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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COMMERCIAL METALS COMPANY
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(Name of Registrant as Specified in its Charter)
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(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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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[ ] 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:
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COMMERCIAL METALS COMPANY
6565 NORTH MACARTHUR BOULEVARD
IRVING, TEXAS 75039
TELEPHONE (214) 689-4300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 22, 2004
The Annual Meeting of Stockholders of Commercial Metals Company, a Delaware
corporation, will be held in the amphitheater at the Four Seasons conference
center, 4150 North MacArthur Boulevard, Irving, Texas, on January 22, 2004, at
10:00 a.m., Central Standard Time. If you are planning to attend the meeting in
person, please check the appropriate space on the enclosed proxy card. A map is
included on the back cover of the attached Proxy Statement. The meeting will be
held for the following purposes:
(1) To elect one person to serve as director until the 2005 annual
meeting of the stockholders and until his successor is elected and to elect
four persons to serve as directors until the 2007 annual meeting of
stockholders and until their successors are elected;
(2) To consider and act upon a proposal to amend our restated
certificate of incorporation to increase the number of authorized shares of
our common stock from 40,000,000 to 100,000,000 with no change in the
number of authorized shares of preferred stock;
(3) To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending August 31, 2004; and
(4) To transact such other business as may properly come before the
meeting or any adjournments of the meeting.
Only stockholders of record on November 24, 2003, are entitled to notice of
and to vote at the meeting or any adjournments of the meeting.
You are cordially invited to attend the annual meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL OUT, SIGN AND MAIL
PROMPTLY THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE ON WHICH NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. ALTERNATIVELY, YOU MAY VOTE
YOUR SHARES VIA TELEPHONE OR THE INTERNET AS DESCRIBED ON THE ENCLOSED PROXY
CARD. PROXIES FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS
REQUESTED BY THEM. THE PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED
IN FURTHER COMMUNICATION.
By Order of the Board of Directors,
/s/ DAVID M. SUDBURY
DAVID M. SUDBURY
Vice President, Secretary
and General Counsel
Dallas, Texas
December 8, 2003
COMMERCIAL METALS COMPANY
6565 NORTH MACARTHUR BOULEVARD
IRVING, TEXAS 75039
TELEPHONE (214) 689-4300
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 22, 2004
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of Commercial Metals Company for use at the
annual meeting of our stockholders to be held on January 22, 2004, and at any
and all adjournments of the meeting. The approximate date on which this proxy
statement and accompanying proxy card are first being sent or given to
stockholders is December 11, 2003.
Shares represented by each proxy, if properly executed and returned to us
prior to the meeting, will be voted as directed, but if not otherwise specified,
will be voted for the election of five directors, for approval of the proposal
to amend our restated certificate of incorporation to increase the number of
authorized shares of our common stock from 40,000,000 to 100,000,000 and for the
approval of the proposal to ratify the appointment of Deloitte & Touche LLP as
independent auditors, all as recommended by our board of directors. A
stockholder executing the proxy may revoke it at any time before it is voted by
giving written notice to the Secretary of Commercial Metals Company, by
subsequently executing and delivering a new proxy or by voting in person at the
meeting (although attending the meeting without executing a ballot or executing
a subsequent proxy will not constitute revocation of a proxy).
Stockholders of record can simplify their voting and reduce our cost by
voting their shares via telephone or the Internet. The telephone and Internet
voting procedures are designed to authenticate stockholders' identities, allow
stockholders to vote their shares and to confirm that their instructions have
been properly recorded. If a stockholder's shares are held in the name of a bank
or broker, the availability of telephone and Internet voting will depend upon
the voting processes of the bank or broker. Accordingly, stockholders should
follow the voting instructions on the form they receive from their bank or
broker.
Stockholders who elect to vote via the Internet may incur
telecommunications and Internet access charges and other costs for which they
are solely responsible. The Internet and telephone voting facilities for
stockholders of record will close at 11:59 p.m., Eastern Standard Time, on the
evening before the annual meeting. Instructions for voting via telephone or the
Internet are contained in the enclosed proxy card.
OUTSTANDING VOTING SECURITIES
On November 24, 2003, the record date for determining stockholders entitled
to vote at the annual meeting, we had outstanding 28,320,895 shares of our
common stock, par value $5.00 per share, not including 3,944,271 treasury
shares. Each share of our common stock is entitled to one vote for each director
to be elected and upon all other matters to be brought to a vote. We had no
shares of preferred stock outstanding at November 24, 2003.
The presence of a majority of our outstanding common stock represented in
person or by proxy at the meeting will constitute a quorum. Shares represented
by proxies that are marked "abstain" will be counted as shares present for
purposes of determining the presence of a quorum. Proxies relating to "street
name" shares that are voted by brokers on some matters will be treated as shares
present for purposes of determining the presence of a quorum, but will not be
treated as shares entitled to vote at the annual meeting on those matters
as to which authority to vote is withheld by the broker. Such shares as to which
authority to vote is withheld are called broker non-votes.
The five nominees receiving the highest vote totals will be elected as
directors. Accordingly, abstentions and broker non-votes will not affect the
outcome of the election of directors.
The proposal to amend our restated certificate of incorporation to increase
the number of authorized shares of common stock, par value $5.00 per share, from
40,000,000 to 100,000,000 shares will require the affirmative vote of the
holders of a majority of our outstanding common stock. Accordingly, abstentions
and broker non-votes will have the same effect as a vote against such proposal.
All other matters to be voted on will be decided by the affirmative vote of
a majority of the shares present or represented at the meeting and entitled to
vote. On any such matter, an abstention will have the same effect as a negative
vote. A broker non-vote on such matters will not be counted as an affirmative
vote or a negative vote because shares held by brokers will not be considered
entitled to vote on matters as to which the brokers withhold authority.
Management has designated the proxies named in the accompanying form of
proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
On the basis of filings with the Securities and Exchange Commission and
other information, we believe that as of the record date the following persons,
including groups of persons, beneficially owned more than 5% of our outstanding
common stock:
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OF CLASS
---------------- ----------------------- --------
Moses Feldman 1,455,470(1) 5.1%
P.O. Box 931
Doylestown, PA 18901
Dimensional Fund Advisors Inc. 1,809,658(2) 6.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Barclays Global Investors, NA 1,844,534(3) 6.5%
45 Fremont Street
San Francisco, CA 94105
AXA Financial, Inc. 1,912,167(4) 6.8%
1290 Avenue of the Americas
New York, NY 10104
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(1) Based on filings with the Securities and Exchange Commission, which indicate
the reporting person has sole voting and dispositive power over 119,038
shares and shared voting and dispositive power over 1,336,432 shares.
Includes 19,038 shares subject to options exercisable within 60 days.
(2) Based on a Schedule 13G report filed with the Securities and Exchange
Commission on February 3, 2003.
(3) Based on a Schedule 13G report filed with the Securities and Exchange
Commission on February 12, 2003.
(4) Based on Amendment No. 1 to Schedule 13G filed with the Securities and
Exchange Commission on February 12, 2003, on behalf of AXA Financial, Inc.,
which indicates that AXA Financial, Inc., through its subsidiaries and
affiliates, had sole voting power over 1,637,793 shares, sole dispositive
voting power over 1,512,767 shares and shared voting power over 15,200
shares and shared dispositive power over 399,400 shares.
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The following table sets forth information known to us about the beneficial
ownership of our common stock as of December 8, 2003, by each director and
nominee for director, the Chief Executive Officer, the other executive officers
included in the Summary Compensation Table, and all current directors, nominees
for director and executive officers as a group. Unless stated otherwise in the
notes to the table, each person named below has sole authority to vote and
invest the shares listed.
OWNED
SHARES OF OPTION SHARES TOTAL SHARES OF PERCENTAGE OF
COMMON OF COMMON COMMON STOCK COMMON STOCK
NAME STOCK STOCK(1) BENEFICIALLY OWNED BENEFICIALLY OWNED
---- --------- ------------- ------------------ ------------------
Adams, Harold L. ............ 0 0 0 *
Feldman, Moses(2)............ 1,436,432 19,038 1,455,470 5.1%
Heinkele, Harry J. .......... 58,680 0 58,680 *
Howell, Leo.................. 121,978 17,000 138,978 *
Loewenberg, Ralph E.(3)...... 0 34,156 34,156 *
Massaro, Anthony A. ......... 2,000 34,156 36,156 *
McClean, Murray R. .......... 0 37,120 37,120 *
Neary, Robert D. ............ 4,000 7,112 11,112 *
Owen, Dorothy G. ............ 366,883 34,156 401,039 1.4%
Rabin, Stanley A. ........... 367,246 323,300 690,546 2.4%
Selig, Clyde P. ............. 81,294 94,420 175,714 *
Smith, J. David.............. 0 0 0 *
Womack, Robert R. ........... 8,670 27,596 36,266 *
All current directors,
nominees and executive
officers as a group (20
persons)................... 2,676,442 971,971 3,648,413 12.9%
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* Less than one percent
(1) Represents shares subject to options exercisable within 60 days of December
8, 2003.
(2) Moses Feldman has sole voting and dispositive power over 119,038 shares and
shared voting and dispositive power over 1,336,432 shares. Includes
1,167,382 shares owned by the Marital Trust under the Trust Indenture
created by the Will of Jacob Feldman of which Moses Feldman is one of four
trustees and 169,050 of 735,000 shares owned by the Feldman Interests Ltd.,
a family limited partnership of which Moses Feldman is managing partner.
Excludes 1,262,214 shares owned of record by The Feldman Foundation, a Texas
non-profit corporation, of which Moses Feldman is one of three voting
directors. Moses Feldman disclaims beneficial ownership as to all shares
held by The Feldman Foundation, the Marital Trust and 565,950 shares held by
the Feldman Interests Ltd.
(3) Mr. Loewenberg is one of four trustees of the Marital Trust under the Trust
Indenture created by the Will of Jacob Feldman which owns 1,167,382 shares.
Mr. Loewenberg disclaims any beneficial interest as to such shares.
