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
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[ ] Preliminary Proxy Statement
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RULE 14a-6(e)(2))
SIFCO Industries, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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3. Per unit price or other underlying value of transaction
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4. Date Filed: _______________________________________________
SIFCO INDUSTRIES, INC.
970 EAST 64TH STREET, CLEVELAND, OHIO 44103
NOTICE OF 20032004 ANNUAL MEETING OF SHAREHOLDERS
The 20032004 Annual Meeting of Shareholders of SIFCO Industries, Inc. will
be held in the National City Bank meeting rooms A & B (4th floor) of the
National City Center Annex Building, 1900 East 9th Street, Cleveland, Ohio, on
January 28, 200327, 2004 at 10:30 a.m., to consider and vote upon proposals to:
1. Elect six (6) directors for one-year terms expiring at the 20042005
Annual Meeting.
2. Ratify the designation of Grant Thornton LLP as the independent
auditors of the Company.
3. Consider and take action upon such other matters as may properly
come before the meeting or any adjournment thereof.
The holders of record of Common Shares at the close of business on
December 6, 2002,5, 2003 will be entitled to receive notice of and vote at the meeting.
The Company's Annual Report for the fiscal year ended September 30,
20022003 is included with this Notice.
By order of the Board of Directors.
SIFCO Industries, Inc.
December 13, 200212, 2003 Carolyn J. Buller, Secretary
KINDLY FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ARE PRESENT AND VOTE IN PERSON AT THE MEETING, YOUR PROXY
WILL NOT BE USED.
SIFCO INDUSTRIES, INC.
970 EAST 64TH STREET, CLEVELAND, OHIO 44103
December 13, 200212, 2003
PROXY STATEMENT
GENERAL INFORMATION
The proxy that accompanies this statement is solicited by the board of
directors of SIFCO Industries, Inc. (the "Company") for use at the 20032004 Annual
Meeting of the Shareholders of the Company to be held January 28, 2003,27, 2004, or at
any adjournment thereof. This proxy statement was first mailed on December 13,
200212,
2003 to shareholders of record on December 6, 2002.5, 2003.
Any shareholder giving a proxy for the meeting may revoke it before it
is exercised by giving a later dated proxy or by giving notice of revocation to
the Company in writing before or at the 2003Annual2004 Annual Meeting. However, the mere
presence at the 20032004 Annual Meeting of the shareholder granting a proxy does not
revoke the proxy. Unless revoked by notice as above stated, the shares
represented by valid proxies will be voted on all matters to be acted upon at
the 20032004 Annual Meeting. On any matter or matters with respect to which the
proxy contains instructions for voting, such shares will be voted in accordance
with such instructions. Abstentions will be deemed to be present for the purpose
of determining a quorum for the 20032004 Annual Meeting, but will be deemed not
voting on the issues or matters as to which abstention is applicable. Brokers
who have not received voting instructions from beneficial owners generally may
vote in their discretion with respect to the election of directors and the
ratification of the auditors. Broker non-votes will not affect the outcome of
any matter for which the 20032004 Annual Meeting is called.
The cost of solicitation of proxies in the form accompanying this
statement will be borne by the Company. Proxies will be solicited by mail or by
telephone or personal interview with an officer or regular employee of the
Company or by requesting brokers and other custodians, nominees and fiduciaries
to forward proxy soliciting material to the beneficial owners of shares held of
record by such brokers, custodians, nominees or fiduciaries, who will be
reimbursed by the Company for their expenses in so doing.
OUTSTANDING SHARES AND VOTING RIGHTS
The record date for determining shareholders entitled to vote at the
20032004 Annual Meeting is December 6, 2002.5, 2003. As of October 31, 2002,2003, the outstanding
voting securities of the Company were 5,107,7335,140,233 Common Shares. Each Common
Share, exclusive of treasury shares, has one vote. The Company held 100,00067,500
Common Shares in its treasury on the record date. The holders of a majority of
the Common Shares of the Company issued and outstanding, present in person or by
proxy, shall constitute a quorum for the purposes of the 20032004 Annual Meeting.
1
The table below names the persons who are known by the Company to be
the beneficial owners of more than 5% of its outstanding Common Shares as of
October 31, 2002,2003, the number of such Common Shares beneficially owned by, or
held in trust for, each such person (including their spouses and children who
live with them, if any) and the percentage of the outstanding Common Shares,
which that number of shares constitutes.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Ms. Janice Carlson and Mr. Charles H. Smith, III 2,004,074 (1) 39.24%38.99%
Trustees, Voting Trust Agreement
970 E. 64th Street
Cleveland, Ohio 44103
Dimensional Fund Advisors, Inc. 343,090275,756 (2) 6.72%5.36%
1299 Ocean Avenue
Santa Monica, CA 90401
(1) As of October 31, 2002,2003, Janice Carlson and Charles H. Smith, III owned, as
Trustees, 2,004,074 Common Shares of the Company, such Common Shares having
been deposited with them or their predecessors, as Trustees, under a Voting
Trust Agreement entered into as of February 1, 1997 and extended to January
31, 2007. The Trustees under the Voting Trust Agreement share voting
control with respect to all such Common Shares.Shares, and may be contacted at the
above noted address. Mrs. G. D. Gotschall, 7425 Pelican Bay Boulevard,
Marbella #606, Naples, Florida 34108, owned 656,972608,972 shares (12.86%(11.85%); and
Mr. C. H. Smith, Jr., 4565 South Lake Drive, Boynton Beach, FL 33436, owned
539,836 shares (10.57%(10.50%), which shares are subject to the Voting Trust
Agreement.
