<PAGE> 1
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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CONSO PRODUCTS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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)(1) and 0-11.
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PRELIMINARY COPIES
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 9, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Conso
Products Company (the "Company") will be held at the executive offices of
Simplicity Pattern Co. Inc., Two Park Avenue, 12th Floor, New York, New York, on
Monday, November 9, 1998, at 3:00 p.m., local time, for the purpose of
considering and acting upon the following:
1. The election of six Directors.
2. Approval of an amendment to the Company's Articles of
Incorporation changing the Company's name to "Conso
International Corporation".
3. Ratification of the selection of Deloitte & Touche LLP as
independent public accountants for the fiscal year ending
June 26, 1999.
4. Any and all other matters that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 18,
1998 as the record date for determining the shareholders entitled to notice of
and to vote at the meeting and any adjournment thereof, and only holders of
Common Stock of the Company of record at such date will be entitled to notice of
or to vote at the meeting.
THE BOARD OF DIRECTORS WILL APPRECIATE THE PROMPT RETURN OF THE ENCLOSED
PROXY, DATED AND SIGNED. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME BEFORE IT
IS EXERCISED AND WILL NOT BE EXERCISED IF YOU ATTEND THE MEETING AND VOTE IN
PERSON.
By Order of the Board of Directors
/s/ J. Cary Findlay
J. Cary Findlay
Chairman
Union, South Carolina
September 25, 1998
<PAGE> 3
PRELIMINARY COPIES
CONSO PRODUCTS COMPANY
P. O. Box 326
513 N. Duncan Bypass
Union, South Carolina 29379
PROXY STATEMENT
General
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of proxies to be used at the Annual Meeting of
Shareholders of Conso Products Company, a South Carolina corporation (the
"Company"), to be held at the executive offices of Simplicity Pattern Co. Inc.,
Two Park Avenue, 12th Floor, New York, New York, at 3:00 p.m., local time, on
Monday, November 9, 1998. This Proxy Statement and accompanying proxy are first
being sent to the shareholders of the Company on or about September 25, 1998.
Solicitation other than by mail may be made personally and by
telephone by regularly employed officers and employees of the Company who will
not be additionally compensated therefor. The Company will request brokers,
dealers, banks or voting trustees, or their nominees, who hold stock in their
names for others or hold stock for others who have the right to give voting
instructions, to forward proxy materials to their principals and request
authority for the execution of the proxy and will reimburse such institutions
for their reasonable expenses in so doing. The total cost of soliciting proxies
will be borne by the Company.
Any proxy delivered in the accompanying form may be revoked by the
person executing the proxy at any time before the authority thereby granted is
exercised by written request addressed to Secretary, Conso Products Company,
P.O. Box 326, Union, South Carolina 29379 or by attending the meeting and
electing to vote in person. Proxies received in such form will be voted as
therein set forth at the meeting or any adjournment thereof.
The only matters to be considered at the meeting, so far as known to
the Board of Directors, are the matters set forth in the Notice of Annual
Meeting of Shareholders, and routine matters incidental to the conduct of the
meeting. However, if any other matters should come before the meeting or any
adjournment thereof, it is the intention of the persons named in the
accompanying form of proxy, or their substitutes, to vote the proxy in
accordance with their judgment on such matters.
Shareholders present or represented and entitled to vote on a matter
at the meeting or any adjournment thereof will be entitled to one vote on such
matter for each share of Common Stock of the Company held by them of record at
the close of business on September 18, 1998, which is the record date for
determining the shareholders entitled to notice of and to vote at the meeting or
any adjournment thereof. Voting on all matters, including the election of
Directors, will be by voice vote or by show of hands, unless the holders of at
least 25% of the shares represented at the meeting and entitled to vote on such
matter demand a vote by ballot prior to the vote. The number of shares of Common
Stock of the Company outstanding on September 18, 1998 was _______________.
Principal Shareholders
At September 1, 1998, the only persons known to the Company to be the
beneficial owners of more than 5% of the Common Stock of the Company were as
follows:
<PAGE> 4
<TABLE>
<CAPTION>
Number of Shares and
Name and Address of Beneficial Nature of Beneficial Percentage of Common
Owner Ownership(1) Stock Outstanding
------------------------------ -------------------- --------------------
<S> <C> <C>
J. Cary Findlay 3,094,033(2) [42.3%]
513 N. Duncan Bypass
Union, SC 29379
FMR Corp. 748,050(3) [10.2%]
82 Devonshire Street
Boston, MA 02109
Royce & Associates, Inc. 496,375(4) [6.8%]
1414 Avenue of the Americas
New York, NY 10019
IDS Diversified Equity Income Fund 407,250(5) [5.6%]
IDS Tower 10
Minneapolis, MN 55440
</TABLE>
- ------------------
(1) Unless otherwise indicated, each shareholder has sole voting and sole
investment power with respect to all shares beneficially owned.
(2) Includes 77,000 shares held by the Findlay Charitable Foundation, of
which Mr. Findlay is a director and officer, and 72,520 shares held
by the Findlay-Conso Education Foundation, of which Mr. Findlay is a
director and officer. Also includes 78,788 shares that Mr. Findlay
holds jointly with his wife, Konstance J.K. Findlay. Excludes 11,275
shares (which includes 9,200 shares subject to options that are
presently exercisable or exercisable within 60 days) held by Mr.
