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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996 Commission file number 1-804
SEQUA CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-188-5030
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Park Avenue, New York, New York 10166
- ---------------------------------------- ------------------------------------
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (212) 986-5500
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ---------------------------
Class A Common Stock, no par value New York Stock Exchange
Class B Common Stock, no par value New York Stock Exchange
$5.00 Cumulative Convertible
Preferred Stock, $1.00 Par Value New York Stock Exchange
9-5/8% Senior Notes, Due
October 15, 1999 New York Stock Exchange
8-3/4% Senior Notes, Due
December 15, 2001 New York Stock Exchange
9-3/8% Senior Subordinated Notes,
Due December 15, 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of registrant's voting stock (Common and Preferred)
held by nonaffiliates as of March 10, 1997 was $311,980,948
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock:
Class Outstanding at March 10, 1997
----- -----------------------------
Class A Common Stock, no par value 6,574,733
Class B Common Stock, no par value 3,330,780
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
<PAGE>
The Registrant filed its Proxy Statement, dated March 27, 1997, by paper
copy with the Securities and Exchange Commission and the New York Stock
Exchange, and mailed it to stockholders of record (as of March 20, 1997), on
various dates between March 29 and April 2, 1997. Due to inadvertence, it was
not electronically filed with the Commission at such time (although it
subsequently was so filed). Therefore, those sections of the Registrant's Report
on Form 10-K for the fiscal year ended December 31, 1996 (Items 10 through 13 of
Part III) that incorporated information by reference from the Proxy Statement
were not electronically filed within 120 days of the close of the
Registrant's fiscal year. This Form 10-K/A updates the Form 10-K to include
Items 10 through 13 of Part III.
<PAGE>
<PAGE>
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
DIRECTORS
<TABLE>
<CAPTION>
PRESENT OCCUPATION, BUSINESS EXPERIENCE
NAME AND AGE AND OTHER INFORMATION
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Norman E. Alexander ...................... Chairman of the Board and Chief Executive Officer of the Company
Age 82 since 1975. Served as President from 1982 to 1983 and from 1957 to
1975. Has been a director of the Company since 1957 and is a member
of the Executive Committee. May be deemed to be a control person of
the Company (see 'Voting Securities and Ownership Thereof
by Certain Beneficial Owners and Management'). Also a director and
Chairman of the Board of Chock Full O' Nuts Corporation and a
director of Richton International Corporation.
Alvin Dworman ............................ Chairman, ADCO Group (a financial services, merchant banking and real
Age 71 estate company) since 1981. Has been a director of the Company
since 1987 and is a member of the Audit Committee.
A. Leon Fergenson ........................ Former Chairman of the Board and Chief Executive Officer, GK
Age 84 Technologies, Inc. (wire and cable products, electronic and
electrical circuits and other products). Has been a director of
the Company since 1968 and is a member of the Executive Committee
and the Compensation Committee and Chairman of the Audit Committee.
Also a director of Buckeye Management Company, National
Benefit Life Insurance Company and American Annuity Group, Inc.
David S. Gottesman ....................... Managing Partner, First Manhattan Co. (an investment management
Age 70 company) since 1964. Has been a director of the Company since 1982
and is a member of the Nominating Committee.
Stuart Z. Krinsly ........................ Senior Executive Vice President and General Counsel of the Company
Age 79 since 1982; from 1965 to 1982, served as an officer and General
Counsel of the Company. Has been a director and officer of the
Company since 1957 and is a member of the Executive Committee. Also a
director of Chock Full O' Nuts Corporation.
Donald D. Kummerfeld ..................... President, Magazine Publishers of America (a publishing trade
Age 62 organization) since 1987 and Chairman, Kummerfeld Associates (an
investment banking and financial advisory firm) since 1985. From
1978 to 1985, was President and Chief Operating Officer, News
America Publishing, Inc. Has been a director of the Company since
1983 and is a member of the Compensation Committee.
Richard S. LeFrak ........................ President, Lefrak Organization, Inc. (a diversified, privately held
Age 51 company active in major residential and commercial real estate
development projects, oil and gas exploration, finance and
entertainment production) since 1975. Has been a director of the
Company since 1986 and is a member of the Nominating Committee.
John J. Quicke ........................... President and Chief Operating Officer of the Company since March
Age 47 1993. Served as Senior Executive Vice President, Operations, of the
Company from June 1992 to March 1993; from February 1991 to June
1992, served as Vice President, Financial Services, of the
Company; from 1987 to February 1991, served as Vice President,
Financial Projects, of the Company. Held various offices and
positions in Chromalloy American Corporation (which became a
subsidiary of the Company in 1987) from 1979 to 1987. Has been a
director of the Company since March 1993 and is a member of the
Executive Committee.
