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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Preformed Line Products Company
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LOGO
PREFORMED LINE PRODUCTS COMPANY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
To our shareholders:
The 2004 annual meeting of shareholders of Preformed Line Products Company
will be held at the offices of the Company, 660 Beta Drive, Mayfield Village,
Ohio, on Monday, April 26, 2004, at 9:00 a.m., local time, for the following
purposes:
1. To fix the number of directors at eight with two classes composed of
four members each;
2. To elect one director for a term expiring in 2005;
3. To elect four directors, each for a term expiring in 2006;
4. To receive reports at the meeting. No action constituting approval or
disapproval of the matters referred to in the reports is contemplated;
and
5. Any other matters that properly come before the meeting.
Only shareholders of record at the close of business on March 15, 2004, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
Shareholders are urged to complete, date and sign the enclosed proxy and return
it in the enclosed envelope. The principal address of Preformed Line Products
Company is 660 Beta Drive, Mayfield Village, Ohio 44143.
By order of the Board of Directors,
J. RICHARD HAMILTON,
Secretary
Dated: March 26, 2004
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY
PREFORMED LINE PRODUCTS COMPANY
PROXY STATEMENT
---------------------
Our Board of Directors is sending you this proxy statement to ask for your
vote as a Preformed Line Products Company shareholder on certain matters to be
voted on at the annual meeting of shareholders. The annual meeting of
shareholders will be held at 660 Beta Drive, Mayfield Village, Ohio, 44143, on
Monday, April 26, 2004, at 9:00 a.m., local time. We are mailing this proxy
statement and the accompanying notice and proxy to you on or about March 26,
2004.
Annual Report. A copy of our Annual Report to Shareholders for the fiscal
year ended December 31, 2003, is enclosed with this proxy statement.
Solicitation of Proxies. Our Board of Directors is making this
solicitation of proxies and we will pay the cost of the solicitation. In
addition to solicitation of proxies by mail, our employees may solicit proxies
by telephone, facsimile or electronic mail.
Proxies; Revocation of Proxies. The shares represented by your proxy will
be voted in accordance with the instructions as indicated on your proxy. In the
absence of any such instructions, they will be voted for the proposal to fix the
number of directors at eight and to elect the director nominees set forth under
"Election of Directors." Your presence at the annual meeting of shareholders,
without more, will not revoke your proxy. However, you may revoke your proxy at
any time before it has been exercised by signing and delivering a later-dated
proxy or by giving notice to us in writing at our address indicated on the
attached Notice of Annual Meeting of Shareholders, or in open meeting.
Voting Eligibility. Only shareholders of record at the close of business
on the record date, March 15, 2004, are entitled to receive notice of the annual
meeting of shareholders and to vote the common shares that they held on the
record date at the meeting. On the record date, our voting securities
outstanding consisted of 5,714,433 common shares, $2 par value, each of which is
entitled to one vote at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the amount of the Company's Common Shares
beneficially owned as of March 12, 2004 by (a) the Company's directors, (b) each
other person known by the Company to own beneficially more than 5% of the
outstanding Common Shares, (c) the Company's Chief Executive Officer and the
other four most highly compensated executive officers named in the Summary
Comparison Table, and (d) the Company's executive officers and directors as a
group.
NUMBER OF
SHARES BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ ------------------- --------
Barbara P. Ruhlman (1)...................................... 1,537,430(2) 26.9%
Jon R. Ruhlman (1).......................................... 562,453(3) 9.8%
Thomas F. Peterson, Jr. .................................... 494,026 8.6%
3060 Lander Road
Pepper Pike, Ohio 44124
Robert G. Ruhlman (1)....................................... 417,143(3)(4) 7.3%
Randall M. Ruhlman.......................................... 226,266(5) 4.0%
KeyCorp (6)................................................. 414,242 7.2%
John D. Drinko.............................................. 555,178(7) 9.7%
1900 East Ninth Street
3200 National City Center
Cleveland, Ohio 44114
Wilber C. Nordstrom......................................... 200 *
Frank B. Carr............................................... 6,000(8) *
Eric R. Graef............................................... 10,450(3) *
William H. Haag III......................................... 11,560(3) *
R. Jon Barnes............................................... 1,500(3) *
All Executive Officers and directors as a Group (13
persons).................................................. 3,280,280 57.4%
---------------
* Represents less than 1%.
(1) The mailing address for each of Barbara P. Ruhlman, Jon R. Ruhlman and
Robert G. Ruhlman is 660 Beta Drive, Mayfield Village, Ohio 44143.
(2) Includes 112,776 shares held by The Thomas F. Peterson Foundation, of which
Barbara P. Ruhlman is President and a Trustee.
(3) Includes the following number of shares that may be acquired pursuant to
currently exercisable stock options for Jon R. Ruhlman, 10,000; Robert G.
Ruhlman, 10,000; Eric R. Graef, 10,000; William H. Haag III, 9,350; and R.
Jon Barnes, 1,500.
(4) Includes 151,975 shares held by the Preformed Line Products Company Profit
Sharing Trust, and 60,000 shares held in trust for the benefit of Robert G.
Ruhlman and his children (these 60,000 shares are also shown as being
beneficially owned by Randall M. Ruhlman) and 14,768 shares owned by his
wife or held by her as custodian or trustee.
(5) Includes 60,000 shares held in trust for the benefit of Randall M. Ruhlman
and his children and for the benefit of Robert G. Ruhlman and his children
(these 60,000 shares are also shown as being beneficially owned by Robert G.