(2) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios.")
In its role as investment advisor and investment manager, Dimensional
possessed both voting and investment power over 343,090275,756 Common Shares of
SIFCO Industries, Inc. as of October 31, 2002.2003. The Portfolios own all
securities reported in this statement, and Dimensional disclaims beneficial
ownership of such securities.
PROPOSAL TO ELECT SIX (6) DIRECTORS
Six (6) directors are to be elected at the annual meeting to hold
office until the next annual meeting of shareholders and until their respective
successors are elected and qualified. It is intended that the accompanying proxy
will be voted in favor of the following persons to serve as directors unless the
shareholder indicates to the contrary on the proxy. The six (6) nominees
receiving the most votes will be elected as directors for 2003.2004.
Although the Company does not contemplate that any of the nominees will
be unavailable for election, if a vacancy in the slate of nominees is occasioned
by death or other unexpected occurrence, it is currently intended that the
remaining directors will, by the vote of a majority of their number, designate a
different nominee for election to the Board at the 20032004 Annual Meeting.
2
Nominees for election to the board of directors
JEFFREY P. GOTSCHALL, 54,55, director of the Company since 1986, Chairman of the
Board since 2001, and Chief Executive Officer of the Company since 1990.
Mr. Gotschall previously served the Company from 1989 to 2002 as President,
from 1986 to 1990 as Chief Operating Officer, from 1986 through 1989 as
Executive Vice President and from 1985 through 1989 as President of SIFCO
Turbine Component Services. Mr. Gotschall is also a director of National
Processing, Inc. (credit and debit card processing service).
HUDSON D. SMITH, 51,52, director of the Company since 1988. Mr. Smith has been
Treasurer of the Company since 1983 and Executive Vice President since
September 2003. Mr. Smith previously served as President of SIFCO Forge
Group since 1998. Mr. Smith previously served asfrom 1998 through August 2003, Vice President and General Manager of
SIFCO Forge Group from 1995 through 1997, General Manager of SIFCO Forge
Group's Cleveland Operations from 1989 through 1995 and Group General Sales
Manager of SIFCO Forge Group from 1985 through 1989.
MICHAEL S. LIPSCOMB, 56,57, director of the Company since 2002. Mr. Lipscomb has
been Chairman, President and Chief Executive Officer of Argo-Tech
Corporation since 1994. Mr. Lipscomb joined TRW's corporate staff in 1981
and was appointed Director of Operations for the Power Accessories Division
in 1985. He was named Vice President of Operations when Argo-Tech was
formed in 1986, becoming Executive V.P and Chief Operating Officer in 1988,
President in 1990 and Chairman in 1994. Mr. Lipscomb has served as a
director of Argo-Tech and AT Holdings Corporation since 1990. He also
serves on the board of Ruhlin Construction Company and is a board member of
the Aerospace Industries Association.
P. CHARLES MILLER, JR., 64,65, director of the Company since 2002. Mr. Miller is
the Chairman and CEO of Duramax Marine LLC. Prior to acquiring Duramax
Marine in 1999, he served as President, CEO and director of Duramax, Inc.
since 1982. Mr. Miller continues to serve as a director of Duramax, Inc.,
and serves on the Business Advisory Council of the Federal Reserve Bank of
Cleveland and on the boardBoard of directorsAdvisors of DTR
Industries, Inc. and Custom Rubber Corporation. He
also serves on the boards of numerous not-for-profit organizations.
ALAYNE L. REITMAN, 38,39, director of the Company since 2002. Ms. Reitman currently
serves as a Trustee for the Cleveland Foundation and Hawken School, where
she is also Assistant Treasurer and a member of the Executive
Committee. Ms Reitman also serves as Treasurer for the Jewish Education
Center of Cleveland.Treasurer. She previously served from 1999 to 2001 as
President of Embedded Planet, a high-tech start-up company; from 1993 to
1998 as Vice President and Chief Financial Officer of The Tranzonic
Companies, Inc.; and from 1991 to 1993 as Senior Financial Analyst for
American Airlines.
3
J. DOUGLAS WHELAN, 63,64, director of the Company since 1995. Mr. Whelan retired
in 1999 from his positions as President, Chief Operating Officer and
director of Wyman-Gordon Company, North Grafton, Massachusetts. He
previously served from 1994 through 1997 as President of Wyman-Gordon
Forgings, Houston, Texas and from 1989 through 1994, as Vice President of
Operations for the Cameron Forged Products Division of Cooper Industries,
Houston, Texas. From 1965 to 1989, Mr. Whelan served in a variety of
executive, technical and management positions with Cameron Iron Works,
Houston, Texas.
