<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
LONE STAR INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[LONE STAR INDUSTRIES LOGO]
300 First Stamford Place
Stamford, CT 06912-0014
203-969-8600
March 30, 1998
Dear Stockholder,
On behalf of the Lone Star Board of Directors, I cordially invite you to
attend the Company's 1998 Annual Meeting of Stockholders to be held on Thursday,
May 14, 1998, commencing at 10:00 a.m. in the Marie Cole Auditorium of The
Greenwich Library in Greenwich, Connecticut.
The business to be considered and voted upon at the meeting is explained in
the accompanying Notice of Annual Meeting and Proxy Statement.
Your vote is important, regardless of the number of shares that you own. I
urge you to read the Proxy Statement and then complete, sign and date the
enclosed proxy card and return it in the envelope provided as soon as possible,
even if you currently plan to attend the meeting. Returning the proxy card will
not prevent you from voting in person, but will assure that your vote is
counted.
Sincerely,
David W. Wallace
David W. Wallace
Chairman of the Board
<PAGE> 3
[LONE STAR INDUSTRIES LOGO]
LONE STAR INDUSTRIES, INC.
300 FIRST STAMFORD PLACE
STAMFORD, CT 06912-0014
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Lone Star Industries, Inc., a
Delaware corporation, will be held on Thursday, May 14, 1998, at 10:00 a.m. in
the Marie Cole Auditorium of The Greenwich Library, 101 West Putnam Avenue,
Greenwich, Connecticut 06830 for the following purposes:
Proposal 1. To elect two directors for a three-year term ending in 2001.
Proposal 2. To ratify the appointment by the board of directors of Coopers &
Lybrand L.L.P. as auditors of the Company for 1998.
Proposal 3. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Stockholders of record at the close of business on March 23, 1998 will be
entitled to vote at the meeting and at any adjournment thereof.
By Order of the Board of Directors,
JAMES W. LANGHAM
Vice President, General
Counsel and Secretary
March 30, 1998
IMPORTANT
IF YOU CANNOT ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED SO THAT
YOUR STOCK MAY BE REPRESENTED AT THE MEETING.
<PAGE> 4
[LONE STAR INDUSTRIES LOGO]
LONE STAR INDUSTRIES, INC.
300 FIRST STAMFORD PLACE
STAMFORD, CT 06912-0014
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS, MAY 14, 1998
The enclosed proxy is solicited on behalf of the board of directors of Lone
Star Industries, Inc. ("Lone Star" or the "Company") in connection with the
annual meeting of stockholders to be held on Thursday, May 14, 1998, and is
being mailed to you on or about March 30, 1998. Only stockholders of record at
the close of business on March 23, 1998 will be entitled to notice of and to
vote at this meeting. As of that date, the Company had outstanding approximately
10,707,681 shares of common stock, each share entitled to one vote on all
proposals. Neither the certificate of incorporation nor the by-laws of the
Company provide for cumulative voting of stock.
Directors are elected by plurality vote. The affirmative vote of a majority
of those shares of common stock represented and entitled to vote at the meeting
is required for the approval of Proposal 2. Both abstentions and broker
non-votes are counted for purposes of determining the presence or absence of a
quorum, but broker non-votes on any matter are not considered present and
entitled to vote on that matter. Consequently, only abstentions will have the
effect of a vote against Proposal 2.
A stockholder executing and returning a proxy in the accompanying form has
the power to revoke such proxy by written notice to the Secretary of Lone Star
prior to the meeting or by attending the meeting and voting in person. All
proxies properly executed and returned to Lone Star will be voted at the
meeting. Proxies may be solicited by mail, telephone, telecopy or personally by
directors, officers and other employees of the Company and by Morrow & Co., 909
Third Avenue, 20th Floor, New York, New York 10022, which has been engaged for a
fee of $7,500 plus expenses for this purpose. The cost of soliciting proxies
will be borne by the Company.
PROPOSAL 1. ELECTION OF DIRECTORS
Lone Star's certificate of incorporation provides for the division of the
board of directors into three classes, with the directors in each class serving
for a term of three years. Each class of directors consists, as nearly as
possible, of one third of the number of directors constituting the entire board
of directors.