Ruhlman).
(6) The mailing address for KeyCorp is 127 Public Square, Cleveland, Ohio 44114.
(7) Includes 400,452 shares held in the Ethel B. Peterson Trust for which John
D. Drinko acts as Trust Advisor and has voting control. Also includes 34,000
held in Mr. Drinko's Trust, 10,400 shares held in Mr. Drinko's IRA and 2,000
shares held by his wife.
(8) Includes 2,000 shares held in Mr. Carr's IRA.
2
ELECTION OF DIRECTORS
In accordance with our current Code of Regulations, the number of directors
is currently fixed at seven. The Company has classified its Board of Directors
into two classes serving staggered terms. The Company will propose at the annual
meeting of shareholders fixing the number of directors at eight, with two
classes composed of four members each, both serving a staggered term. Four of
our current seven directors, Messrs. John D. Drinko, Wilber C. Nordstrom, Jon R.
Ruhlman and Randall M. Ruhlman, are serving a term that expires at this year's
annual meeting of shareholders and have been nominated for re-election at the
meeting. Three directors, Mrs. Barbara P. Ruhlman and Messrs. Robert G. Ruhlman
and Frank B. Carr, are currently serving a term that expires in 2005. One
person, John P. O'Brien, has been nominated by the Board for election to the
Board for a term that expires in 2005. The election of Mr. O'Brien is
conditioned upon the approval by the shareholders at the meeting of the proposal
to fix the number of directors at eight. The Board of Directors proposes that
the nominees described below, four of whom are currently serving as directors,
be re-elected, and one new nominee be elected to the Board of Directors. At the
annual meeting of shareholders, the shares represented by proxies, unless
otherwise specified, will be voted for the proposal to fix the number of
directors at eight and the election of the five nominees hereinafter named.
The director nominees are identified in the following table. If for any
reason any of the nominees is not a candidate when the election occurs (which is
not expected), the Board of Directors expects that proxies will be voted for the
election of a substitute nominee designated by management. The following
information is furnished with respect to each person nominated for election as a
director.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL TO FIX THE NUMBER OF
DIRECTORS AT EIGHT AND "FOR" THE FOLLOWING NOMINEES.
3
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
EXPIRATION
PERIOD OF TERM
PRINCIPAL OCCUPATION OF SERVICE FOR WHICH
NAME AND AGE AND BUSINESS EXPERIENCE AS A DIRECTOR PROPOSED
------------ --------------------------------------------- ------------- ----------
Nominated 2005
John P. O'Brien, 62.... Since 1990 Mr. O'Brien has been a Managing
Director of Inglewood Associates, Inc., a
private
investment and consulting firm.
Since March 1993, Mr. O'Brien has served as
the Chairman of the Board of Allied
Construction Products, Inc., a manufacturer
and distributor of hydraulic and pneumatic
demolition, compaction, and horizontal boring
tools and trench shoring devices. Mr. O'Brien
led an investor group that acquired Allied on
March 1, 1993.
From October 1995 until June 2000, Mr.
O'Brien served as Chairman of the Board and
CEO of Jeffrey Mining Products L.P., a
manufacturer and distributor of underground
mining products.
Prior to April 1990, Mr. O'Brien was the
Southeast
Regional Managing Partner for Price
Waterhouse
resident in Atlanta, Georgia, and a member of
the firm's Policy Board and Management
Committee.
Prior to May 1985, Mr. O'Brien was in charge
of the Price Waterhouse-Cleveland client
service team serving entrepreneurial and
middle market clients in Northeast Ohio.
Mr. O'Brien currently serves as a director
for the following companies and
organizations: Allied Construction Products,
LLC.; JMP Partners, L.P. (formerly Jeffrey
Mining Products, L.P.); Century Aluminum
Corporation (NASDAQ); Oglebay Norton Company
(NASDAQ); Cleveland Sight Center and
MainStreet-Chagrin Falls (Chairman).
John D. Drinko, 82..... Senior Partner - Baker & Hostetler LLP 1954 to date 2006
Wilber C. Nordstrom,
85................... Retired Executive with The Standard Products 1977 to date 2006
Company, Mr. Nordstrom was serving as
Executive Vice President when he retired in
1983.
Jon R. Ruhlman, 76..... Chairman of the Company since 1975. Mr. 1956 to date 2006
Ruhlman served as the Company's CEO from 1975
until July 2000.
Randall M. Ruhlman,
45................... President of Ruhlman Motorsports (a racecar 1998 to date 2006
team) since 1987
Current directors whose terms will not expire at the annual meeting of
shareholders.
PERIOD
PRINCIPAL OCCUPATION OF SERVICE TERM
NAME AND AGE AND BUSINESS EXPERIENCE AS A DIRECTOR EXPIRATION
------------ --------------------------------------------- ------------- ----------
Robert G. Ruhlman,
47................... Chief Executive Officer since July 2000, Mr. 1992 to date 2005
Ruhlman served as President since 1995 (a
position he continues to hold).
Frank B. Carr, 76...... Private investor 1975 to date 2005
Barbara P. Ruhlman,
71................... President of the Thomas F. Peterson 1988 to date 2005
Foundation since 1988
4
The Board has determined that Messrs. Drinko, Nordstrom and Carr are
independent under the NASDAQ's new corporate governance rules. In the opinion of
the Board Mr. Drinko's affiliation with Baker & Hostetler LLP, a law firm that
regularly provides legal services to the Company, does not interfere with Mr.