3
STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND NOMINEES
The following table sets forth as of October 31, 2002,2003, the number of
Common Shares of the Company beneficially owned by each director and officer
and all directors and officers as a group, according to information furnished
to the Company by such persons:
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
---- ------------------------ ----------------
Timothy V. Crean (1) 181,493 3.55195,868 3.81 %
Hudson D. Smith (1)(2)(3)(4) 148,840 2.91151,590 2.95 %
Jeffrey P. Gotschall (1)(2)(3)(4) 125,475 2.46137,225 2.67 %
Frank A. Cappello (1) 14,750 *
J. Douglas Whelan 8,000 *
Frank A. Cappello (1) 7,500P. Charles Miller, Jr. 2,700 *
Alayne L. Reitman 1,100 *
Michael S. Lipscomb 600 *
Alayne L. Reitman 500 *
P. Charles Miller 1,000 *
-------
All Directors and Officers as a Group 473,408 9.27511,833 9.96 %
=======
*Common Shares owned are less than one percent of class.
(1) Unless otherwise stated below, the shares owned are owned of record by that
person who has sole voting and investment power as to those shares. A
portion of the total number of shares for the following persons and group
represents shares which could be acquired within 60 days (February 10,
2004) of the date of this Proxy Statement by exercise of stock options: Mr.
T. V. Crean, 132,500134,375 shares; Mr. J. P. Gotschall, 10,00013,750 shares; Mr. H. D.
Smith, 7,0009,750 shares; Mr. F. A. Cappello, 7,50013,750 shares; and all directors
and officers as a group, 159,500176,625 shares.
(2) Includes in the cases of Messrs.Mr. J. P. Gotschall and Mr. H. D. Smith shares
owned by their spouses and any minor children or in trust for them, their
spouses and their lineal descendants.
(3) Includes Voting Trust Certificates issued by the aforementioned (see page
2) Voting Trust representing an equivalent number of Common Shares held by
such Trust as follows: Mr. J. P. Gotschall-- 115,475;123,475; and Mr. H. D. Smith--
140,400,140,400.
(4) Mr. J. P. Gotschall and Mr. H. D. Smith are cousins.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities and Exchange Commission Act of 1934
requires the Company's officers and directors, and persons who own more than ten
(10) percent of a registered class of Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten (10) percent shareholders
are required by SEC regulation to furnish the Company with copies of all Section
16 (a) forms they file.
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company
during, or with respect to, 2003, no director, officer, beneficial owner of more
than ten (10) percent of its outstanding common stock or any other person
subject to Section 16 (a) of the Exchange Act failed to file on a timely basis
4
during 2003 any reports required by 16 (a) of the Exchange Act, except that Mr.
C.H. Smith Jr. and Mr. H.D. Smith each made a single, late filing with respect
to transfers of shares between family members.
ORGANIZATION AND COMPENSATION OF THE BOARD OF DIRECTORS
The Company's Board of Directors held four (4) regularly scheduled
meetings during the last fiscal year. The Board of Directors' standing
committees are the Audit, Compensation, and Governance Committees. During 2002fiscal
2003 each director attended at least 75% of the total number of meetings of the
Board and the Committees on which he or she served.
The functions of the Audit Committee are to select, subject to
shareholder ratification, the Company's independent auditor; to approve all
non-audit related services performed by the Company's independent auditor; to
determine the scope of the audit,audit; to discuss any special problems that may arise
during the course of the auditaudit; and to review the audit and its findings for the
purpose of reporting to the board of directors. The Audit committee consists of
outside, independent directors, all of whom are financially literate with at
least one experienced in finance and accounting. The Audit Committee, currently
composed of M.S. Lipscomb (Chairperson), A. L. Reitman, P. C. P. Miller, Jr. and J.
D. Whelan, held two (2) meetings during the last fiscal year.
The function of the Compensation Committee is to review and recommend
the compensation of directors and officers of the Company, including the
granting of stock options and the number of shares that should be subject to
each option so granted. The Compensation Committee, currently composed of J. D.
Whelan (Chairperson), M.S. Lipscomb, A. L. Reitman and P. C. P. Miller, Jr., held
two (2) meetings during the last fiscal year.
The function of the Governance Committee is to recommend candidates for
the board of directors and address issues relating to senior management
performance and succession, and to the composition and procedures of the board.
The Governance Committee is currently composed of J.P. Gotschall, M.S. Lipscomb,
A. L. Reitman, J. D. Whelan and P. C. P. Miller.Miller, Jr.. The Governance Committee will
consider shareholder nominations for directors at any time.any. Any shareholder desiring
to have a nominee considered by the Governance Committee should submit such
recommendation in writing to a member of the Governance Committee or the
Secretary of the Company. The Governance Committee did not hold any formal
meetings during the last fiscal year; however, its function was fulfilled during
sessions of the full board of directors.
In fiscal 2002,2003, each director (other than directors who are employed by
the Company) received an annual retainer fee of $12,000 and an attendance fee of
$1,000 per Board meeting, $1,000 per Committee meeting for meetings held on a
day other than the day of a Board meeting and $500 per Committee meeting for
meetings held on the day of a Board meeting. Committee chairpersonchairpersons received an
additional $2,000 annual retainer for such service.