Since the terms of the directors of Class II expire at the 1998 annual
meeting, two Class II directors are to be elected to serve until the 2001 annual
meeting and until their successors are elected and qualified. While the board of
directors has no reason to believe that either of the named nominees is
unavailable or will not serve if elected, if this occurs the proxies will be
voted for a substituted nominee selected by the board of directors or, at its
option, the board may reduce the number of its members.
NOMINEES FOR DIRECTOR (CLASS II)
James E. Bacon, 67, has been a director since 1992 and is a member of the
Executive, Audit and Compensation and Stock Option Committees of the board. He
is a private investor and consultant. From 1986 to 1990, he was Executive Vice
President and a Director of United States Trust Company, a bank holding
<PAGE> 5
company, and a Trustee of United States Trust Company of New York. Mr. Bacon is
a trustee of the funds advised by Nuveen Institutional Advisory Corp.
William M. Troutman, 57, has been a director since 1992 and is a member of
the Executive Committee of the board. Since 1986, he has been President and,
since May 1997, Chief Executive Officer of Lone Star.
CONTINUING DIRECTORS -- TERM TO EXPIRE 1999 (CLASS III)
Theodore F. Brophy, 74, has been a director since 1992 and is a member of
the Executive and Audit Committees of the board. He is a consultant and director
of various companies. Until May 1988, Mr. Brophy was Chairman and Chief
Executive Officer of GTE Corporation, a telecommunications company. In 1988, he
was Chairman, United States Delegation to the World Administrative Conference on
Space Communications. Mr. Brophy is also a director of Transcell Technologies
Inc.
Robert G. Schwartz, 70, has been a director since 1994 and is a member of
the Executive and Compensation and Stock Option Committees of the board. Mr.
Schwartz retired as Chairman of the Board of Directors, President and Chief
Executive Officer of the Metropolitan Life Insurance Company in 1993, having
held these positions since 1989. He has continued as a director of the
Metropolitan Life Insurance Company, and is also a director of COMSAT
Corporation, Lowe's Companies, Inc., Mobil Corporation, Potlatch Corporation and
The Reader's Digest Association, Inc., and a member of the Board of Trustees of
the Consolidated Edison Company of New York. Mr. Schwartz is a member of the
Business Council, a Trustee of the Committee for Economic Development and a
director of the Horatio Alger Association of Distinguished Americans, Inc.
Jack R. Wentworth, 69, has been a director since 1992 and is Chairman of
the Compensation and Stock Option Committee of the board. From 1984 to 1993, he
was Dean of the Graduate School of Business, and is Arthur M. Weimer Professor
Emeritus of Business Administration, at Indiana University. Professor Wentworth
is also a director of Kimball International, Inc. and Market Facts, Inc.
CONTINUING DIRECTORS -- TERM TO EXPIRE 2000 (CLASS I)
Arthur B. Newman, 54, has been a director since 1994 and is a member of the
Audit Committee of the board. Since May 1991, he has been a member of Blackstone
Group Holdings L.L.C., a private investment banking firm. Mr. Newman is a
director of Premium Standard Farms, Inc. and Toys "R" Us, Inc.
Allen E. Puckett, 78, has been a director since 1976 and is Chairman of the
Audit Committee of the board. Since April 1987, he has been Chairman Emeritus of
Hughes Aircraft Company, a manufacturer of aerospace and missile systems, data
processing systems and industrial electronics equipment. From 1978 to 1987, he
was Chairman of the Board and Chief Executive Officer of Hughes Aircraft
Company. Dr. Puckett is also a director of the University of Southern
California, the Museum of Flying and the Center for Russian and Eurasian
Studies.
David W. Wallace, 74, has been a director since 1970 and has served as
Chairman of the Board of Lone Star since January 1991. He is also Chairman of
the Executive Committee of the board. Mr. Wallace was Chairman of the Board and
Chief Executive Officer of Todd Shipyards Corporation from 1987 to 1990, and
prior to July 1984, he was Chairman of the Board and President, Bangor Punta
Corporation, a diversified company. Mr. Wallace is a director of The Northstar
Mutual Funds, a family of mutual funds, and The Emigrant Savings Bank.
COMMITTEES OF THE BOARD OF DIRECTORS
The board has standing Audit, Compensation and Stock Option and Executive
Committees.
