<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
MEDALIST INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MEDALIST INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
[ ] 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.:
------------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
MEDALIST INDUSTRIES, INC.
TO THE SHAREHOLDERS:
Medalist Industries, Inc. will hold its Annual Meeting at:
10:00 AM Thursday, April 27, 1995
The Pfister Hotel
424 East Wisconsin Avenue
Milwaukee, Wisconsin
The purposes of this Meeting are:
1. To elect two directors of the corporation for a three year term.
2. To act on any other business that may properly come before the
Meeting or any adjournment of the Meeting.
Shareholders of record at the close of business on March 13, 1995 are
entitled to notice of the Meeting and entitled to vote at the Meeting.
If you will not be voting your shares in person, please date, sign, and
mail the accompanying proxy. Any proxy may be revoked at any time prior to
being voted at the Meeting.
By Order of the Board of Directors
WILLIAM C. O'LOUGHLIN
Secretary
Milwaukee, Wisconsin
March 21, 1995
<PAGE> 3
MEDALIST
MEDALIST INDUSTRIES, INC.
10850 WEST PARK PLACE, SUITE 150
MILWAUKEE, WISCONSIN 53224
* * * * * * * * *
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 27, 1995
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Medalist Industries, Inc. ("Medalist") of proxies for
use at the Annual Meeting of Shareholders to be held at The Pfister Hotel, 424
East Wisconsin Avenue, Milwaukee, Wisconsin on Thursday, April 27, 1995 at
10:00 AM and at any adjournment thereof, (1) to elect two directors of the
corporation for a three year term, (2) to act on any other business that may
properly come before the Meeting or any adjournment of the Meeting. Unless
otherwise specified on your proxy card, all properly executed and delivered
proxies will be voted at the Annual Meeting "FOR" the nominees for directors
previously approved by the Board.
On March 13, 1995, the record date for the determination of shareholders
entitled to receive notice of and to vote at the Annual Meeting, there were
3,849,434 shares of common stock of Medalist outstanding. Each such share is
entitled to one vote. A majority of the shares entitled to vote, represented
in person or by proxy, will constitute a quorum. A simple majority of the
total shares outstanding is required to elect the directors provided a quorum
is present. Votes will be tabulated by an inspector at the meeting.
This Proxy Statement is being mailed to shareholders beginning March 21,
1995.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Exhibit 1 lists information concerning the beneficial ownership of the
common stock of Medalist by those persons believed by Medalist to beneficially
own more than five percent of the common stock outstanding at the dates
indicated.
Exhibit 2 sets forth information regarding the beneficial ownership of
common stock shares of Medalist, as of March 13, 1995, by each director and by
all directors and officers of Medalist as a group. These persons had sole
voting and investment power for the shares listed, except for 26,398 shares,
included in the total for all directors and officers, owned by the Medalist
Salaried Pension Trust, for which an executive officer of the Company is a
trustee. The beneficial ownership information in Exhibit 2 is based on
information furnished by these persons and is determined in accordance with
Rule 13d-3, as required for this Proxy Statement. It is not to be construed as
an admission of beneficial ownership for other purposes.
Exhibit 1
Security Ownership of 5% Shareholders
<TABLE>
<CAPTION>
Percent
Amount and nature share
Name and address of beneficial owner of beneficial ownership of class
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Heartland Advisors, Inc. 1,115,572 (a) 29.0
790 N. Milwaukee Street
Milwaukee, WI 53202
State of Wisconsin Investment Board 378,000 (b) 9.8
P.O. Box 7842
Madison, WI 53707
Brinson Partners, Inc. 352,544 (c) 9.2
209 South LaSalle
Chicago, IL 60604
The Prudential Insurance Company of America 373,100 (d) 9.7
Prudential Plaza
Newark, NJ 07102
Edward D. Hopkins 262,974 (e) 6.5
9310 N. Upper River Road
River Hills, WI 53217
</TABLE>
-------------------------------------------------------
(a) These shares include 43,672 shares which would be issued if the
debentures were fully converted. As indicated in Schedule 13G
filed January 9, 1995, Heartland Advisors, Inc. has dispositive
power for 1,115,572 shares, but does not have or share voting
power for any of the shares.