Michael I. Sovern ........................ Chancellor Kent Professor of Law and President Emeritus of Columbia
Age 65 University since 1993; President of Columbia University from 1980
to 1993; President of the Shubert Foundation since 1996. Served as
Advisor to the Board of Directors of the Company from 1990 to May
1996, when he was elected to serve as a director, and is a member of
the Nominating Committee. Also a director of AT&T, Warner- Lambert,
GNY Insurance Co. and the Shubert Organization.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRESENT OCCUPATION, BUSINESS EXPERIENCE
NAME AND AGE AND OTHER INFORMATION
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Fred R. Sullivan ......................... Chairman of the Board and Chief Executive Officer, Richton
Age 82 International Corporation (a diversified service company) since
1989. From 1987 to 1991, served as Chairman of the Board and
President, Interim Systems Corporation (a temporary personnel
and health care service company). From 1971 to 1988, served as
Chairman of the Board and President, Kidde, Inc. (a
multi-market manufacturing and service company). Has been a
director of the Company since 1962 and is a member of the Audit
Committee.
Gerald Tsai, Jr. ......................... Chairman, President and Chief Executive Officer, Delta Life
Age 68 Corporation (an insurance company) since February 1993; private
investor from 1991 to 1993; Chairman of the Executive
Committee of the Board of Directors, Primerica Corporation
(a diversified financial services company) from 1988 to 1991; from
1987 to 1988, was Chairman and Chief Executive Officer of
Primerica; and from 1982 to 1987, held several other offices at
Primerica. Has been a director of the Company since 1976 and is a
member of the Audit Committee and Chairman of the Compensation
Committee. Also a director of Rite Aid Corporation, Proffitt's Inc.,
Triarc Companies, Inc. and Zenith National Insurance Corp. Also a
Trustee of Boston University, Meditrust and New York University
Medical Center.
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AND AGE POSITION AND BUSINESS EXPERIENCE
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Norman E. Alexander....................... Chairman of the Board, Chief Executive Officer, Director and member
Age 82 of the Executive Committee
John J. Quicke........................... President, Chief Operating Officer, Director and member of the Executive
Age 47 Committee
Stuart Z. Krinsly........................ Senior Executive Vice President - General Counsel, Director and member
Age 79 of the Executive Committee
Gerald S. Gutterman...................... Executive Vice President - Finance and Administration
Age 68
Antonio L. Savoca........................ Senior Vice President - Atlantic Research Operations
Age 73
Ira A. Schreger.......................... Senior Vice President - Legal - Corporate Secretary
Age 46
Martin Weinstein......................... Senior Vice President - Chromalloy Gas Turbine Operations
Age 61
</TABLE>
All of the above-named executive officers has been employed by Sequa in the same
or a similar capacity for at least five years.
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<PAGE>
FAMILY RELATIONSHIPS
Sequa is not aware of any family relationships among any of its directors
or executive officers.
TERMS OF OFFICE
Directors are elected to hold office until the next annual meeting and
until their successors have been elected. Executive Officers hold office for a
term expiring on the date of the next annual organization meeting of the Board
of Directors, subject to the provisions of Section 5 of Article IV of the
Company's By-Laws relative to removal of officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
In June 1992, Fred R. Sullivan settled a claim by the United States
Securities and Exchange Commission that he disclosed material, non-public
information that led to the purchase of stock by another person. No allegation
of personal profit to Mr. Sullivan was made. Mr. Sullivan agreed to the entry of
a judgment permanently enjoining him from engaging in certain activities in
violation of Section 10(b) of the Securities Exchange Act of 1934, as amended,
and Rule 10b-5 thereunder, in connection with the purchase or sale of any
security and paid a fine of $58,000.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
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SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for services rendered
in all capacities to the Company and its subsidiaries during 1994, 1995 and 1996
to the Chief Executive Officer of the Company and to the next four most highly
compensated executive officers.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
-------------------------------------- ------------
OTHER SECURITIES ALL
NAME AND ANNUAL UNDERLYING OTHER
PRINCIPAL BONUS COMPENSATION OPTIONS/ COMPENSATION
POSITION YEAR SALARY ($) ($) SARS(#) ($)
- ---------------------------------------- ---- ---------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Alexander .................... 1996 $1,131,491 $378,979 -- -- 4,500(1)
Chairman and Chief Executive Officer 1995 1,095,102 409,258 -- -- 4,500(1)
1994 1,043,148 -- -- -- 4,500(1)
Stuart Z. Krinsly ...................... 1996 605,193 187,123 -- -- 4,776(1)
Senior Executive Vice President and 1995 585,739 202,062 -- -- 4,804(1)
General Counsel 1994 557,949 -- -- -- 4,899(1)
John J. Quicke ......................... 1996 428,820 188,236 -- -- 5,864(1)
President and Chief Operating Officer 1995 410,149 215,006 -- 8,500 5,903(1)
1994 390,108 -- -- -- 6,157(1)
Antonio Savoca ......................... 1996 350,723 265,200 $ 71,408(2) -- 95,865(1)
Senior Vice President, Atlantic 1995 340,000 250,920 71,715(2) -- 89,605(1)
Research Operations 1994 336,971 238,000 68,753(2) -- 76,916(1)
Martin Weinstein ....................... 1996 438,440(3) 170,529 -- -- 4,500(1)
Senior Vice President, Gas Turbine 1995 462,083(3) 42,294 -- -- 4,500(1)
Operations 1994 452,000(3) -- -- -- 4,500(1)
</TABLE>
- ------------
(1) These amounts consist of a matching contribution by the Company under the
respective 401-K Plan in which each executive officer participates ($4,500
as to each named executive officer in 1994, 1995 and 1996, (except for
$6,000 with respect to Mr. Savoca in 1994 and $7,500 in 1995 and 1996), plus
(i) with respect to Mr. Krinsly, $399, $304 and $276 for executive term life
insurance premiums in 1994, 1995 and 1996, respectively; (ii) with respect
to Mr. Quicke, $1,657, $1,403 and $1,364 for executive term life insurance
premiums in 1994, 1995 and 1996, respectively; and (iii) with respect to Mr.