Drinko's exercise of independent judgment in carrying out his duties as a
director.
Barbara P. Ruhlman and Jon R. Ruhlman are married and are the parents of
Randall M. Ruhlman and Robert G. Ruhlman.
Jon R. Ruhlman has been the Chairman of the Company since 1975. He served
as Chief Executive Officer from 1975 until July 2000. Robert G. Ruhlman became
Chief Executive Officer in July 2000. He had served as President since 1995 (a
position he continues to hold). From 1983 to 1996, Mr. Carr was a Managing
Director of McDonald & Company Securities, Inc., Cleveland, Ohio, an investment
banking and brokerage firm, and a partner in its predecessor firm (McDonald &
Company) since 1968.
The Board of Directors has determined that the Company is a "controlled
company" pursuant to the NASDAQ corporate governance rules. A controlled company
includes a company in which more than 50% of the voting power is held by a
group. The Board has determined that the Company is a controlled company because
a group, which includes the Ruhlman family and certain members of management,
controls more than 50% of the Company's Common Shares. A Schedule 13D has been
filed with the Securities and Exchange Commission related to the control group
of the Company. As a controlled company the Company is exempt from certain
NASDAQ corporate governance rules, including the requirement that a majority of
its Board be composed of independent directors and the rule that requires that
nominees for election of director be selected (or recommended for selection) by
a nominating committee composed of only independent directors or by a majority
of the independent directors. Because the Company is a controlled company the
Board believes that it is appropriate for the Board not to have a nominating
committee. Rather, the entire Board participates in the consideration of
director nominees. Mr. O'Brien was recommended as a director nominee by the
Company's management. Similarly, as a controlled company and because of the
historically small turnover of its members, it is the view of the Board that it
is appropriate for the Board not to consider director candidates recommended by
shareholders.
Our Board of Directors has appointed an Audit Committee and a Salary
Committee. The Board of Directors does not have a finance committee. The Audit
Committee is presently comprised of Messrs. Carr (chairman), Drinko and
Nordstrom, of whom Messrs. Carr and Nordstrom qualify as independent for audit
committee purposes under the NASDAQ rules. If elected Mr. O'Brien will meet the
criteria for director and audit committee independence and is expected to be
appointed as a new member to the Audit Committee at the annual meeting of the
directors, which immediately follows the annual meeting of shareholders. Mr.
Drinko will not be reappointed to the Audit Committee. Therefore, the Company
expects that its Audit Committee will be composed of three independent
directors, as independence is determined under the NASDAQ rules for audit
committees. The Audit Committee financial expert is Frank B. Carr. The Salary
Committee is presently comprised of Messrs. Carr, Drinko (chairman) and
Nordstrom.
The Audit Committee of the Board of Directors engages the independent
public accountants for our Company, reviews with the independent public
accountants the plans and results of audit engagements, preapproves all
professional services provided by the independent public accountants including
audit and non-audit related services, reviews the independence of the
independent public accountants, approves the range of audit and nonaudit fees,
reviews the independent public accountants' management letters and our
responses, reviews with management their conclusions about the effectiveness of
the Company's disclosure controls and procedures, and reviews major accounting
or reporting changes. Only the Audit Committee is authorized to approve
professional services provided by the independent public accountants for audit
and non-audit related services.
The Salary Committee reviews employment, development, reassignment and
compensation matters involving corporate officers and other executive level
employees, including issues related to salary, bonus and incentive arrangements.
The Salary Committee also administers our equity award (stock option) plan.
In 2003, our Board of Directors held five meetings. In 2003, the Audit
Committee held two formal and two informal (telephonic) meetings and the Salary
Committee held one meeting. In 2003, each member of the Board
5
of Directors attended at least 75% of the meetings of the Board of Directors and
of the committees on which he or she serves.
Directors' Compensation. Each director who is not an employee of the
Company receives $3,300 per quarter for being a director, $1,540 for attending
each meeting of the Board of Directors and each meeting of any committee.
Directors who are also employees of ours are not paid any director's fee. We
reimburse out-of-pocket expenses incurred by all directors in connection with
attending Board of Directors and committee meetings.
SALARY (COMPENSATION) COMMITTEE REPORT
The Company's executive compensation program is administered by the Salary
Committee, which has responsibility for reviewing all aspects of the
compensation program for the executive officers of the Company. The Committee is
comprised of the three directors listed at the end of this report, none of whom
is an employee of the Company.
The Committee's primary objective with respect to executive compensation is
to establish programs, which attract and retain key officers and managers and
align their compensation with the Company's overall business strategies, values,
and performance. To this end, the Committee has established and the Board of
Directors has endorsed an executive compensation philosophy to compensate
executive officers based on their responsibilities and the Company's overall
annual and longer-term performance.
The primary components of the Company's executive compensation program are
(a) base salaries, and (b) annual cash incentive opportunities, and (c) stock
options. These components are discussed below.
Base Salaries. Base salaries for each of the Company's executive officers
are reviewed every 18 to 24 months by the Committee using as a guide one or more
widely accepted salary evaluation systems, taking into account the size of the
Company, expectations for the annual bonus plan described below and Company
performance, and competitive, inflationary, and internal equity considerations.
The Committee considers relevant trends in executive compensation practices, the
Company's compensation practices for employees in general, the Company's
financial performance and business condition, and recommendations of executive
management on compensation of executive officers. The salary of Robert G.
