DEF 14A
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d04248ddef14a.txt
DEFINITIVE PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
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RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
ENCORE WIRE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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ENCORE WIRE CORPORATION
1410 MILLWOOD ROAD
MCKINNEY, TEXAS 75069
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 2003
NOTICE is hereby given that the annual meeting of stockholders of
Encore Wire Corporation (the "Company") will be held on Tuesday, May 6, 2003, at
9:00 a.m., local time, at the Company's offices, 1411-A Millwood Road, McKinney,
Texas, 75069, for the following purposes:
(1) To elect a Board of Directors for the ensuing year;
(2) To ratify the appointment of Ernst & Young LLP as auditors to
audit the financial statements of the Company for the fiscal
year ending December 31, 2003; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 7, 2003
are entitled to notice of and to vote at the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Company's 2002 Annual Report, containing
a record of the Company's activities and consolidated financial statements for
the year ended December 31, 2002, is also enclosed.
Dated: April 4, 2003.
By Order of the Board of Directors
FRANK J. BILBAN
Secretary
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YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. IF
YOU DO ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON. THE PROMPT RETURN OF PROXIES WILL INSURE A QUORUM AND SAVE THE COMPANY
THE EXPENSE OF FURTHER SOLICITATION.
ENCORE WIRE CORPORATION
1410 MILLWOOD ROAD
MCKINNEY, TEXAS 75069
PROXY STATEMENT
For Annual Meeting of Stockholders
To be Held on May 6, 2003
GENERAL
The accompanying proxy is solicited by the Board of Directors of Encore
Wire Corporation (the "Company" or "Encore") for use at the annual meeting of
stockholders of the Company to be held at the time and place and for the
purposes set forth in the foregoing notice. The approximate date on which this
proxy statement and the accompanying proxy are first being sent to stockholders
is April 4, 2003.
The cost of soliciting proxies will be borne by the Company. The
Company may use certain of its officers and employees (who will receive no
special compensation therefor) to solicit proxies in person or by telephone,
facsimile, telegraph or similar means.
PROXIES
Shares represented by a proxy in the accompanying form, duly signed,
dated and returned to the Company and not revoked, will be voted at the meeting
in accordance with the directions given. If no direction is given, such shares
will be voted for the election of the nominees for directors named in the
accompanying form of proxy and in favor of the other proposal set forth in the
notice. Any stockholder returning a proxy may revoke it at any time before it
has been exercised by giving written notice of such revocation to the Secretary
of the Company, by filing with the Company a proxy bearing a subsequent date or
by voting in person at the meeting.
VOTING PROCEDURES AND TABULATION
The Company will appoint one or more inspectors of election to conduct
the voting at the meeting. Prior to the meeting, the inspectors will sign an
oath to perform their duties in an impartial manner and to the best of their
abilities. The inspectors will ascertain the number of shares outstanding and
the voting power of each of such shares, determine the shares represented at the
meeting and the validity of proxies and ballots, count all votes and ballots and
perform certain other duties as required by law.
The inspectors will tabulate the number of votes cast for or withheld
as to the vote on each nominee for director and the number of votes cast for,
against or withheld, as well as the number of abstentions and broker non-votes,
as to the proposal to ratify the appointment of the auditors. A majority of the
Common Stock outstanding and entitled to vote at the meeting must be present in
person or represented by proxy in order to constitute a quorum. Directors are
elected by a plurality of the shares of Common Stock present in person or by
proxy at the meeting and entitled to vote thereat. Under Delaware law and the
Company's Certificate of Incorporation and Bylaws, abstentions and broker
non-votes will have no effect on voting on the election of directors, provided a
quorum is present. The proposal to ratify the appointment of auditors will be
approved by a vote of a majority of the holders of shares of Common Stock having
voting power present in person or represented by proxy. An abstention with
respect to such proposal will therefore effectively count as a vote against such
proposal. A broker non-vote or other limited proxy as to the proposal to ratify
the auditors will be counted towards a meeting quorum, but such broker non-vote
cannot be voted on such proposal and therefore will not be considered a part of
the voting power with respect to the proposal. This has the effect of reducing
the number of shareholder votes required to approve that proposal.
