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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1997 Commission File Number 2-30905
HMI INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1202810
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
3631 Perkins Avenue, Cleveland, Ohio 44114
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 432-1990
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of class
--------------
Common Stock, $1 par value per share
Indicate by check mark whether 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 and (2) has been subject to such filing requirements for the
past ninety (90) days. Yes X No
----- ----
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. []
The aggregate market value of voting stock held by non-affiliates of Registrant,
computed by reference to the closing price on the NASDAQ Stock Exchange on
December 22, 1997 was approximately $10,623,000.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 26, 1998
- ------------------------------------ -------------------------------
Common stock, $1 par value per share 5,033,996
This report consists of 14 pages.
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PART III.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
- --------------------------------------------------------
(A) DIRECTORS
The following information is presented regarding the name, age, business
experience, term of office, positions with HMI Industries Inc. ("the Company")
and legal proceedings for each of the directors of the Company.
CLASS C DIRECTORS: NOMINEES FOR ELECTION AT THE 1998 ANNUAL SHAREHOLDERS'
MEETING TO SERVE FOR A THREE-YEAR TERM EXPIRING IN THE YEAR
2001
Mark A. Kirk, age 40, became a Director of the Company in May 1997. He was
elected President and Chief Operating Officer of the Company in May 1997. He was
elected Chief Financial Officer of the Company in February 1997. From 1993 to
1997 he served as Senior Vice President and Chief Financial Officer of Anchor
Glass Container Corporation, a manufacturer of glass bottles and other
containers. From 1990 to 1993 he was Senior Vice President and Chief Financial
Officer of Grimes Aerospace Company, a manufacturer of components for the
aircraft industry, including interior and exterior lighting, engine valves,
electronic systems and avionics. In September 1996, a petition was filed in the
United States Bankruptcy Court in Delaware by Anchor Glass under Chapter 11 of
the Bankruptcy Code in order to restructure the debt of Anchor Glass. Mr. Kirk
was an executive officer of that company at that time.
John S. Meany, Jr., age 52, became a Director of the Company in 1986. Mr. Meany
is an attorney in private practice and has served as Secretary of the Company
since 1995. Mr. Meany previously served as Secretary of the Company from 1986 to
1991, as Vice President-Legal of the Company from 1983 to 1990 and as Vice
President and General Counsel from 1990 to 1991.
Barry L. Needler, age 49, became a Director of the Company in 1989. Mr. Needler
is a private investor. Since 1991 he has been President and Chief Executive
Officer of Steeplechase Corp. and Reldeen Ltd., investment holding companies,
and since 1990 he has been President and Chief Executive Officer of Fairway,
Inc., a family management company.
CLASS A DIRECTORS: (CONTINUING) TERM EXPIRING IN 1999
Moffat Dunlap, age 56, became a Director of the Company in 1993. Mr. Dunlap has
held a license in the real estate industry since 1962 and has been President of
Moffat Dunlap Real Estate Limited (real-estate broker for residential estates)
since 1972.
Grace McCarthy, age 70, became a Director of the Company in 1993. Mrs. McCarthy
is a former Deputy Premier of the Province of British Columbia and a former
Leader of the B.C. Social Credit Party. She served as a Member of the
Legislature for British Columbia for 26 years. She has served as a Cabinet
Minister holding various portfolios including Economic Development, Tourism,
Human Resources, Fish and Wildlife and Provincial Secretary. Mrs. McCarthy has
indicated that she intends to resign from the Company's Board of Directors
subsequent to the 1998 Annual Shareholders' Meeting.
Ivan Winfield, age 63, became a Director of the Company in 1995. He is an
independent business and financial consultant. Mr. Winfield was a partner of
Coopers & Lybrand (the Company's auditors) from
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1970 to 1994. Mr. Winfield is a trustee of the Fairport Group of Mutual Funds.
He is also a director of Boykin Lodging Company and International Total Service,
Inc.
CLASS B DIRECTORS: (CONTINUING) TERM EXPIRING IN THE YEAR 2000
Robert J. Abrahams, age 71, became a Director of the Company in 1984. Mr.
Abrahams has been President of Crestwood Consultants, a financial consulting
company, since 1988. Mr. Abrahams is also the President of Health-Mor Acceptance
Corporation and HMI Acceptance Corporation, wholly-owned subsidiaries of the
Company.
Donald L. Baker, age 68, became a Director of the Company in 1986. Mr. Baker has
been President of Complete Industrial Enterprises, Inc., a distributor of
electrical and industrial equipment, since 1985. Mr. Baker has also served as
Mayor of Peru, Illinois since 1965.
