KEYSTONE CONSOLIDATED INDUSTRIES, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1740
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 6, 1999
To the Stockholders of
Keystone Consolidated Industries, Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of Keystone
Consolidated Industries, Inc., a Delaware corporation ("Keystone" or the
"Company"), will be held on May 6, 1999, at 9:00 a.m., local time, at the
offices of the Company at 5430 LBJ Freeway, Suite 1740, Dallas, Texas, for the
following purposes:
(1) To elect two directors each for a term of three years, and until
their successors are duly elected and qualified; and
(2) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 24, 1999,
as the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting. A complete list of the stockholders entitled to
vote at the Annual Meeting will be made available for inspection by any
stockholder of record at the offices of Keystone during ordinary business hours
from April 7, 1999, through the time of the Annual Meeting for any purpose
germane to the Annual Meeting.
In order to ensure that you are represented at the meeting, please complete
the enclosed proxy card and return it promptly in the accompanying postage-paid
envelope. If you choose, you may still vote in person at the Annual Meeting
even though you previously signed your proxy. You may revoke your proxy by
following the procedures specified in the accompanying Proxy Statement. Your
vote, whether given by proxy or in person at the Annual Meeting, will be held in
confidence by the Inspector of Election for the Annual Meeting in accordance
with the Company's bylaws.
By order of the Board of Directors,
Sandra K. Myers
Secretary
Dallas, Texas
April 5, 1999
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1740
Dallas, Texas 75240
PROXY STATEMENT
Annual Meeting of Stockholders
To be held on May 6, 1999
This Proxy Statement and the accompanying proxy card are being furnished to
the stockholders of Keystone Consolidated Industries, Inc., a Delaware
corporation ("Keystone" or the "Company"), in connection with the solicitation
of proxies by and on behalf of the Board of Directors of Keystone for use at the
1999 Annual Meeting of Stockholders to be held at 9:00 a.m., local time, on
Thursday, May 6, 1999, at the Company's offices at 5430 LBJ Freeway, Suite 1740,
Dallas, Texas and at any adjournment or postponement thereof (the "Annual
Meeting"). Any stockholder executing a proxy has the power to revoke it at any
time before it is voted. A proxy may be revoked by either (i) filing with the
Inspector of Election a written revocation of the proxy; (ii) appearing at the
Annual Meeting and casting a vote contrary to that indicated on the proxy; or
(iii) submitting a duly executed proxy bearing a later date. Attendance at the
Annual Meeting alone, however, will not in itself constitute the revocation of a
proxy. This Proxy Statement and the accompanying proxy card are first being
mailed to stockholders on or about April 16, 1999. An annual report for the
year ended December 31, 1998 is enclosed herewith.
Only stockholders of record at the close of business on March 24, 1999,
(the "Record Date") will be entitled to vote at the Annual Meeting. As of the
Record Date, there were 9,837,495 shares of Keystone's common stock, $1.00 par
value per share ("Common Stock"), outstanding and entitled to vote. Each share
of Common Stock entitles the holder thereof to one vote. The presence, in person
or by proxy, of the holders of a majority of the shares of Common Stock voting
as one class entitled to vote at the Annual Meeting is necessary to constitute a
quorum for the conduct of business at the Annual Meeting. Shares of stock that
are voted to abstain from any business coming before the Annual Meeting and
broker/nominee non-votes will be counted as being in attendance at the Annual
Meeting for purposes of determining whether a quorum is present.
Employees participating in the Keystone Consolidated Industries, Inc.
Deferred Incentive Plan or the DeSoto Stock Ownership Plus Plan, who are
beneficial owners of Common Stock under such plans, may use the enclosed voting
instruction card to instruct the plan trustees how to vote the shares held for
such employees, and the trustees will, subject to the terms of the plan, vote
such shares in accordance with such instructions.
ChaseMellon Shareholder Services, L.L.C. ("Chase"), the transfer agent and
registrar for the Common Stock, has been appointed by the Board of Directors to
receive proxies, tabulate the vote and serve as Inspector of Election at the
Annual Meeting. All proxies and ballots delivered to Chase shall be kept
confidential by Chase in accordance with the Company's bylaws.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to stockholders in connection with the
solicitation of proxies will be borne by Keystone. In addition to the
solicitation of proxies by use of the mail, officers, directors, and employees
of Keystone may solicit proxies by written communication, telephone or personal
calls for which such persons will receive no special compensation.
ELECTION OF DIRECTORS
Keystone's Restated Certificate of Incorporation provides for the Board of
Directors to be divided into three classes. The bylaws of the Company provide
that the Board of Directors shall consist of not less than five and not more
than nine persons, as determined by the Board of Directors from time to time.
The number of directors is currently seven.
The nominees receiving a plurality of the votes of the shares present in
person or represented at the Annual Meeting and entitled to vote will be elected
to the classes designated and until their successors are duly elected and
qualified (except in cases where no successor is elected due to a reduction in
the size of the Board), or earlier resignation, removal from office, death or
incapacity. Neither shares as to which authority to vote on the election of
directors has been withheld nor broker/nominee non-votes will be counted as
affirmative votes to elect director nominees to the Board of Directors.
All of the nominees set forth below have consented to serve if elected to
the Board of Directors. If any individual nominated for a directorship is not
available for election, which is not anticipated, votes will be cast by the
proxy holder for such substitute nominee as shall be designated by the Board of
Directors.