Ruhlman, Chief Executive Officer, was set by the Committee to be within a range
that is competitive with the fixed salaries of chief executive officers of
similar size companies with comparable profitability. The Chief Executive
Officer's annual salary is $350,000, maintaining Mr. Ruhlman's salary to what
the Committee believes is nearly the mid-level range of salaries at comparable
companies.
Annual Cash Incentives. All officers, including Robert R. Ruhlman, of the
Company are eligible to receive annual cash bonus awards based on a set
percentage of their base salary with a maximum bonus attainable equal to 50% of
base salary. The percentage of base salary is determined on a sliding scale,
based on the return on shareholders' equity. The bonus awards for all officers
for the years 2001, 2002 and 2003 were 20%, 20% and 25%, respectively, of base
salary.
Stock Options. The Committee has awarded options to purchase 188,000
shares of the Company's Common Stock. While the Committee has had the
opportunity to grant stock options for only four years, it believes that option
grants are a valuable motivating tool and provide a long-term incentive to
management. Share option grants reinforce long-term goals by providing the
proper nexus between the interests of management and the interests of the
Company's shareholders. All options were awarded to retain qualified personnel
in positions of significant responsibility with the Company. No options were
granted to employees who had been with the Company for less than two years and
all options contained provisions for periodic vesting. Each named executive
officer was granted an option to purchase 10,000 common shares in 2000, but none
in 2001 and 2002. One new executive officer was granted options to purchase
10,000 common shares during 2003. All option grants had exercise prices at least
equal to the fair market value of the Company's Common Shares on the date of the
grant.
Frank B. Carr
John D. Drinko, Chairman
Wilber C. Nordstrom
6
AUDIT COMMITTEE REPORT
On February 18, 2004 the Board of Directors approved and adopted a new
written charter for the Audit Committee and a copy of this charter is attached
to this proxy statement as Appendix A. In accordance with its written charter,
the Audit Committee assists the Board of Directors in fulfilling its
responsibility relating to corporate accounting, reporting practices of the
Company, and the quality and integrity of the financial reports and other
financial information provided by the Company to any governmental body or the
public. Management is responsible for the financial statements and the reporting
process, including the system of internal controls. The independent auditors are
responsible for expressing an opinion on the conformity of the audited financial
statements with generally accepted accounting principles. Our Audit Committee is
comprised of three directors, who are not officers or employees of the Company.
As addressed above two members, Messrs. Carr and Nordstrom, are "independent"
under the current NASDAQ rules. The Board of Directors has nominated John P.
O'Brien for election as a director at the annual meeting of the shareholders.
Mr. O'Brien will also meet the criteria for director and audit committee
independence and is expected to be appointed a new member to the Audit
Committee. He also qualifies as an audit committee financial expert.
In discharging its oversight responsibility as to the audit process, the
Audit Committee reviewed and discussed the audited financial statements of the
Company for the year ended December 31, 2003, with the Company's management. The
Audit Committee discussed the matters required to be discussed by SAS 61, as
modified or supplemented, with the independent accountants. The Audit Committee
also obtained a formal written statement from the independent accountants that
described all relationships between the independent accountants and the Company
that might bear on the accountant's independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit Committee,"
as amended or supplemented. The Audit Committee discussed with the independent
accountants any relationships that might affect their objectivity and
independence and satisfied itself as to the accountants' independence. The Audit
Committee also considered whether the provision of non-audit services by
PricewaterhouseCoopers LLP ("PwC") is compatible with maintaining PwC's
independence. Management has the responsibility for the preparation of the
Company's financial statements, and the independent accountants have the
responsibility for the examination of those statements.
Based on the above-referenced review and discussions with management and
the independent accountants, the Audit Committee recommended to the Board of
Directors that the Company's audited financial statements be included in its
Annual Report on Form 10-K for the year ended December 31, 2003, for filing with
the Securities and Exchange Commission.
Frank B. Carr, Chairman
John D. Drinko
Wilber C. Nordstrom
7
EXECUTIVE COMPENSATION
The table below describes the compensation earned for the last three fiscal
years for our chief executive officer and the four other most highly compensated
executive officers. We sometimes refer to the persons listed in the table below
as our "named executive officers."
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION OTHER ----------------------
-------------------------- ANNUAL SHARE ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) # ($) (3) (4)
------------------ ---- -------- -------- ------------ ------- ------------
Robert G.
Ruhlman........... 2003 $350,000 $ 87,500 -- -- $ 62,996
President and..... 2002 325,000 65,000 -- -- 58,362
Chief Executive... 2001 300,000 60,000 -- -- 59,775
Officer
Jon R. Ruhlman..... 2003 500,000 125,000 -- -- 167,227(5)
Chairman of the... 2002 490,000 98,000 -- -- 153,048
Company........... 2001 480,000 96,000 -- -- 137,525
Eric R. Graef...... 2003 194,000 48,500 -- -- 36,540
Vice President--.. 2002 187,000 37,400 -- -- 35,181
Finance........... 2001 180,000 36,000 -- -- 37,873
and Treasurer
William H. Haag III 2003 180,000 45,000 -- -- 32,127
Vice President--.. 2002 165,000 33,000 -- -- 29,371
International..... 2001 150,000 30,000 -- -- 29,645
Operations
R. Jon Barnes...... 2003 168,000 42,000 -- -- 30,460
Vice President--.. 2002 162,000 32,400 -- -- 29,304
Sales and......... 2001 156,000 31,200 -- -- 31,394
Marketing
---------------
(1) The Bonus Plan for all named executive officers is discussed in the Salary
(Compensation) Committee Report.