Findlay's wife individually, as to which shares Mr. Findlay disclaims
beneficial ownership.
(3) The information concerning beneficial ownership set forth above and
in this note is derived from an Amendment No. 2 to Schedule 13G dated
June 10, 1998. FMR Corp. ("FMR") may be deemed to have sole
dispositive power with respect to all of such shares because its
wholly-owned subsidiary, Fidelity Management & Research Company
("Fidelity"), acts as investment adviser to the Fidelity Low-Priced
Stock Fund (the "Fund"). The Schedule 13G reported that (a) the Fund
owned all of such shares, (b) each of Edward C. Johnson III (a
shareholder of FMR), FMR, Fidelity and the Fund has sole dispositive
power with respect to such shares, (c) the Board of Trustees of the
Fund has sole voting power with respect to such shares, (d) neither
Mr. Johnson, FMR nor Fidelity has voting power with respect to such
shares and (e) through ownership of FMR and a shareholders'
agreement, members of Mr. Johnson's family and trusts for their
benefit may be deemed to form a controlling group with respect to
FMR.
(4) The information concerning beneficial ownership set forth above and
in this note is derived from a Schedule 13G dated February 10, 1998.
Royce & Associates, Inc. ("RAI") and Charles M. Royce, as a group,
are the beneficial owners of 496,375 shares of the Company's Common
Stock. Mr. Royce may be deemed to be a controlling person of RAI and
to have sole voting and dispositive power with respect to all shares
owned by it.
(5) The information concerning beneficial ownership set forth above and
in this note is derived from an Amendment No. 1 to Schedule 13G dated
August 31, 1995. American Express Financial Corporation, a registered
investment adviser, has reported that such shares are held by IDS
Diversified Equity Income Fund, an investment company advised by it.
American Express Financial Corporation is a subsidiary of American
Express Company, which disclaims beneficial ownership of all such
shares.
The following table sets forth, as of September 1, 1998, information
as to the beneficial ownership of the Common Stock by all Directors and
executive officers of the Company as a group and by S. Duane Southerland, Jr.,
2
<PAGE> 5
William M. Stewart, David Sears and C.V. Balakrishnan. Messrs. Southerland,
Stewart, Sears and Balakrishnan are executive officers named in the Summary
Compensation Table who are not also nominees as Directors. Mr. Southerland
resigned as President, Chief Executive Officer and Director effective August 10,
1998. Information with respect to the beneficial ownership of the Common Stock
by J. Cary Findlay and the other Directors (and nominees) is contained in the
table under "Election of Directors."
<TABLE>
<CAPTION>
Number of Shares and
Name of Nature of Beneficial Percentage of Common
Beneficial Owner Ownership(1) Stock Outstanding
---------------- ------------ -----------------
<S> <C> <C>
Directors and executive 3,301,109(3) [45.1%]
officers as a group
(15 persons) (2)
S. Duane Southerland, Jr. 59,250(4) (5)
William M. Stewart 10,650(6) (5)
David Sears 10,325(7) (5)
C.V. Balakrishnan 89,875(8) [1.2%]
</TABLE>
- ----------------------------
(1) Except as otherwise indicated in this Proxy Statement, all shares are
currently issued and outstanding and each Director and executive
officer has sole voting and investment power with respect to all
shares beneficially owned. Share amounts are rounded to the nearest
whole share.
(2) Includes shares owned by Judith Raymond Hadjandreas, Louis S. Oltman,
Frank J. Rizzo, and Gordon B. Robinson, who became executive officers
of the Company on August 21, 1998. Excludes shares owned by Sara H.
Bissell, a nominee for Director, and S. Duane Southerland, Jr., who
resigned as President, Chief Executive Officer and Director of the
Company effective August 10, 1998.
(3) Includes an aggregate of 52,300 shares subject to options that are
presently exercisable or exercisable within 60 days. Includes 27,000
shares held by the wife of C.V. Balakrishnan, an executive officer of
the Company, as to which shares Mr. Balakrishnan disclaims beneficial
ownership. Also includes and excludes certain shares as reflected in
the notes to the table under "Election of Directors."
(4) Includes 3,000 shares subject to options that are presently
exercisable or exercisable within 60 days.
(5) Less than 1%.
(6) Includes 10,425 shares subject to options that are presently
exercisable or exercisable within 60 days.
(7) Includes 7,550 shares subject to options that are presently
exercisable or exercisable within 60 days.
(8) Includes 9,200 shares subject to options that are presently
exercisable or exercisable within 60 days. Also includes 27,000
shares held by Mr. Balakrishnan's wife, as to which shares Mr.
Balakrishnan disclaims beneficial ownership.
Election of Directors
The Bylaws of the Company provide that the number of Directors shall
not be less than one nor more than nine, as determined from time to time by
resolution of the shareholders or the Board of Directors. The Board of Directors
has fixed the number of Directors to be elected at the meeting at six.