The Audit Committee recommends the principal auditors of Lone Star,
consults with the principal auditors with regard to the plan of audit, reviews
the report of audit and the accompanying management letter, consults with the
principal auditors with regard to the adequacy of internal controls, and
consults with Lone Star's internal auditor on these matters.
2
<PAGE> 6
The Compensation and Stock Option Committee approves compensation
arrangements for senior management, approves and recommends to the board of
directors the adoption of any compensation plans in which officers and directors
are eligible to participate, and grants stock options and other benefits under
these plans.
The Executive Committee is empowered to exercise all of the authority of
the board of directors, except that it does not have the power to rescind any
action previously taken by the board of directors or to take certain actions
enumerated in the Company's by-laws (such as amending the Company's certificate
of incorporation, changing the Company's dividend policy or adopting an
agreement of merger or consolidation).
Lone Star has no nominating committee or other committee of the board
performing a similar function.
MEETINGS OF THE BOARD AND COMMITTEES
Four meetings of the board of directors, two meetings of the Audit
Committee, and one meeting of the Compensation and Stock Option Committee were
held during 1997. All directors attended at least 75% of the aggregate number of
meetings of the board and committees on which he served.
DIRECTORS' COMPENSATION
All directors, other than Messrs. Wallace and Troutman, are compensated for
their services pursuant to the Lone Star Industries, Inc. Voluntary Deferred
Compensation Plan for Non-Employee Directors (the "Plan"). Under the Plan,
non-employee directors receive an annual retainer fee of 400 shares of common
stock, subject to adjustment in certain circumstances, and $10,000 in cash.
These retainer fees are paid quarterly in arrears. The Plan permits non-employee
directors to defer all or a part of the cash portion of their annual retainer
fee in an interest-bearing account (an "Interest Account"). Interest is credited
to the Interest Account at the prime rate, compounded monthly. The Plan also
permits participants to defer receipt of all or a part of the common stock
portion of their annual retainer fee in a stock equivalent account (the "Phantom
Share Account"). The Phantom Share Account contains phantom units, each of which
is equivalent in value to a share of common stock. Phantom units are credited
with dividends which are reinvested in additional phantom units. In addition to
these annual retainers, non-employee directors receive $1,000 for each board and
board committee meeting attended and $2,500 annually for any board committee
they chair.
Non-employee directors also are provided $100,000 of life insurance, and if
they leave service as a director after having served a minimum of five years,
are entitled to continued life insurance and they (or their estates) are
entitled to annual payments of $15,000 for 10 years after the date they leave
service (the "Director Deferred Compensation"). Having served as a director for
more than five years prior to becoming an employee of Lone Star, Mr. Wallace is
entitled to the Director Deferred Compensation and the continuation of his life
insurance.
The Company's Directors Stock Option Plan provides for the grant to
non-employee directors of options to purchase up to 50,000 shares of common
stock, subject to adjustment under certain circumstances. Under this plan, each
non-employee director annually is granted a ten-year option to purchase 1,000
shares of common stock at an exercise price equal to the fair market value of a
share of common stock on the date of grant. All such options vest six months
from the date of grant. The plan is administered by the board of directors and
expires on March 10, 2004.
3
<PAGE> 7
EXECUTIVE COMPENSATION
The following table shows, for the three fiscal years ended December 31,
1997, the compensation paid by the Company to its Chief Executive Officer and
four other most highly paid executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
--- --- --- --- --- --- --- --- ---
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
COMPENSATION STOCK OPTIONS/ LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) (2) AWARD(S) SARS PAYOUTS (3)
--------------------------- ---- ------ -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Wallace............. 1997 $204,166 $200,000 -- -- -- -- $ 27,019
Chairman of the Board 1996 170,833 75,000 -- -- -- -- 465,489
1995 150,000 -- -- -- -- -- 21,791
William M. Troutman.......... 1997 382,788 350,000 -- -- -- -- 88,134
President and Chief 1996 306,250 137,500 -- -- -- -- 477, 948
Executive Officer 1995 275,000 -- -- -- -- -- 13,010
Roger J. Campbell............ 1997 187,083 185,000 -- -- -- -- 13,660
Vice President -- 1996 176,250 85,000 -- -- -- -- 65,909
Cement Operations 1995 170,000 -- -- -- -- -- 8,794
Michael W. Puckett........... 1997 177,083 175,000 -- -- -- -- 12,231
Vice President -- Cement 1996 166,250 80,000 -- -- -- -- 33,339
Sales and Concrete
Operations 1995 160,000 -- -- -- -- -- 7,894
William E. Roberts........... 1997 179,166 175,000 -- -- -- -- 10,319
Vice President, Chief 1996 166,250 80,000 -- -- -- -- 384,282
Financial Officer,
Controller 1995 160,000 -- -- -- -- -- 8,785
and Treasurer
</TABLE>
- ---------------
(1) Bonuses under the Company's Executive Incentive Plan are paid during the
first quarter of the year following the year for which the bonuses are
earned.