Savoca, $1,310, $1,622 and $983 for executive term life insurance premiums
in 1994, 1995 and 1996, respectively, and $69,606, $80,483 and $87,382
credited as a benefit (including interest payable at the prime rate) in
1994, 1995 and 1996, respectively, under a Supplemental Executive Retirement
Plan ('SERP') maintained by Atlantic Research Corporation, an affiliate of
the Company ('ARC') (the SERPs in which the other named executive officers
participate are defined benefit plans, unlike the ARC plan, and are,
therefore, accounted for under 'Pension Plans').
(2) These amounts consist of the aggregate cost of personal benefits provided by
ARC; the two items that each exceeds 25% of the total value of all reported
personal benefits provided to Mr. Savoca are $37,956 in 1996, 1995 and 1994
paid to him as a housing allowance, and $22,539 in 1995 and $23,925 in each
of 1996 and 1994 paid in connection with ARC's 'cafeteria' plan, allowing
for
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
reimbursement of certain items with payment of the unused balance (up to the
entire amount) to the executive in cash.
(3) This amount includes $81,000 for additional compensation in connection with
Mr. Weinstein's management of another Chromalloy Gas Turbine operation,
Chromalloy New York (formerly, Chromalloy Research and Technology),
commencing in June 1993 and ending upon the termination of this temporary
assignment, which occurred December 31, 1996. His 1995 salary included
certain vacation compensation (not applicable in 1996); the lower amount in
1996 reflects an across-the-board three percent salary reduction at
Chromalloy Gas Turbine (terminated December 31, 1996).
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
No stock options or SARs were granted to any of the named executive
officers of the Company during 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES TABLE
During 1996, none of the named executive officers except Mr. Savoca
exercised any stock options. The following table shows the number of shares of
Class A Common Stock acquired on exercise and the value realized by Mr. Savoca,
and the number of shares of Class A Common Stock represented by outstanding
unexercised stock options (there are no SARs) held by each of the named
executive officers as of December 31, 1996. The Class A Common Stock had a
closing price of $46.25 on September 17, 1996, the date on which Mr. Savoca
exercised his option, and a closing price of $39.25 on December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Alexander......... -- -- 15,000 -- $ 105,000 --
Stuart Z. Krinsly........... -- -- 12,500 -- 87,500 --
John J. Quicke.............. -- -- 17,666 2,834 166,157 $41,093
Antonio L. Savoca........... 3,100 $43,400 4,400 -- 30,800 --
Martin Weinstein............ -- -- 9,300 1,700 65,100 11,900
</TABLE>
PENSION PLANS
The following tables show the estimated annual pension benefits payable to
each covered participant at normal retirement age under the Company's qualified
defined benefit pension plans, taking into account any applicable nonqualified
supplemental pension plans that provide benefits that would otherwise be denied
participants by reason of certain Internal Revenue Code limitations on qualified
plan benefits and any existing individual agreements, based on remuneration that
is covered
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<PAGE>
under the plans and agreements and years of service with the Company and its
subsidiaries. There are separate pension plans within the Company for various
subsidiaries.
PENSION PLAN TABLE -- A
<TABLE>
<CAPTION>
YEARS OF SERVICE
PLAN ------------------------------------
COMPENSATION 35 40 45
- ------------------------------------------------------ -------- ---------- ----------
<S> <C> <C> <C>
$ 600,000............................................. $340,718 $ 389,392 $ 438,066
800,000............................................ 457,385 522,725 588,066
1,000,000............................................ 574,051 656,059 738,066
1,200,000............................................ 690,718 789,392 888,066
1,400,000............................................ 807,385 922,725 1,038,066
1,600,000............................................ 924,051 1,056,059 1,188,066
</TABLE>
Table A applies to Messrs. Alexander and Krinsly. Mr. Alexander is required
to be paid $243,779 annually from the qualified defined benefit portion of the
applicable amount shown as his aggregate benefit in Table A. As a result of the
Small Business Job Protection Act of 1996, Mr. Krinsly's pension benefit from
the qualified defined benefit pension plan has been actuarially increased for
retirement after age 70 1/2. The increased annual benefit amount on January 1,
1997, is $724,068. This increased benefit replaces the lower amount in Table A
that would otherwise be applicable to Mr. Krinsly.