VOTING SECURITIES
The only voting security of the Company outstanding is its Common
Stock, par value $.01 per share. Only the holders of record of Common Stock at
the close of business on March 7, 2003, the record date for the meeting, are
entitled to notice of, and to vote at, the meeting. On the record date, there
were 15,119,065 shares of Common Stock outstanding and entitled to be voted at
the meeting. A majority of such shares, present in person or by proxy, is
necessary to constitute a quorum. Each share of Common Stock is entitled to one
vote.
PROPOSAL ONE
ELECTION OF DIRECTORS
The business and affairs of the Company are managed by the Board of
Directors, which exercises all corporate powers of the Company and establishes
broad corporate policies. The Bylaws of the Company provide for eight directors.
At the meeting, eight directors will be elected.
Directors are elected by plurality vote, and cumulative voting is not
permitted. All duly submitted and unrevoked proxies will be voted for the
nominees for director selected by the Board of Directors, except where
authorization so to vote is withheld. If any nominee should become unavailable
for election for any presently unforeseen reason, the persons designated as
proxies will have full discretion to vote for another person designated by the
Board. Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and qualified.
The nominees of the Board for directors of the Company are named below.
Each of the nominees has consented to serve as a director if elected. The table
below sets forth certain information with respect to the nominees. All of the
nominees are presently directors of the Company. With the exception of John H.
Wilson, all of the nominees have served continuously as directors since the date
of their first election to the Board. Mr. Wilson served as a director of Encore
from April 1989 until May 1993 and was re-elected to the Board in May 1994.
VINCENT A. REGO, age 79, Mr. Rego has been Chairman of the Board since Encore's inception in
director since 1989. 1989 and has served as its Chief Executive Officer since 1996. Mr.
Rego previously served as President, Chief Executive Officer and
Chairman of the Board of Directors of Capital Wire and Cable
Corporation, a manufacturer of electrical wire and cable products.
DONALD E. COURTNEY, age 72, Mr. Courtney has been President and Chairman of the Board of Directors
director since 1989. of Investech, Ltd., which is a private importing firm, since 1994.
Mr. Courtney is also currently Chairman of Tempo Lighting, Inc.
DANIEL L. JONES, age 39, Mr. Jones has served as President of Encore since May 1998 and as
director since May 1994. Chief Operating Officer since October 1997. Mr. Jones previously
served the Company as Vice President - Sales and Marketing from May
1992 to May 1997 and as Executive Vice President from May 1997 to May
1998.
JOHN P. PRINGLE, age 73, Mr. Pringle has been President of Tekserco Inc., which owns and
director since 1990. operates pay telephones, since 1990. Prior thereto, Mr. Pringle was
employed in various capacities by Capital Wire and Cable Corporation,
most recently as Vice President -- Engineering.
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WILLIAM R. THOMAS, age 74, Mr. Thomas has been President since 1980 and Chairman of the Board
director since 1989. since 1982 of Capital Southwest Corporation, a publicly owned venture
capital investment firm. Mr. Thomas is currently a director of (i)
Alamo Group, Inc., which provides mowing equipment for agricultural,
commercial and governmental users, and (ii) Palm Harbor Homes, Inc., a
manufactured housing company. Mr. Thomas was formerly a director of
Capital Wire and Cable Corporation.
JOHN H. WILSON, age 60, Mr. Wilson has been President of U.S. Equity Corporation, a venture
director from 1989 capital firm, since 1983 and served as President of Whitehall
until May 1993 and since Corporation from May 1995 to July 1998. Mr. Wilson is currently a
May 1994. director of (i) Capital Southwest Corporation and (ii) Palm Harbor
Homes, Inc., a manufactured housing company. Mr. Wilson formerly
served as a director of Capital Wire and Cable Corporation.