Harold C. Simmons and his affiliates hold approximately 50.0% of the
outstanding shares of Common Stock as of the Record Date and have indicated
their intention to vote such shares "For" the election of all of the nominees
for director as set forth in this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
FOR THE BOARD OF DIRECTORS SET FORTH BELOW.
NOMINEES FOR BOARD OF DIRECTORS
The following biographical information has been provided by the nominees
for election to the Board of Directors of the Company for terms expiring at the
2002 annual meeting of stockholders:
GLENN R. SIMMONS Director since 1986
Mr. Simmons, age 71, is Chairman of the Board of Directors of Keystone and
has served in such capacity since prior to 1994. Mr. Simmons was Chief
Executive Officer of Keystone from prior to 1994 to February 1997. Mr. Simmons
has served as Vice Chairman of the Board of Directors of Contran Corporation
("Contran"), a privately owned diversified holding company that may be deemed to
be the beneficial holder of approximately 47.0% of the outstanding Common Stock
as of the Record Date, since prior to 1994. Mr. Simmons has been a director of
Contran and an executive officer and/or director of various companies related to
Contran since prior to 1994. He is Vice Chairman of the Board of Valhi, Inc.
("Valhi") and a director of NL Industries, Inc. ("NL"), Tremont Corporation
("Tremont"), Titanium Metals Corporation ("TIMET"), and CompX International Inc.
("CompX"), all of which companies may be deemed to be affiliates of Keystone.
Mr. Simmons is a nominee for a term expiring at the annual meeting in 2002.
J. WALTER TUCKER, JR. Director since 1971
Mr. Tucker, age 73, is Vice Chairman of the Board of Directors of the
Company and has served in such capacity since prior to 1994. Mr. Tucker has
served as a Director, President, and Treasurer of Tucker & Branham, Inc., a
privately owned real estate, mortgage banking and insurance firm since prior to
1994. Mr. Tucker is also a director of Valhi. He has also been an executive
officer and/or director of various companies related to Valhi and Contran since
prior to 1994. Mr. Tucker is a nominee for a term expiring at the annual
meeting in 2002.
OTHER BOARD MEMBERS
The following biographical information has been provided by the directors
whose terms do not expire at the Annual Meeting:
THOMAS E. BARRY Director since 1989
Dr. Barry, age 55, is Vice President for Executive Affairs at Southern
Methodist University and has been a Professor of Marketing in the Edwin L. Cox
School of Business at Southern Methodist University since prior to 1994. Dr.
Barry's term as a director expires at the annual meeting in 2000.
PAUL M. BASS, JR. Director since 1989
Mr. Bass, age 64, is Vice Chairman of First Southwest Company, a privately
owned investment banking firm, and has served as a director since prior to 1994.
Mr. Bass is also a director of CompX and Jayhawk Acceptance Corporation;
Chairman of MorAmerica Private Equities Company; and director and Chairman of
the Audit Committee of California Federal Bank. Mr. Bass is currently serving
as Chairman of Zale-Lipshy University Hospital and as Chairman of the Board of
Trustees of Southwestern Medical Foundation. Mr. Bass' term as a director
expires at the annual meeting in 2001.
DAVID E. CONNOR Director since 1992
Mr. Connor, age 73, is President of David E. Connor and Associates,
advisers to commerce and industry, in Peoria, Illinois and has served in such
capacity since prior to 1994. He is Chairman of the Board of First Bankers
Trustshares, Quincy, Illinois. He is also director of Heartland Community
Health Clinic, Peoria, Illinois and Museum Trustees Association, Washington,
D.C. Mr. Connor's term as a director expires at the annual meeting in 2001.
WILLIAM P. LYONS, JR. Director since 1996
Mr. Lyons, age 57, is Chairman of the Board of JVL Corp., now an
investment firm, but formerly a generic pharmaceutical manufacturer, since prior
to 1994. Mr. Lyons is also Managing Director of Madison Partners, LLC, an
investment firm. He is also a director of Checkpoint Systems, Inc. and Chairman
of its Executive Committee since February 1999. Mr. Lyons was Chairman of
Holmes Protection Group, Inc., an electronic security systems and monitoring
company, from 1995 until February 1998. Mr. Lyons' term as a director expires
at the annual meeting in 2000.
WILLIAM SPIER Director since 1996
Mr. Spier, age 64, is President and Chairman of Sutton Holding Corp., a
private investment firm, and has served in such capacity since prior to 1994.
Mr. Spier is acting Chief Executive Officer of Integrated Technology USA, Inc.
and has served in such capacity since November 1997. Mr. Spier is Chairman of
the Board of Geotek Communications, Inc. since April 1998. Geotek
Communications, Inc. filed for Chapter 11 protection under the Bankruptcy Code
in June 1998. Mr. Spier was Chairman of DeSoto, Inc. from prior to 1994 to 1996,
Chief Executive Officer of DeSoto, Inc. from prior to 1994 to 1994 and from 1995
to 1996. He is a director of Integrated Technology USA, Inc., Moto Guzzi, Inc.,
and Trident Rowan Group, Inc. Mr. Spier's term as a director expires at the
annual meeting in 2000.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1998, the Board of Directors met
six times. All directors of the Company were present at more than 75% of the
meetings of the Board of Directors and the committees of the Board of Directors
on which they served.
The Executive Committee, which did not meet during 1998, exercises all
powers and authority of the Board of Directors in the management of the business
and affairs of the Company, to the extent permitted by Delaware law, when a
meeting of the Board of Directors is not possible. The members of the Executive
Committee are Messrs. Bass, Simmons, Spier and Tucker.