(2) Perquisites and other personal benefits were less than either $50,000 or 10%
of the total annual salary and bonus for 1995, 1996 and 1997 for each of the
named executive officers.
(3) Other Compensation in 1996 consisted principally of (i) a one-time
nonrecurring payment by Rosebud Holdings, Inc., the Company's liquidating
subsidiary, under the Rosebud Incentive Plan, which was established with the
approval of the Company's creditors and the bankruptcy court in connection
with the Company's emergence from bankruptcy in 1994; (ii) one-time premium
payments to insurance companies for fully paid policies covering litigation
costs, if any, that may arise in connection with enforcing change of control
agreements previously entered into with executives as described below; and
(iii) in the case of Messrs. Wallace and Troutman, one-time premium payments
to insurance companies for fully paid policies covering the costs of certain
retiree medical and life insurance benefits previously granted to the
executives as described below in the event that the Company fails to provide
such benefits following a change of control, together with payments to
Messrs. Wallace and Troutman for the taxes paid on the noncash compensation
represented by these premiums. Additional components of Other Compensation
include (a) Company contributions under the Savings Plan for Salaried
Employees; (b) Company contributions under the Employees Stock Purchase
Plan; (c) group term life insurance premiums; and (d) in 1997, relocation
costs reimbursed to Mr. Troutman.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Company has employment agreements with each of David W. Wallace and
William M. Troutman. Pursuant to their respective agreements, Mr. Wallace is
Chairman of the Company at an annual salary of $210,000 and Mr. Troutman is
President and Chief Executive Officer of the Company at an annual salary of
$400,000. Each of these employment agreement's initial term runs through June
30, 1998 and, thereafter, renews for successive two-year terms unless terminated
at the end of the then current term by either the
4
<PAGE> 8
Company or the executive on at least six months prior notice (in which case, if
terminated by the Company, the executive receives one year's salary as severance
pay and receives medical and certain other benefits during this one-year
period). Upon a "change in control", as defined in his agreement, each of
Messrs. Wallace and Troutman may terminate his employment and receive severance
pay equal to two and one-half years' salary and receive medical and certain
other benefits during this severance period. The agreements require the Company
to establish a grantor trust to fulfill its financial obligations under the
agreements (such trust to be funded upon a change of control).
Mr. Troutman is entitled to receive annual retirement benefits at age 65
which amount to 50% of his salary and bonus, and in no event shall such benefits
be less than $237,500 annually. These benefits will be reduced by the sum of the
annual retirement benefits paid to him pursuant to the Salaried Employees
Pension Plan and the annual payments to which he is entitled under an annuity
purchased by Lone Star in 1989. If Mr. Troutman ceases full-time employment with
the Company prior to age 62, he may elect to receive his retirement benefits
reduced by 5% for each year before age 62. Thereafter, there will be no
reduction. If Mr. Troutman is disabled at any time, the retirement benefits
commence immediately. Upon his death, the retirement benefits will be paid to
his spouse until her death.
Upon retirement, Messrs. Wallace and Troutman, and their respective
spouses, will be entitled to full payment for certain medical services and
expenses pursuant to agreements between each of them and the Company. These
medical benefit payments are to be reduced by an annual deductible per insured
of $1,000 prior to age 65 and $750 thereafter, with benefit payments coordinated
with medicare and with a lifetime benefit limit for each person of $1.0 million.