JOSEPH M. BRITO, age 80, Mr. Brito has been President of C.B. Utility Co., C. Brito
director since October 1997. Construction Co. and Brito Enterprises, Inc., public utility
contracting firms for more than ten years. Mr. Brito is also a
general partner of Tupelo Realty and Brito Associates, real estate
development companies, and an officer of 1776 Liquors, Ltd. of
Bristol, a liquor retailer. Mr. Brito has also served on the regional
advisory board of Fleet National Bank, as regional Vice President of
the National Utility Contractors Association and as Administrative
Vice President of the Rhode Island Contractors Association.
SCOTT D. WEAVER, age 44, Mr. Weaver has been the Vice President and Chief Financial Officer of
nominee for director Western Refining Company, an independent refining and marketing
company located in El Paso, Texas, since June 2000. From 1993 until
June 2000, Mr. Weaver was the Vice President-Finance, Treasurer and
Secretary of the Company. Prior to 1993, Mr. Weaver was responsible
for the financial oversight of assisted acquisitions of certain
failed savings and loan institutions as an employee of Federal
Depository Insurance Corporation, served as the Vice
President-Finance of 2M Companies, a Dallas investment company and
was employed by the public accounting firm of Ernst & Young LLP.
There are no family relationships between any of the nominees or
between any of the nominees and any executive officer of the Company. Mr. Thomas
and Mr. Wilson were originally elected to the Board of Directors of the Company
pursuant to the terms of an investment purchase agreement entered into in
connection with the formation of the Company in 1989. The director election
provisions of the agreement were terminated in connection with the Company's
initial public offering in 1992.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE NOMINEES SET
FORTH ABOVE
ADDITIONAL INFORMATION REGARDING THE BOARD OF DIRECTORS
BOARD MEETINGS AND COMMITTEES
As permitted by the Bylaws of the Company, the Board has designated
from its members a compensation committee ("Compensation Committee") and an
audit committee ("Audit Committee"). The Company does not have a standing
nominating committee of the Board or any other committee that performs a similar
function.
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During 2002, the Board of Directors held a total of four meetings. Each
director attended at least 75% of the aggregate of such meetings held during the
period in which such director served and the meetings held by all committees on
which such director served.
The current committees of the Board, the composition and functions
thereof and the number of meetings held in 2002 are set forth below.
Compensation Committee. In 2002, the members of the
Compensation Committee were Donald E. Courtney, William R. Thomas and
John H. Wilson. The Compensation Committee met four times during 2002.
The role of the Compensation Committee is to review the performance of
officers, including those officers who are also members of the Board,
and to set their compensation. The Compensation Committee also
supervises and administers the Company's employee stock option plans
and all other compensation and benefit policies, practices and plans of
the Company.
Audit Committee. In 2002, the members of the Audit Committee
were Donald E. Courtney, John H. Wilson and Joseph M. Brito. The Audit
Committee met five times during 2002. The role of the Audit Committee
is to review, with the Company's auditors, the scope of the audit
procedures to be applied in the conduct of the annual audit as well as
the results of the annual audit.
INDEPENDENCE OF AUDIT COMMITTEE MEMBERS
All three members of the Audit Committee are currently independent as
defined by Rule 4200(a)(14) of the National Association of Securities Dealers,
Inc. listing standards.
REPORT OF THE AUDIT COMMITTEE
To the Stockholders of Encore Wire Corporation:
The Audit Committee of the Board of Directors (the "Audit Committee")
oversees the Company's financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for the financial reporting
process including the Company's system of internal controls, and the preparation
of the Company's consolidated financial statements in accordance with generally
accepted accounting principles. The Company's independent auditors are
responsible for auditing those financial statements. The Audit Committee's
responsibility is to monitor and review these processes.
It is not the Audit Committee's duty or responsibility to conduct
auditing or accounting reviews or procedures. Members of the Audit Committee are
not employees of the Company and may not represent themselves to be or to serve
as accountants or auditors by profession or experts in the fields of accounting
or auditing. As a result, the Audit Committee has relied, without independent
verification, on management's representation that the financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America and on the
representations of the independent auditors included in their report on the
Company's financial statements.