The Master Trust Committee, which met once during 1998, exercises the
powers, rights and responsibilities included under Articles 3 and 10 of the
Keystone Consolidated Industries, Inc. Master Retirement Trust. The members of
the Master Trust Committee are Messrs. Bass and Tucker.
The Audit Committee, which met twice during 1998, reviews and evaluates
significant matters relating to the audit and internal controls of the Company,
and reviews the scope and results of audit and non-audit assignments of the
Company's independent accountants. The Audit Committee examines and recommends
for approval the audited financial statements of the Company, and annually
recommends to the Board of Directors the appointment of, and fees paid to, the
independent accountants. Recommendations and actions of the Audit Committee are
reported to the full Board of Directors. The members of the Audit Committee are
Messrs. Bass, Connor and Lyons.
The Compensation Committee, which met twice during 1998, reviews and
approves the amounts and forms of compensation paid to executive officers. The
members of the Compensation Committee are Messrs. Barry and Bass.
The Board of Directors does not have a Nominating Committee.
DIRECTOR'S COMPENSATION
Directors of Keystone receive an annual retainer of $12,000. Such
directors also receive a fee of $450 per day for each Board of Directors meeting
and/or committee meeting attended. Directors are also reimbursed for reasonable
expenses incurred in attending Board of Directors and/or committee meetings.
Under the Keystone Consolidated Industries, Inc. 1992 Non-Employee Director
Stock Option Plan ("Director Plan"), which terminated May 1, 1997, non-employee
directors were granted an option to purchase 1,000 shares of Common Stock on the
third business day after the Company issued its press release summarizing the
Company's annual financial results for the prior fiscal year. The exercise
price of the options was equal to the last reported sale price of Common Stock
on the New York Stock Exchange Composite Tape on the date of grant. Options
granted pursuant to the Director Plan became exercisable one year after the date
of grant and expired on the fifth anniversary following the date of grant. The
Keystone Consolidated Industries, Inc. 1997 Long-Term Incentive Plan provides
for awards or grants of stock options, stock appreciation rights, restricted
stock, performance grants and other awards to key individuals, including
directors, performing services for the Company or its subsidiaries. Mr. Glenn
R. Simmons' services are made available to the Company pursuant to the
Intercorporate Services Agreement. In addition to being a director, Mr. Tucker
provides certain consulting services to the Company for which the Company pays a
company related to Mr. Tucker. See "Certain Business Relationships and Related
Transactions."
In February 1999, the Board approved an increase in the compensation paid
to non-employee directors, increasing the annual retainer to $15,000 and the
meeting attendance fee to $750 per day for each Board of Directors meeting
and/or committee meeting. Additionally, the Compensation Committee approved in
February 1999, under the 1997 Long-Term Incentive Plan, the grant to such
directors of annual stock options exercisable for 1,000 shares of Common Stock.
These options will have an exercise price equal to the closing sales price of
Common Stock on the date of grant, have a term of ten years and fully vest on
the first anniversary of the date of grant.
EXECUTIVE OFFICERS
In addition to Glenn R. Simmons as Chairman of the Board and J. Walter
Tucker, Jr. as Vice Chairman, the following are currently executive officers of
Keystone:
HAROLD M. CURDY, age 51, has served as Vice President - Finance and
Treasurer of the Company since prior to 1994.
BERT E. DOWNING, JR., age 42, has served as Corporate Controller of the
Company since prior to 1994.
RALPH P. END, age 61, has served as Vice President and General Counsel of
the Company since prior to 1994.
THOMAS J. GLAISTER, age 49, has served as President, Keystone Steel & Wire,
a division of the Company, since 1997. Mr. Glaister was General Manager,
Logistics of Lukens, Inc. prior to joining Keystone Steel & Wire. He held
various management positions at Lukens from prior to 1994 to 1997.
BILL J. JOHNSON, age 62, has served as President of Sherman Wire, a
division of DeSoto, Inc., since 1995. Mr. Johnson served as Vice President &
General Manager, Sherman Wire, since prior to 1994.
SANDRA K. MYERS, age 55, has served as Corporate Secretary of the Company
and as Executive Secretary of Contran since prior to 1994.
ROBERT W. SINGER, age 62, is President and Chief Executive Officer of the
Company and has served in such capacities since 1997. Mr. Singer served as
President and Chief Operating Officer since prior to 1994. He served as Vice
President of Valhi and Contran since prior to 1994 to 1998 and is a director of
CompX and Columbian Mutual Life Insurance Company.