James R. Malone, age 55, became a Director of the Company in 1996. Mr. Malone
was elected Chairman of the Board in December 1996, and was elected as Chief
Executive Officer in May 1997. He is also Chairman and Chief Executive Officer
of Intek Capital Corp., a private investment firm. From 1993 to 1997 he was
Chairman, President and Chief Executive Officer of Anchor Glass Container
Corporation, a manufacturer of glass bottles and other containers. From 1990 to
1993 he was Chairman and Chief Executive Officer of Grimes Aerospace Company, a
manufacturer of components for the aircraft industry, including interior and
exterior lighting, engine valves, electronic systems and avionics. He is a
member of the Board of Directors of AmSouth Bancorporation, a regional bank
holding company in the Southeast, and Ametek Inc., a manufacturer of measuring
and controlling devices, including motors, blowers, sensors, filters and
housings. In September 1996, a petition was filed in the United States
Bankruptcy Court in Delaware by Anchor Glass under Chapter 11 of the Bankruptcy
Code in order to restructure the debt of Anchor Glass. Mr. Malone was an
executive officer of that company at that time.
Frank M. Rasmussen, age 63, became a Director of the Company in 1994. Mr.
Rasmussen was a Partner of Squire, Sanders & Dempsey L.L.P., the Company's
principal law firm, from 1970 until his retirement in 1996.
(B) EXECUTIVE OFFICERS
For information regarding the Executive Officers of the registrant, please see
the list of Executive Officers following Part I of the Company's Annual Report
on Form 10-K for the year ended September 30, 1997.
(C) SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that
the Company's officers, directors and owners of more than 10% of the Company's
common stock file reports of ownership and changes in ownership of the
Company's securities with the Securities and Exchange Commission and the
Nasdaq Stock Market and to furnish the Company with a copy of all such reports
they file.
Based solely on a review of the copies of such forms the Company has received,
the Company believes that all of its executive officers and directors complied
with all filing requirements applicable to them with respect to transactions
during the fiscal year ended September 30, 1997, except for the following: Kirk
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Foley, an executive officer and director, failed to file a Form 4 for January
1997 reporting the vesting of 24,390 shares of phantom stock and the grant of an
employee stock option to purchase 20,000 shares of Common Stock; and Michael
Harper and Robert M. Benedict, Jr., each an executive officer of the Company,
were each late in filing Form 5 relating to the grant of employee stock options
to purchase 15,000 shares of Common Stock.
ITEM 11. EXECUTIVE COMPENSATION
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(A) COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the respective amounts of compensation for the
individuals who served as the Chief Executive Officer in 1997, and the four most
highly compensated executive officers of the Company other than the Chief
Executive Officer for each of the years 1995, 1996 and 1997 (all such officers,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
All Other
Annual Compensation Long Term Compensation (5) Compensation (8)
------------------------------- ------------------------------------ ----------------
Awards
Other Annual Restricted Stock Phantom
Name and Compensation Stock ($) Options (#) Stock ($)
Principal Position Year Salary(1) Bonus (2) ($)(3) (4) (6) (7)
------------------ ---- --------- --------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James R. Malone (9) 1997 $277,642 $0 $75,000 76,500 $0 $0
Chairman and Chief Executive 1996 -- -- -- -- -- -- --
Officer since May 1997 1995 -- -- -- -- -- -- --
Kirk W. Foley (10) 1997 $451,667 $0 $127,200 $0 20,000 $0 $3,956 (11)
President & Chief 1996 $449,802 $0 $182,613 $0 20,000 $0 $5,549 (11)
Executive Officer to May 1997 1995 $368,316 $382,121 $96,155 $0 40,000 $1,734,375 $4,790 (11)
Chuck Ellens (12) 1997 $324,066 $0 -- $0 0 $0 $0
Vice President, Sales and 1996 $344,878 $0 -- $0 0 $0 $685
Marketing 1995 $499,305 $0 -- $0 0 $0 $775
Mark A. Kirk (13) 1997 $204,333 $0 -- $200,000 75,000 $0 $108,040 (14)
President, Chief Operating 1996 -- -- -- -- -- -- --
Officer & Chief Financial Officer 1995 -- -- -- -- -- -- --
Carl H. Young, III (15) 1997 $204,333 $0 -- $200,000 75,000 $0 $0
Executive Vice President and 1996 -- -- -- -- -- -- --
General Counsel 1995 -- -- -- -- -- -- --
Kevin Dow 1997 $130,400 $0 -- $0 0 $0 $0
Vice President, Corporate 1996 $130,400 $0 -- $0 0 $0 $685
Services & Assistant Treasurer 1995 $126,300 $71,875 -- $0 0 $0 $775
</TABLE>
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(1) Salary amounts include automobile allowance and automobile insurance.