5
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
received for each of the three previous fiscal years by the Company's Chief
Executive Officer and three other executive officers of the Company:
=============================================================================================================================================================================================
SUMMARY COMPENSATION TABLE
-------------------------------- -------------------- -------------------------------- ------------------------------------------------------------------------------------------------------
ANNUAL LONG TERM
COMPENSATION COMPENSATION
-------------------------------- -------------------- -------------------------------- ---------------------------------- ---------- --------- ---------- ---------- ----------- ------------
NAME & RESTRICTED LTIP OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY($SALARY ($) BONUS($BONUS ($) STOCK PAYOUTS AWARDS COMPENSATION
AWARDS ($) (2) (3)
($) (1)
--------------------- ---------- --------- ---------- ---------- ---------- ---------- ------------------------ ------------
Jeffrey P. Gotschall 2003 240,000 -0- -0- -0- 5,460
Chairman & CEO 2002 238,326 -0- -0- -0- 5,000 3,120
Chairman & CEO
2001 259,992 106,000 -0- -0- 5,000 3,120
2000 260,442 32,000 -0- 76,984 10,000 3,120
--------------------- ---------- --------- ---------- ---------- ---------- ---------- ------------------------ ------------
Timothy V. Crean 2003 185,095 -0- -0- -0- -0-
President & COO 2002 190,000 60,000 202,500 -0- 7,500 -0-
President & COO
2001 185,543 94,458 -0- -0- 10,000 -0-
2000 174,332 58,091 -0- 159,506 10,000 -0-
--------------------- ---------- --------- ---------- ---------- ---------- ---------- -------------
Frank A. Cappello 2002 141,004----------- ------------
Hudson D. Smith, 2003 113,376 7,500 -0- -0- 3,410
Executive Vice 2002 111,684 2,320 -0- 10,000 1,680
Vice5,000 1,320
President & CFO 2001 141,004 58,000 -0- -0- 10,000 1,260
2000(4) 85,483 19,000 -0-113,376 11,199 -0- 5,000 -0-1,320
Treasurer
--------------------- ---------- --------- ---------- ---------- ----------- ------------
Frank A. Cappello 2003 143,965 10,000 -0- -0- 4,298
Vice President & CFO 2002 141,004 -0- -0- 10,000 1,680
2001 141,004 58,000 -0- 10,000 1,260
--------------------- ---------- --------- ---------- ---------- -------------
Hudson D. Smith, 2002 111,684 2,320 -0- -0- 5,000 1,320
Treasurer 2001 113,376 11,199 -0- -0- 5,000 1,320
2000 113,376 3,574 -0- 199,312 6,000 1,320
===================== ========== ========= ========== ========== ========== ========== =============----------- ------------
(1) All restricted shares are valued by multiplying the number of shares
granted by the closing price on the grant date, minus any consideration
paid by the named executive. On July 30, 2002 the Company granted named
executive 50,000 restricted shares, on which date the Company's common
shares closed at $4.05 per share. No monetary consideration will be
contributed by officer for the restricted shares. The restricted shares
have a vesting rate of 25% per year beginning on the first anniversary date
of the grant. The market value of the 50,000 restricted shares at September
30, 20022003 was $142,500$115,000 based on the closing price for Company's common
shares of $2.85.$2.30. Restricted shares shall be entitled to receive dividends.
(2) Represents final distributions from the Company's Phantom Stock Plan.
(3) Represents amounts contributed by the Company as matching contributions
with respect to U.S. employees pursuant to the SIFCO Industries, Inc.
Employees' Thrift Plan, a defined contribution plan. (4) RepresentsUnder the Plan, as
amended April 1, 2003, the Company matches 50% of the first 10% of
participating employee compensation contributed to the Plan. Employees
become vested in those amounts since February 21, 2000, date oncontributed by the Company at varying
percentages prior to achieving three full years of service, at which officer was
hired.time
they become 100% vested.
6
OPTION GRANTS
SetFor each individual named in the Summary Compensation Table, set forth
below is information on grants of stock options, pursuant to the Company's 1998
Long-Term Incentive Plan, during the fiscal year ended September 30, 2002 to the executive officers named in the Summary Compensation
Table.2003.
===================================================================================== =====================
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
- ------------------------------------------------------------------------------------- ---------------------
% OF TOTAL
OPTIONS/ OPTIONS GRANTED EXERCISE
NAME SARS TO EMPLOYEES IN OR BASE EXPIRATION 5% ($) 10% ($)
GRANTED FISCAL YEAR PRICE DATE
# ($/SHARE)
- --------------------------- ----------- ------------------- ------------- ----------- ---------- ----------
Jeffrey P. Gotschall 5,000 7% 5.50 4/30/2012 17,295 43,828-0- -0- -0- N/A -0- -0-
- --------------------------- ----------- ------------------- ------------- ----------- ---------- ----------
Timothy V. Crean 7,500 10% 5.50 4/30/2012 25,942 65,742-0- -0- -0- N/A -0- -0-
- --------------------------- ----------- ------------------- ------------- ----------- ---------- ----------
Frank A. Cappello 10,000 13% 5.50 4/30/2012 34,589 87,656-0- -0- -0- N/A -0- -0-
- --------------------------- ----------- ------------------- ------------- ----------- ---------- ----------
Hudson D. Smith 5,000 7% 5.50 4/30/2012 17,295 43,828-0- -0- -0- N/A -0- -0-
=========================== =========== =================== ============= =========== ========== ==========
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below, forFor each individual named in the Summary Compensation Table, set forth
below is information relating to such person's exercise of stock options during
the fiscal year ended September 30, 20022003 and ownership of unexercised stock
options at September 30, 2002.2003.
