Board of Directors. The periods during which such persons have served in such
capacities are indicated in the description of business experience of such
persons below.
<TABLE>
<S> <C>
Clarence C. Comer (50).............................. President, Chief Executive Officer
and Director
J. Bruce Tompkins (48)............................. Executive Vice President and Chief
Operating Officer
Eugene P. Martineau (58).............................. Executive Vice President - Concrete
Products Group
James L. Persky (49)............................... Executive Vice President - Finance and
Administration
Dennis M. Thies (49)............................... Executive Vice President and Chief Financial Officer
Patrick S. Bullard (36).............................. Vice President - General Counsel and Secretary
Stephen R. Miley (50)............................... Senior Vice President - Cement Sales
Thomas E. Daman (41)................................. Vice President and Treasurer
Allan B. Korsakov (55)............................... Vice President and Corporate Controller
</TABLE>
Mr. Comer was elected President and Chief Executive Officer effective
February 4, 1987.
Mr. Tompkins was elected Executive Vice President and Chief Operating
Officer in October 1997. For more than five years prior to this Mr. Tompkins was
Executive Vice President - Cement Group.
Mr. Martineau was elected Executive Vice President - Concrete Products
Group effective April 16, 1992. He has resigned as an officer of Southdown
effective July 31, 1998.
Mr. Persky resigned as an officer of the Company in March 1998. He had held
his position of Executive Vice President - Finance and Administration since May
1994. From July 1989 to May 1994, Mr. Persky was Senior Vice President - Finance
of the Company.
Mr. Thies was appointed Executive Vice President and Chief Financial
Officer in March 1998. From May 1995 to March 1998, Mr. Thies was Senior Vice
President - Corporate Development. From April 1992 to May 1995, Mr. Thies was
Senior Vice President - Environmental Systems.
Mr. Bullard was elected Vice President - General Counsel and Secretary
effective May 16, 1996. From August 21, 1995 to May 1996, Mr. Bullard was Vice
President and General Counsel. From May 1993 to that time Mr. Bullard was
associated with the law firm of Bracewell & Patterson, L.L.P., Houston, Texas.
Mr. Miley was elected Senior Vice President - Cement Sales in April 1998.
From September 1994 to March 1998 Mr. Miley served as Corporate Vice President -
Sales. From September 1990 to September 1994 Mr. Miley was Corporate Vice
President - Sales & Marketing of the Company.
Mr. Daman was elected Vice President and Treasurer in May 1997. From
February 1996 to May 1997, Mr. Daman was Treasurer. For more than five years
prior to that time he served as Assistant Treasurer of the Company.
Mr. Korsakov was appointed Vice President and Corporate Controller in
February 1998. For more than five years prior to that time he served as
Corporate Controller.
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(c) COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934:
Under the securities laws of the United States the Company's directors, its
executive officers, and any persons holding more than 10% of the Company's
Common Stock are required to report their initial ownership of Common Stock and
any subsequent changes in that ownership to the Commission and the NYSE.
Specific due dates for these reports have been established and the Company is
required to disclose in this Form 10-K/A any failure to file by these dates. All
required filings in 1997 were satisfied on a timely basis. In making these
disclosures, the Company has relied solely on written statements of its
directors, executive officers and shareholders and copies of the reports that
they have filed with the Commission.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities to the Company and
its subsidiaries during the year ended December 31, 1997 for the Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company ("Named Officers").