(2) No named executive officer received perquisites and other personal benefits
above the threshold amounts specified in the regulations of the Securities
and Exchange Commission.
(3) Reflects the Company's contributions to the Profit Sharing Plan in 2003 for
Robert G. Ruhlman, $30,662; Jon R. Ruhlman, $31,467; Eric R. Graef, $30,144;
William H. Haag III, $30,489; and R. Jon Barnes, $29,752. Also includes
accruals to the related Supplemental Plan in 2003 for Robert G. Ruhlman,
$30,425; Jon R. Ruhlman, $56,321; Eric R. Graef, $3,493; and William H. Haag
III, $1,076.
(4) Reflects premiums paid for group term life insurance for 2003: Robert G.
Ruhlman, $1,909; Jon R. Ruhlman, $9,839; Eric R. Graef, $2,903; William H.
Haag III, $562; and R. Jon Barnes, $708.
(5) Also includes, for Jon R. Ruhlman, premiums paid on "split dollar" life
insurance policies covering Mr. and Mrs. Ruhlman, which totaled $69,600 in
2003.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
SHARES OPTIONS AT FISCAL MONEY OPTIONS AT
ACQUIRED YEAR-END YEAR-END ($)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------------- -------------------
Robert G. Ruhlman...................... -- -- 10,000/0 142,020/0
Jon R. Ruhlman......................... -- -- 10,000/0 142,020/0
Eric R. Graef.......................... -- -- 10,000/0 157,150/0
R. Jon Barnes.......................... 8,500 84,049 1,500/0 23,573/0
William H. Haag III.................... 650 7,732 9,350/0 146,935/0
COMPENSATION (SALARY) COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Salary Committee interlocks. John D. Drinko, a member of the
Salary Committee, is senior partner of Baker & Hostetler LLP, which firm acts as
general outside legal counsel for the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee has approved all related party transactions.
The Company is a sponsor of Ruhlman Motorsports. Ruhlman Motorsports is
owned by Randall M. Ruhlman, a director of the Company, and by his wife. The
Company paid sponsorship fees of $658,000, annually, to Ruhlman Motorsports
during 2001, 2002 and 2003. In addition, in 2001, 2002, and 2003 the Company's
Canadian subsidiary, Preformed Line Products (Canada) Ltd., paid $0, $159,000,
and $99,000, respectively, to Ruhlman Motorsports in sponsorship fees. This
sponsorship provides the Company with a unique venue to entertain the Company's
customers and to advertise on the racecar, which participates on the Trans-Am
racing circuit. The Company believes that its sponsorship contract with Ruhlman
Motorsports is as favorable to the Company as a similar contract with a similar
independent third-party racing team would be. The Company and Preformed Line
Products (Canada) Ltd. intend to continue to sponsor Ruhlman Motorsports in
2004. The Company further believes that the sponsorship has great marketing
value because it entertains actual users of the Company's products, such as
linemen and their supervisors, and thus provides a grassroots sales approach.
Mr. John D. Drinko, one of the Company's directors, is a senior partner of
Baker & Hostetler LLP, which acts as our general outside counsel. The Company
expects that Baker & Hostetler will continue to provide legal services in that
capacity in 2004.
The Company paid fees of $158,254, $172,105, and $205,447 to
Liggett-Stashower, Inc. during 2001, 2002 and 2003, respectively. The brother of
Jon R. Ruhlman, the Chairman and a director of the Company, is an officer of
Liggett-Stashower. Liggett-Stashower is a Cleveland, Ohio-based advertising and
public relations firm which assists the Company with its advertising and the
publication of its annual report. The Company believes that the fees paid to
Liggett-Stashower were substantially similar to the fees that would have been
required to be paid to an unaffiliated third-party public relations firm for
similar service. The Company has continued to contract for the services of
Liggett-Stashower in 2004; however, the Chairman's brother has retired from
Liggett-Stashower effective January 1, 2004.
9
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return of a
hypothetical investment in our common shares with the cumulative total return of
hypothetical investments in the NASDAQ Market Index and the Media General
Financial Services, Inc. -- Industry Group 627 (Industrial Electrical Equipment)
Index based on the respective market price of each investment at December 31,
2000, June 30, 2001, December 31, 2001, June 30, 2002, December 31, 2002, June
30, 2003 and December 31, 2003 assuming in each case an initial investment of
$100 on December 31, 2000, and reinvestment of dividends.
PREFORMED LINE PRODUCTS CO. MG GROUP INDEX NASDAQ MARKET INDEX
--------------------------- -------------- -------------------
12/31/00 100.00 100.00 100.00
6/30/01 147.44 101.10 88.36
12/31/01 146.93 76.23 79.98
6/30/02 146.05 77.50 60.80
12/31/02 134.64 56.61 55.69
6/30/03 126.43 60.25 67.80
12/31/03 261.83 79.03 83.90
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COMPANY/INDEX/MARKET 12/31/2000 6/30/2001 12/31/2001 6/30/2002 12/31/2002 6/30/2003 12/31/2003
------------------------------------------------------------------------------------------------------------------------
Preformed Line Products
Co. 100.00 147.44 146.93 146.05 134.64 126.43 261.83
MG Group Index 100.00 101.10 76.23 77.50 56.61 60.25 79.03
NASDAQ Market Index 100.00 88.36 79.98 60.80 55.69 67.80 83.90
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Proposals of shareholders intended to be presented, pursuant to Rule 14a-8
under the Securities Exchange Act of 1934 (the "Exchange Act"), at our 2005
annual meeting of shareholders must be received by us at 660 Beta Drive,
Mayfield Village, Ohio 44143, on or before November 27, 2004, for inclusion in
our proxy statement and form of proxy relating to the 2005 annual meeting of
shareholders. In order for a shareholder's proposal outside of Rule 14a-8 under
the Exchange Act to be considered timely within the meaning of Rule 14a-4(c) of
the Exchange Act, such proposal must be received by us at the address listed in
the immediately preceding sentence not later than February 12, 2005.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers, and owners of more than 10% of our common shares, to file with the
Securities and Exchange Commission (the "SEC") and the NASDAQ initial reports of
ownership and reports of changes in ownership of our Common Shares and other
equity
10
securities. Executive officers, directors and owners of more than 10% of the
common shares are required by SEC regulations to furnish our Company with copies
of all forms they file pursuant to Section 16(a).