PENSION PLAN TABLE -- B
<TABLE>
<CAPTION>
YEARS OF SERVICE
PLAN --------------------------------
COMPENSATION 30 35 40
- ----------------------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
$300,000..................................................................... $129,725 $151,346 $164,846
400,000..................................................................... 174,725 203,846 221,846
500,000..................................................................... 219,725 256,346 278,846
600,000..................................................................... 264,725 308,846 335,846
700,000..................................................................... 309,725 361,346 392,846
800,000..................................................................... 354,725 413,846 449,846
</TABLE>
Table B applies to Mr. Quicke.
PENSION PLAN TABLE -- C
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------
PLAN COMPENSATION 5 10
- ------------------------------------------------------------------------ ------- -------
<S> <C> <C>
$150,000................................................................ $18,096 $35,965
$160,000................................................................ 19,366 38,489
</TABLE>
Table C applies to Mr. Savoca. Mr. Savoca is required to be paid annually
the full benefit shown in Table C. Plan compensation is limited by SS 401(a)(17)
of the Internal Revenue Code, which is $160,000 for 1997 and $150,000 for prior
years. Plan benefits are limited by SS 415(b) of the Code, which is $125,000
annually for 1997.
<PAGE>
<PAGE>
PENSION PLAN TABLE -- D
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------
PLAN COMPENSATION 30 35 40
- --------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
$400,000................................................. $212,044 $232,044 $252,044
500,000................................................. 267,044 292,044 317,044
600,000................................................. 322,044 352,044 382,044
</TABLE>
Table D applies to Mr. Weinstein.
Compensation covered by the plans is total pay for services, including
elective deferrals to qualified plans, but excluding severance payments, expense
reimbursements, and other non-wage items. Compensation for Mr. Savoca also
excludes bonuses. With respect to Messrs. Alexander, Krinsly and Savoca,
benefits are based on their respective highest average annual compensation in
any five consecutive years of employment with the Company. With respect to Mr.
Quicke, benefits are based on his average compensation for all years after 1987.
With respect to Mr. Weinstein, benefits are based on his average compensation
for all years after 1979.
The credited years of service and plan compensation for the named executive
officers are:
<TABLE>
<CAPTION>
ESTIMATED
CREDITED YEARS PLAN
OF SERVICE* COMPENSATION
-------------- ------------
<S> <C> <C>
Alexander..................................................... 40 $1,366,311
Krinsly....................................................... 40 699,301
Quicke........................................................ 35 360,607
Weinstein..................................................... 33 491,002
Savoca........................................................ 7 150,000
</TABLE>
Benefits shown are computed as a straight life annuity beginning at age 65*
and are offset by a portion of estimated Social Security benefits, if
applicable.
- ------------
* At normal retirement age or current age if older.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company received an annual
retainer of $27,500 for 1996 and $500 for each meeting attended. Non-employee
members of the Executive Committee, Audit Committee, Nominating Committee and
Compensation Committee receive an additional annual fee of $5,000, $3,500,
$2,500 and $3,500, respectively, and $500 for each committee meeting attended.
The Company also reimburses its non-employee directors for travel, lodging and
related expenses they may incur in attending Board and Committee meetings.
<PAGE>
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with the named executive
officers listed below (supplementary retirement agreements with any of the named
executive officers are accounted for in the foregoing section, 'Pension Plans').
<TABLE>
<CAPTION>
TERM OF ANNUAL
NAME TITLE AGREEMENT COMPENSATION
- --------------------------- ----------------------------------------- --------------------- ------------
<S> <C> <C> <C>
John J. Quicke............. President and Chief Operating Officer 1/1/95 - 12/31/99(1) $432,328(2)
Antonio L. Savoca.......... Senior Vice President, Atlantic Research
Operations 3/1/91 - 2/28/97(1) $391,556(2)(3)
Martin Weinstein........... Senior Vice President, Gas Turbine
Operations 6/1/96 - 12/31/99(1) $371,000(2)(4)
</TABLE>
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(1) The term may be extended or terminated prior to expiration under certain
circumstances (including death, disability and for cause). Mr. Savoca
retired on February 28, 1997.
(2) These amounts reflect December 31, 1996 salaries and do not include
additional incentive compensation which may be payable.
(3) This includes $37,956 per year paid to Mr. Savoca as a housing allowance. It
does not include $23,925 paid to him through ARC's cafeteria plan.
(4) This excludes $81,000 per year in connection with a temporary assignment
(ended on December 31, 1996) to manage another Chromalloy Gas Turbine
operation, Chromalloy New York (formerly, Chromalloy Research and
Technology).