Amount for Kirk Foley also includes $38,317 paid in 1997, $27,250 paid in
1996 and $10,500 paid in 1995 as an allowance for living expenses pursuant
to his employment agreement with the Company. Amounts for Mark Kirk and
Carl Young include an employment bonus of $65,000 each.
(2) Amounts paid in the fiscal year pursuant to the Company's Incentive Bonus
Plans. Incentive bonuses are calculated on a calendar year basis.
(3) Kirk Foley is the only named executive officer who received perquisites or
other benefits required to be disclosed under applicable regulations. The
amounts identified consist of repayments of interest and principal made by
the Company on behalf of Mr. Foley in accordance with his employment
agreement for loans taken out by Mr. Foley. See "Compensation of the Chief
Executive Officer" elsewhere in this amendment for more information.
(4) Reflects the fair market value of grants of restricted stock on the dates
of grant. Mr. Kirk and Mr. Young each received an award of 20,000 shares of
restricted stock which vest on February 1, 1998. Messrs. Malone, Kirk and
Young each received an award of 25,000 shares of restricted stock vesting
in equal amounts of 12,500 shares on October 1, 1997 and January 1, 1998.
Subsequently, Messrs. Malone, Kirk and Young each surrendered to the
Company the 12,500 shares of stock vesting on October 1, 1997. The value of
these shares was not included in the value of the restricted stock awards
in the table above. The value of the shares, which were still restricted at
September 30, 1997, including the shares subsequently surrendered, was
$603,750. No dividends have been paid on the shares awarded in the above
table because no dividends have been declared by the Company since those
shares were awarded.
(5) Reflects the number of shares of Common Stock of the Company covered by
stock options granted during the year, and the fair market value on the
date of grant of phantom stock and restricted stock. No stock appreciation
rights ("SAR"), either in conjunction with or separate from stock options,
were granted to the named executives during the years shown.
(6) The Company maintains plans under which stock options may be awarded. The
Company does not, however, make "long term compensation awards" as that
term is used in applicable SEC rules, because the amount of Company
incentive awards is not measured by performance of the Company over longer
than a one-year period.
(7) Phantom shares were deemed issued October 4, 1994 when Mr. Foley signed his
employment agreement with the Company. This agreement provides that the
shares vest in installments in 1995, 1996 and 1997, with the final
installment vesting on January 1, 1999. See "Compensation of the Chief
Executive Officer" regarding the surrender of a portion of the phantom
shares vesting in 1996.
(8) Except as otherwise noted, reflects contributions made by the Company or a
subsidiary under defined contribution plans maintained by the Company and a
subsidiary.
(9) Mr. Malone was elected as Chairman of the Company in December 1996 and
Chief Executive Officer in May 1997.
(10) The amount shown as salary for 1995 and 1996 represents compensation paid
to Mr. Foley as President of the Company and as Chairman and Chief
Executive Officer of the Company. The amount shown as salary for 1997
includes amounts paid through September 30, 1997.
(11) Premiums on life insurance paid pursuant to Mr. Foley's employment
agreement. For a description of additional compensation received by Mr.
Foley in connection with his termination of employment, see also "Certain
Relationships and Related Transactions" in this amendment.
(12) Mr. Ellens was elected an executive officer of the Company in 1996.
(13) Mr. Kirk was elected Vice President-Finance and Chief Financial Officer in
February 1997 and President and Chief Operating Officer in May 1997.
(14) Represents an allowance for Mr. Kirk's relocation to Cleveland, Ohio.
(15) Mr. Young was elected Executive Vice President and General Counsel in May
1997 and previously served as Vice President- Administration and General
Counsel from February 1997 to May 1997.
(B) 1992 OMNIBUS LONG-TERM COMPENSATION PLAN
In 1992, the stockholders of the Company adopted the Omnibus Long-Term
Compensation Plan (the "Plan"). The purpose of the Plan is to advance the
long-term interests of the Company by motivating executive personnel by means of
long-term stock based or derivative compensation, to align the interests of
participants with those of the stockholders, and to permit the Company to
attract and retain directors and executive personnel.
The Plan provides for the grant of the following types of awards: stock options,
including incentive stock options; stock appreciation rights, in tandem with
stock options or freestanding; common stock awards; phantom stock; restricted
stock; and performance shares. Awards are determined by the Compensation
Committee.
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The following table sets forth certain information regarding stock options
granted to the executive officers named in the Summary Compensation Table during
fiscal 1997.