<TABLE>
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LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
FISCAL OTHER ANNUAL STOCK ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
------------------------- ------ ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Clarence C. Comer 1997 $546,000 $645,372 - 36,000 $ -0-
President & Chief 1996 546,000 479,934 - 50,000 -0-
Executive Officer 1995 533,000 170,000 - 38,000 -0-
J. Bruce Tompkins 1997 313,500 278,075 - 11,800 4,800 (2)
Executive Vice President 1996 313,500 206,597 - 18,000 4,500 (2)
and Chief Operating Officer 1995 307,250 100,000 - 17,600 9,828 (2)
Eugene P. Martineau (3) 1997 262,500 200,813 (4) - 10,600 10,785 (4)
Executive Vice President- 1996 262,500 172,988 - 18,000 10,920 (4)
Concrete Products Group 1995 256,250 73,500 - 14,600 15,593 (4)
James L. Persky (5) 1997 262,500 227,325 - 8,800 4,800 (2)
Executive Vice President- 1996 262,500 172,988 - 14,000 4,500 (2)
Finance and Administration 1995 256,250 73,500 - 14,600 9,548 (2)
Dennis M. Thies (6) 1997 233,000 179,410 - 5,300 4,800 (2)
Senior Vice President- 1996 233,000 136,538 - 6,000 4,500 (2)
Corporate Development 1995 229,500 35,000 - 11,000 7,906 (2)
</TABLE>
- ------------
(1) Although the officers receive certain perquisites such as a car
allowance and Company provided life insurance, the value of such
perquisites did not exceed the lesser of $50,000 or 10% of the officer's
salary and bonus.
(2) These amounts represent the Company's contribution to the Company's
Retirement Savings Plan.
(3) In March 1998, Mr. Martineau announced his resignation as an officer of
the Company effective as of July 31, 1998.
(4) Mr. Martineau elected to receive an option to purchase securities under
the Company's Key Employee Security Option Plan in lieu of receiving his
1997 bonus in cash. For a description of this plan, see the "Employee
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Compensation and Benefits Committee Report on Executive Compensation."
At the time of his employment with the Company, Mr. Martineau was
granted an interest free loan of $75,000 from the Company. In addition
to Company contributions to the retirement savings plan, other
compensation includes imputed interest income from this loan. The
current balance of this loan is $75,000.
(5) Mr. Persky resigned as an officer of the Company in March 1998.
(6) Mr. Thies was elected Executive Vice President and Chief Financial
Officer in March 1998.
EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Employee Compensation and Benefits Committee (the "Committee") includes
only directors who are not employees of the Company. The Committee is
responsible for recommending to the full Board of Directors the compensation
arrangements for senior management and directors, recommending to the full Board
of Directors the adoption of compensation plans in which senior management and
directors are eligible to participate and granting options or other benefits
under such plans.
COMPENSATION POLICIES AND PROGRAMS. The Committee believes that the
ultimate goal of the executive compensation program should be to align the
interests of management with those of the shareholders in maximizing shareholder
value over the long term. The Committee believes that the best way to do this is
by tying the financial interests of the Company's executives closely to the
interests of the Company's shareholders through a combination of annual cash
incentives and stock options. The Committee believes that the Company's
executive compensation program should: (i) motivate executives toward effective
long-term management through stock programs which focus executives' attention on
increasing shareholder value, as measured by stock price; (ii) reward effective,
efficient ongoing management of Company operations through annual incentives
which are tied to Company and individual performance; and (iii) provide the
ability to attract and retain executives through salary levels which are
competitive with other leading industrial companies.
The Company's executive compensation program includes base salary, annual
cash incentives, and stock options, each of which is tied to the Company's and
the executive's performance.
BASE SALARY. It is the policy of the Committee that salaries should reflect
Company and individual performance in meeting the goal of maximizing shareholder
value. Some Company performance measures that are considered by the Committee
are profitability, positive stock price trends and effective cash flow and
balance sheet management. Individual performance measures considered by the
Committee vary depending on the executive's sphere of responsibility, but
generally include revenue growth, expense control, improvement of products and
services and asset management. No specific weighting is applied to any
particular measure. The Committee reviews annually the performance of each
senior executive officer other than the Chief Executive Officer ("CEO") who is
reviewed annually by the full Board of Directors. Salary increases are granted
to senior executive officers only in years during which both the Company's and
individual performance justify an increase and are limited to ranges competitive
with other industrial companies.
INCENTIVE PLAN. The Annual Incentive Plan or bonus plan is based upon
performance measures set by the Committee at the beginning of the year. These
performance measures are: (i) a comparison of the Company's earnings before
interest, taxes, depreciation and amortization to a targeted earnings
projection;and (ii) the Company's return on average equity as compared to the
return on average equity of a peer group. Each of these measures is weighted at
35%. The remaining 30% of the award is discretionary based upon individual
performance. In the case of the Named Officers, the performance of the Common
Stock as compared to the peer group's stock performance is a major factor
considered by the Committee in setting the discretionary amount.