<PAGE>
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD ON EXECUTIVE COMPENSATION
The Company's executive compensation program is developed and implemented
by the Company's Human Resources Department in conjunction with the Compensation
Committee of the Board of Directors. The Compensation Committee, which is
comprised of three outside directors, approves all elements of the program,
which is then ratified by the full Board of Directors. This program is based
upon objectives that seek to attract and retain key executives critical to the
success of the Company, and reward and motivate executives for performance that
maximizes Company success and shareholder value. In order to accomplish these
goals, the Company has designed a competitive base salary program and annual
incentive cash bonus plans which are predominantly geared toward achievement of
stated financial goals. In addition, stock option grants and restricted stock
grants may be awarded from time to time in order to emphasize stockholder
returns and focus on long-term goals.
Base salaries for executive officers of the Company are intended to
maintain competitive rates of pay for executives in relation to the market. The
Company competes for executive talent across a broad range of industrial and
non-industrial industry segments. The Company's Human Resources Department
collects and analyzes competitive salary data from a comprehensive group of
surveys produced by leading human resource/compensation consulting firms. In
1996, these surveys included those published by Towers Perrin, Hewitt
Associates, the Conference Board, William M. Mercer, Inc. and the American
Compensation Association, among others. These surveys disclose compensation
levels for executives at corporations comparable to the Company in size and
industry mix, including firms classified as 'S&P 500.' The Human Resources
Department does not limit its comparative analyses to companies classified as
'Aerospace/Defense,' since it believes that the Company competes for executive
talent beyond these industries.
This analysis is presented to the Compensation Committee in the form of an
'Officer Salary Survey.' In the officers' survey, particular reliance is placed
on the findings of Towers Perrin and Hewitt Associates. Here, definitions of
survey positions, company size and industry mix most closely align with the
actual responsibilities of Sequa's executive officer group. The base salary
levels for certain of Sequa's executive officers fall at the high end of survey
ranges, although these levels are disproportionately affected by salaries paid
to those executives with extensive years of service.
The Compensation Committee's review of the competitive market resulted in
salary increases of 3.9% being awarded to Messrs. Alexander and Krinsly, and
5.0% to Mr. Quicke in March 1997. Mr. Savoca, who retired in February 1997, was
not awarded any increase. Mr. Weinstein, who had declined an increase of 5.6%
awarded by the Compensation Committee in 1994, accepted that increase effective
December 31, 1996. The Board of Directors, together with the Compensation
Committee, awarded an aggregate increase to Mr. Weinstein of 9.3% for 1997,
payable as to 5.1% effective January 1, 1997, and 4.0% effective March 1, 1997.
The other executive officers were granted increases of between 3% and 4% in
March, having been found by the Committee to require these adjustments in order
to retain competitive, yet reasonable, salary levels. In all cases, there was a
desire to maintain the high level of motivation and contribution associated with
these executives. The Compensation Committee's conclusions were based upon the
detailed comparisons described above with respect to Company size, complexity
and industry mix, overlaid by the performance, experience and tenure of the
Company's executive officers.
<PAGE>
<PAGE>
The Company's annual incentive bonus plans seek to motivate and reward
executives by recognizing the impact their individual accomplishments have had
on the financial performance of the Company or of a particular division during
the previous year. The named executive officers (excluding Mr. Savoca), together
with the Executive Vice President, Finance and Administration, are measured by
the Company's Management Incentive Bonus Plan for Corporate Executive Officers
(the 'Plan'). Three of the five Corporate Executive Officers (as defined in the
Plan) earned bonuses for 1996 based solely on the Company's having achieved in
excess of its minimum target of earnings per share from continuing operations
('EPS'), which target is determined by the Compensation Committee each year: the
Chairman/Chief Executive Officer was awarded a bonus of $378,979; the Senior
Executive Vice President/General Counsel was awarded $187,123; and the Executive
Vice President/Finance and Administration was awarded $115,432. The bonus
opportunity for the Chairman/Chief Executive Officer is calculated at 32.5% of
his base compensation if the Company achieves its 'Minimum' EPS, up to 65% of
base compensation at 'Par' EPS, and up to 97.5% of base compensation at
'Outstanding' EPS. The bonus opportunity for the Senior Executive Vice
President/General Counsel and the Executive Vice President/Finance and
Administration is calculated at 30%, up to 60% and up to 90% of their respective
base compensation, depending upon whether 'Minimum', 'Par' or 'Outstanding' EPS,
respectively, has been achieved.
For the President/Chief Operating Officer, 33.3% of bonus opportunity is
based upon EPS, with the other 66.6% dependent upon operating income and return
on net assets ('RONA') results for the operations which are under his direction
(all non-gas turbine operations). That provision was designed so that the Plan
would reflect the contributions made by Mr. Quicke not only to the Company as a
whole but also to the operations he directs. Accordingly, Mr. Quicke was awarded
a bonus of $188,236, based upon both the EPS component of his bonus formula, as
well as the 1996 operating income and RONA of the operations under his
direction.