======================= ============= =========== ============================ ============================
NAME SHARE NUMBER OF SECURITIES VALUE OF UNEXERCISED IN
ACQUIRED ON VALUE UNDERLYING UNEXERCISED THE MONEY OPTIONS AT
EXERCISE REALIZED OPTIONS AT YEAR-END FISCAL YEAR-END
---------------------------- ----------------------------------------- -------------- ------------- --------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ------------- ----------- ------------- -------------- ------------- --------------
Jeffrey P. Gotschall -0- -0- 6,250 13,75011,250 8,750 -0- -0-
- ----------------------- ------------- ----------- ------------- -------------- ------------- --------------
Timothy V. Crean -0- -0- 113,750 33,750129,375 13,125 -0- -0-
- ----------------------- ------------- ----------- ------------- -------------- ------------- --------------
Frank A. Cappello -0- -0- 5,000 20,00011,250 13,750 -0- -0-
- ----------------------- ------------- ----------- ------------- -------------- ------------- --------------
Hudson D. Smith -0- -0- 4,250 11,7508,250 7,750 -0- -0-
======================= ============= =========== ============= ============== ============= ==============
7
- --------------------------------------------------------------------------------
DEFINED BENEFIT PENSION PLANS
- --------------------------------------------------------------------------------
The amounts stated in the foregoing Summary Compensation Table do not
include amounts paid by the Company for purposes of funding the Company's
non-contributory pension plan. Messrs.Mr. J. P. Gotschall, Mr. F. A. Cappello, and Mr.
H. D. Smith participate on the same basis as other salaried employees in a
qualified, non-contributory pension plan known as SIFCO Industries, Inc.
Salaried Retirement Plan (the "Retirement Plan"). Mr. T. V. Crean participates
in the SIFCO Turbine Components Limited Pension Plan (the "STCL Plan"), which is
described later in this section.
The Summary Compensation Table on page 6 includes both base salary and
incentive compensation. Benefits payable under the Retirement Plan are
calculated using only base salary. Under the terms of the Retirement Plan, as
amended March 1, 2003 to cease the accrual of future retirement benefits as of
that date, the amount of normal annual retirement benefit payable to a
participating employee is generally based upon (i) years of service with the
Company prior to normal retirement date but limited to service through March 1,
2003, (ii) "final average earnings" (average basicbase salary during the 60
consecutive month period, within the 120 month period preceding retirement,March 1, 2003,
during which the total amount of basicbase salary was the highest), and (iii) average
Social Security covered compensation. For an employee retiring with 25 years of
service or less as of March 1, 2003, the benefit is equal to 2.144% of final
average earnings minus ..625%.625% of average Social Security covered compensation
multiplied by years of service up to 25 years. If an employee has more than 25
years of service at
retirement,as of March 1, 2003, the benefit is increased by 1.25% of final
average earnings multiplied by his years of service in excess of 25 years. The
amount so determined is payable in the form of a single life annuity or a lump
sum payment. Under the Internal Revenue Code, the maximum annual benefit payable
under the Retirement Plan to covered employees is limited to $160,000 per year
for 2002.2003. In addition, the maximum amount of final average earnings used to
compute benefits under the Retirement Plan is limited by the Internal Revenue
Code. Therefore, in response to such limitations, the Company established a
non-qualified Supplemental Executive Retirement Plan ("SERP") to provide covered
employees with a benefit amount equal to what they would have been entitled to
receive under the Retirement Plan, as of March 1, 2003, if no such limitations
existed.
The estimated annual retirement benefit under the combined Plansplans for
each participant is based upon the assumption that base salary will remain
unchanged untilat March 1, 2003, the normal retirement age of 65 is reached, and that likewise
the provisions ofdate on
which benefits under the Retirement Plan with respectand SERP ceased to those retirement benefits
will remain unchanged.accrue for all
participants. The following table shows estimated combined annual benefits
payable upon retirement under the Retirement Plan and the SERP:
Years of Service
- ---------------------------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35 40 45
- ----------------- ------------ ------------ ------------- ------------ ------------- ------------ -------------
$ 50,000 12,382 16,510 20,637 23,762 26,887 30,012 33,137
75,000 20,422 27,230 34,037 38,724 43,412 48,099 52,787
100,000 28,462 37,950 47,437 53,687 59,937 66,187 72,437
150,000 44,542 59,390 74,237 83,612 92,987 102,362 111,737
200,000 60,622 80,830 101,037 113,537 126,037 138,537 151,037
250,000 76,702 102,270 127,837 143,462 159,087 174,712 190,337
300,000 92,782 123,710 154,637 173,387 192,137 210,887 229,637
- ----------------------------------------------------------------------------------------------------------------
8
The payments by the Company to fund the benefits under the Retirement
Plan and SERP are actuarially determined. The estimated annual benefits payable
upon retirement and projected years of credited service through March 1, 2003,
the date on which benefits under the Plan ceased to retirementaccrue for all participants,
are as follows: Mr. J. P. Gotschall-- $163,001 (39.8$132,598 (29.7 years); Mr. F. A.