At the meeting, six Directors will be elected to serve, subject to
the provisions of the Bylaws, until the 1999 Annual Meeting of Shareholders and
until their successors are duly elected and qualified. Directors are elected by
a plurality of the votes cast by the holders of the shares entitled to vote in
the election of Directors at a meeting at
3
<PAGE> 6
which a quorum is present. Provided a quorum is present, abstentions and shares
not voted are not taken into account in determining a plurality. A quorum
consists of a majority of votes entitled to be cast. It is the intention of the
persons named in the accompanying proxy to vote all proxies solicited by the
Board of Directors FOR the six nominees listed below unless authority to vote
for the nominees or any individual nominee is withheld by a shareholder in such
shareholder's proxy. If for any reason any nominee shall not become a candidate
for election as a Director at the meeting, an event not now anticipated, the
proxies will be voted for up to six nominees including any substitutes that may
be designated by the Board of Directors.
The nominees for the Board of Directors are: J. Cary Findlay, Antony
W. Laughton, John H. Maxheim, James H. Shaw, Konstance J.K. Findlay and Sara H.
Bissell. Set forth below is information about the nominees and about Marcus T.
Hickman, who is retiring as a Director when his term expires at the Annual
Meeting of Shareholders. Except for Sara H. Bissell, each of the nominees is
currently a member of the Board of Directors. Mr. Findlay has been a Director of
the Company since 1986. Messrs. Laughton, Maxheim and Shaw were first elected
Directors on January 6, 1994. Ms. Findlay was elected Director on May 15, 1995.
Mr. Hickman was elected Director on February 9, 1996. Mr. Findlay and Ms.
Findlay are husband and wife.
<TABLE>
<CAPTION>
Number of
Shares and
Nature of Percentage of
Name of Information About Beneficial Common Stock
Director or Nominee (1) Age Director or Nominee Ownership(2) Outstanding
- ----------------------- --- ------------------- ------------ -----------
<S> <C> <C> <C> <C>
J. Cary Findlay 59 Chairman of the Board since 1986; President 3,094,033(3) [42.3%]
and Chief Executive Officer of the Company
from December 1987 to May 1995 and since
August 1998
Antony W. Laughton 65 Consultant to British Trimmings Limited, a 54,525(4) (5)
wholly-owned subsidiary of the Company
("British Trimmings") since October 1997;
Managing Director of British Trimmings from
1974 to September 1997
John H. Maxheim 63 Chairman, President, Chief Executive Officer 8,371 (5)
and a Director of Piedmont Natural Gas
Company (a utility company) since 1984
James H. Shaw 69 Retired; Chairman of Consolidated Ivey's 3,750 (5)
(department store chain) from 1986 to 1989;
Chief Executive Officer of Consolidated
Ivey's from 1986 to 1988; Director of The
Cato Corporation (apparel retailer)
Konstance J. K. Findlay 51 Senior Vice President-Business Development 230,383(6) [2.3%]
of the Company since May 1995; Vice
President-International Sales of the Company
from January 1993 to May 1995; Vice
President-Production of the Company from
January 1992 to January 1993; Production
Manager of the Company from November 1988 to
January 1992
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
Number of
Shares and
Nature of Percentage of
Name of Information About Beneficial Common Stock
Director or Nominee (1) Age Director or Nominee Ownership(2) Outstanding
- ----------------------- --- ------------------- ------------ -----------
<S> <C> <C> <C> <C>
Sara H. Bissell 60 President of Treasures Unlimited, Inc. 1,000 (5)
(retail shop selling custom linens, antiques
and gifts) since 1983
Marcus T. Hickman 75 Of Counsel to Kennedy Covington Lobdell & 5,446(7) (5)
Hickman, L.L.P. (attorneys) since January
1995; Partner in Kennedy Covington Lobdell &
Hickman, L.L.P. from 1957, when he
co-founded the firm, through 1994
</TABLE>
- ------------------
(1) The information about the Directors was furnished by them to the
Company.
(2) Except as otherwise indicated, all shares are currently issued and
outstanding and each shareholder has sole voting and investment power
with respect to all shares beneficially owned. Common Stock ownership
information is as of September 1, 1998.
(3) Includes 77,000 shares held by the Findlay Charitable Foundation, of
which Mr. Findlay is a director and officer, and 72,520 shares held by
the Findlay-Conso Education Foundation, of which Mr. Findlay is a
director and officer. Also includes 78,788 shares that Mr. Findlay
holds jointly with his wife, Konstance J. K. Findlay. Excludes 11,275
shares (which includes 9,200 shares subject to options that are
presently exercisable or exercisable within 60 days) held by Mr.
Findlay's wife individually, as to which shares Mr. Findlay disclaims
beneficial ownership.
(4) Includes 42,750 shares held in trusts for the benefit of Mr.
Laughton's children, of which Mr. Laughton and his wife are trustees,
and 5,250 shares subject to options that are presently exercisable or
exercisable within 60 days.
(5) Less than 1%.
(6) Includes 9,200 shares subject to options that are presently
exercisable or exercisable within 60 days, 77,000 shares held by the
Findlay Charitable Foundation, of which Ms. Findlay is a director and
officer, and 72,520 shares held by the Findlay-Conso Education
Foundation, of which Ms. Findlay is a director and officer. Also
includes 78,788 shares that Ms. Findlay holds jointly with her
husband, J. Cary Findlay. Excludes 3,094,033 shares held by Ms.