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the Company's chief
executive officer and to each of the Company's four most highly compensated
executive officers other than the chief executive officer (each a "named
executive officer") for services rendered in all capacities to the Company for
the years ended December 31, 1998, 1997 and 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards All Other
Name and Annual Compensation Securities Underlying Compensation
Principal Position Year Salary ($) Bonus($) Optons (#) ($)(1)
<S> <C> <C> <C> <C> <C>
Glenn R. Simmons (2) 1998 146,153 - - -
Chairman of the Board 1997 126,923 200,000 - -
1996 126,923 250,000 125,000 -
Harold M. Curdy 1998 180,000 70,000 - 19,571
Vice President - 1997 150,000 85,000 10,000 11,882
Finance & Treasurer 1996 140,000 175,000 25,000 7,260
Ralph P. End 1998 125,000 50,000 - 10,478
Vice President & 1997 97,000 65,000 - 5,451
General Counsel 1996 95,000 47,000 15,000 6,195
Thomas J. Glaister (3) 1998 190,000 - - 19,785
President 1997 171,636 112,500 20,000 -
Keystone Steel & Wire
Robert W. Singer (4) 1998 275,000 175,000 - 74,033
President and 1997 185,000 350,000 40,000 62,943
Chief Executive Officer 1996 170,000 200,000 - 7,260
</TABLE>
(1) All other compensation for the last three years (or such shorter
period if the named executive officer was not an executive officer for the
entire three years) for each of the following named executive officers
consisted of (i) the Company's matching contributions pursuant to the
Company's 401(k) Plan; and (ii) accruals to unfunded reserve accounts
attributable to certain limits under the Code with respect to the 401(k)
Plan and Keystone's pension plan, which amounts are payable upon the named
executive officer's retirement, the termination of his employment with the
Company or to his beneficiaries upon his death; as follows:
<TABLE>
<CAPTION>
Unfunded Reserve Account Accruals
Interest
Account Accruals Accruals
Employer's Related to 401(k) Above 120%
Named 401(k) and Pension Plan of the AFR
Executive Officer Year Contribution(a) Limitations Rate (b) Total
<S> <C> <C> <C> <C> <C>
Harold M. Curdy 1998 $8,000 $11,285 $286 $19,571
1997 5,451 6,431 0 11,882
1996 7,260 0 0 7,260
Ralph P. End 1998 8,000 2,478 0 10,478
1997 5,451 0 0 5,451
1996 6,195 0 0 6,195
Thomas J. Glaister 1998 8,000 11,785 0 19,785
Robert W. Singer 1998 8,000 63,475 2,558 74,033
1997 5,451 57,492 0 62,943
1996 7,260 0 0 7,260
</TABLE>
(a) The Company's matching contributions to the 401(k) plan are made
in Common Stock. Common Stock was valued at $8.125/share,
$12.00/share, and $8.25/share for 1998, 1997 and 1996, respectively.
(b) Effective as of January 1, 1998, the agreements providing for
these unfunded reserve accounts, were amended to provide that the
balance of such accounts would accrue interest at an annual rate in
effect from time to time equal to two percent above the base rate on
corporate loans. Pursuant to the rules of the Commission, the
amounts shown represent the portion of the interest accruals to the
unfunded reserve accounts that exceeds 120% of the applicable
federal long-term rate as prescribed by the Code (the "AFR Rate").
The AFR Rate used for such computations was the AFR Rate in effect
on December 31, 1998, the date the interest accruals for 1998 were
credited to the unfunded reserve accounts.
(2) Mr. Simmons is not a salaried employee of the Company. The reported salary
represents an allocation of his time devoted to Keystone business under the
Intercorporate Services Agreement. See "Certain Business Relationships and
Related Transactions" below. Keystone, however, paid Mr. Simmons' reported
bonuses in 1997 and 1996.
(3) Mr. Glaister was first appointed an executive officer of the Company in
January 1997.
(4) The amounts shown in the table as compensation for Mr. Singer exclude the
amount Contran credited to Keystone for Mr. Singer's services rendered to
Valhi pursuant to intercorporate services agreements with Contran, which
amounts were $65,000 and $55,000 for 1997 and 1996, respectively.
No stock options were granted to the executive officers during 1998. The
following table provides information, with respect to the named executive
officers, concerning the value of unexercised stock options held as of December
31, 1998. In 1998, no named executive officer exercised any stock options.
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at December 31, 1998(#) at December 31, 1998 ($)(1)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Glenn R. Simmons 110,833 41,667 0 0
Harold M. Curdy 25,000 15,000 0 0
Ralph P. End 11,500 5,000 0 0
Thomas J. Glaister 6,667 13,333 0 0
Robert W. Singer 23,333 26,667 0 0
</TABLE>
(1) The values shown in the table are based on the $8.125 per share closing
price of the Common Stock on December 31, 1998, as reported by the New York
Stock Exchange Composite Tape, less the exercise price of the options.
Pension Plan
Keystone maintains a qualified, noncontributory defined benefit plan which
provides defined retirement benefits to various groups of eligible employees
including executive officers. Normal retirement age under the Company's pension
plan is age 65. The defined benefit for salaried employees, including officers,
is based on a straight life annuity. An individual's monthly benefit is the sum
of the following: (a) for credited service prior to January 1, 1981, the amount
determined by his or her average monthly cash compensation for the five years of
his or her highest earnings prior to January 1, 1981, multiplied by 1.1%,
multiplied by the years of credited service, plus (b) for each year of service
between 1980 and 1989, the amount determined by the sum of 1.2% multiplied by
his or her average monthly cash compensation that year up to the social security
wage base and 1.75% multiplied by his or her average monthly cash compensation
that year in excess of the social security wage base, plus (c) for each year
subsequent to 1989, the amount determined by 1.2% multiplied by his or her
average monthly cash compensation that year, but not less than $14.00 per month.
The estimated annual benefits payable upon retirement at normal retirement
age for each of the salaried employees named in the Summary Compensation Table,
assuming continued employment with the Company until normal retirement age at
current salary levels are: Harold M. Curdy, $50,649; Ralph P. End, $32,026;
Thomas J. Glaister, $33,920; and Robert W. Singer, $28,056. Glenn R. Simmons
does not participate in the Keystone Pension Plan.