KEY EMPLOYEE SECURITY OPTION PLAN. Under the Company's Key Employee
Security Option Plan ("KEYSOP"), key employees, including the Named Officers,
may elect to forgo payment of all or a portion of amount due them under the
Annual Inventive Plan and instead receive an option to purchase investment
securities from the Company. The option, which is not exercisable until six
months after the date of grant, calls for an exercise price of 70% of the fair
market value of the investment securities on the date of exercise. The fair
market value of the option on the date of grant substantially equals the amount
of the forfeited bonus payment. The investment securities available for purchase
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under the option are publicly-traded mutual funds of varying investment risk.
The KEYSOP is structured to defer recognition of taxable income by the employee
until the option is exercised.
STOCK OPTIONS. The Committee believes that stock options are critical in
motivating the long-term creation of shareholder value because stock options
focus executive attention on stock price as the primary measure of performance.
The Committee considers the grant of options to senior executive officers each
year and bases the grants on Company and individual performances and competitive
practices within the industry. The Committee has established several guidelines
regarding the grant of options to senior executive officers. These guidelines
provide that: (i) all stock options will be granted at full market value on the
date of grant so that executives realize gain only to the extent that the
Company's stock price appreciates;and (ii) the quantity of options granted will
be tied to industry practice and the compensation level of the executive. In
addition, since the options vest over a period of years they enhance the ability
of the Company to retain senior executive officers while encouraging such
officers to take a long-term view in their management decisions.
COMPENSATION AGREEMENTS. The Company has entered into employment agreements
with certain of its executives which specify the terms and conditions of their
employment. Central to these agreements are post-takeover employment
arrangements. The Committee believes that these change in control agreements are
an essential aspect of the terms of employment of senior executive officers and
recognizes the importance to the Company of retaining its senior executive
officers during and after the disruption typically provoked by a takeover offer
(whether or not ultimately successful). See "Employment and Other Agreements"
below for a detailed discussion of the terms of these employment agreements.
COMPENSATION OF THE CEO. The CEO's salary, annual incentive payments and
stock option grants are determined in part based upon the same Company and
individual performance measures described above. Within this framework, the
CEO's compensation is based upon the Board of Directors' judgment concerning the
CEO's individual contribution to the business, level of responsibility and
career experience. Although none of these factors has a specific weight and no
particular formulas or procedures are used, primary consideration is given to
the CEO's individual contribution to the business. This type of evaluation along
with a periodic review of the compensation levels of other CEO's and executive
officers of other cement companies of similar size, are the main factors in
determining the CEO's total compensation package.
THE EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE
V. H. Van Horn III, Chairman
Robert G. Potter
Frank J. Ryan
M. Whitson Sadler
Robert J. Slater
David J. Tippeconnic
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STOCK PERFORMANCE GRAPH
The following graph compares total return of the Company's Common Stock
against the S&P 500 Index and a peer group index consisting of public companies
in the cement industry.* The graph assumes that $100 was invested on December
31, 1992 in the Company's Common Stock, the S&P 500 Index and the peer group and
that dividends thereon were reinvested quarterly.
[STOCK PERFORMANCE GRAPH]
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<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
SOUTHDOWN $ 100.00 $ 251.28 $ 148.71 $ 199.98 $ 324.39 $ 620.56
PEER GROUP $ 100.00 $ 179.18 $ 142.36 $ 159.01 $ 194.24 $ 263.94
S&P 500 $ 100.00 $ 110.08 $ 111.53 $ 153.45 $ 188.68 $ 251.62
</TABLE>
* The peer group includes Giant Group, Ltd., Giant Cement Holding, Inc.,
Holnam Inc., Lafarge Corporation, Lone Star Industries, Medusa Corporation
and Centex Construction Products, Inc. Giant Group Ltd. sold its cement
operation in October 1994 through a public offering of its subsidiary Giant
Cement Holding, Inc. The graph includes information for Giant Group, Ltd. for
years prior to 1995 and for Giant Cement Holding, Inc. thereafter.