In fulfilling its oversight responsibilities, the Audit Committee
reviewed with management the audited financial statements in the Company's
Annual Report referred to below, including a discussion of the quality, not just
the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards. The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statements on Auditing Standards No. 61. In addition, the Audit
Committee has discussed with the independent auditors the auditors' independence
from management and the Company, including the matters in the written
disclosures and
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letter received from the independent auditors as required by the Independence
Standards Board Standard No. 1, and has considered the compatibility of
non-audit services with the auditors' independence.
The Audit Committee's oversight does not provide it with an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the considerations and discussions
with management and the independent auditors do not assure that the Company's
financial statements are presented in accordance with generally accepted
accounting principles, that the audit of the Company's financial statements has
been carried out in accordance with generally accepted auditing standards or
that the Company's independent accountants are in fact "independent."
The Audit Committee discussed with the Company's independent auditors
the overall scope and plans for their audits. The Audit Committee has met with
the independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls and the overall quality of the Company's financial reporting. The Audit
Committee held five meetings during fiscal year 2002.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2002 for filing with the Securities and
Exchange Commission. The Audit Committee and the Board have also recommended the
selection of Ernst & Young LLP as the Company's independent auditors.
AUDIT COMMITTEE
Donald E. Courtney, Chairman
John H. Wilson
Joseph M. Brito
The above report of the Audit Committee and the information disclosed
above under the heading "Independence of Audit Committee Members" shall not be
deemed to be "soliciting material" or to be "filed" with the SEC or subject to
the SEC's proxy rules or to the liabilities of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act"), and such information shall not be
deemed to be incorporated by reference into any filing made by the Company under
the Exchange Act or under the Securities Act of 1933 (the "Securities Act").
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth, as of March 7, 2003, the beneficial
ownership of Common Stock of the Company (the only equity securities of the
Company presently outstanding) by (i) each director and nominee for director of
the Company, (ii) the named executive officers listed in the Summary
Compensation Table elsewhere in this proxy statement, (iii) all directors and
executive officers of the Company as a group and (iv) each person who was known
to the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock.
COMMON STOCK
BENEFICIALLY OWNED(1)
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NUMBER PERCENT OF
NAME OF SHARES CLASS
---- ------------- -------------
Directors and Nominees for Director
Vincent A. Rego .............................................. 1,489,485(2) 9.85%
Donald E. Courtney ........................................... 165,505 1.09%
Daniel L. Jones .............................................. 186,170(3) 1.22%
John P. Pringle .............................................. 64,163 .42%
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COMMON STOCK
BENEFICIALLY OWNED(1)
-----------------------------------
NUMBER PERCENT OF
NAME OF SHARES CLASS
---- ------------- -------------
William R. Thomas ............................................ --(4) --
John H. Wilson ............................................... --(4) --
Joseph M. Brito .............................................. 22,050(5) .15%
Scott D. Weaver .............................................. 25,000 .17%
Named Executive Officers (excluding directors and
nominees named above)
Frank J. Bilban .............................................. 36,134(6) .24%
David K. Smith ............................................... 92,869(7) .61%
All Directors and Executive
Officers as a group (10 persons) ............................. 2,081,376(8) 13.41%
Beneficial Owners of More than 5% (excluding persons
named above)
Capital Southwest Corporation ................................ 2,724,500(9) 18.02%
Dimensional Fund Advisors Inc. ............................... 766,600(10) 5.07%
Strong Capital Management, Inc. .............................. 1,522,045(11) 10.07%
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(1) Except as otherwise indicated, each stockholder named in the table has
sole voting and investment power with respect to all shares indicated
as being beneficially owned by such stockholder.
(2) Includes 1,236,985 shares of Common Stock held by Dorvin Partners,
L.P., a family limited partnership. The general partner of Dorvin
Partners, L.P. is a trust, and its limited partners are eight separate
family trusts for the benefit of Mr. Rego's two sons. Mr. Rego serves
as trustee for the general partner trust and is a co-trustee of four of
the limited partnership trusts. Mr. Rego has sole power to vote or to
direct the vote and the sole power to dispose of or to direct the
disposition of all 1,236,985 shares of Common Stock held by Dorvin
Partners.