PROPOSAL I
ELECTION OF DIRECTORS
We are adding two directors to our board of directors at this annual
meeting of stockholders, bringing the size of our board of directors to 11
members. Our restated certificate of incorporation divides the board of
directors into three classes. To divide our 11 directors as equally as possible
among the three classes, we are adding one additional Class I director and one
additional Class III director. The term of office of the three existing Class
III directors expires at this annual meeting of stockholders. Three of the four
Class III nominees, Moses Feldman, Ralph E. Loewenberg and Stanley A. Rabin,
were previously elected by the stockholders, currently serve as directors and
are standing for election to a three year term of office expiring at
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the 2007 annual meeting and until their successors are duly elected. In
addition, nominee Harold L. Adams stands for election as a Class III director to
serve a three year term of office expiring at the 2007 annual meeting and until
his successor is duly elected. Mr. Adams has been the Chairman Emeritus of RTKL
Associates Inc., an international architecture, engineering and planning firm
headquartered in Baltimore, Maryland, since April 2003 and has been associated
with RTKL since 1969, having previously served as Chairman since 1987, Chief
Executive Officer since 1971 and President from 1969 through 1999. The three
continuing Class I directors and nominee J. David Smith, if elected, will serve
as a Class I director until the 2005 annual meeting of stockholders. Mr. Smith
has been Chairman, President and Chief Executive Officer of Euramax
International, Inc., since its inception in 1996 when it acquired certain
portions of the fabricated products operations of Alumax, Inc. Mr. Smith had
been President of the Amerimax Fabricated Product group since 1990 and was a
Vice President of Alumax from 1994 to 1996. Euramax is an international producer
of aluminum, steel, vinyl and fiberglass products for original equipment
manufacturers, distributors, contractors and home centers in North America and
Western Europe. The term of office of the three continuing Class II directors
expires at the 2006 annual meeting of stockholders. Proxies cannot be voted for
the election of more than five persons to the board of directors at the meeting.
Each nominee has consented to being named in this proxy statement and to
serve if elected. If any nominee becomes unavailable for any reason, the shares
represented by the proxies will be voted for the person, if any, as may be
designated by our board of directors. However, management has no reason to
believe that any nominee will be unavailable.
The following table sets forth information about the directors. All
directors have been employed in substantially the same positions set forth in
the table for at least the past five years except for Messrs. Rabin, Adams,
Womack and Selig. Mr. Rabin was elected to the additional position of Chairman
of Commercial Metals Company in March 1999. Mr. Adams was named Chairman
Emeritus of RTKL Associates Inc. in April 2003 having been Chairman and Chief
Executive Officer for more than five years. Mr. Womack was Chairman and Chief
Executive Officer of Zurn Industries, Inc. prior to its merger in 1998 with U.S.
Industries. Mr. Womack retired as Chairman and Chief Executive Officer of Zurn
Industries, Inc. and Chief Executive of U.S. Industries Bath and Plumbing
Products Group in January 2000. Mr. Selig was elected to the additional position
of Chief Executive Officer of the CMC Steel Group in June 2002.
NOMINEES
SERVED AS
NAME, PRINCIPAL DIRECTOR
OCCUPATION AND BUSINESS AGE SINCE
----------------------- --- ---------
CLASS III -- TERM TO EXPIRE IN 2007
Moses Feldman 63 1976
President, AeroMed, Inc.
Ralph E. Loewenberg 64 1971
President, R. E. Loewenberg Capital Management
Corporation
Stanley A. Rabin 65 1979
Chairman, President and Chief Executive Officer,
Commercial Metals Company
Harold L. Adams 64 --
Chairman Emeritus, RTKL Associates Inc.
CLASS I -- TERM TO EXPIRE IN 2005
J. David Smith 54 --
Chairman, President and Chief Executive Officer,
Euramax International, Inc.
4
DIRECTORS CONTINUING IN OFFICE
SERVED AS
NAME, PRINCIPAL DIRECTOR
OCCUPATION AND BUSINESS AGE SINCE
----------------------- --- ---------
CLASS I -- TERM TO EXPIRE IN 2005
A. Leo Howell 82 1977
Vice President, Commercial Metals Company; President,
Howell Metal Company
Dorothy G. Owen 68 1995
Retired - Former Chairman of the Board, Owen Steel
Company, Inc.; Management of Investments
Robert R. Womack 66 1999
Retired - Former Chairman and Chief Executive Officer,
Zurn Industries, Inc.; and Chief Executive Officer of
U.S. Industries Bath and Plumbing Products Group
CLASS II -- TERM TO EXPIRE IN 2006
Anthony A. Massaro 59 1999
Chairman, President and Chief Executive Officer,
Lincoln Electric Holdings, Inc.
Robert D. Neary 70 2001
Retired - Former Co-Chairman of Ernst & Young
Clyde P. Selig 71 2002
Vice President, Commercial Metals Company; President
and Chief Executive Officer, CMC Steel Group
Clyde P. Selig is the uncle of Jeffrey H. Selig, an executive officer.
There are no other family relationships among the directors, nominees and
executive officers.
Mr. Adams is a director of Legg Mason, Inc. and Lincoln Electric Holdings,
Inc. Mr. Massaro is a director of Lincoln Electric Holdings, Inc., Thomas
Industries, Inc. and PNC Financial Services Group, Inc. Mr. Neary is a director
of Strategic Distribution, Inc. and is Chairman of the Board of Trustees of
Armada Funds. Mr. Smith is a director of Euramax International, Inc. Mr. Womack
is a director of Covanta Energy, Inc., and Jacuzzi Brands, Inc.
ADDITIONAL INFORMATION RELATING TO CORPORATE GOVERNANCE
AND THE BOARD OF DIRECTORS
Corporate Governance. Our board of directors has determined, after
considering all the relevant facts and circumstances, that Messrs. Loewenberg,
Feldman, Neary, Massaro and Womack and nominee Mr. Smith and nominee Mr. Adams
and Ms. Owen are independent, as "independence" is defined by the recently
approved revised listing standards of the New York Stock Exchange, because they
have no direct or indirect material relationship with us (either directly or as
a partner, shareholder or officer of an organization that has a relationship
with the company).
We have three standing board committees, audit, compensation and nominating
and corporate governance. Membership of each of these committees is comprised
entirely of independent directors. The board of directors has adopted charters
for each of these committees describing the authority and responsibilities
delegated to each committee by the board. Our board of directors has also
adopted corporate governance guidelines. In addition to the charter of the audit
committee, as recently amended and attached to this proxy statement, all
committee charters, corporate governance guidelines, financial code of ethics
and other information is available at our website, www.commercialmetals.com. The
board recognizes that there is an
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ongoing and energetic debate about corporate governance and it will review these
charters, guidelines and other aspects of governance as deemed necessary.
Non-management directors regularly schedule executive sessions in which
non-management directors meet without the presence of management. The presiding
director of such executive sessions rotates among the Chairs of the audit
committee, compensation committee and the nominating and corporate governance
committee. Interested parties may communicate with the non-management directors
by submitting a letter addressed to Non-management Directors c/o General Counsel
at P.O. Box 1046, Dallas, Texas 75221.
Meetings of the Board of Directors. During the fiscal year ended August
31, 2003, the entire board of directors met ten times, of which seven were
regularly scheduled meetings and three were special meetings. All directors
attended at least seventy-five percent or more of the meetings of the board and
of the committees on which they served.
Audit Committee. The board of directors has a standing audit committee
which performs the activities more fully described in the Audit Committee Report
on page 17. The members of the audit committee during fiscal year 2003 were
Messrs. Womack (Chairman), Feldman, and Neary and Ms. Owen. During the fiscal
year ended August 31, 2003, the audit committee met nine times.
Compensation Committee. The board of directors has a standing compensation
committee that is responsible for the matters described in the committee's
charter including annually reviewing and approving corporate goals and
objectives relevant to the CEO's compensation, evaluating the CEO's performance
in light of those goals and objectives and setting the CEO's compensation based
on this evaluation as well as assisting the board in the discharge of its
responsibilities relating to the establishment, administration and monitoring of
fair and competitive compensation and benefits programs for the company's
executive officers and other executives. During 2003, the compensation committee
consisted of Messrs. Loewenberg (Chairman), Feldman, Neary and Massaro. The
compensation committee met three times during the fiscal year ended August 31,
2003, to establish the CEO's salary and bonus, make recommendations to the board
of directors as to salary and bonus compensation for other executive officers,
to review compensation policies, approve the issuance of stock options and
consider the committee's charter.
Nominating and Corporate Governance Committee. The board of directors has
a standing nominating and corporate governance committee that is responsible for
the matters described in the committee's charter including efforts to identify
and make recommendations as to individuals qualified to be nominated for
election to the board of directors, reviewing management succession planning,
and corporate governance matters. During 2003, the nominating and corporate
governance committee consisted of Messrs. Massaro (Chairman), Feldman,
Loewenberg, Neary and Womack and Ms. Owen. The nominating and corporate
governance committee met four times during the fiscal year ended August 31,
2003, to consider board structure, corporate governance matters including
governance guidelines and committee charters, candidates for directors and
executive officer succession. The committee will consider persons recommended by
stockholders for inclusion as nominees for election to our board of directors if
the names, biographical data and qualifications of such persons are submitted in
writing in a timely manner addressed to the attention of the committee and
delivered to the Secretary of Commercial Metals Company at P.O. Box 1046,
Dallas, Texas 75221.
Compensation of Non-employee Directors. None of our employees receive
additional compensation for serving as a director. Messrs. Feldman, Loewenberg,
Massaro, Neary and Womack and Ms. Owen were paid an annual retainer fee of
$27,000 and $1,200 for each board meeting or $600 for each committee meeting
they attended prior to April 1, 2003. Effective April 1, 2003, the annual
retainer fee was increased to $34,000 and board and committee meeting attendance
fees were increased to $1,500. Chairmen of the audit, compensation and
nominating and corporate governance committees receive an additional payment,
which was $1,500 per year prior to April 1, 2003 and was increased to $5,000 per
year effective April 1, 2003. We also reimburse the directors for expenses in
connection with their attendance at board and committee meetings.