(b) As indicated in Schedule 13G filed February 13, 1995, State of
Wisconsin Investment Board has sole voting and dispositive power
over 378,000 shares.
(c) As indicated in Schedule 13G filed February 13, 1995, Brinson
Partners, Inc. has sole voting and dispositive power over 150,225
shares. Brinson Trust Company, a wholly owned subsidiary of
Brinson Partners, Inc., has sole voting and dispositive power over
202,319 shares.
(d) As indicated in Schedule 13G filed January 31, 1995, The
Prudential Insurance Company of America has sole voting and
dispositive power over 168,100 shares and shared voting and
dispositive power over 205,000 shares. Prudential denies being
the beneficial owner of any registered equity securities of the
issuer for the purposes of Section 13(d) or 13(g) of the
Securities Exchange Act of 1934.
(e) Includes 165,000 shares for which Mr. Hopkins has options
exercisable, 35,893 shares which would be issued if the Debentures
were fully converted, and 62,081 common shares already owned. Mr.
Hopkins has sole power to vote and dispose of all shares.
2
<PAGE> 5
Exhibit 2
Security Ownership of Directors and Management
<TABLE>
<CAPTION>
Rights to Total Percent
acquire beneficial beneficially share
Name ownership owned of class
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Harry S. Burker 6,215 8,215 .2
James D. Dodson 893 103,393 2.7
Peter A. Fischer 6,215 22,515 .6
John B. Howenstine 6,215 61,215 1.6
John T. Paprocki 15,000 15,000 .4
John S. Sammond 8,508 15,508 .4
Roger E. Secrist 6,215 6,315 .2
All directors and executive 74,794 289,856 7.4
officers as a group (10 persons)
</TABLE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission certain reports of ownership and reports
of changes in ownership of common stock and other equity securities of the
Company. Directors, executive officers, and greater-than-ten-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all filed Section 16(a) forms.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during 1994, all Section 16(a) filing requirements
applicable to its directors, executive officers, and greater-than-ten-percent
beneficial owners were complied with.
3
<PAGE> 6
(1) ELECTION OF DIRECTORS
The Articles of Incorporation and Bylaws of the Company provide for the
election of directors by classes. Effective March 1, 1995, the Board will
consist of six persons. Two persons have been nominated for election at the
Meeting to serve for terms of three years. All of the nominees are currently
directors. Mr. Sammond's current term expires in 1997; the size of the class of
1997 is being reduced from three to two directors. The remaining four directors
will continue to serve in accordance with their prior election. If any of the
nominees is unable to serve, proxies may be voted with discretionary authority
for a substitute nominee approved by the Board. Exhibit 3 lists Medalist's
directors and the two nominees for terms expiring in 1998.
Exhibit 3
Directors
<TABLE>
<CAPTION>
Director
Name and age Principal occupation and business experience since
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
<CAPTION>
NOMINEES FOR TERMS EXPIRING IN 1998
Peter A. Fischer, 52 Assembly of God Minister; director of Bando-McGlocklin Capital Corp. 1975
and the Gehl Company.
John S. Sammond, 66 Partner, Quarles & Brady (attorneys for Medalist) since 1960. 1978
<CAPTION>
DIRECTORS WITH TERMS EXPIRING IN 1996
Harry S. Burker, 66 President, Execu-Com Inc. (business consultants) since 1991; director, 1989
president, and chief executive officer, Siemens Energy & Automation, Inc.
(electrical equipment manufacturer), 1985 through 1990; director of
SPD Technologies, Inc. since 1993.
Roger E. Secrist, 55 Retired chairman of the board and chief executive officer of ANGUS Chemical 1984
Company (specialty chemicals); director of Gehl Company since 1982.
<CAPTION>
DIRECTORS WITH TERMS EXPIRING IN 1997
James D. Dodson, 58 Private Investor; director of Swing-N-Slide Corporation 1993
John B. Howenstine, 54 President, chief executive officer and chairman of Fiberflex, Inc. since 1994; 1989
managing director, Riverway Capital Partners, (financial advisory firm)
since 1989.
</TABLE>
During 1994, Medalist's Board of Directors held ten meetings. The
Executive Committee, consisting of Messrs. Fischer, Hopkins, Sammond, and
Secrist, held zero meetings.