(3) Includes 110,438 shares of Common Stock subject to stock options that
are exercisable within 60 days, 6,750 shares of Common Stock owned by
Mr. Jones' spouse and 225 shares owned for the benefit of Mr. Jones'
minor son. Mr. Jones disclaims beneficial ownership of the shares owned
by his spouse.
(4) William R. Thomas and John H. Wilson, directors of the Company, are
both directors of, and Mr. Thomas is President and Chairman of the
Board of, Capital Southwest Corporation. As indicated in the table,
Capital Southwest Corporation is a principal stockholder of the
Company. Mr. Thomas and Mr. Wilson may be deemed to share voting and
investment power with respect to the 2,724,500 shares of Common Stock
beneficially owned by Capital Southwest Corporation. Mr. Thomas and Mr.
Wilson each disclaim beneficial ownership of such shares.
(5) Includes 10,000 shares of Common Stock held by the Brito Family Limited
Partnership.
(6) Includes 28,000 shares of Common Stock subject to stock options that
are exercisable within 60 days.
(7) Includes 34,188 shares of Common Stock subject to stock options that
are exercisable within 60 days.
(8) Includes an aggregate of 172,626 shares of Common Stock that directors
and executive officers have the right to acquire within 60 days
pursuant to the exercise of stock options, but does not include
2,724,500 shares beneficially owned by Capital Southwest Corporation as
to which Mr. Thomas and Mr. Wilson may be deemed to share voting and
investment power as directors and, in the case of Mr. Thomas, as an
officer, of Capital Southwest Corporation because Mr. Thomas and Mr.
Wilson disclaim beneficial ownership of such shares.
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(9) As reported in a Schedule 13D filed October 9, 1998 with the SEC by
Capital Southwest Corporation showing its beneficial ownership of
Company stock, including 1,849,500 shares held by Capital Southwest
Venture Corporation, a wholly-owned subsidiary of Capital Southwest
Corporation.
(10) As reported in a Schedule 13G filed February 7, 2003 with the SEC by
Dimensional Fund Advisors Inc. showing its beneficial ownership of
Common Stock and reporting that it beneficially owns all of the shares
with sole voting and dispositive power.
(11) As reported in a Schedule 13G/A filed March 6, 2003 with the SEC by
Strong Capital Management, Inc. ("Strong") and Richard S. Strong, as
Chairman of the Board of Directors of Strong, showing Strong's
beneficial ownership of Common Stock and reporting that it beneficially
owns all of the shares with shared dispositive power, but only
1,516,535 of the Strong shares with shared voting power.
The respective addresses of the holders of more than five percent of
the Common Stock of the Company are as follows: Capital Southwest Corporation,
12900 Preston Road, Dallas, Texas 75230; Dimensional Fund Advisors Inc., 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401; Strong Financial
Corporation, 100 Heritage Reserve, Menomonee Falls, Wisconsin 53051: and Vincent
A. Rego, 1410 Millwood Road, McKinney, Texas 75069.
EXECUTIVE COMPENSATION
The Compensation Committee Report appearing below and the information
presented herein under the caption "Executive Compensation -- Performance Graph"
shall not be deemed to be "soliciting material" or to be "filed" with the SEC or
subject to the SEC's proxy rules or to the liabilities of Section 18 of the
Exchange Act, and such information shall not be deemed to be incorporated by
reference into any filing made by the Company under the Exchange Act or under
the Securities Act.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
To the Stockholders of Encore Wire Corporation:
The Compensation Committee of the Board of Directors (the "Compensation
Committee") administers the compensation program for executive officers and
certain key employees of the Company and makes all related decisions. The
Compensation Committee also administers the Company's employee stock option
plans, based on the recommendation of the Chief Executive Officer, and grants
stock options to employees of the Company under such plans.
The goals of the Company's compensation program are to attract, retain
and motivate competent executive officers who have the experience and ability to
contribute to the long-term success of the Company. The individual judgments
made by the Compensation Committee are subjective and are based largely on the
Compensation Committee's perception of each executive's contribution to both
past performance and the long-term growth potential of the Company. The
principal elements of compensation for executive officers are base salary,
discretionary bonus payments and stock options.