The Non-Employee Director Stock Option Plan approved at the 2000 annual
meeting of stockholders provides that each non-employee director receive on the
date of each annual meeting of stockholders an option
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to acquire, as adjusted for our June, 2002, two-for-one stock dividend, 3,000
shares. Directors elected to fill vacancies between annual meetings receive a
grant for a pro rata amount based on their period of service before the next
annual meeting. Each non-employee director received on January 23, 2003, an
option to acquire 3,000 shares of common stock at an exercise price of $15.10
per share. In addition, each non-employee director may make an irrevocable
election prior to January 1 of each year to accept an additional option grant in
lieu of all or part of the annual cash retainer to be paid for that year. The
number of shares subject to option as a result of this election is determined by
dividing the amount of the annual retainer by the Black-Scholes value for one
share as of the grant date. The grant date is the date of the annual meeting of
stockholders following the calendar year covered by the election. Messrs.
Loewenberg, Massaro and Ms. Owen each received an option to acquire 6,560 shares
of common stock at an exercise price of $15.10 per share on January 23, 2003, in
lieu of receipt of the annual cash retainer for calendar year 2002. Messrs.
Loewenberg and Massaro and Ms. Owen have also elected to accept an option for a
number of shares to be determined and granted January 22, 2004, in lieu of their
retainer fee for the calendar year 2003.
The exercise price for all options granted non-employee directors shall be
the fair market value on the day of grant. One-half of the number of the shares
covered by each 3,000 share option vests on the first anniversary of the date of
grant with the remaining one-half vesting on the second anniversary or
immediately upon a change in control. All options received as a result of a
non-employee director's election to receive an option in lieu of the cash
retainer are fully vested on the date of grant. All non-employee director
options terminate on the earliest of (i) the seventh anniversary of the date of
grant; (ii) one year after termination of service by reason of death or
disability; (iii) two years after termination of service by reason of retirement
after age sixty-two; or (iv) thirty days following termination of service for
any other reason. These options are "non-qualified" options under Section 422A
of the Internal Revenue Code.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and beneficial owners of more than 10% of our
common stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of our common stock and any of
our other equity securities. Based solely upon our review of the copies of such
forms received by us or written representations that no Form 5's were required
from reporting persons, we believe that all such reports were submitted on a
timely basis during the fiscal year ended August 31, 2003, except as follows:
Hugh M. Ghormley, a former executive officer, inadvertently failed to
timely report two transactions, a purchase of 573 shares that occurred in April,
2002 and a gift of 400 shares in July, 2002. The transactions were reported on
two Form 4s filed on April 4, 2003 with the Securities and Exchange Commission.
Robert R. Womack, a non-employee director, inadvertently failed to timely
report 18 separate small acquisitions for an aggregate of 670.86 shares that
occurred one per quarter during each quarter from the fourth quarter of fiscal
1999 through the first quarter of fiscal 2004 pursuant to a broker-administered
automatic dividend reinvestment program. The transactions were reported on a
Form 4 filed on November 12, 2003 with the Securities and Exchange Commission.
7
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid
during each of the last three fiscal years to the Chief Executive Officer and
the named executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ---------------
FISCAL SALARY BONUS AWARDS OF STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTION(#)(1) COMPENSATION($)(2)
------------------------------------- ------ -------- -------- --------------- ------------------
Stanley A. Rabin..................... 2003 525,000 240,000 41,800 35,072
Chairman, President and 2002 475,000 350,000 38,000 87,941
Chief Executive Officer 2001 475,000 295,000 38,000 39,087
A. Leo Howell........................ 2003 350,000 120,000 0 21,508
Vice President; President - 2002 340,000 240,000 0 63,236
Howell Metal Company 2001 340,000 350,000 0 39,659
Clyde P. Selig....................... 2003 350,000 134,500 0 22,670
Vice President; CMC Steel Group - 2002 320,000 235,000 0 69,335
President and Chief Operating
Officer 2001 320,000 241,000 0 28,929
Murray R. McClean.................... 2003 320,000 380,000 12,800 27,353
Vice President; Marketing and 2002 310,000 295,000 13,720 45,622
Distribution Segment - President 2001 310,000 110,000 14,880 24,560
Harry J. Heinkele.................... 2003 280,000 350,000 0 28,944
Vice President; President - 2002 270,000 145,000 0 47,407
Secondary Metals Processing
Division 2001 270,000 20,000 0 15,019
---------------
(1) These awards were granted under our 1996 Long-Term Incentive Plan. The
exercise price is the fair market value of such share on the date granted.
Although our 1996 Long-Term Incentive Plan provides for the granting of
stock appreciation rights, performance awards, restricted stock and
incentive stock options qualified under Section 422A of the Internal Revenue
Code, none have been made and each of the awards shown represent stock
options which do not qualify under Section 422A. The options are exercisable
one half at one year from grant date and the second half two years from
grant date and expire seven years from grant date. All options may vest
earlier upon a change in control as defined in the plan.
(2) The compensation reported represents contributions to and forfeitures
allocated to the account of the recipient under the Commercial Metals
Companies Profit Sharing and 401(k) Plan or, in the case of Mr. Selig, the
Structural Metals, Inc. Profit Sharing and 401(k) Plan and contributions to
the account of the recipient pursuant to the Benefit Restoration Plan, a
non-qualified plan for certain executives. All of the amounts reported are
fully vested in the recipient. The compensation for the named executive
officers for fiscal year 2003 include a credit to the account of each under
the Benefit Restoration Plan in the following amounts: Mr. Rabin - $25,871;
Mr. Howell - $12,307; Mr. Selig - $13,489; Mr. McClean - $18,152; and Mr.
Heinkele - $19,743.
8
The following table provides information on options granted to Messrs.
Rabin and McClean and to all of our current executive officers as a group in
fiscal year 2003. There were no option grants to the other executive officers
included in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM($)(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5% 10%
---- ------------- ------------ ----------- ---------- -------- ----------
Stanley A. Rabin............ 41,800 5.2 $14.54 2/3/2010 $247,456 $ 576,422
Murray R. McClean........... 12,800 1.6 $14.54 2/3/2010 $ 75,776 $ 176,512
All executive officers as a
group (12 persons)........ 131,525 16.2 $14.54 2/3/2010 $778,628 $1,813,730
Potential Future Commercial Metals Company Stock Price............................... $ 20.46 $ 28.33
---------------
(1) These options become exercisable in two equal installments, one-half
February 4, 2004, and one-half February 4, 2005 or earlier upon a change of
control as defined in our 1996 Long-Term Incentive Plan.
(2) The exercise price is the fair market value (mean of high and low sales
price) on the date of grant.
(3) The dollar amounts in the last two columns are the result of calculations at
the 5% or 10% compound annual rates set by the Securities and Exchange
Commission and are not intended to forecast future appreciation of our
stock.
The following table provides information concerning the exercise of options
during fiscal year 2003 and unexercised options held as of August 31, 2003, for
the executive officers included in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Stanley A. Rabin.......... 0 $ 0 283,400 60,800 $1,614,014 $253,821
A. Leo Howell............. 0 $ 0 30,600 0 $ 132,609 $ 0
Clyde P. Selig............ 0 $ 0 111,042 0 $ 617,040 $ 0
Murray R. McClean......... 14,880 $84,704 23,860 19,660 $ 89,634 $ 80,194
Harry J. Heinkele......... 0 $ 0 0 0 $ 0 $ 0
---------------
(1) The amounts shown represent the difference between the market value of our
common stock on August 31, 2003, of $19.535 and the exercise price of such
options.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
We entered into an employment agreement with Murray R. McClean on September
1, 1999. Mr. McClean is employed as a Vice President of Commercial Metals
Company and as President of the Marketing and Distribution segment. The initial
term of the employment agreement expired August 31, 2002, but the agreement
automatically extends for three consecutive one-year terms, beginning September
1, 2002, unless either party terminates the agreement. Mr. McClean's minimum
base salary is $300,000 per year. He is
9
also eligible to earn a discretionary annual bonus. Mr. McClean is eligible to
participate in or receive benefits under any plan or arrangement made generally
available to our employees. If we terminate Mr. McClean's employment for cause,
or for nonperformance due to disability, or if Mr. McClean terminates his own
employment, then we have no further payment obligations. If we terminate Mr.
McClean's employment without cause, then we must pay his base salary for a
period of 12 months. Mr. McClean has agreed that during the term of his
employment and for two years after his termination, he will not participate in
any business that is competitive with our business.
RETIREMENT BENEFITS
Substantially all of our employees and employees of our domestic
subsidiaries participate in one of three profit sharing and 401(k) plans, all
defined contribution plans. We have no defined benefit pension plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee of our board of directors are
Messrs. Loewenberg, Feldman, Massaro and Neary. None of the members of the
compensation committee was at any time during fiscal year 2003, or at any other
time, an officer or employee of Commercial Metals Company. No member of the
compensation committee serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of our board of directors or compensation committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is submitted by the compensation committee concerning
compensation policies applicable to our twelve executive officers and the basis
for Mr. Rabin's compensation as Chief Executive Officer, for the fiscal year
ended August 31, 2003. The compensation committee is comprised of non-employee
directors, Messrs. Loewenberg (Chairman), Feldman, Massaro and Neary.
OBJECTIVES AND STRATEGY
We have two cash incentive plans in existence, the Key Employee Annual
Incentive Plan and the Key Employee Long-Term Performance Plan. During the
fiscal year ten of our thirteen executive officers (one retired at year end) and
certain other key employees participated in both plans. Two executive officers
participate only in the Key Employee Long-Term Performance Plan although
eligible for discretionary bonus payments which are also subject to review and
approval by the committee. Only one of our executive officers has an employment
contract (described at Certain Relationships and Related Transactions on page
14) although most have many years of service with the company.