Information for Holnam Inc. is included only for years prior to 1994 when it
ceased being a public company. Information for Centex Construction Products,
Inc. is included beginning in 1994, its first year as a public company.
COMPENSATION ARRANGEMENTS FOR AND TRANSACTIONS WITH MEMBERS OF
THE BOARD OF DIRECTORS
Mr. Ryan receives a fee of $12,500 per month for his services as Chairman
of the Board. Commencing in 1998, members of the Board of Directors of the
Company, other than the Chairman of the Board and those directors who are
employees of the Company or its subsidiaries, will receive a fee of $3,000 per
month for their services as directors.
At least 50% of the directors' fees are paid in fair market value of Common
Stock under the Company's Phantom Stock and Deferred Compensation Plan for
Non-Employee Directors (the "Phantom Stock Plan"). The Phantom Stock
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Plan defers the recognition of compensation by the director by deferring the
issuance of the Common Stock earned until he or she leaves the Board. The
directors also receive fair market value of Common Stock equal to cash dividends
on the Common Stock that would have been received had the Common Stock been
issued when earned.
The 1991 Nonqualified Stock Option Plan for Non-Employee Directors (the
"1991 Plan") provides for the grant of stock options to non-employee directors
of the Company. Each director of the Company who is not an employee of the
Company or any of the Company's subsidiaries ("Eligible Director"), will be
granted options to acquire 10,000 shares of Common Stock on the date of such
director's first election to the Board. Additional options to acquire 2,000
shares of Common Stock will thereafter be awarded to each Eligible Director on
the date of each annual meeting of shareholders during his or her term on the
Board.
The Directors' Retirement Plan of the Company provides a retirement benefit
to all directors who are not covered by a qualified retirement plan of the
Company and who have served on the Board for a minimum of five years. In the
event of a change in control of the Company, the retirement benefits vest
immediately without regard to the five years of service requirement. The annual
benefit payable at the later of age 65 or the date of retirement is equal to
two-thirds of the total fees paid to the director during his last twelve months
of service on the Board and is payable for a period equal to the period of his
service on the Board. Should the director die before full payment of this
retirement benefit, his surviving spouse will be entitled to fifty percent of
the remaining obligation.
Mr. Wolitzer is a managing director of Lehman Brothers Inc., which has
provided from time to time investment banking services to the Company for which
it has received customary fees and commissions.
Mr. Tutor is President of Tutor-Saliba Corporation, which purchases
ready-mixed concrete from the Company on terms and conditions comparable to
those offered to other customers of the Company. According to Company records,
Tutor-Saliba Corporation and various affiliated entities purchased approximately
$1,150,000 of ready-mixed concrete from the Company in 1997.
EMPLOYMENT AND OTHER AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with Messrs. Comer, Tompkins, Martineau, Thies and one other
executive. Under the Employment Agreements, the Company employs Mr. Comer as
President and Chief Executive Officer at an annual salary of no less than
$546,000, Mr. Tompkins as Executive Vice President and Chief Operating Officer
at an annual salary of no less than $350,000, Mr. Martineau, who has resigned as
Executive Vice President - Concrete Products Group effective July 31, 1998, at
an annual salary of no less than $262,500 and Mr. Thies as Executive Vice
President and Chief Financial Officer at an annual salary of no less than
$233,000. Under the terms of the employment agreements, the salaries of Messrs.
Comer, Tompkins, and Thies may be increased by the Board of Directors of the
Company (or the appropriate committee thereof) from time to time.