OPTION GRANTS IN 1997
- ---------------------
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE AT
SECURITIES PERCENT ASSUMED ANNUAL RATES OF
UNDERLYING OF TOTAL OPTIONS STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE EXPIRATION FOR OPTION TERM
NAME GRANTED EMPLOYEES PRICE (1) DATE 5%($) 10%($)
---- ------- --------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
James R. Malone 6,000 2% $5.50 January 2, 2002 $9,117 $20,147
James R. Malone 75,000 24% $5.68 July 2, 2002 $148,327 $298,730
Kirk W. Foley 20,000 6% $6.05 January 2, 2007 $58,178 $164,312
Mark A. Kirk 75,000 24% $5.68 July 2, 2002 $148,327 $298,730
Carl H. Young, III 75,000 24% $5.68 July 2, 2002 $148,327 $298,730
- --------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Stock options issued to Mr. Foley were granted pursuant to his Employment Agreement with the Company and have an
exercise price equal to 110% of fair market value on the date of grant, which is the first business day of the year.
The closing price on the Nasdaq Stock Market on January 2, 1997 was $5.50. The stock options issued to Mr. Malone, on
January 2, 1997, were valued at the closing price on the date of grant. The stock options issued to Messrs. Malone,
Kirk and Young on July 2, 1997, were valued at the average between the high and the low sale price for the ten trading
days preceding the date of grant. The closing price on the Nasdaq Stock Market on July 2, 1997, the date of grant, was
$6.00.
</FN>
</TABLE>
The following table sets forth information regarding stock options held at the
end of the fiscal year by the named executive officers. There were no stock
option exercises in 1997 by any named executive officer.
<TABLE>
<CAPTION> NUMBER OF
SHARES OF COMMON
STOCK UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SEPTEMBER 30, 1997 (1) SEPTEMBER 30, 1997 (2)
---------------------- ----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James R. Malone 57,395 23,605 $0 $0
Kirk W. Foley 80,000 0 $0 $0
Kevin Dow 0 0 $0 $0
Chuck Ellens 0 0 $0 $0
Mark A. Kirk 57,395 17,605 $0 $0
Carl H. Young, III 57,395 17,605 $0 $0
- --------------------------------------------------------------------------------------------------------------------
<FN>
(1) There were no SARs outstanding at September 30, 1997 and none granted during the fiscal year.
(2) The "value of unexercised in-the-money options at September 30, 1997" was calculated by determining the
difference between the fair market value of the underlying shares of Common Stock at September 30, 1997 ($5.25
per share) and the exercise price of the option. An option is "in-the-money" when the fair market value of the
underlying shares of Common Stock exceeds the exercise price of the option. None of the options held by the
named executive officers was "in the money" on September 30, 1997.
</FN>
</TABLE>
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(C) DIRECTORS' COMPENSATION
A director who is an employee of the Company or a subsidiary is not separately
compensated for service as a director. Other directors receive a retainer of
$10,000 per year, payable quarterly, and $600 per meeting for each committee
meeting attended which is held on a day other than a day on which there is a
Board of Directors meeting.
Pursuant to the Company's Omnibus Plan, on the first business day of each
calendar year each non-employee director automatically receives an option to
purchase 6,000 shares of Common Stock of the Company (as adjusted for stock
splits).
(D) DIRECTORS' CONSULTING AGREEMENTS
Several members of the Board have entered into consulting contracts with the
Company relating to various matters within their fields of expertise.
Information regarding these contracts follows.
In 1990, the Company entered into a consulting agreement with Robert J.
Abrahams, a director of the Company, for consulting services relating to retail
financing programs for distributors of the Company's Consumer Goods Division. In
1991, this agreement was amended to include services to Health-Mor Acceptance
Corporation and HMI Acceptance Corporation, subsidiaries of the Company. Mr.
Abrahams is paid a total of $50,000 per year, plus expenses, for such services.
The consulting agreements with Mr. Abrahams are for one year periods and are
anticipated to be renewed. A total of $50,000 was paid in fiscal 1997 under this
agreement.
The Company pays a management fee in the amount of $25,000 per quarter to
Fairway Inc. for the consulting services of Mr. Needler relating to various
matters requested by the Company. Barry L. Needler, a director of the Company,
owns a majority of the outstanding shares of Fairway Inc. and is President of
that company. A total of $50,000 was paid to Fairway Inc. in 1997.
In 1996, the Company entered into a consulting agreement with Ivan Winfield, a
director of the Company, for services relating to issues involving the capital
structure of the Company, proposed acquisitions and divestitures, oversight of
the Company's capital structure, cash flow, debt management, long term corporate
planning and such other matters as may be required by the Chief Executive
Officer. Mr. Winfield was paid $12,500 per month for his services from October
1996 through March 1997, and $6,250 per month from April through September 1997.