The objectives of our annual incentive plan include:
- payment for short-term results which encourages longer term value
creation by achieving annual business and financial performance targets;
- directly linking compensation to consolidated financial results;
- maintaining an entrepreneurial culture among management by linking
compensation to results in defined areas of responsibility;
- communicating expectations, results and incentive payouts;
- paying competitive or above market total cash compensation for high
performance; and
- funding incentive payouts from financial results while maintaining
acceptable stockholder returns.
This plan provides for target award opportunities expressed as a percentage of
base salary with threshold and superior award levels. The plan establishes a
maximum limitation as a percentage of operating profit on all
10
annual bonuses. The plan's primary performance measure is operating profit
defined as FIFO operating profit before certain items, including taxes, but
after interest expense. The plan provides for the participant's award
opportunity to be determined based on corporate, business unit and individual
performance. For instance, the chief executive officer's annual award is based
entirely on our consolidated performance, and the annual award of each president
of our segments is a pro rata performance award based on that segment's
performance and our consolidated performance.
The objectives of our long-term performance plan include:
- linking compensation to factors that create long-term financial success;
- providing greater long-term orientation and competitiveness in total
compensation by establishing a performance based component in addition to
our existing stock option incentives;
- providing a balance to short-term incentives in the decision making
process;
- encouraging management to promote our overall interest by linking
performance to company-wide financial results;
- remaining competitive with respect to compensation in attracting and
retaining superior talent; and
- funding cash payments through improved business results.
This plan provides cash payments contingent on the attainment of multi-year
performance goals. At the beginning of the performance period, the committee
establishes goals and measures results over a three-year period. The committee
establishes target award opportunities as a percentage of base salary for each
participant. The awards may be paid if we achieve the targeted performance at
the end of the performance period. Threshold and maximum award levels are also
established. The plan's primary performance measure is growth in earnings before
interest, taxes, depreciation and amortization, which we call EBITDA. The
committee establishes achievement levels at the beginning of each performance
period using our historical EBITDA as a base line. We measure growth in EBITDA
against our highest EBITDA amount prior to the commencement of the three-year
measurement period. Participants earn awards only if we exceed the previous
record EBITDA. Since the plan uses overall corporate financial performance to
determine award levels, we do not consider individual segment results.
The committee believes these plans support our long-standing practice of
basing a significant portion of total compensation for key executives as risk
contingent upon financial results. This strategy continues our philosophy of
having competitive base salaries, and providing an opportunity for above-average
annual cash bonuses with attainable long-term equity incentive expectations. In
addition, the committee has continued to award stock option grants to executive
officers in lower amounts and subject to shorter exercise time periods than
levels and terms at comparable companies. The committee believes this strategy
is consistent with the highly cyclical nature of our business which is
characterized by wide periodic swings in steel and metal prices.
In evaluating compensation matters, the committee reviews information
prepared or compiled by our employees, confers with independent executive
compensation consultants as appropriate and makes decisions based on the
business experience of each committee member.
CASH COMPENSATION
Base Salary. Fiscal year 2003 base salaries for all executive officers
increased in the aggregate approximately 6.6%. Two factors considered by the
committee resulted in approval of this larger than customary aggregate increase.
Eight of the executive officers' salaries had not increased since 2001 and four
received above normal increases (comprising approximately 48% of the aggregate
group increase) as a result of their assumption of additional responsibilities
following the retirement of a senior executive officer the prior year. Fiscal
year 2004 base salaries for the twelve continuing executive officers have been
approved by the committee at levels which result in an aggregate increase of
approximately 1.5%. Seven of the twelve executive officers received no base
salary increase from 2003. The committee believes the base salary of each
executive
11
officer reflects his or her individual contribution, is within the salary range
for similar positions in companies of comparable size and complexity, and is
aligned with our total compensation strategy.
Annual Incentive Bonus. The committee approved cash bonus payments for
each executive officer in 2003 based upon the committee's evaluation of
individual contribution, the respective segment performance and our overall
consolidated financial results for 2003. Net earnings decreased 53% over the
prior year. Consolidated fiscal year 2003 results were significantly below
expectations although results varied dramatically between segments with the
Recycling segment and the Marketing and Distribution segment exceeding
expectations. Consistent with the objectives of the annual incentive plan, those
two executive officers with direct responsibilities for the two of our three
segments with excellent financial results received bonus awards which increased
in aggregate 66% over the prior year and were heavily influenced by those
segments' results. All other executive officers, with annual incentives more
aligned with consolidated results or our weaker performing segment, received
aggregate bonus payments which declined 26% from 2002. The aggregate amount of
bonuses paid all executive officers for their 2003 performance decreased
$316,500 or approximately 16% compared to 2002. The committee believes these
bonus payments are consistent with the evaluation of our overall financial
results and the intent of our annual incentive plan, taking into consideration
the unusually mixed segment financial results.
LONG-TERM COMPENSATION
Equity-Based. We issued stock option grants to nine of the twelve
executive officers during fiscal year 2003 and to 230 other employees. The
number of shares subject to grants awarded to executive officers during the
fiscal year 2003 was 131,525, approximately 16% of the shares awarded to all
employees for option grants during the fiscal year 2003. We made these periodic
grants based on an evaluation of each executive's responsibilities and ability
to influence long-term growth and profitability. The committee believes equity
based incentives align stockholder interest with compensation levels. The
committee intends to continue issuing equity incentives, when and in the form it
considers appropriate, subject to stockholder approval of any increase to the
number of shares available for issuance beyond that previously authorized by
stockholders.
Long-Term Incentive Plan. No awards were earned during fiscal year 2003 or
in 2002 under the long-term incentive plan because performance measures
established under the plan were not met. The committee will continue to review
the appropriateness of the performance measures adopted under the plan. The
committee considers high, yet attainable, results over a three-year period to be
a significant factor in executive officer compensation strategy.
Retirement Benefits. We have no defined benefit pension plans. The only
long-term compensation retirement plans we have for our employees in the United
States are the defined contribution profit sharing and 401(k) plans. As a result
of limitations mandated by federal tax law and regulations that limit defined
contribution plan retirement benefits of more highly compensated employees,
including executive officers, our board of directors in 1996 approved the
Benefit Restoration Plan. The Benefit Restoration Plan is a non-qualified plan
for certain executives subject to reduced benefits. Following each year-end we
contribute to a trust created under the Benefit Restoration Plan an amount equal
to the additional contribution which the participant would have received under
the profit sharing and 401(k) plan had the executive's benefit not been reduced.
The payments we make to the Benefit Restoration Plan for the benefit of
participants, including executive officers, vest under the same terms and
conditions as the relevant profit sharing and 401(k) plan. The committee
believes these payments are an important element in our long-term compensation
program because they restore a reasonable level of retirement benefits for
executive officers and other key employees.
CEO COMPENSATION
The committee annually sets Mr. Rabin's salary based on similar positions
in comparable companies. Mr. Rabin's annual bonus is based on the same factors
considered for other members of the executive officer group as described under
the annual incentive plan and is tied to our overall performance with no
weighting for individual segment performance. Mr. Rabin's salary for fiscal year
2003 was $525,000, an increase of $50,000 over the prior year. Mr. Rabin's cash
bonus for fiscal year 2003 was set at $240,000, a decrease of $110,000, or
12
31% below the prior year cash bonus amount. As a result, his overall
compensation decreased 7.3%. The decreased annual incentive cash bonus paid to
Mr. Rabin reflected the committee's determination that as Chief Executive
Officer with responsibility for consolidated financial performance his earnings
should decline notwithstanding the committee's evaluation of his performance as
continuing to be superior. In particular the committee is cognizant of the
prolonged difficult industry-wide market conditions faced by our Manufacturing
segment during the past year and the ameliorating impact of strategic objectives
implemented under his guidance. The committee believes Mr. Rabin's bonus is
consistent with the intent of our annual incentive plan. The committee
determined that Mr. Rabin's salary for fiscal year 2004 should be increased to
$550,000. Mr. Rabin received a stock option grant for 41,800 shares during
fiscal year 2003, a 10% increase from his last option grant in 2002.
CONCLUSION
The committee believes that current total compensation arrangements are
reasonable, competitive, and consistent with the compensation philosophy and
plans described above and reflect our financial results. The committee will
continue to monitor the federal tax treatment to us and to our executive
officers of various payments and benefits and in particular the limitations on
deductibility of compensation payments to certain officers under Section 162(m)
of the Internal Revenue Code. To date, this limitation has not had a significant
impact on the deductibility of compensation we have paid. The committee has not
recommended that the annual incentive plan or long-term incentive plan be
submitted to stockholders for approval due, in part, to the fact that we have
incurred no significant loss of tax deductions for compensation to our executive
officers. The committee will continue to monitor the impact of this restriction
and may in certain circumstances limit executive compensation to that which is
deductible under Section 162(m) of the Internal Revenue Code. The committee
shall continue to evaluate and set the CEO's compensation, administer
compensation programs for executive officers, evaluate recommendations for
establishment of performance measures under existing plans, consider new
compensation policies when appropriate and perform the responsibilities
delegated to the committee in its charter.
COMPENSATION COMMITTEE
Ralph E. Loewenberg (Chairman)
Moses Feldman
Anthony A. Massaro
Robert D. Neary
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Commencing in July, 2000, pursuant to the terms of Murray R. McClean's
employment agreement, we made three loans evidenced by three notes to Mr.
McClean. The purpose of the loans was to assist with Mr. McClean's expenses,
including the purchase of a home, in connection with his relocation from
Australia to our headquarters in Dallas. The largest aggregate amount of Mr.
McClean's indebtedness during fiscal year 2003 was $628,110. Two unsecured notes
in the original aggregate principal amount of $330,000 bear interest at a
variable rate fixed annually each September 1 equal to U.S. Treasury Securities
adjusted to a constant maturity of one year for the preceding month of July plus
one percent. As of September 1, 2002, the applicable rate on the unpaid balance
of $330,000 on these two notes was 2.96%. As of September 1, 2003, the interest
rate was 2.12%. A third note in the original principal amount of $385,000 was
secured by a second lien on a residence purchased by Mr. McClean and did not
bear interest.