To our knowledge, based solely on our review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the fiscal year ended December 31, 2003, all Section 16(a) filing
requirements applicable to its executive officers, directors and
greater-than-10% beneficial owners were complied with.
OTHER MATTERS
INDEPENDENT PUBLIC ACCOUNTANTS
We have not selected our independent accountants for the current fiscal
year. The Audit Committee of the Board of Directors will make this selection
later in the year. Representatives of PwC, which served as our independent
public accountants for the fiscal year ended December 31, 2003, are expected to
be present at the annual meeting of shareholders, will have an opportunity to
make a statement if they so desire, and will be available to respond to
appropriate questions.
AUDIT FEES
The aggregate fees billed for professional services rendered by PwC for the
audit of the Company's annual financial statements for the years ended December
31, 2002 and 2003, and for PwC's reviews of the financial statements included in
the Company's Form 10-Q filed with the Securities and Exchange Commission were
$420,000, and $435,000.
AUDIT-RELATED FEES
The incremental fees billed for professional services rendered by PwC for
audit-related services for the years ended December 31, 2002 and 2003, were
$42,000, and $15,000. Fees included in 2002 were for services rendered for the
audit of our employee benefit plan, work related to sales cutoff at a foreign
subsidiary and the audit of our Italian office. Fees included in 2003 were for
services rendered for the employee benefit plan audit.
TAX FEES
The incremental fees billed for professional services rendered by PwC for
tax-related services for the years ended December 31, 2002 and 2003, were
$52,000, and $41,000. Fees included in 2002 were for tax services related to an
Internal Revenue Service examination, loss strategies related to closing our
data communications operations in Europe, VAT analysis related to our data
communications location in Europe, and a transfer pricing analysis, capital
allowance deduction analysis and group structuring for tax purposes related to
our Australian subsidiary. Fees included in 2003 were for tax services related
to the Internal Revenue Service examination, a transfer pricing analysis at our
Mexico subsidiary, income tax return and other tax consulting for our Australian
subsidiary and an income tax return for our Canadian subsidiary.
ALL OTHER FEES
The incremental fees billed for professional services rendered by PwC for
all other services for the years ended December 31, 2002 and 2003, were $0, and
$2,000. The fees included in 2003 were for filing the Company's financial
statements in Puerto Rico.
11
COMMUNICATION WITH THE BOARD OF DIRECTORS
The Board of Directors of the Company believes that it is important for
shareholders to have a process to send communications to the Board. Accordingly,
shareholders who wish to communicate with the Board of Directors or a particular
director may do so by sending a letter to:
J. Richard Hamilton -or - Frank B. Carr
Secretary Chairman, Audit Committee
Baker & Hostetler LLP 2005 Chestnut Hills
1900 East Ninth Street Cleveland Heights, Ohio 44106
3200 National City Center
Cleveland, Ohio 44114
The mailing envelope must contain a clear notation indicating that the
enclosed letter is a "Stockholder-Board Communication" or "Stockholder-Director
Communication." All such letters must identify the author as a stockholder and
clearly state whether the intended recipients are all members of the Board of
Directors or certain specified individual directors. The Secretary and Mr. Carr,
as applicable, will make copies of all such letters and circulate them to the
appropriate director or directors. The Directors are not spokespeople for the
Company and shareholders should not expect a response or reply to any
communication.
MISCELLANEOUS
The Company expects its directors to attend the Company's annual meeting of
shareholders. All of the directors attended last year's annual meeting of
shareholders.
If the enclosed proxy card is executed and returned to us, the persons
named in it will vote the shares represented by that proxy at the meeting. The
form of proxy permits specification of a vote for the proposal to fix the number
of directors at eight and for the election of directors as set forth under
"Election of Directors" above, the withholding of authority to vote in the
election of directors, or the withholding of authority to vote for one or more
specified nominees. When a choice has been specified in the proxy, the shares
represented will be voted in accordance with that specification. If no
specification is made, those shares will be voted at the meeting for the
proposal to fix the number of directors at eight and to elect directors as set
forth under "Election of Directors" above. Under Ohio law and our Amended and
Restated Articles of Incorporation, broker non-votes and abstaining votes will
not be counted in favor of or against the proposal to fix the number of
directors at eight or any nominee but will be counted as "present" for purposes
of determining whether a quorum has been achieved at the meeting. Director
nominees who receive the greatest number of affirmative votes will be elected
directors. All other matters to be considered at the meeting, including the
proposal to fix the number of directors at eight, require for approval the
favorable vote of a majority of the shares voted at the meeting in person or by
proxy. If any other matter properly comes before the meeting, the persons named
in the proxy will vote thereon in accordance with their judgment. We do not know
of any other matter that will be presented for action at the meeting and we have
not received any timely notice that any of our shareholders intend to present a
proposal at the meeting.