A total of $112,500 was paid to Mr. Winfield in 1997 under this consulting
agreement. This agreement was terminated at the end of December 1997.
In 1995, the Company entered into an agreement with John Meany, a director of
the Company, to act as Administrator of the Company's Profit Sharing Plan. Also
in 1995, the Company entered into an agreement with Mr. Meany to act as
corporate Secretary of the Company and to oversee the functions of the corporate
Secretary's office. Mr. Meany received $2,700 per month under these agreements
from October 1996 through June 1997. Effective July 1997, the amount was raised
to $4,167 per month. In 1997, the Company paid Mr. Meany a total of $38,300
under these agreements.
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(E) EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. Malone, Kirk and Young each have employment agreements which state that
they are to receive one year's salary in the event of termination of employment
without cause. Certain executives of the Company, including Messrs. Malone, Kirk
and Young, also have agreements which provide that in the event of termination
of employment without cause (other than for death or disability, or voluntary
termination by the employee) in the twelve months following a change in control
(as defined in the agreement), the executives are to receive compensation equal
to a certain number of months of salary. In the case of Messrs. Malone, Kirk and
Young, this compensation is equal to two years' base salary.
(F) COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board is responsible for recommending to the
Board the compensation of executive officers and key employees of the Company
and its subsidiaries. The Compensation Committee consists of Robert J. Abrahams,
Donald L. Baker and Barry L. Needler.
The Compensation Committee annually reviews compensation of the Chief Executive
Officer, other executive officers and key employees of the Company and its
subsidiaries. The Compensation Committee meets periodically during the year to
monitor performance and fix awards based on performance standards and to review
compensation decisions. The Committee's policy in evaluating and compensating
executive officers and key employees is to consider the performance of the
Company as a whole, the performance of the business unit for which the
individual has responsibility and the individual's contribution toward the
Company's attainment of established Company and individual goals. Factors
considered in evaluating performance are both subjective (such as the
individual's performance and development) and objective (such as the attainment
of specified financial goals).
The composition of compensation varies broadly among executive officers and key
employees of the Company based on their responsibilities and the business unit
to which they are assigned. Generally, base salary is targeted at competitive
rates believed by the Committee members to be necessary in their experience to
retain qualified personnel. The Company maintains an Incentive Bonus Plan under
which participating employees may be eligible for a bonus if the pretax profits
of the Company for the year exceed a specified target which is established
annually by the Compensation Committee. Beginning in 1995, the target was
changed from an after-tax to a pretax amount in order to put more emphasis on
meeting operating goals, and to remove from consideration those factors over
which the Company has no control, such as tax rates. The maximum bonus payable
to an individual is a percentage of base salary ranging from 25% to 150% of base
salary. Bonuses are based on varying performance criteria, including the
Company's pretax profits, return on assets, divisional net contribution, cost
containment programs and departmental gross margins. Specific incentive
performance criteria for each participating individual are determined by the
Committee at the beginning of the year based upon the individual's duties. The
targets for 1995, 1996 and 1997 were not met, and no bonuses were awarded for
those years under this Plan. Key employees of subsidiaries who do not
participate in the Incentive Bonus Plan have bonus or incentive arrangements
based on criteria deemed by the Compensation Committee to be effective in
aligning the financial interest of the employee with those of Company's
stockholders. Among the criteria that are utilized in incentive compensation of
key employees of subsidiaries include percentage of profits or net
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income, commissions based on sales, net profit contribution, and balance sheet
measures such as inventory and accounts receivable turnover and working capital
improvements. From time to time, the Company engages outside compensation
consultants to provide information and advice about competitive levels of
compensation and particular compensation techniques.
Compensation of the Chief Executive Officer
- -------------------------------------------
Mr. Foley's compensation was paid pursuant to his employment agreement with the
Company, which was approved by the Company's stockholders at the 1995 annual
meeting. In fiscal year 1997, Mr. Foley was paid total salary of $396,850.
No bonus relating to the calendar year 1997 was earned.
Mr. Foley's employment agreement also provided that he receive options to
purchase 20,000 shares of Common Stock on the first business day of each year
through 1998. The option price is equal to 110% of the fair market value on the
date of grant, and the options are immediately exercisable. The period of
exercisability will be determined by the Compensation Committee and may last for
up to ten years. Mr. Foley's contract also provided that he receive 125,000
shares of phantom stock. The phantom stock was to vest in increments of 21,857
shares on each of June 30, 1995, January 1 and June 30, 1996, and January 1 and
June 30, 1997, with the final 37,571 shares vesting on January 1, 1999.