For the Senior Vice President, Gas Turbine Operations (the final Corporate
Executive Officer, as defined in the Plan), 33.3% of his bonus opportunity is
based upon EPS and 66.6% on operating income and RONA results (before major
litigation expenses) measured against the performance of the Gas Turbine
operations which are under his supervision. Accordingly, Mr. Weinstein was
awarded a bonus of $170,529, based upon both the EPS component of his bonus
formula as well as the 1996 operating income and RONA of the Gas Turbine
operations in 1996.
The Plan was initially approved by shareholders in 1994 to comply with
Section 162(m) of the Internal Revenue Code. That section provides that
compensation of an executive officer who is required to be listed in the Summary
Compensation Table of the Proxy Statement is not tax deductible by the Company
to the extent that it exceeds $1.0 million, unless certain criteria (including
shareholder approval) have been met. Thus, bonuses (but not salaries) payable to
Corporate Executive Officers under the Plan (which complies with the
requirements of Section 162(m)) are tax deductible by the Company to the extent
that they raise total compensation of any such officer above $1.0 million. While
the terms of the Plan provide that it cannot be substantively amended without
shareholder approval (or it will no longer be in compliance with Section
162(m)), the Compensation Committee always retains discretion to impose more
restrictive, although not more generous, criteria under the Plan. The terms of
the original 1994 Plan provided for achievement of budgeted EPS levels of 85%
(Minimum), up to 100% (Par) and up to 115% (Outstanding). The Compensation
Committee made these bonus levels
<PAGE>
<PAGE>
more difficult to achieve for 1996 by raising them to 300% of EPS (Minimum), up
to 500% (Par) and up to 775% (Outstanding).
Executive officers of the Company who are not Corporate Executive Officers
(as defined in the Plan) participate in separate bonus plans, dependent upon
financial performance of the Company or of a particular unit and, to a far
lesser degree, individual performance achievement or attainment by the unit of
non-financial goals. Those measurements are determined at the commencement of
each fiscal year by senior management of the Company and then submitted to the
Compensation Committee for approval. The Compensation Committee retains
discretion within those plans to recognize the response of an (executive
excluding Corporate Executive Officers) to unplanned business events or
opportunities.
With respect to the Company's other executive and non-executive officers
who are part of the corporate staff, they were awarded bonuses for 1996 based on
the Company's having achieved in excess of minimum budgeted consolidated
operating income (the Company having achieved positive EPS after accrual for
bonus awards), as well as individual performance achievement. With respect to
Mr. Savoca, bonuses for his unit (ARC and Casco Products Corporation) were
determined by attainment of budgeted operating income and RONA results,
together, to a significantly lesser extent, with achievement of non-financial
goals by each unit. For 1996, Mr. Savoca's unit results exceeded the
predetermined criteria that had been specifically established. He was,
therefore, awarded a bonus of $265,200. All bonuses earned with respect to 1996
were paid in March 1997.
During 1994, an effort was made to retain and motivate certain key
corporate executives of the Company through the provisional granting of
restricted stock, although no grant was made to any of the named executive
officers or Corporate Executive Officers. The period of restriction was for
three years, expiring in October 1997. Those grants were approved by
shareholders at the 1995 annual meeting. No stock options were granted in 1996
to any executive officer of the Company.
While 1996 constituted a year of significantly improved performance by the
Gas Turbine operations and throughout the aerospace industry, as well as strong
results from several of the non-gas turbine operations, there is recognition
that the Company still has significant challenges before it. Nevertheless, the
Compensation Committee is confident that Sequa's core executive officer group
continues to be equipped to meet these challenges. The Compensation Committee
holds to the belief that the total compensation packages provided to the
Company's executive officers are competitive without being excessive and are
appropriate to assure the retention and motivation of this highly-skilled and
experienced segment of the Sequa workforce.
/s/ Gerald Tsai, Jr.
Gerald Tsai, Jr., Chairman
/s/ A. Leon Fergenson
A. Leon Fergenson
/s/ Donald D. Kummerfeld
Donald D. Kummerfeld
<PAGE>
<PAGE>
STOCK PERFORMANCE GRAPH -- 5 YEAR CUMULATIVE INDEX
The graph set forth below compares the annual percentage change in the
cumulative total shareholder return on an investment of $100 in the Company's
Common Stock, on an indexed basis, with the S&P 500 Stock Index and the S&P
Aerospace/Defense Index, for the period of five years ended December 31, 1996.