Upon retirement, Lone Star will also provide Messrs. Wallace and Troutman
retiree life insurance on the same basis as that presently in effect for Lone
Star's salaried retirees.
The Company has entered into change of control agreements with Messrs.
Campbell, Puckett and Roberts. Pursuant to these agreements, in the event his
employment is not continued on a substantially equivalent basis for a year
following a change of control, or if for any reason he elects to terminate his
employment during a thirty-day period commencing on the first anniversary of the
change of control, the officer is entitled to severance pay equal to two and
one-half years' base salary and to medical and certain other benefits for this
two and one-half year period. The agreements remain in effect until December 31,
1999. Upon a change of control, the named executives are also entitled to a
bonus equal to 100% of their then base salary under the Company's Executive
Incentive Plan and, except for Mr. Troutman, to certain pension benefits under a
Supplemental Executive Retirement Plan described below.
STOCK OPTIONS
The following table provides information on stock options exercised during
the year ended December 31, 1997 and option holdings as of that date by
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Wallace.......... -- $ -- -- -- $ -- $ --
William M. Troutman....... 75,000 1,668,750 50,000 -- 1,887,500 --
Roger J. Campbell......... 75,000 1,583,750 -- -- -- --
Michael W. Puckett........ 25,000 681,250 -- -- -- --
William E. Roberts........ 500 19,500 21,500 -- 811,625 --
</TABLE>
- ---------------
(1) The closing price of a share of common stock on the New York Stock Exchange
for the last trading day of 1997 was $53 1/8.
5
<PAGE> 9
PENSION PLAN
The following table shows the estimated annual benefit payable upon
retirement to persons in specified compensation and years of credited service
classifications under the Lone Star Salaried Employees' Pension Plan and
Supplemental Executive Retirement Plan:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFIT PAYABLE AT NORMAL RETIREMENT
ASSUMING THE FOLLOWING YEARS OF CREDITED SERVICE
ASSUMED AVERAGE -------------------------------------------------------------
ANNUAL COMPENSATION 10 15 20 25 30 35
- ------------------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $17,700 $26,500 $ 35,400 $ 44,200 $ 53,100 $ 62,300
150,000 21,700 32,500 43,400 54,200 65,100 76,300
175,000 25,700 38,600 51,400 64,300 77,100 90,400
200,000 29,700 44,600 59,500 74,300 89,200 104,400
250,000 37,800 56,600 75,500 94,400 113,300 132,500
300,000 45,800 68,700 91,600 114,500 137,300 160,600
350,000 53,800 80,700 107,600 134,500 161,400 188,700
400,000 61,800 92,800 123,700 154,600 185,500 216,800
</TABLE>
The compensation covered by the qualified plan includes base pay, subject
to ERISA limitations of $228,860 for 1992, $235,840 for 1993, and $150,000 for
1994 through 1996 and $160,000 for 1997 and later years. The compensation
covered by the supplemental plan include base pay plus bonuses with no
limitation.
The years of credited service for David W. Wallace, William M. Troutman,
Roger J. Campbell, Michael W. Puckett and William E. Roberts are 7, 15, 12, 28
and 23, respectively. Mr. Troutman is not a participant in the supplemental
benefit plan.
The qualified plan benefits are payable for the lifetime of the
individuals, while the supplemental benefits are payable as a lump sum. The
benefits shown are payable without reduction at age 62 or later, and are not
subject to any deductions or offsets. However, ERISA currently limits benefits
payable at age 65 to $118,800 for 1994, $120,000 for 1995 and 1996, and $125,000
for 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, Metropolitan Life Insurance Company, The TCW Group, Inc. and
certain of their affiliates are parties to a registration rights agreement
pursuant to which the Company has registered certain securities of the Company
held by such entities and will maintain the effectiveness of the registration
statement until such registration is no longer required. Pursuant to this
agreement, the Company is obligated to pay all expenses incident to the
registration, offering and sale of the securities offered to the public, other
than underwriting commissions, and to indemnify these parties against certain
civil liabilities, including liabilities under the Securities Act of 1933.
Metropolitan Life Insurance Company, along with one of its subsidiaries,
provides various services in connection with the Company's sponsorship and
administration of its salaried and hourly employee 401(k) savings plans. In
addition, Metropolitan Life and one of its affiliates hold the Company's $50
million principal amount of 7.31% Senior Notes due 2007, which were issued in
March 1997.