Findlay's husband, as to which shares Ms. Findlay disclaims beneficial
ownership.
(7) Includes 450 shares held by Mr. Hickman's wife, as to which shares Mr.
Hickman disclaims beneficial ownership.
The Board of Directors and its Committees
The Board of Directors met seven times during the past fiscal year
ended June 27, 1998. Each Director attended at least 75% of the meetings of the
Board of Directors and any Committees on which such Director served during the
period that he or she was a Director in the last fiscal year. The Board of
Directors of the Company has Executive, Compensation, Audit and Nominating
Committees.
5
<PAGE> 8
The Executive Committee is composed of Messrs. Findlay and Maxheim and
is authorized to exercise all the powers and authority of the Board of Directors
that can be delegated to a committee under the South Carolina Business
Corporation Act. The Executive Committee did not meet during the past fiscal
year, although from time to time it meets informally and acts by unanimous
written consent.
The Compensation Committee is composed of Messrs. Maxheim, Shaw and
Hickman and is responsible for making recommendations with respect to
compensation of executive officers and for other compensation matters (other
than the administration of the Company's 1993 Stock Option Plan). The
Compensation Committee met four times during the past fiscal year.
The Audit Committee is composed of Messrs. Maxheim, Shaw and Hickman
and is responsible for reviewing the Company's financial statements, audit
reports, internal financial controls, internal audit procedures and the services
performed by the Company's independent public accountants, and for making
recommendations with respect to those matters to the Board of Directors.
The Audit Committee met five times during the past fiscal year.
The Nominating Committee is composed of Messrs. Findlay, Maxheim, Shaw
and Hickman. The function of the Nominating Committee is to search for and
recommend qualified, experienced candidates to be nominated for election as
Directors at annual shareholder meetings and to fill any vacancies on the Board
of Directors. The Nominating Committee will consider shareholder recommendations
for nominees with the potential nominee's consent. However, the final
determination of whether a candidate will be nominated to become a Director is
reserved for the Nominating Committee. Any shareholder recommendations should be
mailed to Nominating Committee, Attention: J. Cary Findlay, Conso Products
Company, P.O. Box 326, Union, South Carolina 29379. The Nominating Committee was
established in May 1998 and did not meet during the past fiscal year.
Executive Officers
Mr. Findlay, Chairman, President and Chief Executive Officer of the
Company and Ms. Findlay, Senior Vice President-Business Development of the
Company, are each nominees for election as Directors. Information about the
Company's executive officers who are not also nominees for election as Directors
follows:
C. V. Balakrishnan, age 59, became Managing Director of British
Trimmings in August 1998. Mr. Balakrishnan, who joined British Trimmings in
1973, was Financial Director from 1981 to 1983 and served as its Chief Operating
Officer from 1983 until September 1997 and as its Co-Managing Director from
October 1997 until August 1998.
Gilbert G. Bartell, age 65, has been Senior Vice President-Finance,
Chief Financial Officer and Treasurer of the Company since October 1986. From
1979 to 1986, Mr. Bartell served Springs Industries, Inc. (a manufacturer of
textile and home furnishings products) as Controller of its Conso Division.
David B. Dechant, age 34, joined the Company in April 1989 and has
served as Chief Accounting Officer since 1990. Prior to joining the Company, Mr.
Dechant was employed by Deloitte, Haskins & Sells (now Deloitte & Touche LLP)
from April 1987 to April 1989 and Arthur Andersen & Co. from June 1985 to April
1987.
Judith Raymond Hadjandreas, age 51, became Senior Vice
President-Pattern Products of the Company in August 1998. In addition, Ms.
Hadjandreas has been Senior Vice President-Products of Simplicity Capital
Corporation since 1985.
Louis S. Oltman, age 51, became Senior Vice President-Sales and
Marketing of the Company in August 1998. In addition, Mr. Oltman has been Senior
Vice President-Sales of Simplicity Capital Corporation since 1991.
Frank J. Rizzo, age 42, became Senior Vice President of the Company
and Chief Operating Officer of Simplicity Capital Corporation in August 1998.
Mr. Rizzo was Senior Vice President and Chief Financial Officer of Simplicity
Capital Corporation from 1991 until August 1998.
6
<PAGE> 9
Gordon B. Robinson, age 47, became Senior Vice President of the
Company in August 1998. In addition, Mr. Robinson has been Vice
President-International of Simplicity Capital Corporation since 1990 and
Managing Director of Simplicity Pattern Limited, an indirect wholly-owned
subsidiary of Simplicity Capital Corporation, since 1987.
David Sears, age 65, has been Vice President-Sales of the Company
since October 1986. From 1979 to 1986, Mr. Sears was employed by Springs
Industries, Inc. as sales manager of its Conso Division.
William M. Stewart, age 49, became Senior Vice President and Chief
Operating Officer-Products of the Company in August 1998. Mr. Stewart previously
served as Vice President-Manufacturing of the Company from July 1988 to
September 1997 and Co-Managing Director of British Trimmings from October 1997
to August 1998.