Dividends that would have been paid had the phantom shares been issued could
have been used to "purchase" additional phantom shares, which would have
vested on the same schedule as the other phantom shares. Mr. Foley deferred the
vesting of one half of the phantom shares and accrued dividends scheduled to
vest on January 1, 1996 for three years. In 1996, his employment agreement was
amended so that the phantom shares that were scheduled to vest on January 1,
1996 and were deferred and the phantom shares scheduled to vest on June 30,
1996 were surrendered in exchange for cash payments of $150,000 on June 30,
1997 and June 30, 1998. In addition, Mr. Foley would have been entitled to
receive an award of shares in the Company in the event of an increase in the
price of the Common Stock between June 30, 1996 and June 30, 1998. The increase
in share price would have been multiplied by the number of phantom shares
surrendered, and the result would have been divided by the share price on
June 30, 1998 to determine the number of shares to be awarded.
Mr. Foley's employment agreement also provided that the Company would guarantee
a loan to him and to pay interest on the loan. The unpaid principal on the loan
at September 30, 1997 was $486,750.
Mr. Foley's employment with the Company was terminated by the Board on May 13,
1997. See Item 13 elsewhere in this report for information regarding the
settlement entered into by the Company with Mr. Foley in connection with the
termination of his employment.
Mr. Malone, who became Chief Executive Officer on May 13, 1997, is paid a base
salary of $325,000 per year and participates in the incentive bonus plan. Mr.
Malone also receives other benefits available generally to all executives.
For the Compensation Committee
Robert J. Abrahams
Donald L. Baker
Barry L. Needler
(G) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert J. Abrahams, Chairman of the Compensation Committee, provides consulting
services to the Company and its finance company subsidiaries (Health-Mor
Acceptance Corporation, HMI Acceptance Corporation and Health-Mor Acceptance PTY
Ltd.) and serves as President of these subsidiaries. He
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received $50,000 for these services in fiscal 1997. Fairway Inc., a company
controlled by Barry L. Needler, provides management consulting services to the
Company and received $50,000 from the Company for services rendered in 1997.
Mr. Needler is Vice Chairman of the Company and is a member of the
Compensation Committee.
(H) PERFORMANCE COMPARISONS
The following chart compares the cumulative shareholder return of the Company
for the five years ended September 30, 1997 to the Nasdaq National Market
Composite Index and a Company-determined peer group. The Company's Common Stock
trades on the Nasdaq National Market System. The chart assumes the investment of
$100 on September 30, 1992 and the immediate reinvestment of all dividends. The
ten companies making up the peer group are in industries believed to be
comparable to the Company's lines of business in 1997 and the peer group, in the
aggregate, is believed to approximate the Company's mix of consumer and
industrial business in 1997.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL
RETURN AMONG THE COMPANY, PEER GROUP
INDEX AND NASDAQ MARKET COMPOSITE INDEX
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
--------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
HMI INDUSTRIES INC. $100 $227 $236 $253 $125 $97
NASDAQ MARKET COMPOSITE INDEX $100 $130 $138 $167 $195 $265
PEER GROUP INDEX $100 $143 $160 $160 $197 $236
</TABLE>
ASSUMES $100 INVESTED ON OCT. 1, 1992
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING SEP. 30, 1997
The Company business in 1997 consisted of two segments: a Consumer Goods segment
and a Manufactured Products segment. The peer companies include companies
believed to be in similar lines of business as the Company. The companies in the
peer group are: Amcast Industrial Corporation, Black and Decker Corporation,
Material Sciences Corporation, National Presto Industries Inc., Rival Co., SPS
Technologies Inc., Steel Technologies Inc., Sunbeam Corporation, Toastmaster
Inc. and Worthington Industries Inc. Some of the Company's direct competitors
are divisions of larger corporations, privately held corporations or foreign
corporations and are not included in the peer comparisons since the pertinent
information is not available to the public.
10
<PAGE> 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the names and share ownership as of January 16,
1998 of those persons who, to the knowledge of the Company, are the beneficial
owners of more than 5% of the Company's outstanding Common Stock based upon
information furnished to the Company by such person. Each beneficial owner has
sole power to vote and dispose of the shares indicated, except as otherwise
stated.