The Audit Committee, consisting of Messrs. Burker, Dodson, and Howenstine,
recommends to the Board of Directors the engagement of independent auditors and
reviews the Company's internal controls and audited financial statements. The
Audit Committee held two meetings during the year.
The Compensation Committee, consisting of Messrs. Burker, Howenstine and
Secrist, administers the Company's various incentive plans, including its stock
incentive plan and its annual bonus plan. The Committee determines the
compensation package for the CEO and reviews in detail the compensation levels
for senior Company executives. The Committee's determinations are subsequently
reviewed and approved by the Company's Board of Directors. The Committee held
two meetings in 1994.
The Nominating Committee, consisting of Messrs. Dodson, Fischer and
Sammond, proposes to the Board of Directors the slate of directors for election
by the shareholders at their Annual Meeting, and considers prospective director
candidates in the event of resignations, death, or retirement of directors.
The Nominating Committee held two meetings in 1994. The Nominating Committee
will consider nominees recommended by shareholders of the Company. Any
recommendations should be submitted in writing to the Secretary of the Company,
10850 West Park Place, Suite 150, Milwaukee, Wisconsin 53224.
All directors attended more than 75 percent of the meetings of the Board
and of the committees of the Board on which they served in 1994.
4
<PAGE> 7
EXECUTIVE COMPENSATION
Summary compensation
Exhibit 4 summarizes the compensation to each of the Company's executive
officers with total 1994 salary and bonus exceeding $100,000.
Exhibit 4
Summary Compensation
<TABLE>
<CAPTION>
Long-term compensation
Annual compensation ----------------------
Name and present -------------------------------------- Restricted
position Year Salary($) Bonus($) stock($) Options(#) All other($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Edward D. Hopkins 1992 295,000 0 0 50,000 36,395 (a)
CEO 1993 320,000 0 0 0 36,064 (a)
1994 320,000 0 0 0 214,126 (a) (b)
John T. Paprocki 1994 77,884 23,125 0 15,000 0
CFO
</TABLE>
- -------------------------------------------
a) Split-dollar life insurance. Medalist's portion of the payments are
secured by an assignment of the cash surrender value or the proceeds of
the policy.
b) The 1994 amount for Mr. Hopkins includes $36,126 for split dollar life
insurance and $178,000 in severance and continuing medical, dental and
other employment benefits pursuant to the December 23, 1994 amendment to
his employment contract.
Stock options and stock compensation
Mr. Paprocki, as a condition of employment, was awarded options to
purchase 15,000 shares of common stock in 1994. These options vest over a
three year period and have an exercise price equal to the market value of the
common stock on the issue date.
Exhibit 5
Options Granted in 1994
<TABLE>
<CAPTION>
Options granted Potential realizable value at
-------------------------------------------------------- assumed annual rates of stock
Share of Exercise Expiration price appreciation for option term
Executive Number total grants price date 5% 10%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John T. Paprocki 15,000 100% 14.00 05/19/2004 132,150 334,500
</TABLE>
5
<PAGE> 8
Exhibit 6 provides information on the options exercised in 1994, the
number of unexercised options, and the value of the unexercised in-the-money
options held by the listed individuals.
Exhibit 6
Options Exercised in 1994, and 1994 Year-end Option Values
<TABLE>
<CAPTION>
Value of unexercised
Number of in-the-money options
Shares Unexercised options at year-end ($)
acquired on Value -------------------------- ------------------------------------
Executive exercise realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Edward D. Hopkins 0 0 165,000 0 0 0
John T. Paprocki 0 0 0 15,000 0 0
</TABLE>
Performance graph
Exhibit 7 compares Medalist's total shareholder return with the cumulative
total return of the NASDAQ Industrials and a line-of-business peer group. All
returns are calculated from the December 31, 1988 base.
The line-of-business peer group consists of the following publicly traded
companies: Chicago Rivet & Machine Company, ELCO Industries, Inc., Federal
Screw Works, Hi-Shear Industries, Inc., Penn Engineering & Manufacturing
Corporation, RB&W Corporation, and SPS Technologies, Inc. This is the same
peer group as used in the prior year. Medalist believes that every company in
this group derives a significant share of revenues from the manufacture or
distribution of industrial fasteners. While 1992 was the first year in which
Medalist would belong in this line-of-business peer group, management believes
this is an appropriate line-of-business peer group following the Company's
redirection beginning in 1992. Due to Medalist having several unrelated non-
fastener businesses prior to 1992, performance comparisons for prior years may
be inappropriate.