By order of the Board of Directors,
J. Richard Hamilton,
Secretary
Dated: March 26, 2004
12
APPENDIX A
PREFORMED LINE PRODUCTS COMPANY
AUDIT COMMITTEE CHARTER
A. PURPOSES OF THE COMMITTEE
The purposes of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Preformed Line Products Company (the "Company") are
(i) to assist the Board in overseeing (a) the integrity of the Company's
financial statements, (b) the Company's accounting and financial reporting
processes, including audits of the Company's financial statements, (c) the
Company's compliance with legal and regulatory requirements, (d) the Company's
independent auditor's qualifications and independence, and (e) the performance
of the Company's independent auditors; and (ii) to prepare the report required
by the rules of the Securities and Exchange Commission (the "SEC") to be
included in the Company's annual proxy statement.
B. COMPOSITION OF THE COMMITTEE
The Committee must be comprised of at least three directors, each of whom
must be independent, as the term "independent" is defined for purposes of
applicable federal securities laws, including Section 10A(m)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act", the rules of the
SEC, including Rule 10A-3 of the 1934 Act, and the listing standards of NASDAQ
Stock Market, Inc. (the "NASDAQ") or other applicable listing standards.
Each Committee member must meet the financial literacy and experience
standards applicable to him or her under applicable law, SEC rules and NASDAQ or
other listing standards. Unless the Board determines otherwise at least one
member of the Committee must be an "audit committee financial expert" as defined
by the SEC in Item 401(h) of Regulation S-K. Each Committee member must be free
of any relationship that, in the opinion of the Board, would interfere with his
or her exercise of independent judgment.
The members of the Committee will be appointed by and serve at the pleasure
of the Board. The Board has the sole authority to remove Committee members and
to fill vacancies on the Committee. The Board will appoint the chairperson.
C. MEETINGS AND PROCEDURE OF THE COMMITTEE
1. Minimum Number of Meetings and Agendas. The Committee shall meet at
least quarterly or more frequently as circumstances require. The chairperson
will, in conjunction with appropriate members of the Committee and management,
establish the meeting calendar and set the agenda for each meeting. All
Committee members may suggest the inclusion of matters for the agenda.
2. Special Meetings. The chairperson of the Committee or a majority of the
members of the Committee may call special meetings of the Committee.
3. Subcommittees. The Committee may form subcommittees of not fewer than
two members for any purpose that the Committee deems appropriate and may
delegate to such subcommittees such power and authority as the Committee deems
appropriate.
4. Attendance by Outsiders. The Committee may request that any directors,
officers or employees of the Company, or other persons whose advice and counsel
are sought by the Committee, attend any meeting of the Committee to provide such
information as the Committee may request.
5. Executive Session. The Committee may meet in executive session outside
the presence of the Company's executive officers. The Committee shall meet in
executive session at least once annually.
6. Meeting Reports and Minutes. Following each of its meetings, the
Committee shall report on the meeting to the Board, including a description of
all actions taken by the Committee at the meeting. The Committee shall keep
written minutes of its meetings and deliver a copy of such minutes to the
Company's corporate secretary for inclusion in the corporate records.
A-1
D. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Committee has the following authority and responsibilities:
1. Engagement of Independent Auditor; Approval of Services. The
Committee has the sole authority to engage and, when appropriate, replace
the Company's independent auditor. The Committee is directly responsible
for the compensation and oversight of the work of the independent auditor
(including resolution of disagreements between management and the auditor
regarding financial reporting) for the purpose of preparing or issuing an
audit report or related work or performing other audit, review or
attestation services for the Company. The Committee must preapprove all
auditing services and permitted non-audit services (including the fees and
terms thereof) to be performed for the Company by its independent auditor.
The Company's independent auditor shall report directly to the Committee.
The Committee shall obtain from the independent auditor assurance that
Section 10A(b) of the 1934 Act has not been implicated.
2. Review and Discussion Items. The Committee shall review and
discuss:
a. with the independent auditor in advance of its audits, the
overall scope and plans for the audits, including the adequacy of
staffing and other factors that may affect the effectiveness and
timeliness of such audits; in this connection, the Committee shall
discuss with management and the independent auditor, among other things,
the Company's significant exposures (whether financial, operating or
otherwise), and the steps management has taken to monitor and control
such exposures, including the Company's risk assessment and risk
management policies;
b. with management and the independent auditor, the financial
information to be included in the Company's Annual Report on Form 10- K
(or the annual report to stockholders if distributed prior to the filing
of the Form 10-K), including the disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," their judgment about the quality, not just acceptability,
of accounting principles, the reasonableness of significant judgments,
the clarity of the disclosures in the financial statements, and any
significant matters regarding internal controls over financial reporting
that have come to the attention of management or the independent
auditor; in this connection, the Committee shall discuss the results of
the annual audit and any other matters required to be communicated to
the Committee by the independent auditor under generally accepted
auditing standards, applicable law or listing standards, including
matters required to be discussed by Statement on Auditing Standards No.