Officers are appointed by the Board of Directors and serve at its
pleasure.
Certain Transactions
On June 19, 1998, the Company acquired all of the capital stock of
Simplicity Capital Corporation, a Delaware corporation ("Simplicity"), from its
shareholders for a total consideration of $33,000,000 in cash. Simplicity and
its subsidiaries are engaged in the business of designing, producing and selling
patterns and pattern catalogs for apparel, costumes, crafts, home decorations,
and other home sewing applications. On August 21, 1998, the following managers
of Simplicity were appointed executive officers of the Company: Judith Raymond
Hadjandreas, Louis S. Oltman, Frank J. Rizzo, and Gordon B. Robinson. In
connection with the acquisition of Simplicity, Messrs. Oltman and Rizzo and Ms.
Hadjandreas each received $318,621 from the Company in cash at closing in
exchange for their Simplicity stock and the satisfaction of certain obligations
of Simplicity to them in connection with their employment with Simplicity. Mr.
Robinson received $155,794 from the Company in cash at closing in exchange for
his Simplicity stock and the satisfaction of certain obligations of Simplicity
to him in connection with his employment with Simplicity. In addition, the
Company has agreed to make payments (in amounts of approximately $99,212 each)
into escrow for the purpose of funding certain tax adjustments for the benefit
of Messrs. Oltman and Rizzo and Ms. Hadjandreas.
On July 1, 1998, the Company purchased real property owned jointly by
Mr. Findlay and Ms. Findlay in exchange for shares of the Company's Common
Stock. The Company issued 78,788 shares of Common Stock to Mr. Findlay and Ms.
Findlay jointly as consideration for the acquisition of the real property. Such
consideration was based upon a closing price of the Common Stock of $8.25 on
July 1, 1998 and a value of $650,000 (the Findlays' cost basis) for the real
property.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended June 27, 1998, the following Directors
served on the Compensation Committee of the Board of Directors of the Company:
James H. Shaw, John H. Maxheim, and Marcus T. Hickman. Mr. Hickman is Of Counsel
to and a retired partner in the law firm of Kennedy Covington Lobdell & Hickman,
L.L.P., which regularly provides legal services to the Company. During the
fiscal year, no executive officer of the Company served as a director or member
of the compensation committee (or committee performing similar functions) of any
other entity of which an executive officer served on the Board of Directors or
Compensation Committee of the Company.
Compensation Committee Report
The Compensation Committee of the Board of Directors of the Company,
whose members are named below, provides overall guidance to the Company's
executive compensation process. The Committee's recommendations regarding the
compensation of the Chief Executive Officer and the other executive officers of
the Company are subject to approval by the Board. The Company's 1993 Stock
Option Plan is administered by a Stock Option Committee composed of Messrs.
Maxheim and Shaw, both of whom are members of the Compensation Committee. The
Stock Option Committee makes decisions with respect to grants under the
Company's 1993 Stock Option Plan.
7
<PAGE> 10
The Committee's compensation policies are designed to fairly
compensate the executive officers of the Company for the effective exercise of
their responsibilities, their management of the business functions for which
they are responsible, the motivation of those officers and employees reporting
to them, their extended period of service to the Company and their dedication
and diligence in carrying out their responsibilities. In determining the
compensation of executive officers other than the Chief Executive Officer, the
Compensation Committee primarily considers the recommendations of the Chief
Executive Officer in connection with the annual reviews of the compensation and
bonuses of all management personnel, except that the compensation (including
bonuses) of Mr. Balakrishnan is determined by his employment agreement that was
entered into at the time British Trimmings was acquired by the Company. See
"Employment Agreements" below. In granting stock options, the Stock Option
Committee also primarily considers the recommendations of the Chief Executive
Officer. Such compensation recommendations by the Chief Executive Officer are
not specifically related to corporate performance, but are based primarily upon
the Chief Executive Officer's subjective assessment of the individual
performance and contributions of the respective employees in light of the
factors described above, which are discussed with the Compensation Committee.
The compensation of Mr. Findlay, the Company's Chairman, Chief
Executive Officer and President, is currently $300,000 per year. Mr. Findlay's
salary had been $275,000 per year from the beginning of 1994 (shortly after the
Company's initial public offering) until August 1998. Mr. Findlay's compensation
is not specifically related to corporate performance. The increase to $300,000
was approved in August 1998 in connection with Mr. Findlay's resumption of the
duties of President and Chief Executive Officer.
The compensation of Mr. Southerland, who was Chief Executive Officer
until August 1998, was initially determined by his employment agreement that was
entered into at the time he joined the Company as Chief Executive Officer in May
1995. See "Employment Agreements" below. Such employment agreement was reviewed
by the Compensation Committee in connection with its approval by the Board of
Directors, and reflected terms negotiated at arms length with Mr. Southerland to
obtain his services and induce him to accept employment with the Company. The
initial compensation level specified by Mr. Southerland's employment agreement
was determined by the members of the Compensation Committee to be appropriate to
attract a Chief Executive Officer with Mr. Southerland's background and
experience. Mr. Southerland's compensation was not specifically related to
corporate performance. Mr.
Southerland resigned as Chief Executive Officer of the Company effective August
10, 1998.