Under the Employment Agreements, each executive is entitled to receive, in
addition to his annual salary, bonuses pursuant to the Company's Annual
Incentive Plan and certain fringe benefits, including the right to participate
in group benefit plans of the Company. The Employment Agreements are
automatically extended for a one-year period on a daily basis unless there is
notice of termination from either the Company or the executive. In the event the
executive's employment is terminated because of his death, disability, voluntary
termination of employment prior to the occurrence of a "change in control event"
(as defined later in this paragraph) or misappropriation of funds or properties
of the Company or otherwise for cause (as defined in the Employment Agreements),
the executive shall receive only his annual salary on a pro rata basis to the
date of termination. If, prior to a change in control event, the executive's
employment is terminated because the executive is no longer discharging his
duties in a manner consistent with the effective administration of the Company's
affairs, the executive shall be entitled to a lump sum payment equal to his base
annual salary. Upon the occurrence of a change in control event, all outstanding
options previously granted by the Company to the executive under any stock
option, stock appreciation or other employee plan will be accelerated and if the
executive's employment terminates following such change in control event, the
Company must pay the executive a lump sum termination payment equal to 2.99
times the sum of his base annual salary and the average annual bonus, if any,
received during the two years preceding the change in control event. Payments
made to such executives under all incentive agreements to which they are parties
in the event of a change in control subject to the provisions
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of Sections 280G and 4999 of the Internal Revenue Code (the "Code"), shall be
"grossed-up" so that the executives shall not be required to bear any of the
costs associated with any 20% excise tax payable in respect of any such payment.
As used in the Employment Agreements, a "change in control event" is defined to
be the acquisition by any person or entity of: (i) beneficial ownership of more
than 40% of the Company's outstanding voting securities; or (ii) all or
substantially all of the Company's assets. For a period of one year after
termination of an executive's employment under an Employment Agreement, the
executive may not engage in the business of manufacturing or selling cement or
ready-mixed concrete products within the United States.
PENSION PLANS
Substantially all employees of the Company, including the Named Officers,
are covered by a noncontributory, defined benefit pension plan (the "Southdown
Plan") sponsored by the Company. The formula used to determine the retirement
benefits to which an employee is entitled at age 65 under the Southdown Plan is
dependent on, among other things, the employee's length of service, his average
compensation level for the five consecutive years during his participation in
the plan yielding the highest average and his social security covered
compensation. The compensation used in the calculation of benefits under the
Southdown Plan is a participant's base salary excluding any bonuses or other
compensation and is limited by Section 401(a) of the Code. The maximum amount
any employee may receive under the Southdown Plan is subject to the annual
benefit limitations proscribed by the provisions of Section 415(b) of the Code.
Certain key employees, including the Named Officers, are also covered by
the Company's Supplemental Executive Retirement Plan ( the "SERP"). The purpose
of the SERP is to attract and retain executives whose skills and talents are
important to the Company's operations by providing replacement retirement income
in a percentage comparable to the benefits payable under the Southdown Plan. The
SERP benefit is calculated under the same formula as the Southdown Plan with two
exceptions. The compensation used to calculate the five year average includes
not only base salary but also bonuses received under the Annual Incentive Plan.
In addition, the computation of the annual benefit does not take into account
the limitations of Sections 401 and 415 of the Code. The annual benefit is
reduced for amounts payable under social security and the Southdown Plan.
The following table sets forth the aggregate annual retirement benefit
payable under the SERP and the Southdown Plan before reduction for amounts to be
paid under social security.
<TABLE>
<CAPTION>
YEARS OF SERVICE AT AGE 65
FINAL AVERAGE -------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------ -------- --------- ----------- ---------- ----------
<C> <C> <C> <C> <C> <C>
$ 300,000 $ 74,250 $ 99,000 $ 123,750 $ 148,500 $ 173,250
600,000 148,500 198,000 247,500 297,000 346,500
900,000 222,750 297,000 371,250 445,500 519,750
1,200,000 297,000 396,000 495,000 594,000 693,000
1,500,000 371,250 495,000 618,750 742,500 866,250
1,800,000 445,500 594,000 742,500 891,000 1,039,500
</TABLE>
STOCK OPTIONS
The Company's 1987 Stock Option Plan (the "1987 Plan") and 1989 Stock
Option Plan (the "1989 Plan"), collectively referred to as the "Plans," provide
for the grant of stock options to key employees of the Company and its
affiliates. The Plans authorize the issuance of options to purchase a total of
4,000,000 shares of Common Stock (2,000,000 shares under the 1987 Plan and
2,000,000 shares under the 1989 Plan). The Plans are administered by the
Employee Compensation and Benefits Committee. Members of the Committee are not
eligible to participate in the Plans or any other plan of the Company or its
affiliates that the Committee administers at any time within one year prior to
appointment or while serving on the Committee. The Committee is authorized to
select key employees to whom stock options are granted under the Plans and to
determine the number of shares, exercise price and terms of each option granted.