Cappello-- $59,242 (23.6$7,755 (3.1 years); and Mr. H. D. Smith-- $72,239 (42.5$53,399 (28.9 years). Total
pension expense related to the Retirement Plan and SERP for fiscal year 20012003 was
$574,687.$292,973.
Mr. T. V. Crean participates in the STCL Plan. This is a contributory
plan for employees of the Company's Irish subsidiary, SIFCO Turbine Components
Limited ("STCL"). Under the STCL Plan, the employee and STCL each pay 50% of
retirement benefits. Other costs such as life insurance are borne by STCL.
Under the terms of the STCL Plan, the amount of normal annual
retirement benefits payable to a participating employee is generally based upon
years of service with STCL prior to normal retirement date, "final pensionable
salary" (average basic salary during the period of 36 consecutive months
preceding retirement) and average government pension. The benefit is 1/60th of
final pensionable salary for each year of service, subject to a maximum of 40
years, minus 1 1/2 times the single person's annual rate of government
retirement pension. Years of service for senior managers who will have completed
at least ten years service may be augmented. The additional cost is paid by
STCL.
The payments by STCL and employees to fund the benefits under the STCL
Plan are actuarially determined. The current dollar value of estimated annual
benefits payable (in Euros) upon retirement and projected years of credited
service to retirement for Mr. T. V. Crean is $130,388$153,385 (40 years). Total pension
expense for the Retirement Plan for fiscal year 20022003 was $245,000.
DEFINED CONTRIBUTION PLANS
The amounts stated in the Summary Compensation Table on page 6 include
amounts contributed and expensed by the Company under the SIFCO Industries, Inc.
Employees' Thrift Plan. This Plan is a qualified 401(k) plan for salaried U.S.
employees and was established in 1981 to encourage savings by employees. Under
the terms of this Plan, all salaried U.S. employees are permitted to contribute
up to 16% of their pay, including wages, overtime pay and any commissions
received, up to a maximum amount of $11,000 in calendar year 2002, to a trust
fund. Under the Plan, the Company matches 60% of the first 2% of participating
employee compensation contributed to the Plan.
Employee contributions may be invested in one or more of four funds: an
equity fund, an international equity fund, a balanced fund and a government
money market fund. Company matching contributions are made in Company Common
Shares. For employees with less than three years of service, one-half of the
amounts contributed by the Company are automatically vested. The remaining 50%
becomes fully vested after three full years of service. Amounts contributed by
the Company for employees with three or more full years of service vest
immediately. All amounts in the fund credited to an employee are payable in cash
or stock upon the employee's death, retirement or permanent disability.
9
$312,627.
CHANGE IN CONTROL AGREEMENTS
During fiscal 2000 and 2002, the Company entered into agreements with
certain key executives of the Company in order to protect the Company and such
key executives in the event of a change in control of the Company. The purpose
of these agreements is to reinforce and encourage the continued attention and
dedication of these executives to their assigned duties without distraction in
the face of (i) solicitations by other employers and (ii) the potentially
disturbing circumstances arising from the possibility of a change in control of
the Company. To that end, the Change in Control Agreements obligate the Company
to provide certain severance benefits, described below, to any of these officers
whose employment is terminated under certain circumstances. Such benefits for
Messrs.Mr. J.P. Gotschall, Mr. T. V. Crean, Mr. H. D. Smith and Mr. F. A. Cappello
include a payment equal to a maximum of 200% of the employee's annual
compensation, continuation of insurance coverage for up to 24 months following
termination, and accelerated vesting of existing stock options and certain
retirement benefits.
9
REPORT OF THE COMPENSATION COMMITTEE
The Company's compensation of its executive personnel has three
components: base salary, cash incentive compensation and stock-based
compensation (stock options and restricted shares).
Based on a consideration of CEO salaries in manufacturing companies of
comparable size, and in view of uncertainty in the aerospace industry and the
Company's recent performance relative to such uncertainty, the Compensation
Committee adjusted Mr. Gotschall's annual salary to $240,000 at the start of
fiscal 2003. Further, in view of the uncertainty in the aerospace industry
during fiscal 2003, year.Mr. Gotschall agreed, in July 2003, to temporarily forego an
additional $60,000 of his annual salary for a twelve-month period. Mr. Gotschall
did not receive a cash incentive for fiscal 2002.2003.
The Company has incentive plans for each business unit and for the
corporate headquarters staff. In general, certain members of the business units
share in compensation pools equal to 10% of the unit's operating profits,
subject to certain adjustments and members of the corporate staff may earn
incentives from a pool equal to 3%up to 10% of profits before tax, subject to
certain adjustments.
During fiscal 2002,2003, no options on 77,500 shares were awarded to participants
in the Company's 1998 Long-Term Incentive Plan, including awards of
5,000 shares to Mr. J. P. Gotschall; 7,500 shares to Mr. T. V. Crean; 5,000
shares to Mr. H. D. Smith; and 10,000 shares to Mr. F. A. Cappello.Plan.
Compensation Committee
----------------------
J. Douglas Whelan, Chairperson
Michael S. Lipscomb
P. Charles Miller, Jr.
Alayne L. Reitman
10
PERFORMANCE GRAPH
Set forth below is a graph comparing the price performance of the
Company's Common Shares to the price performance of the S&P Composite - 500
Stock Index and the S&P Aerospace/Defense Group. The graph assumes that the
value of the investment in the Common Shares, the S&P Composite - 500 Stock
Index and the S&P Aerospace/Defense Group was $100 on September 30, 1997.1998.