6
<PAGE> 10
REPORT AND PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of Lone Star's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, in whole or in part, including
the Company's Annual Report on Form 10-K for 1997 and the Company's currently
effective Registration Statements on Form S-3 and S-8, the following Report and
Performance Graph shall not be incorporated by reference into any such filings.
REPORT OF THE COMPENSATION AND STOCK OPTION
COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL PHILOSOPHY
The Company's general philosophy for the compensation of its executives is
based on the premise that levels and types of compensation should be established
to support the Company's business strategy and long-term development and to
enhance stockholder value. Such compensation must also be competitive with that
offered by comparable companies in order to attract, retain and reward
executives capable of achieving those objectives.
When the Compensation and Stock Option Committee considers executive
compensation it is guided by the experience of the executive involved, future
initiatives for and challenges to the Company, the executive's expected
contribution to the Company's performance and compensation arrangements in
businesses similar to that of the Company. If appropriate in the judgment of the
Committee, recommendations of a compensation consulting firm are sought in
connection with the determination of executive compensation. The Committee
considers annually the compensation of the Company executives and held one
meeting in 1997.
BASE SALARY
Consistent with the Company's continuing efforts to manage costs, salaries
of officers were kept essentially at the same levels from 1990 to 1996.
Recognizing that these salaries had become significantly below those of the
Company's competitors, modest salary increases to selected executive officers
were implemented during 1996 and 1997. Mr. Wallace's salary is $210,000 and Mr.
Troutman's salary is $400,000. In setting these salaries, and in setting
salaries in the future, the Committee will remain cognizant of the cyclical
nature of the Company's business. Accordingly, the Committee will be balancing
the need to recognize the contribution of these individuals against the need to
manage the Company's ongoing cost structure with the result that it is expected
that the Company will continue to emphasize incentive compensation rather than
change salary structures significantly. Factors evaluated in setting salaries
include the Committee's judgment concerning individuals' contribution to the
business, levels of responsibility and career experience. No particular formulas
or measures are used.
BONUSES
The Company has an Executive Incentive Plan. This Plan provides for bonuses
to be paid in an amount equal to certain percentages of salary determined from
formulas tied to various earnings benchmarks. The maximum bonus under the plan
is 100% of base salary. All such benchmarks were exceeded in 1997, and each of
the named executives received the maximum bonus.
STOCK OPTIONS
The Committee believes that a significant portion of a senior executive's
compensation should be dependent on value created for the stockholders and
options (as well as performance bonuses) are excellent vehicles to accomplish
this by tying an executive's interests directly to the stockholders' interests.
The Company has two option plans, and under the first plan implemented in 1994,
all 700,000 shares have been granted and all but 127,750 of the options have
been exercised.
7
<PAGE> 11
The second option plan was approved by the board of directors and
stockholders in 1996 and covers options to purchase and/or stock appreciation
rights that may be exercised with respect to, 1,500,000 shares of common stock.
No grants of options or SARs have been made, and the Committee has not made any
determination of which executives and managers will receive grants, or the
amounts of the grants. The Committee expects that, when made, grants will be
based on the recipient's performance and level of responsibility. The Committee
believes that an award level should be sufficient in size to provide a strong
incentive for an executive to work for the long term business interests of the
Company and become a significant owner of the business. The Committee
anticipates that the 1996 plan will be sufficient to cover grants through the
year 2000.
GENERAL
The Committee believes that the Company has an appropriate and competitive
compensation program comprised of a sound base salary structure combined with
effective long and short term incentives.
No member of the Committee is a former or current executive officer or
employee of the Company or of any of its subsidiaries.
James E. Bacon
Robert G. Schwartz
Jack R. Wentworth, Chairman
PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the period commencing May 3,
1994 (the date the Company's common stock began trading) and ending December 31,
1997, the cumulative total return on the Company's common stock against the
cumulative total return of the Standard & Poor's 500 and a peer group. The peer
group is comprised of five cement companies: Centex Construction Products, Inc.,
Giant Cement Company, Lafarge Corp., Medusa Corporation and Southdown, Inc. The
graph assumes: (1) investment of $100 at the opening of trading on May 3, 1994
in Lone Star's common stock, the S&P 500 and the peer group; and (2) the
reinvestment of all dividends.