In setting the base salaries for the executive officers and certain key
employees, including the Chief Executive Officer, the Compensation Committee
considers individual contributions to the Company's performance, length of
tenure with the Company, internal equities among positions and compensation
levels for comparable positions in companies of similar types and sizes. In view
of the decline in the Company's 2002 earnings and the manner in which those
earnings trended down in the second half of the year, along with the state of
the building wire industry, the committee determined in December 2002, that
there would be no changes in the base salaries of executive officers and certain
key management employees and that there would be no bonuses paid for the 2002
year.
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From time to time, the Compensation Committee grants stock options
under the Company's amended 1999 Stock Option Plan to executive officers and key
employees to align their long-term interests with those of the Company's
stockholders. During 2002, no executive officers received any stock option
grants.
At December 31, 2002 unexercised options covering 193,710 shares under
the 1989 Stock Option Plan and 560,000 shares under the amended 1999 Stock
Option Plan were outstanding and 39,500 shares remained available for future
stock option grants under the amended 1999 Stock Option Plan.
Stock options are granted at exercise prices not less than the fair
market value on the date of the grant and thus will have no value unless the
value of the Company's Common Stock appreciates. The Compensation Committee
believes that stock options provide a significant incentive for the option
holders to enhance the value of the Company's Common Stock by continually
improving the Company's performance.
COMPENSATION COMMITTEE
William R. Thomas, Chairman
Donald E. Courtney
John H. Wilson
SUMMARY COMPENSATION
The following table sets forth summary information regarding the
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and the three other executive officers in 2002 for the years indicated.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- ----------------------
OTHER
NAME AND ANNUAL SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#)
------------------------ ---- ---------- ---------- -------------- ----------------------
Vincent A. Rego 2002 $ 350,000 $ -- $ 3,919 --
Chairman and Chief 2001 250,000 300,000 9,186 --
Executive Officer 2000 250,000 250,000 7,891 --
Daniel L. Jones 2002 $ 250,000 $ -- $ 23,468 --
President and Chief 2001 200,000 175,000 22,883 75,000
Operating Officer 2000 200,000 125,000 22,115 --
David K. Smith 2002 $ 160,000 $ -- $ 6,838 --
Vice President - 2001 146,000 60,000 7,456 50,000
Operations 2000 118,000 50,000 6,815 --
Frank J. Bilban 2002 $ 160,000 $ -- $ 11,664 --
Vice President - 2001 145,000 60,000 8,316 75,000
Finance, Treasurer 2000 65,000(1) 45,000(2) 1,411 20,000
and Secretary
(1) Mr. Bilban joined the Company in June of 2000.
(2) The 2000 bonus for Mr. Bilban includes a $20,000 signing bonus.
DEFINED BENEFIT PLANS AND OTHER ARRANGEMENTS
The Company has no defined benefit plans and has not entered into any
agreements or arrangements with respect to any of its executive officers.
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OPTION GRANTS
No Common Stock options were granted to any named executive officer during 2002.
OPTION EXERCISES AND YEAR-END VALUES
The following table summarizes the number and value of options exercised
during 2002, as well as the number and value of unexercised options, as of
December 31, 2002, held by each of the named executive officers.
AGGREGATED OPTION EXERCISES IN 2002 AND DECEMBER 31, 2002 OPTION VALUE
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)(1)
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable
--------------- ---------------- ------------------ --------------- --------------
Vincent A. Rego -- -- 0 shares/ $ 0/
0 shares 0
Daniel L. Jones -- -- 110,438 shares/ $ 215,310/
100,000 shares 102,000
David K. Smith -- -- 34,188 shares/ $ 54,210/
40,000 shares 0
Frank J. Bilban -- -- 23,000 shares/ $ 39,525/
72,000 shares 89,600
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(1) The closing sales price per share on December 31, 2002 was
$9.05 as reported by the National Association of Securities
Dealers Automated Quotation System.