During fiscal year 2003, Mr. McClean made early prepayments and mandatory
principal payments totaling $364,110 and interest payments of $14,606 on the
three notes. The note secured by the second lien on the residence was paid in
full in November, 2002. The unpaid principal balance at August 31, 2003, on the
remaining two unsecured notes was $264,000. In October, 2003, Mr. McClean made
additional payments of principal totaling $66,000 thereby reducing the aggregate
principal outstanding under the remaining two unsecured notes to $198,000.
Pursuant to the Sarbanes-Oxley Act of 2002, new loans to executive officers
and directors are prohibited, and existing loans may not be amended or extended.
As a result, we will not grant any new loans or extend or amend any existing
loans to our executive officers or directors. The loans to Mr. McClean were made
prior to the effective date of the Sarbanes-Oxley Act of 2002, there have been
no extensions or amendments of these loans after such date and all required
payments of principal and interest have been made on or before the due dates.
14
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return of our common
stock during the five year period beginning August 31, 1998, and ending August
31, 2003, with the Standard & Poor's 500 Composite Stock Price Index also known
as the "S&P 500" and the Standard & Poor's Steel Industry Group Index also known
as the "S&P Steel Group." Each index assumes $100 invested at the close of
trading August 31, 1998, and reinvestment of dividends.
(PERFORMANCE GRAPH)
Cumulative Total Return
-------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
-------------------------------------------------------------------------------------------------
Commercial Metals
Company $100.00 $128.35 $119.15 $136.68 $167.19 $ 178.20
S&P 500 $100.00 $139.83 $162.64 $122.98 $100.85 $ 113.02
S&P Steel Group $100.00 $125.92 $ 88.27 $104.17 $ 94.74 $ 100.36
15
PROPOSAL II
PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
On November 17, 2003, the board of directors adopted a resolution to amend
our restated certificate of incorporation to increase the number of authorized
shares of common stock, par value $5.00 per share, from 40,000,000 to
100,000,000 shares and to propose such an amendment to be voted on by the
stockholders at this annual meeting. The board of directors strongly recommends
the adoption by the stockholders of such an amendment.
On November 24, 2003, there were 28,320,895 shares of common stock issued
and outstanding not including 3,944,271 treasury shares. In addition, as of such
date, 3,753,689 shares of common stock were reserved for issuance upon exercise
of outstanding stock options and subscriptions under our employee stock purchase
plan. A total of 2,342,930 shares of common stock were reserved for future
issuance under our equity compensation plans. Accordingly, as of November 24,
2003, 5,582,486 shares were otherwise available for future issuance. If this
proposal is approved and effected, we will have available 65,582,486 authorized
but unissued and unreserved shares of common stock.
The board of directors believes that it is in the best interests of our
company and its stockholders to increase the number of authorized but unissued
shares of common stock in order to have additional shares available to meet
future business needs as they arise. The board of directors believes the
availability of these additional shares will provide our company with the
flexibility to issue common stock for a variety of purposes including, among
others, the declaration of stock splits or distributions, the sale of common
stock or securities that may convert into common stock to obtain additional
funding, the purchase of property, the acquisition of other companies, the use
(subject to stockholder approval as required) of additional shares for various
equity compensation and other employee benefit plans, and other bona fide
corporate purposes. Historically the board of directors has declared stock
dividends when, in the discretion of the board of directors, the earnings,
business prospects, share price and cash requirements of the company permitted.
Since 1966 we have declared and paid 15 stock dividends ranging from 5% to 100%.
For example, in June, 2002, a two-for-one stock split in the form of a stock
dividend was declared and paid to stockholders.
While no stock dividend, acquisition for stock or use of stock for
additional financing is presently proposed or contemplated and we have no
immediate plans, understandings, agreements or commitments to issue any portion
of the additional authorized shares that would result from the proposed
amendment, the board of directors believes that the proposed increase will
provide desired flexibility should a need arise.
Although not designed or intended for such purposes, the effect of the
proposed increase in the authorized number of common stock might render more
difficult or discourage a merger, tender offer, proxy contest or change in
control and the removal of management, which stockholders might otherwise deem
favorable. The authority of the board of directors to issue common stock might
be used to create voting impediments or to frustrate an attempt by another
person or entity to effect a takeover or otherwise gain control of our company
because the issuance of additional common stock would dilute the voting power of
the common stock and preferred stock then outstanding. The additional shares of
common stock could also be issued to purchasers who would support the board of
directors in opposing a takeover bid which the board of directors determines not
to be in the best interests of our company and the interest of its stockholders.
We are not currently aware of any pending or proposed transaction involving a
change in control. While authorization of additional shares may be deemed to
have potential anti-takeover effects, this proposal is not prompted by any
specific effort or perceived threat of takeover.
The proposed amendment would not alter any of the rights incident to the
ownership of shares of common stock or affect the terms and conditions upon
which shares of common stock currently may be issued. Holders of shares of
common stock currently have no preemptive rights to acquire any additional
securities including any shares of common stock, and this will continue to be
the case if the proposed amendment is approved and adopted.
16
The proposed amendment authorizing the increase in the authorized shares of
the common stock will amend the Article Fourth of our restated certificate of
incorporation. If the amendment is approved, the text of the Article Fourth will
read in its entirety as set forth below:
FOURTH: The aggregate number of shares of capital stock which the
corporation shall have authority to issue is One Hundred Two
Million (102,000,000) of which One Hundred Million
(100,000,000) shares shall be Common Stock at the Par Value of
Five Dollars ($5.00) per share and Two Million (2,000,000)
shares shall be Preferred Stock of the Par Value of One Dollar
($1.00).
If this proposal is approved, we plan to file a certificate of amendment to
the restated certificate of incorporation with the Secretary of State of
Delaware as soon as possible after the annual meeting.
VOTE REQUIRED
The affirmative vote of the holders of a majority of our common stock
issued and outstanding is required to adopt the amendment to the restated
certificate of incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION.
AUDIT COMMITTEE REPORT
For many years we have had a standing audit committee of our board of
directors. Our board of directors annually selects the members of the committee.
Four non-employee directors, Messrs. Womack (Chairman), Feldman and Neary and
Ms. Owen are presently members of the committee. Our board of directors has
determined that each member of the committee is qualified to serve. The
committee satisfies all applicable financial literacy requirements and each
member is independent as required by the Sarbanes-Oxley Act and as
"independence" is defined by the recently revised listing standards of the New
York Stock Exchange. Our board of directors has determined that Messrs. Womack
and Neary meet the definition of "audit committee financial expert" as defined
by the Securities and Exchange Commission.
The Audit Committee Charter sets forth the duties and responsibilities of
the committee. The Audit Committee Charter was initially adopted on March 17,
2000. As part of the review of all corporate governance matters by our board of
directors, during the past fiscal year the committee and our board of directors
evaluated the provisions of that initial charter in light of new laws and
regulations and proposed and recently adopted revisions to New York Stock
Exchange listing requirements. On September 22, 2003, our board of directors
adopted the Audit Committee Charter attached to this proxy statement as Appendix
"A" to replace the initial charter. During the fiscal year ended August 31,
2003, the committee met nine times. The committee, among the other activities
described in its charter, has sole authority for the appointment (subject to
stockholder ratification), retention, oversight, termination and replacement of
the independent auditor, recommends to our board of directors whether the
audited financial statements should be included in our Annual Report on Form
10-K, reviews quarterly financial statements with management and the independent
auditor, reviews with our internal audit staff and independent auditor our
controls and procedures and approves, prior to rendition of services, all audit
and engagement fees of the independent auditor.
The committee has reviewed and discussed the audited financial statements
for the fiscal year ended August 31, 2003, with management and with the
independent auditors. Those discussions included the matters required to be
disclosed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The committee has received the written disclosures and letter from
the independent auditors as required by Independence Standards Board Standard
No. 1 concerning independence discussions with audit committees. The committee
has discussed with the independent auditors their independence under such
standards and has determined that the services provided by Deloitte & Touche LLP
are compatible with maintaining their independence. Based on the committee's
discussion and review with management and the independent auditors, the
committee recommended to our board of directors that the audited financial
statements for the
17
fiscal year ended August 31, 2003, be included in our Annual Report on Form 10-K
as filed November 24, 2003 with the Securities and Exchange Commission.
AUDIT COMMITTEE
Robert R. Womack, Chairman
Moses Feldman
Robert D. Neary
Dorothy G. Owen
PROPOSAL III
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
The audit committee of our board of directors has appointed Deloitte &
Touche LLP as the independent auditors for the fiscal year ending August 31,
2004, subject to stockholder ratification. Deloitte & Touche LLP or its
predecessors have conducted the audits of our financial statements for many
years. Fees billed by Deloitte & Touche LLP to us for services during the fiscal
years ended August 31, 2002 and August 31, 2003 were:
FISCAL YEAR FISCAL YEAR
TYPE OF FEES 2002 2003
------------ ----------- -----------
Audit Fees................................................ $768,075 $ 954,470
Audit-Related Fees........................................ $ 8,920 $ 28,602
Tax Fees.................................................. $ 57,866 $ 95,910
All Other Fees............................................ $ 55,033 $ 229,950
Deloitte & Touche LLP Total Fees............................ $889,894 $1,308,932
In accordance with new SEC definitions and rules which we elected to adopt
for this year's proxy statement, the above table discloses all fees we have paid
Deloitte & Touche LLP for services during our fiscal years ended August 31, 2003
and 2002. The caption "audit fees" are fees we paid Deloitte & Touche LLP for
professional services for the audit of our consolidated financial statements
included in Form 10-K and review of financial statements included in Form 10-Qs,
or for services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements. "Audit-related fees" are fees
billed by Deloitte & Touche LLP for assurance and related services that are
reasonably related to the performance of the audit or review of our financial
statements, "tax fees" are fees for tax compliance, tax advice, and tax
planning, and "all other fees" are fees billed by Deloitte & Touche LLP for any
services not included in the first three categories.