The above report is presented by the following members of the
Compensation Committee: James H. Shaw, John H. Maxheim and Marcus T. Hickman.
8
<PAGE> 11
Shareholder Return Performance Graph
Presented below is a line graph comparing the percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return on Standard & Poor's Textile - Home Furnishings Index
(the "S&P Textile - Home Furnishings Index") and the Total Return Index for The
Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Composite Index") for the
period commencing December 15, 1993 (the date the Company's Common Stock
commenced trading on the Nasdaq National Market) and ending June 27, 1998.
[graph]
<TABLE>
<CAPTION>
====================================================================================================================================
Company / Index Dec. 15, 1993 July 2, 1994 July 1, 1995 June 29, 1996 June 28, 1997 June 27, 1998
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CONSO PRODUCTS COMPANY 100 128.83 124.37 216.55 245.00 165.00
- ------------------------------------------------------------------------------------------------------------------------------------
S&P TEXTILE - HOME FURNISHINGS 100 79.13 98.67 133.77 143.8 129.01
- ------------------------------------------------------------------------------------------------------------------------------------
NASDAQ COMPOSITE INDEX 100 91.32 121.89 156.49 190.3 251.19
====================================================================================================================================
</TABLE>
This graph assumes that $100 was invested in the Company's Common Stock,
on the S&P Textile - Home Furnishings Index and on the Nasdaq Composite Index on
December 15, 1993, and that dividends were reinvested.
9
<PAGE> 12
Executive Compensation
The table below shows the compensation paid or accrued by the Company
for the three fiscal years ended June 27, 1998 to or for the account of the
Company's Chief Executive Officer and its four other most highly compensated
executive officers (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------
Long Term
Compensation
Other Annual Awards
Name and Principal Fiscal Salary Bonus Compensation Options
Position Year ($) ($) ($) (#)
------------------ ---- ------- ------ -------- ------------
<S> <C> <C> <C> <C>
J. Cary Findlay(1)(2) 1998 275,000 -- (3) --
Chairman, President and 1997 275,000 -- (3) --
Chief Executive Officer 1996 275,000 -- (3) --
S. Duane Southerland, Jr. 1998 221,250 15,000 38,765(4) --
President and Chief 1997 212,500 20,000 31,867(4) 4,500
Executive Officer (until 1996 202,500 -- 25,676(4) --
August 1998)(2)
William M. Stewart 1998 141,000 10,000 (3) --
Senior Vice President- 1997 114,500 10,000 (3) 4,500
Production 1996 101,500 7,500 (3) 7,425
David Sears 1998 121,750 6,000 (3) --
Vice President-Sales 1997 117,250 8,000 (3) 3,000
1996 113,000 8,000 (3) 8,325
C.V. Balakrishnan 1998 114,594 -- 96,596(5) --
Managing Director - 1997 108,924 13,732 75,740(5) 3,000
United Kingdom Products 1996 101,561 7,729 80,697(5) 7,200
</TABLE>
- ---------------
(1) Excludes all compensation paid or awarded to Mr. Findlay's wife,
Konstance J. K. Findlay.
(2) Mr. Southerland resigned as President and Chief Executive Officer
effective August 10, 1998, at which time Mr. Findlay assumed such
offices.
(3) The Named Executive Officer did not receive personal benefits during
such year (valued at the aggregate incremental cost to the Company and
its subsidiaries) in excess of 10% of his salary and bonus.
(4) Includes (a) $32,296 in relocation expenses for fiscal 1998, (b)
$16,728 in relocation expenses and $9,132 in country club membership
expenses for fiscal 1997 and (c) $20,090 in moving and related
expenses for fiscal 1996.
(5) Includes payments by the Company to fund a pension arrangement whereby
Mr. Balakrishnan can retire at age 60 (May 2000) at two-thirds of his
salary. Such payments were in the amounts of $69,807 in fiscal 1998,
$65,040 in fiscal 1997 and $90,659 in fiscal 1998.
10
<PAGE> 13
The table below sets forth information relating to the exercise of stock
options during the fiscal year ended June 27, 1998 by each Named Executive
Officer and the fiscal year-end value of unexercised stock options.
AGGREGATED OPTION EXERCISES IN
FISCAL 1998 AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Shares Underlying Unexercised
Unexercised In-the-Money
Options Options
at FY-End(#) at FY-End($)
Shares ------------- -------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized($) Unexercisable Unexercisable
---- -------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
J. Cary Findlay -- -- 0/0 0/0
S. Duane Southerland, Jr. -- -- 1,500/3,000 0/0
William M. Stewart -- -- 6,450/3,000 3,911/7,821
David Sears -- -- 4,700/3,850 2,923/5,846
C.V. Balakrishnan -- -- 5,800/4,400 7,584/3,792
</TABLE>
No tables showing option grants or awards under long-term incentive
plans are presented because no Named Executive Officer received any such
compensation during the fiscal year ended June 27, 1998.