The section entitled "Equity Compensation Plan Information" appearing
in Item 5. of the Company's Form 10-K for the year ending December 31,
2002, sets forth certain information with respect to the Company's
equity compensation plan and is incorporated herein by reference.
COMPENSATION OF DIRECTORS
Directors do not receive fees for attending meetings of the Board of
Directors or any committee thereof. The Company does, however, reimburse
directors for reasonable travel, lodging and related expenses incurred in
attending Board and committee meetings.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are William R.
Thomas, Donald E. Courtney and John H. Wilson. None of the members was an
officer or employee of the Company in the past fiscal year. None of the members
has ever served as an officer of the Company. Mr. Courtney's son-in-law is a 50%
owner of Lone Star Reel Corporation ("Lone Star Reel"), and Aegis Pallet
Corporation ("Aegis Pallet"). Lone Star Reel sells reels to the Company and
Aegis Pallet sells pallets to the Company. See "Certain Relationships and
Related Transactions" below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company uses Best/H & A Trucking, Inc. ("H & A Trucking") for a
minor percentage of its freight services. H & A is one of many freight carriers
doing business with the Company. H & A Trucking is wholly-owned by the father of
Daniel L. Jones, a nominee for director and the Company's President. The Board
of Directors has approved the continued use of the transportation services of H
& A Trucking and has determined that these services are at rates no less
favorable than are available from non-affiliated parties. During the year ended
December 31, 2002, Encore paid H & A Trucking approximately $333,000 for these
services on the basis of rates the Company believes compare favorably with rates
charged by other common carriers.
The Company purchases reels on which wire is wound, from Lone Star Reel
as well as other reel suppliers. Reels of various types are used by the Company
to wind both in-process and finished wire. Lone Star Reel is 50% owned by the
son-in-law of Donald E. Courtney, a nominee for director. This same ownership
group owns Aegis Pallet, which sell pallets to the company. The Company buys
pallets from several suppliers including Aegis. These purchases are let out for
competitive bids to at least 3 vendors in the normal course of business to
ensure the prices are competitive. The Board of Directors has approved the
continued use of Lone Star Reel and Aegis Pallet as suppliers subject to
continued determinations that all such purchases are at prices no less favorable
than are available from non-affiliated parties. During the year ended December
31, 2002, Encore paid Lone Star Reel approximately $3,300,000 and Aegis Pallet
approximately $350,000 for reels and pallets on the basis of rates the Company
believes compare favorably with rates charged by other suppliers.
PERFORMANCE GRAPH
The following graph sets forth the cumulative total stockholder return,
which assumes reinvestment of dividends, of a $100 investment in the Company's
Common Stock, the Peer Group(1) and CRSP Total Return Index for The Nasdaq Stock
Market (U.S. companies).
The Company believes that although the companies included in the Peer
Group are not entirely representative of the Company's business in the building
wire and cable industry, they are the only companies that are representative of
the Company's business, and they accurately reflect the Company's peers in the
wire and cable industry.
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COMPARISON OF QUARTERLY CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, PEER GROUP AND CRSP TOTAL RETURN INDEX
FOR THE NASDAQ STOCK MARKET (U.S.)
(PERFORMANCE GRAPH)
Symbol CRSP Total Returns Index for: 12/31/97 12/31/98 12/31/99 12/31/00 12/29/01 12/31/02
------ ----------------------------- -------- -------- -------- -------- -------- --------
(BOX) Encore Wire Corporation 100.00 45.2 37.3 28.4 59.1 44.2
(STAR) Nasdaq Stock Market (US Companies) 100.00 141.0 261.5 157.4 124.9 86.3
(TRIANGLE) Self-Determined Peer Group(1) 100.00 87.1 60.5 53.8 57.2 27.0
(1) Consists of the following companies, with each company being added to
the index on its first date of public trading, as indicated: Cable
Design Technologies Corporation (11/24/93), General Cable Corporation
(5/16/97), Belden Inc. (9/30/93) and Superior Telecom, Inc. (10/11/96).