Exhibit 7
Stock Price Performance
Medalist, Peers, and NASDAQ Industrials
<TABLE>
<CAPTION>
12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94
<S> <C> <C> <C> <C> <C> <C>
Medalist Industries Inc. 100 109.86 92.96 81.69 174.65 64.79
Peer Group 100 62.45 88.74 89.65 136.24 137.72
NASDAQ Composite (US) 100 84.92 136.28 158.58 180.93 176.44
</TABLE>
6
<PAGE> 9
Retirement plans
From December 1, 1979 through the end of 1993, Medalist maintained a
defined benefit pension plan for all salaried employees. Effective December
31, 1993, Medalist merged its hourly production pension plans into its salaried
pension plan and ceased all future benefit accruals under the surviving
salaried plan and the merged hourly production plans. The plan provides a
benefit equal to 1.5% of the employee's average monthly pay (up to $235,840 per
year) for the period from 1989 through 1993, multiplied by the number of years
of credited service. Remuneration under the plan is defined as total
compensation pay which would be subject to tax for social security benefits
without regard to the dollar limitation on such compensation subject to FICA
taxes. Mr. Hopkins has five years of credited service, and his estimated
annual benefits payable upon retirement will be $13,153. In conjunction with
the merger of its defined benefit plans, the Company simultaneously merged its
defined contribution plans effective December 31, 1993. This merger created
the Medalist Employee Retirement Incentive Trust Plan. This plan encourages
employee participation with Company matching funds and allows employees to
direct personal, as well as, company contributions into six separate accounts,
one of which is Medalist Common Stock. Executives participate in this plan on
the same terms as eligible non-executive employees.
Employment contracts
Medalist's Employment Agreement with Mr. Hopkins dated May 1, 1992, as
amended December 23, 1994, required services to be rendered until March 1,
1995. The amended Agreement provides Mr. Hopkins, following his contract
termination on February 28, 1995, with severance benefits including certain
medical, dental and other employment benefits in the total amount of $178,000.
Medalist and Mr. Hopkins also entered into a Mutual and General Release
Agreement pursuant to which Mr. Hopkins received payments aggregating $192,000,
and the parties released each other and their affiliates from all potential
claims.
Directors' fees
Directors' fees are paid only to non-employee directors, who receive an
annual retainer of $12,500 and a fee of $700 (and necessary expenses) for each
Board or committee meeting attended. Each committee chairperson receives $950
for each committee meeting held. Each non-employee director receives an annual
option at the fair market value at the date of grant equal to his annual
retainer divided by the fair value of a share on the date of grant. Grants to
directors were made in 1994, at market price on the date of grant (893 shares
each at $14.00 per share), to Messrs. Burker, Dodson, Fischer, Howenstine,
Sammond, and Secrist.
7
<PAGE> 10
Report of the Compensation Committee on Executive Compensation
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely
of independent, non-employee directors. The committee provides overview
monitoring of executive compensation, perquisites and benefit programs.
Specific responsibilities of the committee include: (1) Executive officer
salary review including approval of salary actions for the chairman, president
and CEO, (2) approval of stock option plans or other long term incentives for
all employees, (3) review of overall performance based bonus plans, and (4)
retirement plan design and investments.
The general philosophy of the Company's executive compensation program is
to offer employees competitive compensation based on both the Company's
performance and on the employee's individual contribution and performance. The
Compensation Committee, in its deliberations on base salary and incentive
compensation matters, is guided by the following fundamental considerations:
(1) The need to attract and retain key management crucial to the Company's
long-term success, (2) the desire to provide performance-based compensation
opportunities which allow key executives to earn rewards for long-term
strategic management and the enhancement of shareholder value, and (3) the
desire to establish a relationship between executive compensation, incentives,
and the Company's annual and long-term strategic goals.
The Company's executive compensation program consists of three main
components: Base Salary, Annual Cash Bonus, and Stock Options.