<TABLE>
<CAPTION>
Measurement Period 'Lone Star Standard & Poors
(Fiscal Year Covered) Industries, Inc.' 500 Peer Group
<S> <C> <C> <C>
5/3/94 100 100 100
1994 115.7 104 83.52
1995 166.37 143 95.21
1996 246.93 176.25 122.11
1997 357.29 235.09 187.18
</TABLE>
8
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the beneficial
ownership of common stock at February 28, 1998 provided to the Company by (a)
each stockholder known by the Company to be the beneficial owner of more than
five percent of the outstanding shares of common stock, (b) each director, (c)
each executive officer named in the Summary Compensation Table, and (d) all
directors and current executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OF OUTSTANDING SHARES
BENEFICIAL OWNERS COMMON STOCK OF COMMON STOCK(1)
------------------- ------------------------ ------------------
<S> <C> <C>
Metropolitan Life Insurance Company and Affiliates.... 2,733,638(2) 25.53%
One Madison Avenue
New York, NY 10010
FMR Corp. and Affiliates.............................. 633,400(3) 5.92
82 Devonshire Street
Boston, Massachusetts 02109
Franklin Resources, Inc............................... 566,710(4) 5.29
777 Mariners Island Blvd.
San Mateo, CA 94403
James E. Bacon........................................ 6,099(5) (6)
Theodore F. Brophy.................................... 7,000(5) (6)
Arthur B. Newman...................................... 9,000(5) (6)
Allen E. Puckett...................................... 5,199(5) (6)
Robert G. Schwartz.................................... 7,600(5) (6)
William M. Troutman................................... 53,735(5)(7) (6)
David W. Wallace...................................... 680,127(8) 6.35
Jack R. Wentworth..................................... 4,133(5) (6)
Roger J. Campbell..................................... 1,700 (6)
Michael W. Puckett.................................... 333 (6)
William E. Roberts.................................... 40,525 (6)
All directors and executive officers as a group (16 889,946(9) 8.31
persons)............................................
</TABLE>
- ---------------
(1) The percentage of outstanding shares of common stock calculation assumes for
each beneficial owner that all of the currently exercisable options and
warrants beneficially owned by such person or entity are exercised in full
by such beneficial owner and that no other options or warrants are deemed to
be exercised by any other stockholders.
(2) Includes 891,609 shares of common stock issuable upon exercise of warrants
held by such stockholder. This information is derived from a Schedule 13G
dated January 30, 1998.
(3) FMR Corp. acts as an investment advisor to various investment companies, and
as sub-advisor to a trust, owning an aggregate of 307,700 of these shares. A
bank subsidiary of FMR Corp. beneficially owns 311,300 of these shares as a
result of its serving as investment manager for certain institutional
accounts. Members of a family, including Edward C. Johnson 3d, the Chairman
of FMR Corp., and Abigail Johnson, through their stockholdings and a voting
agreement, may be deemed a controlling group with respect to FMR Corp. A
former subsidiary of FMR Corp., Fidelity International Limited, of which Mr.
Johnson and members of his family are significant stockholders, beneficially
owns 41,000 shares, of which 26,600 are included in the foregoing numbers as
beneficially held by FMR Corp. The information contained herein is derived
from a Schedule 13G dated February 14, 1998.
(4) These shares are beneficially owned by one or more open or closed-end
investment companies or other managed accounts which are advised by direct
and indirect investment advisory subsidiaries of Franklin Resources, Inc.
("FRI"). Charles B. Johnson and Rupert H. Johnson, Jr., FRI's principal
stockholders, FRI and each of the investment advisory subsidiaries disclaim
any economic interest or beneficial ownership of these securities. The
information contained herein is derived from a Schedule 13G dated January
30, 1998.