The Board of Directors has amended the 1989 Plan to increase the number of
shares available for grant from 2,000,000 to 5,000,000 and to limit the maximum
number of shares that may be granted under option to any one employee in any one
calendar year. These amendments are subject to stockholder approval at the 1998
annual meeting.
9
<PAGE> 11
OPTION/SAR GRANTS TO NAMED OFFICERS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/ ANNUAL RATES OF STOCK
UNDERLYING SARS PRICE APPRECIATION
OPTIONS/ GRANTED TO EXERCISE FOR OPTION TERM (3)
SARS EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME GRANTED (1) FISCAL YEAR SHARE(2) DATE 5% 10%
---- ----------- ----------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Clarence C. Comer 36,000 16.41 $31.5625 1/16/07 $714,582 $1,810,880
J. Bruce Tompkins 11,800 5.38 31.5625 1/16/07 234,224 593,569
Eugene P. Martineau 10,600 4.83 31.5625 1/16/07 210,405 533,206
James L. Persky 8,800 4.01 31.5625 1/16/07 174,675 442,662
Dennis M. Thies 5,300 2.42 31.5625 1/16/07 105,202 266,603
</TABLE>
- -----------
(1) All options were granted under the Company's 1989 Plan and become
exercisable in annual increments of 25% beginning January 16, 1998.
(2) All options are granted with an exercise price equal to the fair market
value of the Common Stock on the date of the grant.
(3) Potential realizable value was reported net of the option exercise
price, but before taxes associated with the exercise. These amounts
represent stated assumed rates of appreciation only. Actual values
realized, if any, on stock option exercises are dependent on the future
performance of the Common Stock and the officer's continued employment
throughout the vesting period. Accordingly, the amounts reflected in
this table may not necessarily be achieved.
NAMED OFFICERS'
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS HELD AT FISCAL AT FISCAL
YEAR END YEAR END*
SHARES -------------------------- --------------------------
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Clarence C. Comer 159,250 $2,406,113 -0- 101,750 $-0- $3,455,938
J. Bruce Tompkins 13,150 248,682 -0- 38,350 -0- 1,322,500
Eugene P. Martineau 94,400 1,949,451 3,650 35,150 140,525 1,212,950
James L. Persky 22,050 332,572 -0- 30,350 -0- 1,052,563
Dennis M. Thies 7,000 147,945 -0- 18,050 -0- 627,481
</TABLE>
- ------------
* Based upon the closing price on the New York Stock Exchange of the
Company's Common Stock on December 31, 1997.
10
<PAGE> 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to each person
who, as of the date indicated in the footnote below, was known by the Company to
be the beneficial owner of more than 5% of the Common Stock as "beneficial
ownership" is used in Section 13(d)(3) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act").
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL CLASS OR
OR SERIES BENEFICIAL OWNER OWNERSHIP SERIES
-------------- ------------------- ----------- ---------
<S> <C> <C> <C>
Common Stock FMR Corp. 2,403,700* 10.18
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
* FMR Corp. and various affiliates have filed with the Commission a Schedule
13G and four amendments dated through February 14, 1998 reporting that FMR
Corp. is the beneficial owner of these shares because it has sole power to
vote 600,200 of such shares and sole power to dispose of all such shares.
The following table is furnished as of February 28, 1998, to indicate
beneficial ownership of shares of the Common Stock by each director, each
nominee for director and each of the Named Officers individually, and all
executive officers and directors of the Company as a group. The information in
the following table was provided by such persons.
<TABLE>
<CAPTION>
AMOUNT
AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF INDIVIDUAL OWNERSHIP OF CLASS OR
OR GROUP COMMON STOCK SERIES
------------------ --------------- ---------
<S> <C> <C>
Clarence C. Comer..................... 115,388 *
K. L. Huger, Jr......................... 42,382 (2) *
Eugene P. Martineau..................... 27,531 (3) *
James L. Persky......................... 9,214 (4) *
Robert G. Potter........................ 12,836 (5) *
Frank J. Ryan........................... 40,483 (6) *
Whitson Sadler.......................... 13,418 (7) *
Robert J. Slater........................ 23,918 (8) *
Dennis M. Thies......................... 8,573 (9) *
David J. Tippeconnic.................... 17,836 (10) *
J. Bruce Tompkins....................... 5,652 (11) *
Ronald N. Tutor......................... 6,168 (12) *
V. H. Van Horn III..................... 22,836 (13) *
Steven B. Wolitzer...................... 17,418 (14) *
All executive officers and directors
as a group (eighteen persons)........ 378,368 (15) 1.6
</TABLE>
- -----------------
* Less than 1%.