<TABLE>
<CAPTION>
Amount &
Name and Address of Nature of
Beneficial Owners Beneficial Percent of
as of January 16, 1998 Ownership Common Stock
- ---------------------------------------------------------------------------------
<S> <C> <C>
Steeplechase Corp. (1) 1,704,750 33.86%
P.O. Box 2463, Station B
Richmond Hill, Ontario L4E 1A5
Barry L. Needler 1,869,000 (2) 37.06%
P.O. Box 2463, Station B
Richmond Hill, Ontario L4E 1A5
Kirk W. Foley 635,016 (3) 12.42%
12700 Lake Avenue, #2006
Lakewood, OH 44107
Amherst Tanti U.S. Inc. (4) 520,148 10.33%
12700 Lake Avenue, #2006
Lakewood, Ohio 44107
John S. Meany, Jr. 376,354 (5) 7.45%
9200 S. Winchester Ave.
Chicago, Illinois 60620
Dimensional Fund Advisors 325,925 6.47%
1299 Ocean Drive
Santa Monica, CA 90401
- ---------------------------------------------------------------
<FN>
(1) Mr. Needler is the President and Chief Executive Officer of Steeplechase
Corp.
(2) Includes shares owned of record and beneficially by Fairway Inc. (150,750
shares) and Steeplechase Corp. (1,704,750 shares), and beneficially by
Reldeen Ltd. (4,500 shares). Includes 9,000 shares subject to issuance upon
the exercise of stock options exercisable within 60 days of the date hereof.
Mr. Needler controls these corporations and serves as a Director and Chief
Executive Officer of these corporations.
(3) Includes 520,148 shares owned of record by Amherst Tanti U.S. Inc.; 10,300
shares in a retirement fund; and 80,000 shares subject to issuance upon the
exercise of stock options exercisable within 60 days of the date hereof.
(4) Amherst Tanti U.S. Inc. is owned by Kirk W. Foley and his wife. Mr. Foley
serves as President of this corporation.
(5) Includes 20,250 shares subject to issuance upon the exercise of stock options
exercisable within 60 days hereof. Also includes 9,000 shares owned by
members of Mr. Meany's immediate family, beneficial ownership of which is
disclaimed.
</FN>
</TABLE>
11
<PAGE> 12
(B) SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of January 16, 1998, information concerning
the number of shares of Common Stock beneficially owned by each nominee
individually, each named executive officer, and by all executive officers and
directors as a group. The totals shown below for each person and for the group
include shares held personally, shares held by immediate family members, and
shares acquirable within sixty days of the date hereof by the exercise of stock
options.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
- -------------------------------------------------------------------------------------------------------------------
Direct Exercisable
Name of Beneficial Owner Ownership Options (2) Total Percent (3)
- ------------------------ --------- ------- ----- -------
<S> <C> <C> <C> <C> <C>
Robert J. Abrahams 28,175 20,250 48,425 *
Donald L. Baker 143,536 (4) 20,250 163,786 3.24%
Kevin Dow (5) 17,075 0 17,075 *
Moffat Dunlap 0 20,250 20,250 *
Chuck Ellens 16,350 (6) 0 16,350 *
Kirk W. Foley 555,016 (7) 80,000 635,016 12.42%
Mark A. Kirk 32,500 75,000 107,500 2.10%
James R. Malone 12,500 76,500 89,000 1.77%
Grace McCarthy 1,100 (8) 20,250 21,350 *
John S. Meany, Jr. 356,104 (9) 20,250 376,354 7.44%
Barry L. Needler (5) 1,860,000 (10) 9,000 1,869,000 37.06%
Frank M. Rasmussen 0 11,250 11,250 *
Ivan Winfield 2,800 104,500 107,300 2.09%
Carl H. Young, III 32,500 75,000 107,500 2.10%
All Executive Officers and
Directors as a Group 3,057,656 532,500 3,590,156 64.50%
- -------------------------------------------------------------------------------------------------------------------
<FN>
(1) Each person has sole voting and investment power with respect to all shares shown except as indicated below.
(2) Represents shares subject to stock options that are currently exercisable or become exercisable within 60 days
hereof.
(3) Unless otherwise indicated, the percentage of Common Stock owned is less than one percent of the Common Stock
outstanding.
(4) Includes 138,136 shares owned by Mr. Baker's wife, beneficial ownership of which is disclaimed. Mr. Baker owns
2,700 shares jointly with his wife.
(5) Mr. Dow and Mr. Needler are first cousins.
(6) Includes 10,350 shares owned jointly with his spouse.
(7) Includes 520,148 shares owned by Amherst Tanti U.S. Inc. and 10,300 shares in a retirement fund.
(8) These shares are owned by her spouse. Mrs. McCarthy disclaims beneficial ownership of these shares.
(9) Includes 9,000 shares owned by members of his immediate family, beneficial ownership of which is disclaimed.