Representatives of Deloitte & Touche LLP will be present at the meeting,
will have the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions. The board of directors requests
that stockholders ratify the appointment by the audit committee of Deloitte &
Touche LLP as independent auditors to conduct the 2004 audit of our financial
statements.
VOTE REQUIRED
The affirmative vote of the holders of a majority of shares present or
represented at the meeting and entitled to vote is required to adopt the
proposal to ratify the appointment of Deloitte & Touche LLP as our independent
auditors for the fiscal year ending August 31, 2004.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP.
18
GENERAL
The annual report to stockholders covering fiscal year 2003 has been mailed
to stockholders with this mailing or previously. The annual report does not form
any part of the material for the solicitation of proxies.
Pursuant to the rules of the Securities and Exchange Commission, a proposal
to be presented by a stockholder at the 2005 annual meeting must be received by
us at our principal executive offices no later than August 13, 2004.
We will bear the expense of solicitation of proxies. In addition to
solicitation by mail, our directors, officers and employees may solicit proxies
personally or by telephone or facsimile. We will request brokers, dealers or
other nominees to send proxy material to and obtain proxies from their
principals and will, upon request, reimburse such persons for their reasonable
expenses.
OTHER BUSINESS
Management knows of no other matter that will come before the meeting.
However, if other matters do come before the meeting, the proxy holders will
vote in accordance with their best judgment.
By Order of the Board of Directors,
/s/ DAVID M. SUDBURY
DAVID M. SUDBURY
Vice President, Secretary
and General Counsel
December 8, 2003
19
APPENDIX A
COMMERCIAL METALS COMPANY
AUDIT COMMITTEE CHARTER
This Audit Committee Charter (Charter) sets forth the purpose and
membership requirements of the Audit Committee (the Committee) of the Board of
Directors (the Board) of Commercial Metals Company (CMC or Company) and
establishes the authority and responsibilities delegated to it by the Board.
1. Purpose.
The purpose of the Committee is to oversee:
- The integrity of the Company's financial statements and disclosures,
- The Company's compliance with legal and regulatory requirements,
- The qualifications, independence and performance of the Company's
independent auditing firm (the Independent Auditor),
- The performance of the Company's internal audit function,
- The Company's internal control systems, and
- The Company's procedures for monitoring compliance with its Code of
Business Conduct (Code of Conduct).
2. Committee Members.
2.1. Composition and Appointment.
The Committee shall consist of three (3) or more members of the Board. The
members and Chairman of the Committee shall be appointed by the Board on the
recommendation of the Nominating and Corporate Governance Committee (Governance
Committee). The Board shall fill vacancies on the Committee and may remove a
Committee member from the membership of the Committee at any time without cause.
Members shall serve until their successors are appointed by the Board.
2.2. Qualifications.
Each member of the Committee shall be independent. To be "independent," a
director may not have a relationship with the Company or its management or a
private interest in the Company that in any way may interfere with the exercise
of such Director's independence from the Company and its management. In
addition, each member of the Committee must meet the independence requirements
of applicable federal laws, including the Sarbanes-Oxley Act of 2002, (the Act),
securities laws, including the rules and regulations of the SEC and of the NYSE
as such requirements are interpreted by the Board in its business judgment.
2.3. Financial Literacy and Expertise.
Each member of the Committee shall, in the Board's judgment, be financially
literate or must become financially literate within a reasonable period of time
after such member's appointment to the Committee. At least one member of the
Committee shall, in the Board's judgment, have accounting or related financial
management expertise. In addition, in connection with the preparation of any
reports regarding the financial experience of the members of the Committee to be
included in the Company's periodic public reports, the Board shall determine
with respect to each member of the Committee whether or not, in the Board's
judgment, such member is an "audit committee financial expert," as such term is
defined by the SEC. As expressly provided by SEC rules, the Board's designation
of an "audit committee financial expert" will not be deemed an expert for any
other purpose including Section 11 of the Securities and Exchange Act of 1933
and that designation shall not impose any additional duties, obligations or
liability on such designee nor affect the duties, obligations of liability of
any other member of the Committee.
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2.4. Simultaneous Service on Other Audit Committees.
If a member of the Committee serves on the audit committee (or, in the
absence of an audit committee, the board committee performing equivalent
functions, or, in the absence of such committee, the board of directors) of more
than four (4) public companies in addition to the Company, the Board must
affirmatively determine that such simultaneous service on multiple audit
committees will not impair the ability of such member to serve on the Committee.
The basis for the Board's determination shall be disclosed in the Company's
proxy statement prepared in connection with its annual meeting of stockholders.
2.5. Compensation.
The members of the Committee shall not receive any direct or indirect
compensation from the Company, other than director's fees. Members of the
Committee shall, at the discretion of the Board, be entitled to receive fees for
service on the Committee or for service as Chairman of the Committee in addition
to the normal fees paid to all directors.
3. Authority.
3.1. Continuing Education.
To help ensure that the members of the Committee have the proper knowledge
to perform their responsibilities, Committee members shall have the authority,
at the Company's expense, to attend outside educational programs, retain outside
professionals to conduct educational programs and undertake other appropriate
steps to keep current with developments in accounting, disclosure, risk
management, internal controls, auditing and other matters that are relevant to
the carrying out of the Committee's responsibilities.
3.2. Advisors.
The Committee shall have the authority (i) to retain, at the Company's
expense, accounting, legal, financial and other advisors (Advisors) it deems
necessary to fulfill its responsibilities, and (ii) determine the compensation
of such Advisors.
3.3. Investigations.
The Committee shall have the authority to conduct investigations that it
deems necessary to fulfill its responsibilities.
3.4. Information.
The Committee shall have the authority to require any officer, director or
employee of the Company, the Company's outside legal counsel and the Independent
Auditor to meet with the Committee and any of its advisors and to respond to
their inquiries. The Committee shall have full access to the books, records and
facilities of the Company in carrying out its responsibilities.
3.5. Funding.
The Committee shall have the authority to determine, on behalf of the
Company, the compensation of (i) the Independent Auditor for its services in
rendering an audit report, and (ii) any Advisors employed by the Committee
pursuant to Section 3.2.
3.6. Subcommittees.
The Committee shall have the authority to delegate authority and
responsibilities to subcommittees provided that no subcommittee shall consist of
less than two members.
4. Meetings.
4.1. Periodic Meetings.
The Committee shall meet at least once each fiscal quarter of the Company
in connection with (i) its review of the Company's earnings releases, financial
statements and the disclosures that are to be included in its Form 10-Q and Form
10-K filings with the SEC, including the disclosures under "Management's
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Discussion and Analysis of Financial Condition and Results of Operations," and
(ii) its preparation of the Committee's report to be included in the Company's
proxy statement in connection with the Company's annual meeting of stockholders.
The Chairman may call a special meeting at any time as he or she deems
advisable.
4.2. Executive Sessions.
The Committee shall maintain free and open communication with (i) the
Company's chief executive officer (CEO), (ii) the Company's chief financial
officer (CFO), (iii) the Company's director of internal audit (Internal
Auditor), (iv) the Independent Auditor, and (v) the Company's general counsel
(General Counsel) and shall periodically meet, in its sole discretion, in
separate executive (private) sessions with each such person to discuss any
matters that the Committee or any of them believes should be discussed privately
with the Committee.
4.3. Minutes.
Minutes of each meeting of the Committee shall be kept to document the
discharge by the Committee of its responsibilities.
4.4. Quorum.
A quorum shall consist of a majority of the Committee's members. The act of
a majority of the Committee members present at a meeting at which a quorum is
present shall be the act of the Committee.
4.5. Agenda.
The Chairman of the Committee shall prepare an agenda for each meeting of
the Committee in consultation with Committee members and any appropriate member
of the Company's management or staff. Appropriate members of the Company
management and staff shall assist the Chairman with the preparation of any
background materials necessary for any Committee meeting. Any Committee member
may request that an item be placed on an agenda or that additional pre-meeting
material be furnished the Committee.
4.6. Presiding Officer.
The Chairman of the Committee shall preside at all Committee meetings. If
the Chairman is absent at a meeting, a majority of the Committee members present
at a meeting shall appoint a different presiding officer for that meeting.
5. General Oversight.
The Committee's responsibilities shall include review of (i) major issues
regarding accounting principles and financial statement presentation, including
any significant changes in the Company's selection or application of accounting
principles, and major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of material control
deficiencies, (ii) any analyses prepared by management or the Independent
Auditor setting forth significant financial reporting issues and judgments made
in connection with the preparation of the Company's financial statements,
including any analyses of the effects of alternative generally accepted
accounting principles (GAAP) methods on the presentation of the Company's
financial statements, (iii) the effect of regulatory and accounting industry
initiatives, as well as off-balance sheet structures, on the Company's financial
statements, and (iv) press releases that contain information with respect to the
historical or projected financial performance of the Company (with particular
attention on the use of pro forma, or adjusted non-GAAP, information), as well
as any other financial information provided to a financial analyst or a rating
agency.
6. Independent Auditor Oversight.
6.1. Selection and Evaluation.
The Committee shall have the responsibility and sole authority for the
appointment (subject to stockholder ratification), retention, oversight,
termination and replacement of the Independent Auditor and for the approval of
all audit and engagement fees. The Committee shall annually, following the
completion of
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the audit reports and at such other times as it deems appropriate, evaluate the
performance of the Independent Auditor, including a specific evaluation of the
Independent Auditor's lead (or coordinating) and concurring audit partners
having responsibility for the Company's audit.
6.2. Pre-Approval of Independent Auditor Services.
6.2.1. Committee Pre-Approval. No audit services or non-audit services
shall be performed by the Independent Auditor for the Company unless first
pre-approved by the Committee and unless permitted by applicable federal
securities laws and the rules and regulations of the SEC. If the Committee
approves an audit service within the scope of the engagement of the Independent
Auditor, such audit service shall be deemed to have been pre-approved for
purposes of this Section.