Director Compensation
Directors who are officers or employees of the Company receive no
additional compensation for serving as Directors. Directors who are not
compensated as officers or employees of the Company are paid a quarterly
retainer fee of $2,000, a fee of $1,400 for each meeting of the Board of
Directors attended and a fee of $300 for each meeting of any Committee thereof
attended. The quarterly retainer fee was increased from $1,000 to $2,000 in
August 1998. All Directors are also reimbursed for out-of-pocket expenses
incurred in attending meetings of the Board of Directors and any of its
Committees.
Under the Company's Stock Election Plan for Non-Employee Directors (the
"Director Stock Plan"), Directors of the Company who are not regular employees
of the Company or its subsidiaries may elect to receive all or a portion of the
cash compensation to which they would otherwise be entitled in the form of
shares of the Company's Common Stock. The number of shares of Common Stock to be
issued to a Director upon such an election is determined based upon 90% of the
fair market value of the Common Stock on the date of issuance (which is five
business days after the date of each quarterly meeting). The Director Stock Plan
was adopted and approved by the Board of Directors on January 28, 1997. During
the fiscal year ended June 27, 1998, Messrs. Maxheim and Hickman were each
issued 2,112 shares of Common Stock pursuant to the Director Stock Plan.
Employment Agreements
In connection with the Company's acquisition of all of the issued and
outstanding share capital of British Trimmings in December 1993, Mr.
Balakrishnan entered into an employment agreement with British Trimmings for the
five-year period following the acquisition. The employment agreement provided
for initial annual compensation of (pound)62,500 for Mr. Balakrishnan to be
adjusted annually for inflation. The employment agreement also provides for an
annual bonus for Mr. Balakrishnan based on British Trimmings' operating profits,
and certain other benefits. In addition, the employment agreement provides for
the Company to continue funding annually a pension arrangement whereby Mr.
Balakrishnan can retire at age 60 (May 2000) at two-thirds of his salary.
The Company is party to an employment agreement with Mr. Southerland,
who resigned as President and Chief Executive Officer of the Company effective
August 10, 1998. The agreement provided for an annual salary of $200,000
(subject to annual review) and certain other benefits. Pursuant to this
agreement, Mr. Southerland is entitled to severance payments for a period of up
to 15 months (or, if earlier, until Mr. Southerland obtains other full-time
employment) at the same rate as Mr. Southerland's base salary immediately prior
to the termination of his employment with the Company. The total amount of
severance to be paid to Mr. Southerland through November 1999 could be up to
$276,562.
11
<PAGE> 14
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and executive officers and certain persons who own more than
10% of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Common Stock and other equity securities. Directors, executive officers and
such greater than 10% shareholders are required to furnish the Company copies of
all such reports they file. To the Company's knowledge, based solely on a review
of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year
ended June 27, 1998, all Section 16(a) filing requirements applicable to
Directors, executive officers and greater than 10% shareholders were complied
with on a timely basis.
Amendment of the Articles of Incorporation to Change the Name of the Company
On August 21, 1998, the Company's Board of Directors authorized an
amendment to the Company's Articles of Incorporation changing the Company's name
to "Conso International Corporation" and recommended that the proposed amendment
be submitted to the shareholders of the Company for approval. To effect the name
change, the Articles of Incorporation would be amended by deleting in its
entirety Article 1 and by inserting in lieu thereof the following:
1. The name of the Corporation is Conso International Corporation.
In recent years, the Company has, largely through acquisitions,
diversified into businesses outside the decorative trimmings industry and
expanded into world markets. The Board of Directors believes that changing the
name of the Company from "Conso Products Company" to "Conso International
Corporation" reflects more accurately the Company's recent diversification and
expansion, while maintaining the brand recognition associated with the "Conso"
name.
Approval of the proposed amendment to the Articles of Incorporation to
change the name of the Company requires the affirmative vote of the holders of
two-thirds of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting of Shareholders. Accordingly, abstentions and broker non-votes
will have the effect of votes against this proposal.
The Board of Directors of the Company recommends a vote FOR the proposal
to amend the Articles of Incorporation to change the name of the Company to
Conso Corporation and proxies solicited by the Board of Directors will be so
voted unless a shareholder specifies a different choice.
Selection of Independent Public Accountants
The Board of Directors has selected Deloitte & Touche LLP as independent
public accountants to audit the financial statements of the Company for the
fiscal year ending June 26, 1999. This selection is being presented to the
shareholders for their ratification at the Annual Meeting of Shareholders.
Deloitte & Touche LLP audited the Company's financial statements for the fiscal
year ended June 26, 1999 and prior years and is considered well qualified.
Representatives of Deloitte & Touche LLP are expected to be present at
the Annual Meeting of Shareholders with an opportunity to make a statement if
they desire to do so, and they are expected to be available to respond to
appropriate questions.
The Board of Directors recommends a vote FOR ratification of the
selection of Deloitte & Touche LLP as independent public accountants to audit
the financial statements of the Company for the fiscal year ending June 26,
1999, and proxies solicited by the Board of Directors will be so voted unless
shareholders specify a different choice.
If the shareholders do not ratify the selection of Deloitte & Touche
LLP, the selection of independent public accountants will be reconsidered by the
Board of Directors.