COMPARISON OF FIVE-YEAR PRICERETURN PERFORMANCE OF
SIFCO INDUSTRIES, INC., S&P 500 INDEX
AND S&P AEROSPACE/DEFENSE GROUP
[GRAPH]
SIF Index S&P 500 S&P Aero
Qtr 9/30/1996 9/30/1996 9/30/1996
Ended =100 =100 =100
- -------------------------------------------------
9/30/97 $100.0 $100.0 $100.0
12/31/97 $92.2 $102.4 $90.3
3/31/98 $110.2 $116.3 $99.8
6/30/98 $101.8 $119.7 $95.1
9/30/98 $60.2 $107.4 $79.7
12/31/98 $59.9 $129.8 $85.2
3/31/99 $36.7 $135.8 $91.7
6/30/99 $39.8 $144.9 $107.8
9/30/99 $33.7 $135.4 $94.9
12/31/99 $34.3 $155.1 $85.4
3/31/00 $28.3 $158.2 $78.5
6/31/00 $30.1 $153.6 $73.1
9/30/00 $28.0 $151.6 $93.9
12/31/00 $22.9 $139.4 $105.3
3/31/01 $22.2 $122.5 $94.3
6/30/01 $26.7 $129.3 $92.6
9/30/01 $22.2 $109.9 $74.5
12/31/01 $26.8 $121.2 $85.3
3/31/02 $27.3 $121.1 $101.6
6/30/02 $24.8 $104.5 $102.0
9/30/02 $13.7 $86.1 $80.9
- --------------------------------------------------
SIFCO
Stock
Price S&P 500 S&P Aerospace
- --------------------------------------------------
9/30/98 $100.0 $100.0 $100.0
12/31/98 $99.5 $120.9 $106.9
3/31/99 $61.0 $126.5 $115.0
6/30/99 $66.0 $135.0 $135.2
9/30/99 $56.0 $126.1 $119.0
12/31/99 $57.0 $144.5 $107.1
3/31/00 $47.0 $147.4 $98.4
6/31/00 $50.0 $143.0 $91.7
9/30/00 $46.5 $141.2 $117.8
12/31/00 $38.0 $129.9 $132.1
3/31/01 $36.8 $114.1 $118.2
6/30/01 $44.4 $120.4 $116.1
9/30/01 $36.8 $102.4 $93.4
12/31/01 $44.6 $112.9 $107.0
3/31/02 $45.4 $112.8 $127.4
6/30/02 $41.2 $97.3 $128.0
9/30/02 $22.8 $80.2 $101.4
12/31/02 $20.0 $86.5 $99.8
3/31/03 $12.0 $83.4 $83.9
6/30/03 $16.1 $95.8 $100.5
9/30/03 $18.4 $97.9 $101.5
11
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviewed and discussed the audited financial
statements of the Company, for the fiscal year ended September 30, 2002,2003, with
the Company's management and with the Company's independent certified public
accountants, Grant Thornton LLP. The Audit Committee also discussed with Grant
Thornton LLP the matters required to be discussed by Statement of Auditing
Standards No. 61 (Communication with Audit Committees).
The Audit Committee received the written disclosures and the letter
from Grant Thornton LLP required by Independence Standards Board Standard No. 1
certifying the firmsfirm's independence and the Audit Committee discussed the
independence of Grant Thornton LLP with that firm.
Effective as of May 2, 2000, the Audit Committee and the Board of
Directors of the Company adopted a written charter, a copy of which is attached
to this Proxy Statement as Exhibit A.charter. The members of the Audit
Committee are all independent directors as defined in Section 121A of The AMEX
Listing Standards, Policies and Requirements.
Based upon the Audit Committee's review and discussion noted above, the
Audit Committee recommended to the board of directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2002.2003.
Audit Committee
---------------
Michael S. Lipscomb, Chairperson
P. Charles Miller, Jr.
Alayne L. Reitman
J. Douglas Whelan
PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT FEES
Fees paid to Grant Thornton LLP for the audit of the annual financial
statements included in the Company's Form 10-K and for the reviews of the
financial statements included in the Company's Forms 10-Q for the year ended
September 30, 2003 were $150,000. Fees paid to Grant Thornton LLP and to the
Company's predecessor auditor, Arthur Andersen LLP, for the audit of the annual
financial statements included in the Company's Form 10-K and for reviewthe reviews of
the financial statements included in the Company's Forms 10-Q for the year ended
September 30, 2002 were $125,000 and $16,000, respectively.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATIONAUDIT-RELATED FEES
There were no such fees paid during 2003 or 2002 to Grant Thornton LLP
or to the Company's predecessor auditor, Arthur Andersen LLP, for professional
services other than those described above.
12
TAX FEES
There were no such fees paid during 2003 or 2002 to Grant Thornton LLP
or to the Company's predecessor auditor, Arthur Andersen LLP, for professional
services other than those described above.
ALL OTHER FEES
There were no such fees paid during 2003 or 2002 to Grant Thornton LLP
or to the Company's predecessor auditor, Arthur Andersen LLP, for professional
services other than those described above.