6.2.2. Delegation of Pre-Approval Authority. The Committee may delegate
to one (1) or more members of the Committee the authority to grant pre-approval
of non-audit services required by this Section. The decision of any member to
whom such authority is delegated to pre-approve non-audit services shall be
reported to the full Committee at its next scheduled meeting.
6.3. Independence.
The Committee shall periodically meet with the Independent Auditor to
assess and satisfy itself that the Independent Auditor is "independent" in
accordance with the rules and regulations of the SEC. The Committee shall
annually obtain from the Independent Auditor a written statement delineating (i)
all relationships between the Independent Auditor and the Company that may
impact the Independent Auditor's objectivity and independence, (ii) confirmation
that the Company's CEO, CFO, controller, chief accounting officer, Internal
Auditor, or any person serving in an equivalent position to any of the foregoing
for the Company, was not employed by the Independent Auditor and participated in
any capacity in the audit of the Company during the one (1) year period
preceding the date of the initiation of the audit for which the Independent
Auditor is engaged, and (iii) all the disclosures required by Independence
Standards Board Standard No. 1 or any other applicable requirements including
those of the PCAOB. The Committee shall establish a policy regarding the
Company's hiring of any former employee of the Independent Auditor.
6.4. Quality Control.
The Committee shall annually obtain from the Independent Auditor a written
report describing (i) the Independent Auditor's internal quality-control
procedures, and (ii) any material issues raised by (a) the Independent Auditor's
most recent internal quality-control review, or peer review or (b) any inquiry
or investigation by governmental or professional authorities, in each case,
within the preceding five years, respecting one or more independent audits
carried out by the Independent Auditor, and any steps taken to deal with any
such issues.
6.5. Audit Partner Rotation.
The Committee shall annually obtain from the Independent Auditor a written
statement disclosing the names of all members of the audit engagement team
constituting "audit partners," including those designated as the "lead" and
"concurring" audit partners as such terms are defined by the rules and
regulations of the SEC. The statement shall confirm that the "lead",
"concurring" and each of the "audit partners" is eligible under all applicable
partner rotation rules and regulations (including effective date and transition
provisions) to provide audit services to the Company during the audit period. If
the Independent Auditor relies on the effective date or transition provisions
permitted under the rules and regulations of the SEC to permit a "lead" or
"concurring" audit partner to perform audit services for more than five (5)
consecutive years or to permit any "audit partner" to perform audit services for
more than seven (7) consecutive years the statement shall describe the basis for
such determination.
6.6. Review of Independent Auditor Reports.
The Committee shall review with management, the Internal Auditor and the
Independent Auditor all reports required to be made by the Independent Auditor
under applicable federal securities laws and the rules and regulations of the
SEC regarding (i) all critical accounting policies and practices used by the
Company,
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(ii) all alternative treatments of the Company's financial information within
GAAP that have been discussed with management, the ramifications of the use of
such alternative disclosures and treatments and the treatment preferred by the
Independent Auditor, (iii) all other material written communications between the
Independent Auditor and management, such as any management letter or schedule of
unadjusted differences, and (iv) management's assessment of the Company's
internal controls.
6.7. Internal Control Assessment.
The Committee shall, effective with the fiscal year beginning September 1,
2003, annually obtain from the Independent Auditor a written report in which the
Independent Auditor attests to and reports on the assessment of the Company's
internal controls made by the Company's management.
6.8. Non-audit Services.
The Committee shall review with management and decide whether to approve
the retention of the Independent Auditor for any non-auditing services proposed
to be rendered to the Company, including assessing their compatibility with
maintaining the Independent Auditor's independence. No non-audit services may be
provided to the Company by the Independent Auditor unless approved in advance by
the Committee under Section 6.2 above. The Independent Auditor shall not provide
to the Company, and the Committee shall not have the authority to approve the
provision to the Company by the Independent Auditor of, those services described
in Section 201 of the Act or any other service that the PCAOB established under
the Act determines, by regulation may not be provided to the Company by the
Independent Auditor.
6.9. Accountability.
The Independent Auditor shall report directly to the Committee and shall be
ultimately accountable to the Committee. The Committee shall obtain an annual
written statement from the Independent Auditor confirming its direct
accountability to the Committee.
6.10. Audit Assessment.
The Committee shall review with management, the Internal Auditor and the
Independent Auditor any problems or difficulties encountered in connection with
the audit process, including any restrictions on the scope of the Independent
Auditor's activities or on access to requested information, any accounting
adjustments that were noted or proposed by the Independent Auditor but that were
passed (as immaterial or otherwise), any communications between the Independent
Auditor's team assigned to the Company's audit and the Independent Auditor's
national office respecting auditing or accounting issues presented by the
Company's audit, and any "management" or "internal control" letter issued, or
proposed to be issued, by the Independent Auditor to the Company.
6.11. Required Communications.
The Committee shall discuss with the Independent Auditor the matters
required to be discussed under Statement on Auditing Standards No. 61 or any
applicable requirements including those of the PCAOB.
6.12. Disagreements.
The Committee shall periodically inquire of management and the Independent
Auditor as to any disagreements that may have occurred between them relating to
the Company's financial statements or disclosures. The Committee shall have sole
responsibility for the resolution of any disagreements between management and
the Independent Auditor regarding financial reporting.
7. Internal Auditing Oversight.
7.1. Internal Auditing Staff.
The Committee shall annually evaluate the performance of the internal
auditing department with management and the Independent Auditor.
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7.2. Internal Audit Process.
The Committee shall meet periodically with the Internal Auditor, the
Independent Auditor and management to review (i) plans for the internal audit
program (including scope, responsibilities, budget and staffing) for the coming
year, (ii) the coordination of such plans with the work of the Independent
Auditor, and (iii) the progress and results of the internal auditing process.
7.3. Internal Audit Reports.
The Committee shall meet periodically with the Internal Auditor to review
any significant reports to management prepared by the internal auditing staff.
The Internal Auditor shall provide a summary of all significant internal audit
reports to the Committee each quarter.
8. Financial Statements and Disclosure Oversight.
8.1. SEC Filings and Earnings Releases and Guidance.
Prior to the filing by the Company with the SEC of any annual report on
Form 10-K or any quarterly report on Form 10-Q, the Committee shall review with
management and the Independent Auditor the financial statements and the
disclosure under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained therein. The Committee shall periodically
review with management and the Independent Auditor the Company's procedures
(including types of information to be disclosed and the type of presentation to
be made) with respect to press releases and with respect to financial
information and earnings guidance provided to financial analysts and rating
agencies.
8.2. Accounting Changes.
The Committee shall, before their implementation, review with management
and the Independent Auditor and approve all significant changes proposed to be
made in the Company's accounting principles and practices.
8.3. Adequate Disclosure.
The Committee shall periodically inquire of management, the Independent
Auditor, the General Counsel and, if the Committee deems it appropriate, outside
legal counsel as to whether the Company's financial statements comport with the
disclosure requirements of federal securities laws, notwithstanding their
conformity to accounting principles and practices.
8.4. Criticisms.
The Committee shall periodically inquire of management, the General Counsel
and the Independent Auditor as to their knowledge of any criticism of the
Company's financial statements or disclosures by any financial analysts, rating
agencies, media sources or other reliable third-party sources. The Committee
shall establish procedures for (i) the receipt, retention, investigation and
resolution of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and (ii) the confidential anonymous
submission by the Company's employees of concerns regarding questionable
accounting or auditing matters.
9. Internal Controls, Legal Compliance and Code of Conduct Oversight.
9.1. Internal Controls and Compliance Policies.
For the purpose of assessing their adequacy and effectiveness, the
Committee (i) shall periodically review and assess with management, the Internal
Auditor, the General Counsel and the Independent Auditor (a) the internal
control systems of the Company, including whether such controls are reasonably
designed to ensure that appropriate information comes to the attention of the
Committee in a timely manner, prevent violations of law and corporate policy and
permit the Company to prepare accurate and informative financial reports, (b)
the Company's policies on compliance with laws and regulations, and (c) the
methods and procedures for monitoring compliance with such policies, and (ii)
shall elicit from them any recommendations for the improvement of the Code of
Conduct and such controls, policies, methods and procedures. The Committee
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shall review with management and the Independent Auditor, prior to its annual
filing, the internal control report (containing the annual assessment of the
effectiveness of the internal control structure and procedures of the Company
for financial reporting) that is required to be filed by the Company with the
SEC on Form 10-K.
9.2. Information Security.
The Committee shall periodically review and assess with management and the
Independent Auditor the adequacy of the security for the Company's information
systems and the Company's contingency plans in the event of a systems breakdown
or security breach.
9.3. Code of Conduct.
The Committee shall periodically inquire of management, the Internal
Auditor and the Independent Auditor as to their knowledge of (i) any violation
of the Code of Conduct, (ii) any waiver of compliance with the Code of Conduct,
and (iii) any investigations undertaken with regard to compliance with the Code
of Conduct. Any waiver of the Code of Conduct with respect to a director or
executive officer may only be granted by the Committee. All waivers granted by
the Committee shall be promptly reported to the entire Board and disclosed as
required by rules and regulations of the SEC and NYSE.
9.4. Misconduct Allegations.
The Committee shall periodically inquire of management and the General
Counsel of their knowledge of any allegations of Director or officer misconduct
or misconduct by the Company (whether made by employees or third parties).
9.5. Disagreements.
The Committee shall inquire of management, the General Counsel and, if
appropriate, outside legal counsel of any disagreements that may have occurred
between management and legal counsel regarding any public disclosures or any
other legal compliance issue.
10. Risk Management Oversight.
10.1. Risk Exposure.
The Committee shall periodically meet with management and the Independent
Auditor to review the Company's major risks or exposures and to assess the steps
taken by management to monitor and control such risks and exposures.
10.2. Insurance.
The Committee shall periodically review and assess with management and the
General Counsel insurance coverage, including Directors and Officers Liability,
property and casualty loss, and surety bonds.