(10) Shares are owned of record and beneficially by Fairway Inc. (150,750 shares) and Steeplechase Corp. (1,704,750
shares), and beneficially by Reldeen Ltd. (4,500 shares). These corporations are controlled by Mr. Needler.
</FN>
</TABLE>
12
<PAGE> 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
In May 1997, the Company advised Kirk W. Foley, then its Chief Executive
Officer, that it was terminating his employment which triggered certain
obligations as per Mr. Foley's employment contract, including an $800,000
severance payment, an assumption of a $518,000 personal bank loan made to Mr.
Foley, other compensation obligations of approximately $79,000 and an obligation
to purchase Mr. Foley's Company Common Stock at current market value
(approximately $325,000).
Because of the Company's tight cash position, noncash ways to satisfy its
obligations to Mr. Foley were sought. The resolution was a decision to transfer
to Mr. Foley the Company's 100% stock interest in Tube Fab Ltd, a Canadian
subsidiary of the Company ("Tube Fab Ltd.") headquartered in Mississauga,
Ontario, Canada, that an independent appraiser valued at $1,512,000. The
Tube-Fab Ltd. stock had been carried on the Company's books at a value of
$2,157,500 and was accordingly written down to its appraised value.
The settlement transaction with Mr. Foley closed on January 8, 1998. It entails
a transfer of the Tube-Fab Ltd. shares to Mr. Foley; Mr. Foley's payment of
$303,000 to the Company; cancellation of the Company's $800,000 severance
obligation; an assumption of the $486,750 ($518,000 less a $31,250 principal
payment made in June 1997) bank loan; cancellation of Mr. Foley's put right with
respect to his Company Common Stock; and assumption by Mr. Foley of an
operating lease of Canadian facilities currently leased by the Company, which
has a remaining lease obligation of approximately $1,050,000 over 8 1/2 years.
Mr. Foley's employment contract also requires the Company to pay to him a
$300,000 cash award relating to phantom shares he had previously earned but had
deferred in 1996. This award has been reduced to a $150,000 payment in the
settlement transaction. The settlement also requires the Company to continue Mr.
Foley's salary and benefits from the time of the termination advisement through
December 15, 1997 (approximately $320,000).
Mr. Foley's departure caused the Company to examine the collectibility of
certain other related party receivables aggregating $743,000 which were forgiven
and accordingly written off in the third and fourth quarters of fiscal 1997.
As an inducement to retain the continued services, following the sale of Bliss
Manufacturing (as discussed in Note 1 of the Notes to the Consolidated Financial
Statements) of certain key executives and individuals employed by the Company,
the Company entered into separate agreements in October 1997 with such
executives and individuals to provide for the payment of bonuses upon the
consummation of the sale and severance allowances in the event of a termination
of employment as a result of a change of control of the Company (as defined in
such agreements). The amount of the bonuses to be awarded varies by individual
and is dependent on the amount of the purchase price ultimately received in the
sale of Bliss Manufacturing by the Company. The current executive officers of
the Company, Messrs. Malone, Kirk and Young will each receive stay bonuses in
the amount of $300,000 (less applicable withholding taxes) upon the
consummation of the sale pursuant to the terms of such agreements.
Refer to Item 11 in this amendment for additional transactions.
13
<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 on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
<S> <C>
HMI INDUSTRIES INC.
(Registrant)
by /s/ Michael Harper
-----------------------------------------
Michael Harper
Vice President, Corporate Controller and
Chief Accounting Officer
January 26, 1998
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
on Form 10-K has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ James R. Malone /s/ Mark A. Kirk
- ----------------------------------------- --------------------------------------- ---------------------------------------
James R. Malone Mark A. Kirk Frank M. Rasmussen
Chairman of the Board, Chief Executive President, Chief Operating Officer, Director
Officer and Director Chief Financial Officer and Director January 26, 1998
January 26, 1998 January 26, 1998
/s/ Robert J. Abrahams /s/ Ivan Winfield
- ----------------------------------------- --------------------------------------- ---------------------------------------
Robert J. Abrahams Grace McCarthy Ivan Winfield
Director Director Director
January 26, 1998 January 26, 1998 January 26, 1998
/s/ Donald L. Baker /s/ John S. Meany, Jr.
- ----------------------------------------- ---------------------------------------
Donald L. Baker John S. Meany, Jr.
Director Director
January 26, 1998 January 26, 1998
/s/ Moffat Dunlap /s/ Barry L. Needler
- ----------------------------------------- ---------------------------------------
Moffat Dunlap Barry L. Needler
Director Director
January 26, 1998 January 26, 1998
</TABLE>
14