SECURITY OWNERSHIP OF MANAGEMENT
As of March 24, 1999, the Company's nominees for directors, directors, the
executive officers named in the Summary Compensation Table above, and the direc-
tors and executive officers as a group, beneficially owned, as defined by the
rules of the Securities and Exchange Commission (the "Commission"), the shares
of Common Stock shown in the following table.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership(1)
Shares of Percent
Name of Common of
Beneficial Owner Stock Class (2)
<S> <C> <C>
Thomas E. Barry (3) 5,167 -
Paul M. Bass, Jr. (3)(4)(5) 12,167 -
David E. Connor (3) 7,167 -
Harold M. Curdy (6) 41,602 -
Ralph P. End (6) 16,202 -
Thomas J. Glaister (6) 15,517 -
William P. Lyons, Jr. (3) 35,062 -
Glenn R. Simmons (5)(6)(7) 162,433 1.7
Robert W. Singer (6) 83,605 -
William Spier (3) 357,929 3.6
J. Walter Tucker, Jr. (3)(5) 155,117 1.6
All directors and executive 935,073 9.3
officers as a group (14
persons) (3)(4)(5)(6)(7)(8)
_________
</TABLE>
(1) All beneficial ownership is sole and direct except as otherwise set forth
herein. Information as to the beneficial ownership of Common Stock has
either been furnished to the Company by or on behalf of the indicated
persons or is taken from reports on file with the Securities and Exchange
Commission.
(2) Percentage omitted if less than 1%.
(3) Includes shares that such person or group could acquire upon the exercise
of options exercisable within 60 days of the Record Date by Messrs. Barry,
Bass, Connor, Lyons, Spier and Tucker for the purchase of 4,667, 4,667,
4,667, 2,667, 2,667, and 1,667 shares, respectively, pursuant to the
Keystone Consolidated Industries, Inc. 1992 Non-Employee Director Stock
Option Plan and the 1997 Long-Term Incentive Plan.
(4) Includes 2,500 shares of Common Stock held in discretionary accounts by
First Southwest Company, a licensed broker-dealer, on behalf of certain of
its clients, as to which Mr. Bass has voting and dispositive authority.
Mr. Bass serves as Vice Chairman of First Southwest Company. As a result
of the foregoing, Mr. Bass may be deemed to be the beneficial owner of such
shares. However, Mr. Bass disclaims all such beneficial ownership.
(5) Excludes certain shares that such individual may be deemed to indirectly
and beneficially own as to which such individual disclaims beneficial
ownership. See footnote (1) to the "Security Ownership of Certain
Beneficial Owners" table.
(6) Includes shares that such person could acquire upon the exercise of options
exercisable within 60 days of the Record Date by Messrs. Curdy, End,
Glaister, Simmons, and Singer for the purchase of 28,333, 11,500, 13,333,
110,833 and 36,667 shares, respectively, pursuant to the Company's various
stock option plans.
(7) Glenn R. Simmons is a brother of Harold C. Simmons. See footnote (1) to
the "Security Ownership of Certain Beneficial Owners" table.
(8) In addition to the foregoing, the shares of Common Stock shown as
beneficially owned by the directors and executive officers of Keystone as a
group include 29,267 shares that the remaining executive officers of
Keystone have the right to acquire upon the exercise within 60 days
subsequent to the Record Date of stock options granted pursuant to the
Company's stock option plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the stockholders known to the Company to be
the beneficial owners of more than 5% of the Common Stock outstanding as of the
Record Date.
<TABLE>
<CAPTION>
Name and Address of Percent
Beneficial Owner Common of
Stock (#) Class
<S> <C> <C>
Harold C. Simmons (1)(2) 4,915,073 50.0
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240
Dimensional Fund Advisors Inc. (3) 594,373 6.0
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
____
(1) The shares of Common Stock shown as beneficially owned by Harold C. Simmons
includes 3,972,159, 326,364, 326,050, 250,000, and 30,000 shares of Common
Stock held by Contran, Valhi, NL, The Harold Simmons Foundation, Inc. (the
"Foundation"), and The Combined Master Retirement Trust (the "Master
Trust"), respectively.
Contran, Valhi and NL directly hold approximately 40.4%, 3.3%, and 3.3%,
respectively, of the outstanding Common Stock. Valhi and Tremont are the
holders of approximately 58.1% and 19.7%, respectively, of the outstanding
common stock of NL. Contran and parties related to Contran hold, directly
or indirectly, approximately 92.7% and 53.3% of the outstanding common
stock of Valhi and Tremont, respectively. Substantially all of Contran's
outstanding voting stock is held either by trusts established for the
benefit of certain of Harold C. Simmons' children and grandchildren
(together, the "Trusts"), of which Mr. Simmons is the sole trustee, or by
Mr. Simmons directly. As sole trustee of each of the Trusts, Mr. Simmons
has the power to vote and direct the disposition of the shares of Contran
stock held by each of the Trusts; however, Mr. Simmons disclaims beneficial
ownership thereof except for those shares that he holds directly.
Harold C. Simmons is Chairman of the Board and Chief Executive Officer of
Contran, and of certain other related entities through which Contran may be
deemed to control Valhi. Additionally, he is Chairman of the Board of NL
and is a director of Tremont.
The Foundation holds approximately 2.5% of the outstanding shares of Common
Stock. The Foundation is a tax-exempt foundation organized and existing
exclusively for charitable purposes. Harold C. Simmons is Chairman of the
Board and Chief Executive Officer of the Foundation.
By virtue of the holding of the offices, the stock ownership and his
service as trustee as described above, Harold C. Simmons may be deemed to
control certain of such entities and Mr. Simmons and certain of such
entities may be deemed to possess indirect beneficial ownership of certain
shares of Common Stock directly held by certain of such other entities.