10.3. Special-Purpose Entities and Off-Balance Sheet Transactions.
The Committee shall periodically meet with management, the Internal
Auditor, the General Counsel and the Independent Auditor to review and assess
all "special-purpose" entities of the Company and all complex financing
transactions involving the Company, including all related off-balance sheet
accounting matters.
10.4. Consultation with Legal Counsel.
The Committee shall periodically receive reports from, and review with the
General Counsel and, if the Committee deems appropriate, outside legal counsel
legal matters (including material claims, pending legal proceedings, government
investigations and material reports, notices or inquiries received from
governmental agencies) that may have a significant impact on the Company's
financial statements or risk management.
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11. Reports and Assessments.
11.1. Board Reports.
The Chairman of the Committee shall report from time to time to the Board
on Committee actions and on the fulfillment of the Committee's responsibilities
under this Charter. Such reports shall include any issues that arise with
respect to the quality or integrity of the Company's financial statements, the
Company's compliance with legal or regulatory requirements, the performance and
independence of the Company's Independent Auditors and the performance of the
Company's internal audit function.
11.2 Charter Assessment.
The Committee shall annually review and assess the adequacy of this Charter
and advise the Board and the Governance Committee of its assessment and of its
recommendation for any changes to the Charter.
11.3 Committee Self-assessment.
The Committee shall annually review and make a self-assessment of its
performance and shall report the results of such self-assessment to the Board
and the Governance Committee.
11.4 Proxy Statement Report.
The Committee shall prepare an annual report as required by the rules and
regulations of the SEC and submit it to the Board for inclusion in the Company's
proxy statement prepared in connection with its annual meeting of stockholders.
11.5 Recommend Action.
The Committee shall annually make a determination as to whether to
recommend to the Board that the audited financials (certified by the Independent
Auditor) be included in the Company's Annual Report on Form 10-K for filing with
the SEC.
11.6 Board Access to Independent Auditor.
The Committee shall, whenever the Board of Directors or the Committee deems
it appropriate, have the Independent Auditor attend a meeting of the full Board
to discuss specific issues and to answer questions from the Directors.
12. General.
12.1. Financial Statement Responsibility.
The Company's management is responsible for the preparation, presentation
and integrity of the Company's financial statements and disclosures, and the
Independent Auditor is responsible for auditing year-end financial statements
and reviewing quarterly financial statements and conducting other procedures. It
is not the duty of the Committee to certify the Company's financial statements,
to guarantee the Independent Auditor's report, or to plan or conduct audits.
Since the primary function of the Committee is oversight, the Committee shall be
entitled to rely on the expertise, skills and knowledge of management, the
Internal Auditor and the Independent Auditor and the accuracy of information
provided to the Committee by such persons in carrying out its oversight
responsibilities. Nothing in this Charter is intended to change the
responsibilities of management and the Independent Auditor.
12.2. Charter Guidelines.
While the responsibilities of the Committee set forth in Section 4 through
11 above are contemplated to be the principal recurring activities of the
Committee in carrying out its oversight function, these responsibilities are to
serve as a guide with the understanding that the Committee may diverge from them
as it deems appropriate given the circumstances.
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DIRECTIONS TO COMMERCIAL METALS COMPANY
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 22, 2004, 10:00 A.M.
FOUR SEASONS CONFERENCE CENTER AMPHITHEATER
4150 NORTH MACARTHUR BOULEVARD
IRVING, TEXAS
DIRECTIONS FROM DFW AIRPORT
Take the North exit out of the airport to 114 East towards Dallas. Take the
MacArthur Blvd. exit and turn RIGHT onto N. MacArthur Blvd. Continue on
approximately 2 miles to the Four Seasons on the left.
DIRECTIONS FROM LOVE FIELD
Take the exit out of Love Field and turn RIGHT onto Mockingbird Lane. Stay
on Mockingbird to 183W toward Fort Worth. Take 114 West toward Grapevine/DFW
Airport North Entry. Take the Walnut Hill Lane/MacArthur Blvd exit. Stay
straight past Walnut Hill Lane to MacArthur Blvd. and turn LEFT onto MacArthur
Blvd. Continue on approximately 2 miles to the Four Seasons entrance on the
left.
DIRECTIONS FROM DOWNTOWN DALLAS
Take 35E/Stemmons Freeway to 114 West toward Grapevine/DFW Airport North
Entry. Take the Walnut Hill Lane/MacArthur Blvd exit. Stay straight past Walnut
Hill Lane to MacArthur Blvd. and turn LEFT onto N. MacArthur Blvd. Continue on
approximately 2 miles to the Four Seasons entrance on the left.
DIRECTIONS FROM NORTH DALLAS
From 75/Central Expressway or the North Dallas Tollway take 635/LBJ Freeway
West toward DFW Airport. Take the President George Bush Tollway SOUTH exit (exit
no. 30). Take the Las Colinas Blvd exit. Stay straight continuing past Las
Colinas Blvd. to MacArthur Blvd. Turn LEFT onto MacArthur Blvd. and continue
approximately 3 miles over 161 and 114 to the Four Seasons entrance on the left.
DIRECTIONS FROM FORT WORTH
Take I-30 EAST to 360 NORTH. Take the 183 EAST exit (towards Dallas) and
stay on 183 to the MacArthur Blvd. exit. Go LEFT on N. MacArthur. Continue on
past Northgate to the Four Seasons entrance on the right.
(Map for Annual Meeting)
(CMC LOGO)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
PLEASE MARK YOUR VOTES AS INDICATED IN [X] THIS EXAMPLE
1. ELECTION OF DIRECTORS 2. AMENDMENT TO RESTATED CERTIFICATE OF FOR AGAINST ABSTAIN
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF THE COMPANY'S [ ] [ ] [ ]
COMMON STOCK FROM 40,000,000 TO 100,000,000.
FOR all nominees WITHHOLD
listed except as AUTHORITY
marked to the to vote for all
contrary nominees listed
[ ] [ ]
3. RATIFICATION OF APPOINTMENT OF DELOITTE & FOR AGAINST ABSTAIN
TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING AUGUST 31, 2004. [ ] [ ] [ ]
NOMINEES: 01 MOSES FELDMAN, 4. IN THEIR DISCRETION, THE PROXIES ARE
02 RALPH E. LOEWENBERG, AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
03 STANLEY A. RABIN, AS MAY PROPERLY COME BEFORE THE MEETING.
04 HAROLD L. ADAMS,
05 J. DAVID SMITH
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
________________________________________
I PLAN TO ATTEND
THE MEETING. [ ]
Dated: _________________________________________________________________________
________________________________________________________________________________
Signature
________________________________________________________________________________
Second Signature if held Jointly
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in the partnership name
by authorized person.
PLEASE MARK, DATE AND RETURN PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59PM EASTERN TIME THE DAY
PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
http://www.eproxy.com/cmc 1-800-435-6710
Use the Internet to vote your Use any touch-tone telephone to vote your Mark, sign and date your
proxy. Have your proxy card in hand proxy. Have your proxy card in hand when proxy card and return it in
when you access the web site. OR you call. OR the enclosed postage-paid
envelope.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE, YOU DO NOT NEED TO MAIL BACK
YOUR PROXY CARD.
PROXY
COMMERCIAL METALS COMPANY
6565 NORTH MACARTHUR BOULEVARD,
IRVING, TEXAS 75039
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Shareholder(s) of Commercial Metals Company hereby appoint(s)
Stanley A. Rabin, Clyde P. Selig and David M. Sudbury, or any of them as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote and act for the undersigned at the 2004 Annual
Meeting of Stockholders of Commercial Metals Company to be held on Thursday,
January 22, 2004 at 10:00 A.M., Central Standard Time in the Four Seasons
conference center, 4150 North MacArthur Boulevard, Irving, Texas, and any
adjournment, continuation, or postponement of the meeting, according to the
number of votes which the undersigned is now, or may then be, entitled to cast,
hereby revoking any proxies previously executed by the undersigned for the
meeting.
All powers may be exercised by a majority of said proxy holders or substitutes
voting or acting or, if only one votes and acts, then by that one. The
undersigned instructs such proxy holders or their substitutes to vote as
specified below on the proposals set forth in the Proxy Statement.
(continued and to be marked, dated and signed on the other side)
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
YOU CAN NOW ACCESS YOUR CMC ACCOUNT ONLINE.
Access your CMC shareholder account online via Investor ServiceDirect(R) (ISD).
Mellon Investor Services LLC, agent for Commercial Metals Company, now makes it
easy and convenient to get current information on your shareholder account.
After a simple and secure process of establishing a Personal Identification
Number (PIN), you are ready to log in and access your account to:
- View account status
- View certificate history
- View book-entry information
- View payment history for dividends
- Make address changes
- Obtain a duplicate 1099 tax form
- Establish/change your PIN
VISIT US ON THE WEB AT http://www.melloninvestor.com
AND FOLLOW THE INSTRUCTIONS SHOWN ON THIS PAGE.
STEP 1: FIRST TIME USERS - STEP 2: LOG IN FOR ACCOUNT STEP 3: ACCOUNT STATUS
ESTABLISH A PIN ACCESS SCREEN
You must first establish a You are now ready to log in. You are now ready to access
Personal Identification Number To access your account please your account information.
(PIN) online by following the enter your: Click on the appropriate
directions provided in the upper - SSN button to view or initiate
right portion of the web screen - PIN transactions.
as follows. You will also need
your Social Security Number (SSN)
or Investor ID available to
establish a PIN.
- Then click on the Submit
button - Certificate History
- Book-Entry Information
THE CONFIDENTIALITY OF YOUR If you have more than one - Issue Certificate
PERSONAL INFORMATION IS PROTECTED account, you will now be asked - Payment History
USING SECURE SOCKET LAYER (SSL) to select the appropriate - Address Change
TECHNOLOGY. account. - Duplicate 1099
- SSN or Investor ID
- Then click on the Establish PIN button Please be sure to remember your PIN, or
maintain it in a secure place for future reference.
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN
9AM-7PM MONDAY-FRIDAY EASTERN TIME