BASE SALARY
In order to attract and retain key executives who could contribute to the
continued restructuring and growth of the Company for calendar year 1994, the
Committee targeted salary levels based on current outside surveys of industrial
manufacturers having $100 to $200 million in sales. The survey data examined
by the Committee consisted of an analysis of compensation information with
respect to over 270 United States corporations producing durable goods,
focusing on companies with annual sales between $100 - $200 million. This
category of companies includes, but is broader than, the peer group of seven
industrial fastener companies included elsewhere in this proxy statement.
Executive officers' salaries, including the chief executive officer, were
targeted between the 50th and 95th percentile, with the chief executive officer
near the upper end of that range. The Committee believed these levels were
necessary to attract, motivate, reward, and train key executives. Currently
this group's actual salaries are between the 25th and 85th percentiles of the
targeted ranges. In addition to survey compensation data, individual
consideration was given to each executive's area of responsibility, pay grade,
and individual contributions when determining base salary adjustments for 1994.
The 1994 salaries paid for executive officers as a group increased 3.4%
over 1993. The base salary paid to the chief executive officer for 1994 did
not change.
ANNUAL CASH BONUS
The cash bonus program provides executive officers with the opportunity to
increase annual compensation by a significant portion of their salary based on
the Company's performance and their individual contributions. The Committee
reviews and approves the executive bonus plan. This pay-for-performance
incentive plan is linked to a single bonus qualifier goal for the business unit
which accounts for 50% to 70% of the award, and is supplemented by up to five
individual executive goals for the other portion. The bonus qualifier goal for
1994 was either a percentage improvement in return on assets invested within a
business unit or earnings per share for the Company as a whole, depending upon
the executive's area of responsibility. Individual executive goals are based
on confidential targets derived from the annual plan, such as business unit
sales, gross margin, profitability, or business unit improvements over the
prior year. Executives begin earning awards when performance is at least 75%
of the target level, and increase on a formula basis up to 130% of the target
level. Bonus ranges are from 5% to 70% of salary depending on executive level.
In 1994, 5 executives out of 16 eligible executives received a cash bonus.
Bonuses paid in 1994 averaged 17% of salary for the 5 executives who received a
bonus. In addition, 11 non-executive key employees divided a pool of $10,000
based on their operating unit achieving its qualifier goals. Mr. Hopkins did
not receive a bonus in 1994 because 1994 earnings did not reach the minimum
bonus qualifier level.
STOCK OPTIONS
The Committee administers the Company's stock option plans. The plans
provide for option grants to executive officers, other key employees, and
directors. The directors' portion is comprised of an annual formula award
based on the retainer fee for outside directors. The executive officer and key
employee awards are discretionary and based on the chief executive officer's
recommendations and Committee consideration and approval. During 1994, 19
employees were granted stock options totaling 61,000 options which were made on
a subjective basis. Six outside directors as a group received a total of 5,358
options under the plan.
HARRY S. BURKER, CHAIRMAN
JOHN B. HOWENSTINE
ROGER E. SECRIST
8
<PAGE> 11
INDEPENDENT AUDITOR
Ernst & Young LLP was Medalist's independent auditor for 1994. It has
been appointed by the Board of Directors, upon recommendation of the Audit
Committee, as auditor for 1995. Representatives of Ernst & Young LLP will be
at the Annual Meeting, will have an opportunity to make a statement, and will
be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
All proposals of shareholders intended to be considered for inclusion in
the Proxy Statement for presentation at the 1996 Annual Meeting of Shareholders
must be received at Medalist offices in Milwaukee, Wisconsin no later than
November 22, 1995.
OTHER MATTERS
The enclosed proxy is being solicited by the Board of Directors of
Medalist. The cost of the solicitation is being borne by Medalist. In
addition to the use of the mail, proxies may be solicited by telephone or
personal interview by regular employees of Medalist without additional
compensation. Medalist will reimburse brokerage firms, banks, trustees,
nominees, and other persons for their out-of-pocket expenses in forwarding
proxy material to the beneficial owners of voting securities.
Management knows of no other matters to be brought before the Meeting,
but if any other matters properly come before the Meeting, it is the intention
of persons named in the enclosed form of proxy to vote for Management's
position on those matters.
By Order of the Board of Directors
WILLIAM C. O'LOUGHLIN
Secretary
Milwaukee, Wisconsin
March 21, 1995
9