TOTAL RETURN TO SHAREHOLDERS
REINVESTED DIVIDENDS
[GRAPH]
<TABLE>
<CAPTION>
Company/Index Name Dec91 Dec92 Dec93 Dec94 Dec95 Dec96
- ------------------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
SEQUA CORP-CL A 100 75.41 78.34 62.67 73.52 94.62
SEQUA CORP-CL B 100 68.15 68.76 56.55 83.90 106.20
S&P 500 INDEX 100 107.62 118.46 120.03 165.13 203.05
AEROSPACE/DEFENSE-500 100 105.20 136.83 148.01 244.94 327.64
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth information with respect to any person (other
than the Company's directors) known to the Company to be the beneficial owner of
more than five percent of any class of the Company's outstanding voting
securities as of March 1, 1997. Except to the extent indicated in the footnotes,
sole voting and investment power with respect to the shares shown is held by the
owner named.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF CLASS A PERCENT OF AGGREGATE
NAME AND ADDRESS COMMON STOCK CLASS VOTING POWER
- --------------------------------------------------------- ---------------- ---------- ------------
<S> <C> <C> <C>
Wellington Management Company ........................... 551,600(1) 8.39 1.36
75 State Street
Boston, MA 02109
Gabelli Funds, Inc. ..................................... 771,700(2) 11.73(2) 1.90
(and affiliates)
One Corporate Center
Rye, NY 10580-1434
Sequa Corporation Master Trust .......................... 544,800(3) 8.28 1.34
(for participating pension plans)
c/o The Bank of New York
(as Master Trustee)
One Wall Street
New York, NY 10286
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF CLASS B PERCENT OF AGGREGATE
COMMON STOCK CLASS VOTING POWER
---------------- ---------- ------------
<S> <C> <C> <C>
Gabelli Funds, Inc. ..................................... 886,100(2) 26.60(2) 21.88(2)
(and affiliates)
One Corporate Center
Rye, NY 10580-1434
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF PERCENT OF AGGREGATE
PREFERRED STOCK CLASS VOTING POWER
---------------- ---------- ------------
<S> <C> <C> <C>
Gabelli Funds, Inc. ..................................... 264,500(2) 43.35(2) (4)
(and affiliates)
One Corporate Center
Rye, NY 10580-1434
</TABLE>
- ------------
(1) Wellington Management Company ('WMC') does not have sole voting or sole
dispositive power with respect to any of these shares; it has shared voting
power with respect to 372,800 shares and shared dispositive power with
respect to all of the shares listed. WMC is an investment advisor with
respect to the reported shares, which are owned by numerous clients.
(2) Gabelli Funds, Inc. (and affiliates) (collectively, the 'Gabelli Companies')
owns beneficially all classes of the Company's stock. Pursuant to Rule
13d-3(d)(1) under the Securities Exchange Act of 1934, as amended, the total
of the Gabelli Companies' Class A Common Stock, Class B Common Stock (if
converted into Class A Common Stock) and Preferred Stock (if converted into
Class A Common Stock) would give the Gabelli Companies aggregate holdings of
2,007,469 shares of Class A Common Stock, or 25.70 percent of that class.
This would represent 6.15 percent of the total votes then outstanding (after
conversions to Class A of all Gabelli Companies' stock) in all classes. If
no conversions were done, the total current holdings of all three classes of
stock by the Gabelli Companies gives them 24.43 percent of the aggregate
voting power of all Company stock. Of the Preferred Stock, the Gabelli
Companies have no voting power with respect to 22,900 shares. In connection
with its shares of Class B Common Stock, the Gabelli Companies have no
voting power with respect to 28,500 shares.
(3) All of the shares of Class A Common Stock held by the Sequa Corporation
Master Trust (the 'Trust') are voted by the Trust's Investment Committee,
comprised of officers of the Company. Such committee also makes decisions
regarding acquisitions and dispositions of Company stock for the Trust.
(4) Less than 1%.
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information as to the Company's voting
securities beneficially owned as of March 1, 1997, by the Company's directors,
the named executive officers of the Company and by all such directors and
executive officers as a group. None of the Company's executive officers or
directors is the beneficial owner of any Preferred Stock (with the exception of
400 shares owned by a trust in which the children of an executive officer have a
partial remainder interest, and as to which the executive officer disclaims
beneficial ownership). Except to the extent indicated in the footnotes, sole
voting and investment power with respect to the shares shown is held by the
owner named.