12
<PAGE> 15
Change in Accountants for Subsidiary
On December 5, 1997, the Company's Audit Committee and its Board of
Directors approved expanding the engagement of Deloitte & Touche LLP, the
Company's principal accountant, to include the audit of the financial statements
of British Trimmings Limited, a significant subsidiary of the Company, for the
fiscal year ending June 27, 1998. For more than the previous two fiscal years,
the financial statements of British Trimmings Limited had been audited by Grant
Thornton and, in its audit reports as principal accountant for the Company,
Deloitte & Touche LLP had expressed reliance on the reports of Grant Thornton as
to British Trimmings Limited. As a result of the expansion of the engagement of
Deloitte & Touche LLP, Grant Thornton was no longer engaged to audit the
financial statements of British Trimmings Limited, but may be engaged to provide
or continue to provide other accounting services for the Company and its
subsidiaries.
Neither the principal accountant's reports on the financial statements
of the Company nor Grant Thornton's reports on the financial statements of
British Trimmings Limited for the two most recent fiscal years ended June 28,
1997 contained an adverse opinion or a disclaimer of opinion or was qualified or
modified as to uncertainty, audit scope or accounting principles.
During the Company's two most recent fiscal years ended June 28, 1997
and subsequent periods, (1) there were no disagreements with Grant Thornton on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which disagreement(s), if not
resolved to the satisfaction of Grant Thornton, would have caused it to make
reference to the subject matter of the disagreement(s) in its report, and (2) no
"reportable event" (as defined in Item 304(a)(1)(v) of Regulation S-K) occurred.
As the Company's principal accountant, Deloitte & Touche LLP was
regularly consulted by the Company as to various accounting, auditing and
financial reporting matters during the two most recent fiscal years and
subsequent interim periods prior to the expansion of its engagement to include
the audit of British Trimmings Limited; however, none of the matters as to which
the Company consulted Deloitte & Touche LLP during such periods were with regard
to the application of accounting principles to specified transactions or the
type of audit opinions that might be rendered on the Company's financial
statements, in either case as related only to British Trimmings Limited.
Shareholder Proposals
Any proposal that a shareholder intends to present for action at the
1999 Annual Meeting of Shareholders, currently scheduled for November 8, 1999,
must be received by the Company no later than May 28, 1999, in order for the
proposal to be included in the proxy statement and form of proxy for the 1999
Annual Meeting of Shareholders. In addition, if the Company receives notice of
shareholder proposals after August 11, 1999, then the persons named as proxies
in such proxy statement and form of proxy will have discretionary authority to
vote on such shareholder proposals, without discussion of the matters in the
proxy statement and without such proposals appearing as separate items on the
proxy card. Shareholders proposals should be sent to Secretary, Conso Products
Company, P.O. Box 326, Union, South Carolina 29379.
Annual Report to Securities and Exchange Commission
UPON WRITTEN REQUEST OF A SHAREHOLDER, THE COMPANY WILL FURNISH WITHOUT
CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE
27, 1998 TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR BEFORE
SEPTEMBER 28, 1998. SUCH REQUEST SHOULD BE SUBMITTED TO GILBERT G. BARTELL,
TREASURER, CONSO PRODUCTS COMPANY, P. O. BOX 326, UNION, SOUTH CAROLINA 29379.
13
<PAGE> 16
APPENDIX A
PRELIMINARY COPIES
Conso Products Company PROXY
Proxy solicited by the Board of Directors for the
Annual Meeting of Shareholders to be held November 9, 1998
The undersigned hereby appoints J. Cary Findlay and Gilbert G. Bartell,
and each or either of them, proxies, with full power of substitution, with the
powers the undersigned would possess if personally present, to vote, as
designated below, all shares of the Common Stock of the undersigned in Conso
Products Company at the Annual Meeting of Shareholders to be held on November 9,
1998, and at any adjournment thereof.
This proxy will be voted as specified herein and, unless otherwise
directed, will be voted (i) FOR the election of all nominees as Directors, (ii)
FOR approval of the amendment to the Company's Articles of Incorporation
changing the name of the Company to "Conso International Corporation," and (iii)
FOR ratification of the selection of Deloitte & Touche LLP as independent public
accountants. The Board of Directors recommends voting FOR each item.
1. ELECTION OF DIRECTORS: Nominees are J. Cary Findlay, Antony W. Laughton,
John H. Maxheim, James H. Shaw, Konstance J.K. Findlay and Sara H.
Bissell.
[ ] 1 FOR all listed nominees (except do not vote for the nominee(s)
whose name(s) I have written below)
---------------------------------------------------------------
[ ] 2 WITHHOLD AUTHORITY to vote for the listed nominees
2. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION CHANGING THE NAME OF
THE COMPANY TO "CONSO INTERNATIONAL CORPORATION"
[ ] 3 FOR [ ] 4 AGAINST [ ] 5 ABSTAIN
3. RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS
[ ] 6 FOR [ ] 7 AGAINST [ ] 8 ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
Receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy
Statement is hereby acknowledged.
Please date and sign exactly as printed below and return promptly in the
enclosed postage paid envelope.
Dated: , 1998.
-----------------------------
--------------------------------------------
--------------------------------------------
(When signing as attorney, executor,
administrator, trustee, guardian, etc., give
title as such. If joint account, each joint
owner should sign.)