12
PROPOSAL FOR APPROVAL OF DESIGNATION OF AUDITORS
The accounting firm of Grant Thornton LLP has, since July of 2002, been
the Company's independent certified public accountants and auditors. Arthur
Andersen LLP was dismissed in June of 2002. There were no disagreements with
Arthur Andersen LLP or other reportable events on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. The board of directors has chosen that firm to audit the accounts of
the Company and its consolidated subsidiaries for the fiscal year ending
September 30, 2003,2004, subject to the approvalratification of the shareholders for which
the affirmative vote of a majority of the Common Shares present and voting at
the 20032004 Annual Meeting (in person or by proxy) is required. Grant Thornton LLP
has advised the Company that neither the firm nor any of its members or
associates has any direct or indirect financial interest in the Company or any
of its affiliates other than as auditors. The board of directors recommends
ratification of the selection of Grant Thornton LLP as independent auditors of
the Company for the year ending September 30, 2003.2004.
Representatives of Grant Thornton LLP are expected to be present at the
20032004 Annual Meeting with the opportunity to make a statement if they desire to
do so and to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR THE 20042005 ANNUAL MEETING
A shareholder who intends to present a proposal at the 20042005 Annual
Meeting, and who wishes to have the proposal included in the Company's proxy
statement and form of proxy for that meeting, must deliver the proposal to the
Company no later than August 15, 2003.13, 2004. Any shareholder proposal submitted other
than for inclusion in the Company's proxy materials for the 20042005 Annual Meeting
must be delivered to the Company no later than October 29, 200328, 2004 or such proposal
will be considered untimely. If a shareholder proposal is received after October
29, 2003,28, 2004, the Company may vote, in its discretion as to the proposal, all of the
Common Shares for which it has received proxies for the 20042005 Annual Meeting.
13
OTHER MATTERS
The management does not know of any other matters that will come before
the meeting. In case any other matter should properly come before the meeting,
it is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
By order of the Board of DirectorsDirectors.
SIFCO Industries, Inc.
Carolyn J. Buller, Secretary
December 13, 2002
13
EXHIBIT A
CHARTER FOR THE
SIFCO AUDIT COMMITTEE
The Audit Committee will consist of a minimum of three outside, independent
directors, all financially literate, at least one experienced in finance and
accounting. The independent auditors will be ultimately accountable to this
committee and the full board.
The Audit Committee will:
- Operate under a formal charter, which it will review and assess
annually.
- Select, subject to shareholder approval, evaluate and, if necessary,
replace the independent auditors.
- Discuss with the independent auditors the scope and thoroughness of
their examinations and review the costs associated therewith.
- If requested by the independent auditors or by management, review and
discuss with management and with the auditors the quarterly financial
statements (10-Q) prior to their submission to the Securities and
Exchange Commission.
- Review and discuss with the independent auditors and with management
the audited annual financial statements prior to their SEC submission
or release, including in such discussion specific consideration of the
quality of the Company's accounting principles applied to its
financial reporting.
- Review with the full board the results of the independent auditors'
examination, as well as the Audit Committee's evaluation thereof.
- Recommend to the board the inclusion of the annual financial
statements in the Annual Report on Form 10-K.
- Ensure that the independent auditors state annually, in writing, any
other relationships that they have with the Company; and determine if
any such relationship might interfere with the auditors' independence.
- Review the need for internal auditors and make appropriate
recommendations to the board.12, 2003
14
DETACH CARD
-------------------------------------------------------------------------------
SIFCO INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JEFFREY P. GOTSCHALL and HUDSON D. SMITH, and
each of them, the proxies of the undersigned to vote the shares of the
undersigned at the Annual Meeting of the Shareholders of SIFCO Industries, Inc.,
to be held on January 28, 2003,27, 2004, and at any and all adjournments thereof, upon
proposals to:
(1) ELECT SIX (6) DIRECTORS. To elect the following persons for one-year terms
expiring at the 20042005 Annual Meeting:
Jeffrey P. Gotschall Michael S. Lipscomb P. Charles Miller, Jr.
Alayne L. Reitman Hudson D. Smith J. Douglas Whelan
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as noted below) To vote for all nominees
(INSTRUCTIONS: If you wish to withhold authority to vote for any individual
nominee, write that nominee's name in the space below.)
- --------------------------------------------------------------------------------
(2) RATIFY THE DESIGNATION OF GRANT THORNTON LLP as independent auditors of the
Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Consider and take action upon such other matters as may properly come before
the meeting or any adjournment thereof.
[ ] GRANT AUTHORITY [ ] WITHHOLD AUTHORITY
(Continued on other side)
DETACH CARD
-------------------------------------------------------------------------------
(Proxy--continued from the other side)
IF NO INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES FOR DIRECTORS, FOR THE PROPOSAL TO RATIFY THE DESIGNATION OF
INDEPENDENT AUDITORS AND, IN THE DISCRETION OF THE PROXIES, ON SUCH OTHER
BUSINESS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT.
Dated:
------------------------------
------------------------------
------------------------------
NOTE: The signature of this
proxy should correspond with
the name (or names), as shown
hereon, in which your stock is
registered. Where stock is
registered jointly in the name
of two or more persons, all
should sign.