However, Mr. Simmons disclaims such beneficial ownership of the shares of
Common Stock beneficially owned, directly or indirectly, by any of such
entities.
The Master Trust holds approximately 0.3% of the outstanding shares of
Common Stock. The Master Trust is a trust formed by Valhi to permit the
collective investment by trusts that maintain the assets of certain
employee benefit plans adopted by Valhi and related companies, including
Keystone. Harold C. Simmons is sole trustee of the Master Trust and a
member of the Trust Investment Committee for the Master Trust. The trustee
and members of the Trust Investment Committee for the Master Trust are
selected by Valhi's board of directors. Paul M. Bass, Jr. and J. Walter
Tucker, Jr. are also members of the Trust Investment Committee for the
Master Trust. Harold C. Simmons, Glenn R. Simmons and J. Walter Tucker,
Jr. are members of Valhi's board of directors. Messrs. Harold and Glenn
Simmons are both participants in one or more of the employee benefit plans
that invest through the Master Trust; however, both such persons disclaim
beneficial ownership of the shares of Common Stock held by the Master
Trust, except to the extent of their respective vested beneficial interests
therein.
The information contained in this footnote is based on information provided
to the Company by Valhi, Contran and certain of their affiliates as of the
Record Date.
(2) The shares of Common Stock shown as beneficially owned by Harold C. Simmons
also includes 10,500 shares of Common Stock held by Mr. Simmons' wife, with
respect to all of which Mr. Simmons disclaims beneficial ownership.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, may be deemed to have beneficial ownership of 594,373 shares of
Common Stock as of December 31, 1998, all of which shares are held in
portfolios for which Dimensional serves as investment advisor and
investment manager. Dimensional possesses both voting and investment power
over the Common Stock owned by such portfolios. Dimensional disclaims
beneficial ownership of such securities.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Keystone's executive officers, directors and persons who own more than 10% of a
registered class of Keystone's equity securities to file reports of ownership
with the Commission, the New York Stock Exchange and Keystone. Based solely on
the review of the copies of such reports filed with the Commission, Keystone
believes that for 1998 its executive officers, directors and 10% stockholders
complied with all applicable filing requirements under Section 16(a).
CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
As set forth under the caption "Security Ownership of Certain Beneficial
Owners," Harold C. Simmons, through Contran and other entities, may be deemed to
beneficially own approximately 50.0% of the outstanding Common Stock as of the
Record Date and, therefore, may be deemed to control the Company. The Company
and other entities that may be deemed to be controlled by or affiliated with Mr.
Simmons sometimes engage in (a) intercorporate transactions such as guarantees,
management and expense sharing arrangements, shared fee arrangements, joint
ventures, partnerships, loans, options, advances of funds on open account, and
sales, leases and exchanges of assets, including securities issued by both
related and unrelated parties, and (b) common investment and acquisition
strategies, business combinations, reorganizations, recapitalizations,
securities repurchases and purchases and sales (and other acquisitions and
dispositions) of subsidiaries, divisions or other business units, which
transactions have involved both related and unrelated parties and have included
transactions that resulted in the acquisition by one related party of a
publicly-held minority equity interest in another related party. The Company
continuously considers, reviews and evaluates and understands that Contran and
related entities consider, review and evaluate transactions of the type
described above. Depending on the business, tax and other objectives then
relevant, it is possible that the Company might be a party to one or more of
such transactions in the future. In connection with these activities, the
Company may consider issuing additional equity securities or incurring
additional indebtedness. The Company's acquisition activities have in the past
and may in the future include participation in the acquisition or restructuring
activities conducted by other companies that may be deemed to be controlled by
Harold C. Simmons. It is the policy of the Company to engage in transactions
with related parties on terms, in the opinion of the Company, no less favorable
to the Company than could be obtained from unrelated parties.
No specific procedures are in place that govern the treatment of
transactions among the Company and its related entities, although such entities
may implement specific procedures as appropriate for particular transactions.
In addition, under applicable principles of law, in the absence of stockholder
ratification or approval by directors who may be deemed disinterested,
transactions involving contracts among companies under common control must be
fair to all companies involved. Furthermore, directors and officers owe
fiduciary duties of good faith and fair dealing to all stockholders of the
companies for which they serve.
Glenn R. Simmons, J. Walter Tucker, Jr., and Sandra K. Myers are not
salaried employees of the Company. The Company has contracted with Contran, on
a fee basis payable in quarterly installments, to provide certain administrative
and other services to the Company in addition to the services of Mr. Simmons and
Ms. Myers, including consulting services of Contran executive officers pursuant
to the Intercorporate Services Agreement between Contran and the Company, a copy
of which is included as Exhibit 10.1 in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, filed on March 30, 1999 (the
"Intercorporate Services Agreement"). The fee incurred during 1998 was
$639,000. The Company compensates Tucker & Branham, Inc. for certain consulting
services of Mr. Tucker on an hourly basis as his services are requested. The
fees paid Tucker & Branham, Inc. during 1998 were $77,000.
NL Insurance Ltd. of Vermont ("NL Insurance"), Valmont Insurance Company
("Valmont"), and EWI RE, Inc. ("EWI") arrange for or broker certain of the
Company's insurance policies. NL Insurance is a wholly owned captive insurance
company of Tremont. Valmont is a wholly owned captive insurance company of
Valhi. Parties related to Contran own 90% of the outstanding common stock of
EWI, and a son-in-law of Harold C. Simmons manages the operations of EWI.