11
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Based on the recommendation of the Audit Committee, Ernst & Young LLP,
which has served as the Company's independent public accountants since the
Company's inception, has been appointed by the Board of Directors to audit the
financial statements of the Company for the year ending December 31, 2003,
subject to the ratification of such appointment by the stockholders of the
Company. Although it is not required to do so, the Board of Directors is
submitting the selection of auditors for ratification in order to obtain the
stockholders' approval of this appointment. The appointment of auditors will be
approved by a vote of a majority of the holders of shares of Common Stock having
voting power present in person or represented by proxy. If the selection is not
ratified, the Board of Directors will reconsider the appointment.
Representatives of Ernst & Young LLP are expected to be present at the meeting
to respond to appropriate questions from the stockholders and will be given the
opportunity to make a statement should they desire to do so.
The following table presents fees for professional services rendered by Ernst &
Young LLP for the audit of the Company's annual financial statements for the
years ended December 31, 2002 and 2001, and fees billed for other services
rendered by Ernst & Young LLP during 2002 and 2001:
2002 2001
------------- -------------
(1) Audit Fees(a) $ 145,260 $ 126,000
(2) Financial Information Systems Design and Implementation
Fees $ -0- $ -0-
(3) All Other Fees:
(i) Audit-related Fees(b) $ 15,756 $ 14,000
(ii) Tax Fees(c) $ 85,305 $ 54,200
(iii) Other Fees(d) $ -0- -0-
(a) AUDIT FEES
Fees and expenses paid to Ernst & Young LLP for (i) the audit of the
consolidated financial statements included in the Company's Annual
Report on Form 10-K; (ii) the reviews of the interim consolidated
financial information included in the Company's Quarterly Reports on
Form 10-Q; (iii) consultations concerning financial accounting and
reporting; and (iv) reviews of documents filed with the SEC and related
consents.
(b) AUDIT-RELATED FEES
Fees and expenses paid to Ernst & Young LLP for (i) benefit plans and
other special audits.
(c) TAX FEES
Fees and expenses paid to Ernst & Young LLP for (i) tax compliance;
(ii) tax planning; and (iii) tax advice.
(d) OTHER FEES
None applicable for 2002 or 2001.
The Audit Committee considered the level of fees rendered by Ernst & Young LLP
and concluded that the services were compatible with maintaining Ernst & Young
LLP's independence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003.
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STOCKHOLDER PROPOSALS AND OTHER MATTERS
It is contemplated that the 2004 annual meeting of Stockholders of the
Company will take place during the first week of May 2004. Stockholder proposals
for inclusion in the Company's proxy materials for the 2004 annual meeting of
Stockholders must be received by the Company at its offices in McKinney, Texas,
addressed to the Secretary of the Company, not less than 120 days in advance of
the date that is one year after this proxy Statement is first distributed to
stockholders; provided, that if the 2004 annual meeting of Stockholders is
changed by more than 30 days from the presently contemplated date, then
proposals must be received a reasonable time in advance of the meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers of
the Company, and persons who own more than 10 percent of the Common Stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of the Common Stock. Directors, officers and more than 10 percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 2002, all of its
directors, officers and more than 10 percent beneficial owners complied with all
applicable Section 16(a) filing requirements.
ANNUAL REPORT
The Company has provided without charge to each person whose proxy is
solicited hereby a copy of the 2002 Annual Report of the Company, which includes
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002 (including the consolidated financial statements) filed with the SEC.
Additional copies of the Annual Report may be obtained without charge upon
written request to the Company, Encore Wire Corporation, 1410 Millwood Road,
McKinney, Texas, 75069, Attention: Corporate Secretary.
OTHER BUSINESS
At the date of this Proxy Statement, the only business that the Board
of Directors intends to present or knows that others will present at the meeting
is as set forth above. If, however, any other matters are properly brought
before the 2003 Annual Meeting, or any adjournment thereof, it is the intention
of the persons named in the accompanying from of proxy to vote such proxy on
such matters in accordance with their best judgment.
By Order of the Board of Directors
Frank J. Bilban,
Vice President - Finance, Treasurer and Secretary
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