(1) Except as otherwise noted, each person listed in the table has sole voting
and sole investment power with respect to the shares of Common Stock
listed in the table.
11
<PAGE> 13
(2) Includes 22,464 shares of Common Stock owned by Mr. Huger's wife. Mr.
Huger has informed the Company that reference to such shares should not be
construed as an admission of his beneficial ownership thereof. Stock
ownership also includes 19,500 shares of Common Stock as to which Mr.
Huger holds stock options that will be exercisable at April 30, 1998 and
418 shares held in the Company's Phantom Stock Plan.
(3) Includes 8,250 shares of Common Stock as to which Mr. Martineau holds
stock options that will be exercisable at April 30, 1998 and 2,594 shares
held in the Company's Retirement Savings Plan.
(4) Includes 2,691 shares held in the Company's Retirement Savings Plan.
(5) Includes 12,000 shares of Common Stock as to which Mr. Potter holds stock
options that will be exercisable at April 30, 1998 and 836 shares held in
the Company's Phantom Stock Plan.
(6) Includes 17,000 shares of Common Stock as to which Mr. Ryan holds stock
options that will be exercisable at April 30, 1998 and 3,483 shares held
in the Company's Phantom Stock Plan.
(7) Includes 12,000 shares of Common Stock as to which Mr. Sadler holds stock
options that will be exercisable at April 30, 1998 and 418 shares held in
the Company's Phantom Stock Plan.
(8) Includes 17,000 shares of Common Stock as to which Mr. Slater holds stock
options that will be exercisable at April 30, 1998 and 418 shares held in
the Company's Phantom Stock Plan. Also includes 1,500 shares of Common
Stock owned by a trust of which Mr. Slater is trustee. Mr. Slater has
informed the Company that reference to such shares should not be construed
as an admission of his beneficial ownership thereof.
(9) Includes 4,250 shares of Common Stock as to which Mr. Thies holds stock
options that will be exercisable on April 20, 1998 and 2,244 shares held
in the Company's Retirement Savings Plan.
(10) Includes 12,000 shares of Common Stock as to which Mr. Tippeconnic holds
stock options that will be exercisable on April 30, 1998 and 836 shares
held in the Company's Phantom Stock Plan.
(11) Includes 1,589 shares held in the Company's Retirement Savings Plan.
(12) Includes 5,750 shares of Common Stock as to which Mr. Tutor holds stock
options that will be exercisable on April 30, 1998 and 418 shares held in
the Company's Phantom Stock Plan.
(13) Includes 22,000 shares of Common Stock as to which Mr. Van Horn holds
stock options that will be exercisable on April 30, 1998 and 836 shares
held in the Company's Phantom Stock Plan.
(14) Includes 17,000 shares of Common Stock as to which Mr. Wolitzer holds
stock options that will be exercisable on April 30, 1998 and 418 shares
held in the Company's Phantom Stock Plan.
(15) Includes 151,321 shares of Common Stock subject to stock options held by
the officers and directors that will be exercisable on April 30, 1998 and
20,856 shares held in the Company's Retirement Savings Plan and Phantom
Stock Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Item 11. Executive Compensation - Summary Compensation Table,
Compensation Arrangements for and Transactions with Members of the Board of
Directors and Employment and Other Agreements."
12
<PAGE> 14
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SOUTHDOWN, INC.
(Registrant)
Date: April 27, 1998 By DENNIS M. THIES
--------------------------------------------
Dennis M. Thies
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: April 27, 1998 By ALLAN B. KORSAKOV
--------------------------------------------
Allan B. Korsakov
Vice President and Corporate Controller
(Principal Accounting Officer)