Consistent with insurance industry practices, NL Insurance, Valmont and EWI
receive commissions from the insurance and reinsurance underwriters for the
policies that they arrange or broker. During 1998, the Company paid
approximately $1.2 million for policies arranged or brokered by NL Insurance,
Valmont and/or EWI. These amounts principally included payments for reinsurance
and insurance premiums paid to unrelated third parties, but also included
commissions paid to NL Insurance, Valmont and EWI. In the Company's opinion,
the amounts that the Company paid for these insurance policies are reasonable
and similar to those it could have obtained through unrelated insurance
companies and/or brokers. The Company expects that these relationships with NL
Insurance, Valmont, and EWI will continue in 1999.
Aircraft services were purchased from Valhi in the amount of $160,000 for
the year ended December 31, 1998.
In the opinion of management and the Board of Directors, the terms of the
transactions described above were no less favorable to the Company than those
that could have been obtained from an unrelated entity.
REPORT ON EXECUTIVE COMPENSATION
Compensation Committee Report
During 1998, matters regarding compensation of executives were administered
by the Compensation Committee (the "Committee"). The Committee is comprised of
directors who are neither officers nor employees of the Company or its
subsidiaries and who are not eligible to participate in any of the employee
benefit plans administered by it except the 1997 Long-Term Incentive Plan. The
Committee adopts compensation policies and is responsible for approving all
compensation of executives paid by the Company.
It is the Company's policy that employee compensation, including
compensation to executives, be at a level which allows the Company to attract,
retain, motivate and reward individuals of training, experience, and ability who
can lead the Company in accomplishing its goals. It is also the Committee's
policy that compensation programs maintain a strong risk/reward ratio, with a
significant component of cash compensation being tied to the Company's financial
results, creating a performance-oriented environment that rewards employees for
achieving pre-set financial performance levels. It is the Company's policy to
structure compensation arrangements to be deductible for federal income tax
purposes under applicable provisions of the Internal Revenue Code.
During 1998, the Company's compensation program with respect to its
executives consisted of three components: base salary, incentive bonus,
including deferred compensation, and stock option awards.
Base Salary
The Committee reviews, in consultation with the Chief Executive Officer
("CEO"), base salaries for executives at least annually. The Committee
approves, with any modifications it deems appropriate, the CEO's recommendations
for base salary levels. Base salaries for all salaried employees, including
executive officers of the Company, have been established on a position-by-
position basis. Annual internal reviews of salary levels are conducted by the
Company's management in an attempt to rank base salary and job value of each
position. The ranges of salaries for comparable positions considered by
management were based upon management's general business knowledge and no
specific survey, study or other analytical process was utilized to determine
such ranges. Additionally, no specific companies' or groups of companies'
compensation were compared with that of the Company, nor was an attempt made to
identify or otherwise quantify the compensation paid by the companies that
served as a basis for such individuals' general business knowledge. Base salary
levels are generally not increased except in instances of (i) promotions, (ii)
increases in responsibility or (iii) unwarranted discrepancies between job value
and the corresponding base salary. The Company considers general base salary
increases from time to time when competitive factors so warrant. Over a period
of years, base salaries are designed to be below the median annual cash
compensation for comparable executives, but when combined with the other
components of compensation create a competitive or above median total
compensation package.
Incentive Bonus Program
Awards under the Company's incentive bonus program represent a significant
portion of an executive's potential annual cash compensation and are awarded at
the discretion of the Committee on recommendation of the CEO. Annual
performance reviews are an important factor in determining management's
recommendation which is primarily based on each individual's performance and,
to a lesser extent, on the Company's overall performance. No specific financial
or budget tests were applied in the measurement of individual performance. The
executive's performance is typically measured by the ability the executive
demonstrates in performing, in a timely and cost efficient manner, the functions
of the executive's position. The Company's overall performance is typically
measured by the Company's historical financial results. No specific overall
performance measures were used and there is no specific relationship between
overall Company performance and an executive's incentive bonus.
Stock Options/Restricted Stock
An integral part of the Company's total compensation program is non-cash
incentive awards in the form of stock options, stock appreciation rights
("SARs") and restricted stock granted to executives. Stock option grants, in
particular, are considered an essential element of the Company's total
compensation package for the executives. The Committee believes that stock
options, SARs and restrictive stock awards provide an earnings opportunity based
on the Company's success measured by Common Stock performance. Additionally,
awards establish an ownership perspective and encourage the retention of
executives. Incentive stock options are granted at a price not less than 100%
of the fair market value of such stock on the date of grant. The exercise price
of all options and the length of period during which the options may be
exercised are determined by the Compensation Committee. The Compensation
Committee also considered the number of stock options already outstanding in
granting new stock options.
The foregoing report is submitted by the members of the Compensation
Committee of the Board of Directors.
Dr. Thomas E. Barry, Chairman
Paul M. Bass, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is or has been an officer or
employee of the Company or any of its subsidiaries. In 1998, no executive
officer of the Company served on the compensation committee or as a director of
another entity, one of whose executive officers served on the Company's
Compensation Committee or Board of Directors.
PERFORMANCE GRAPH
The following graph reflects a comparison of the cumulative total return of
the Common Stock from December 31, 1993 through December 31, 1998, with the
Standard & Poor's 500 Composite Index and the Standard & Poor's Iron & Steel
Index. The comparison for each of the periods assumes that the value of the
investment in the Common Stock and each index was $100 on December 31, 1993 and
that all dividends were reinvested.