9
<PAGE> 13
(5) Includes shares of common stock which the directors and executive officers
had the right to acquire through the exercise of warrants held by them as
follows: James E. Bacon -- 83 shares; Allen E. Puckett -- 413 shares;
William M. Troutman -- 538 shares; Jack R. Wentworth -- 33 shares; Also
includes shares of common stock underlying exercisable options, as follows:
James E. Bacon -- 4,000 shares; Theodore F. Brophy -- 4,000 shares; Arthur
B. Newman -- 4,000 shares; Allen E. Puckett -- 4,000 shares; Robert G.
Schwartz -- 4,000 shares; William M. Troutman -- 50,000 shares; Jack R.
Wentworth -- 4,000 shares; and William E. Roberts -- 21,500 shares.
(6) Represents less than 1% of the outstanding shares of common stock.
(7) Excludes 100 shares of common stock held by Mr. Troutman's son, as to which
shares he disclaims beneficial ownership.
(8) Excludes 93,098 shares of common stock held by Mr. Wallace's wife. Includes
617,000 shares of common stock held by The Robert R. Young Foundation, a
charitable foundation (the "Foundation"). Mr. Wallace is an officer and
trustee of the Foundation, but has no pecuniary interest in, and receives no
compensation, expense reimbursement or other monies from, the Foundation. He
disclaims beneficial ownership of all shares held by his wife and the
Foundation.
(9) Includes or excludes, as the case may be, shares of common stock as
indicated in the preceding footnotes. With respect to the executive officers
not named above, (i) includes 21 shares of common stock issuable upon
exercise of warrants and 56,250 shares of common stock underlying
exercisable options and (ii) excludes an aggregate of 501 shares of common
stock, and warrants to purchase 5 shares, held by the wives of two such
officers, as to which shares beneficial ownership is disclaimed by such
officers.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
The board of directors has recommended that stockholders ratify its
appointment of Coopers & Lybrand L.L.P. as principal independent auditors of the
Company for the year ending December 31, 1998. Coopers & Lybrand L.L.P. has
performed the annual audits of the Company's accounts for many years. A
representative of Coopers & Lybrand L.L.P. is expected to be present at the
meeting to respond to any questions stockholders may have concerning the audited
financial statements of the Company and to make a statement, if he or she so
desires.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals for the 1999 annual meeting should be received by the
Company no later than December 1, 1998 in order to be considered for inclusion
in the 1999 annual meeting proxy statement and form of proxy.
OTHER MATTERS
The board of directors knows of no other business to be presented at the
meeting. If other matters do properly come before the meeting, the persons
acting pursuant to the proxy will vote on them in their discretion. A copy of
the 1997 Annual Report on Form 10-K is being mailed with this Proxy Statement.
By Order of the Board of Directors,
JAMES W. LANGHAM
Vice President, General Counsel
and Secretary
March 30, 1998
10
<PAGE> 14
[RECYCLE LOGO]
<PAGE> 15
PROXY
LONESTAR LOGO
LONE STAR INDUSTRIES, INC.
STAMFORD, CONNECTICUT
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints DAVID W. WALLACE, WILLIAM M. TROUTMAN AND JAMES
W. LANGHAM, and each of them, proxies, with full power of substitution, to vote
with all powers the undersigned would possess if personally present at the
Annual Meeting of Stockholders of Lone Star Industries, Inc. to be held May 14,
1998 at 10:00 a.m. at The Greenwich Library, 101 West Putnam Avenue, Greenwich,
Connecticut, for each of the matters listed below and the transaction of such
other business as may properly come before the meeting (including
adjournments).
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS
1 AND 2. ON ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING, THIS PROXY WILL
BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED PERSONS.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 16
Please mark
your votes as [X]
indicated in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
FOR (except as
withheld below) WITHHELD
Proposal 1 - Election of Directors. / / / /
Nominees: James E. Bacon and William M. Troutman
(To withhold authority to vote for any individual
nominee write that nominee's name in the space
provided below.)
- -------------------------------------------------
FOR AGAINST ABSTAIN
Proposal 2 - Ratification of Appointment of / / / / / /
Independent Auditors.
Please date Proxy, sign Proxy as your name appears above and return Proxy in
the enclosed envelope. If acting as executor, administrator, trustee, guardian,
partner, etc., you should so indicate when signing. If the signer is a
corporation, please sign the full corporate name, by duly authorized officer.
If shares are held jointly, each stockholder named should sign.
Signature(s) Date , 1998
--------------------------------------------- ---------
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FOLD AND DETACH HERE