<TABLE>
<CAPTION>
PERCENT
NUMBER OF NUMBER OF OF
SHARES OF PERCENT SHARES OF PERCENT AGGREGATE
CLASS A OF CLASS B OF VOTING
COMMON STOCK CLASS COMMON STOCK CLASS POWER
------------ ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Norman E. Alexander............... 2,232,469(a)(b)(c)(d) 33.88 1,946,647(d) 58.44 53.56
Alvin Dworman..................... 413 (e) None -- (e)
A. Leon Fergenson................. 2,623(f) (e) 2,283(e) (e) (e)
David S. Gottesman................ 7,500 (e) None -- (e)
Stuart Z. Krinsly................. 226,875(a)(b)(c)(d) 3.44 203,404(d) 6.10 5.58
Donald D. Kummerfeld.............. 200 (e) None -- (e)
</TABLE>
(table continued on next page)
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
PERCENT
NUMBER OF NUMBER OF OF
SHARES OF PERCENT SHARES OF PERCENT AGGREGATE
CLASS A OF CLASS B OF VOTING
COMMON STOCK CLASS COMMON STOCK CLASS POWER
------------ ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Richard S. LeFrak................. 2,000 (e) 500 (e) (e)
John J. Quicke.................... 18,666(b)(g) (e) 1,000 (e) (e)
Antonio L. Savoca................. 7,500(b) (e) None -- (e)
Michael I. Sovern................. 1,000 (e) None -- (e)
Fred R. Sullivan.................. 1,659(h) (e) 648 (e) (e)
Gerald Tsai, Jr................... 500 (e) None -- (e)
Martin Weinstein.................. 20,291(a)(b) (e) None -- (e)
All executive officers and
directors as a group (15 persons
including the above)............ 2,395,729(a)(b)(c) 36.07 2,015,108 60.49 55.59
</TABLE>
- ------------
(a) Includes certain shares held for the benefit of the named executive officer
in the Company's 401-K Plan.
(b) Includes shares of Class A Common Stock which may be obtained upon the
exercise, within sixty days of the date of this Proxy Statement, of stock
options by Messrs. Alexander, Quicke, Krinsly, Savoca and Weinstein and by
all executive officers as a group, as follows:
<TABLE>
<CAPTION>
NAME SHARES
- ------------------------------------------------------------------------------------- ------
<S> <C>
Norman E. Alexander.............................................................. 15,000
John J. Quicke................................................................... 17,666
Stuart Z. Krinsly................................................................ 12,500
Antonio L. Savoca................................................................ 4,400
Martin Weinstein................................................................. 9,300
All executive officers as a group................................................ 66,866
</TABLE>
With the exception of 5,666 exercisable stock options owned by Mr. Quicke
(which have an exercise price of $24.75 and expire in 2000), all exercisable
stock options owned by the executive officers of the Company have an
exercise price of $32.25 and expire in September 1998. The closing price of
the Class A Common Stock on March 20, 1997 was $45.50.
(c) Does not include shares held by the Sequa Corporation Master Trust (see
'Security Ownership by Certain Beneficial Owners', above), of which Messrs.
Alexander and Krinsly are members of its Investment Committee.
(d) Includes 170,000 shares of Class A Common Stock and 139,374 shares of Class
B Common Stock held in trust for the benefit of Mr. and Mrs. Alexander and
Mr. Alexander's estate. Mr. Krinsly and another individual share voting and
investment power with respect to such shares and
(footnotes continued on next page)
<PAGE>
<PAGE>
(footnotes continued from previous page)
Mr. Alexander retains the sole right to remove such shares at any time from
the trust and replace them with other property.
(e) Less than one percent.
(f) Includes 1,670 shares of Class A Common Stock and 1,500 shares of Class B
Common Stock owned by Mrs. A. Leon Fergenson, as to which Mr. Fergenson
disclaims beneficial ownership.
(g) Includes 400 shares of Class A Common Stock owned by minor children of Mr.
Quicke, as to which he disclaims beneficial ownership.
(h) Includes 500 shares of Class A Common Stock owned by Mrs. Fred R. Sullivan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
The master trust of the Company's Pension Plan had an investment of
approximately $300,000 in ADCO Equity Bridge Fund Limited Partnership, which was
managed by the ADCO Group, of which Mr. Dworman, a Director of the Company, is
Chairman and owner. The investment was a mortgage on an office complex in
Pennsylvania, due December 31, 1996 and paying interest at a rate equal to the
prime rate plus 1.5%. In October 1996, the master trust received a final
distribution of $347,520 (bringing the total investment return to 9.25%) as its
share of a discounted repayment of the mortgage.
In connection with Mr. Quicke's relocation to New York, the Company made a
$300,000 interest-free loan in 1993, payable on demand, and secured by a second
mortgage on his home. In early 1996, Mr. Quicke repaid $50,000 of this loan and
he repaid another $50,000 in early 1997. Accordingly, the principal balance of
his loan has been reduced to $200,000.
In connection with Mr. Weinstein's temporary relocation to New York, the
Company made a $300,000 unsecured, interest-free loan in 1993, payable in June
1997, all of which remains outstanding.
Alex Alexander, brother of Norman Alexander (Chairman, Chief Executive
Officer and Director of the Company), performs services for Chromalloy Men's
Apparel Group, Inc. (a subsidiary of the Company) and is compensated at an
annual rate of $75,000 plus certain employee benefits. This arrangement
commenced in early 1994, and the aggregate cost to the Company of such payments
and benefits in 1996 was $84,226.
<PAGE>
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SEQUA CORPORATION
Date: July 24, 1997 By: /S/ WILLIAM P. KSIAZEK
------------- -------------------------
William P. Ksiazek
Vice President and Controller