Comparison of Five Year Cumulative Total Shareholder Return Among
Keystone Consolidated Industries, Inc., S&P 500, and S&P Iron & Steel Index
[Performance graph goes here]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Keystone $100 $133 $112 $80 $117 $79
S&P 500 $100 $101 $139 $171 $229 $294
S&P Iron & $100 $97 $90 $81 $82 $71
Steel
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, independent public accountants, have audited
the Company's financial statements and are currently expected to be retained to
audit the financial statements for 1999. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting. They will
have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meetings, subject to regulations adopted by the
Commission. The Company presently intends to call the next annual meeting
during May 2000. For such proposals to be considered for inclusion in the Proxy
Statement and form of proxy relating to the 2000 annual meeting, they must be
received by the Company not later than December 18, 1999. Such proposals should
be addressed to: Secretary, Keystone Consolidated Industries, Inc., Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240.
OTHER MATTERS
Management does not intend to present, and has no information as of the
date of preparation of this Proxy Statement that others will present, any
business at the Annual Meeting other than business pertaining to matters set
forth in the Notice of Annual Meeting of Stockholders and this Proxy Statement.
However, if other matters requiring the vote of the stockholders properly come
before the meeting, it is the intention of the persons named in the enclosed
form of proxy to vote the proxies held by them in accordance with their best
judgment on such matters.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
April 5, 1999
A copy of Keystone's 1998 Form 10-K Annual Report, as filed with the
Commission, is included in Keystone's 1998 Annual Report to Stockholders
distributed to stockholders with this Proxy Statement. Additional copies are
available without charge by writing to: Secretary, Keystone Consolidated
Industries, Inc., 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240.
VOTING INSTRUCTIONS
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
5430 LBJ Freeway, Suite 1740
Dallas, Texas 75240
SOLICITED BY THE BOARD OF DIRECTORS
for Annual Meeting of Stockholders
Thursday, May 6, 1999
The undersigned, being participants in the Keystone Consolidated
Industries, Inc. Deferred Incentive Plan or the DeSoto Stock Ownership Plus
Plan, having received the Notice of Annual Meeting and Proxy Statement dated
April 5, 1999, and Annual Report to Stockholders, hereby instructs the trustee,
to vote, as specified below, all the shares of common stock of KEYSTONE
CONSOLIDATED INDUSTRIES, INC., a Delaware corporation (the "Company"), held of
record by the trustee for the account of the undersigned and entitled to vote on
the record date, March 24, 1999, at the Annual Meeting of Stockholders to be
held on May 6, 1999, and all adjournments or postponements thereof, as directed
and, in their discretion, on all other matters which may properly come before
the Annual Meeting or any adjournments or postponements thereof.
(Continued, and to be marked, dated and signed, on the other side)
************
(Back Side)
Please vote all shares allocated to my account in the Keystone Consolidated
Industries, Inc. Deferred Incentive Plan or the DeSoto Stock Ownership Plus
Plan, as applicable, as follows:
Election of Directors NOMINEES: Glenn R. Simmons and J. Walter Tucker, Jr.
each for a term of three years.
(Instruction: To withhold authority for any single
nominee, write that nominee's name in the space
provided below)
_____________________________________________________
FOR all nominees WITHHOLD AUTHORITY
listed to the right to vote for all nominees
(except as marked to listed to the right
the contrary)
[ ] [ ]
___________________________________
Signature
Date: _______________________, 1999
PLEASE SIGN, DATE, AND RETURN THE CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
PROXY
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
5430 LBJ Freeway, Suite 1740
Dallas, Texas 75240
SOLICITED BY THE BOARD OF DIRECTORS
for Annual Meeting of Stockholders
Thursday, May 6, 1999
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated April 5, 1999, and Annual Report to Stockholders, hereby
appoints Ralph P. End and Sandra K. Myers, or either of them, proxies, with full
power of substitution to vote, as specified in this proxy, all the shares of
capital stock of KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware corporation
(the "Company"), held of record by the undersigned and entitled to vote on the
record date, March 24, 1999, at the Annual Meeting of Stockholders to be held at
5430 LBJ Freeway, Suite 1740, Dallas, TX 75240 at 9:00 a.m. local time on May
6, 1999, and all adjournments or postponements thereof, as directed and, in
their discretion, on all other matters which may properly come before the Annual
Meeting or any adjournments or postponements thereof. The undersigned directs
said proxies to vote as specified upon the items shown on the reverse side,
which are referred to in the Notice of Annual Meeting and set forth in the Proxy
Statement. The undersigned hereby acknowledges receipt of the accompanying
Proxy Statement and Annual Report to Stockholders, and hereby revokes any proxy
or proxies heretofore given by the undersigned relating to the Annual Meeting.
(Continued, and to be marked, dated and signed, on the other side)
(Back Side)
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted "For" all nominees for election as Directors.
Election of Directors NOMINEES: Glenn R. Simmons and J. Walter Tucker, Jr.
each for a term of three years.
(Instruction: To withhold authority for any single
nominee, write that nominee's name in the space
provided below)
_____________________________________________________
FOR all nominees WITHHOLD AUTHORITY
listed to the right to vote for all nominees
(except as marked to listed to the right
the contrary)
[ ] [ ]
Please mark, date and sign exactly as your name appears on this proxy card.
When shares are held jointly, both holders should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If the holder is a corporation or partnership, the full corporate or
partnership name should be signed by a duly authorized officer.
___________________________________
Signature
___________________________________
Signature, if shares held jointly
Date: _______________________, 1999
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE KEYSTONE CONSOLIDATED
INDUSTRIES, INC. PROXY STATEMENT THAT ACCOMPANIED THIS PROXY.