61, as amended by Statement on Auditing Standards No. 90, and shall
determine whether to recommend to the Board that the audited financial
statements be included in the Company's Form 10-K;
c. with management and the independent auditor, the quarterly
financial information to be included in the Company's Quarterly Reports
on Form 10-Q, including the disclosures under "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and any
other matters required at the time of that discussion to be communicated
to the Committee by the independent auditor under generally accepted
auditing standards, applicable law or listing standards; in this
connection, the Committee shall discuss the results of the independent
auditor's review of the Company's quarterly financial information
conducted in accordance with Statement on Auditing Standards No. 100;
d. with the Chief Executive Officer and the Chief Financial Officer
periodically (and at least quarterly), management's conclusions about
the efficacy of the Company's disclosure controls and procedures,
including any significant deficiencies in the design or operation of
such controls and procedures or material weaknesses therein, and with
management and the independent auditor annually, management's annual
internal control report, including the auditor's attestation thereof, if
any;
e. with management, at least annually and at such other times as
the Committee considers appropriate, the Company's earnings press
releases, including the use of any "pro forma" or "adjusted" non-GAAP
information, and the nature of financial information and earnings
guidance provided to analysts and rating agencies;
A-2
f. with the independent auditor, at least annually, any problems or
difficulties the auditor has encountered in connection with the annual
audit or otherwise, including any restrictions on the scope of its
activities or access to required information, any disagreements with
management regarding U.S. generally accepted accounting principles
("GAAP") or other matters, material adjustments to the financial
statements recommended by the independent auditor, and adjustments that
were proposed but "passed," regardless of materiality; in this
connection, the Committee shall review with the independent auditor
significant consultations on matters that are otherwise are required to
be disclosed to the Committee made between the audit team and the
independent auditor's national office, any management letter issued or
proposed to be issued by the auditor and the Company's response to that
letter;
g. with management and the independent auditor, at least annually
and at such other times as the Committee considers appropriate, (a)
significant issues regarding accounting principles and financial
statement presentations, including any significant change in the
Company's selection or application of accounting principles, and
significant issues as to the adequacy of the Company's internal controls
and any special audit steps adopted in light of material control
deficiencies, (b) analyses prepared by management or the independent
auditor setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial
statements, (c) all alternative treatments of financial information
within GAAP that have been discussed with management, ramifications of
the use of such alternative treatments, and the treatment preferred by
the independent auditor, and (d) the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the Company's
financial statements and other public disclosures;
h. with the independent auditor, at least annually, the auditor's
periodic reports regarding its independence;
i. with the independent auditor, at least annually, the auditor's
performance, including the Committee's evaluation of the auditor's lead
partner; in conducting this review, the Committee shall consult with
management and obtain and review a report by the independent auditor
describing its internal quality-control procedures, material issues
raised in its most recent internal quality-control review, or peer
review (if applicable), or by any inquiry or investigation by
governmental or professional authorities within the preceding five
years, respecting any independent audit carried out by the independent
auditor, and the response of the independent auditor;
j. with the General Counsel, other appropriate legal staff of the
Company or its outside counsel, at least annually and at such other
times as the Committee considers appropriate, material legal affairs of
the Company and the Company's compliance with applicable law and listing
standards; in this connection, the Committee shall discuss with
management (and appropriate counsel) and the independent auditor any
correspondence with, or other action by, regulators or governmental
agencies and any employee complaints or published reports that raise
concerns regarding the Company's financial statements, accounting or
auditing matters or compliance with the Company's code of ethics or
other standards of conduct;
k. with management, annually, a summary of the Company's
transactions with directors and officers of the Company and with firms
that employ directors, and any other material related party
transactions;
l. with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports which
raise material issues regarding the Company's financial statements or
accounting policies; and
m. with the full board, annually, an evaluation of this Charter and
of the Committee's performance under this Charter.
3. Reports. The Committee shall report regularly to the full board
with respect to the Company's financial statements, the Company's
compliance with legal and regulatory requirements, the performance and
independence of the Company's independent auditors, and the performance of
the internal audit function, and shall report annually to the full board
with respect to the Committee's evaluation of this
A-3
Charter and the Committee's performance thereunder. The Committee shall
prepare the reports required to be included in the Company's annual proxy
statement with respect to financial and accounting matters and Committee
actions, and such other reports with respect to those matters as are
required by applicable law, applicable rules of the SEC or applicable
NASDAQ or other listing standards.
4. Hiring and Complaint Processing Policies and Procedures. The
Committee shall establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls and auditing matters, and (ii) the
confidential, anonymous submission by employees of the Company of concerns
regarding accounting or auditing matters.
5. Other Authority and Responsibilities; Limitation. The Committee
will have such additional authority and responsibilities as may be granted
to or imposed on audit committees from time to time by applicable law, SEC
rules and NASDAQ or other listing standards, and shall discharge all of its
authority and responsibilities in accordance with all applicable law, SEC
rules and NASDAQ or other listing standards. The Committee may conduct or
authorize the conduct of such investigations within the scope of its
authority and responsibilities as it considers appropriate.
The Committee will rely on the expertise, knowledge and experience of
management and the independent auditor in carrying our the Committee's oversight
responsibilities. In discharging its responsibilities, the Committee is not
responsible for the planning or conduct of audits or for any determination that
the Company's financial statements are complete and accurate or in accordance
with GAAP and applicable rules and regulations. These matters are the
responsibility of management. The independent auditor is responsible for
planning and conducting audits to detect whether the financial statements
present fairly in all material respects the financial position and results of
operations of the Company.
6. Access to Records. The Committee is entitled to full access to all
books, records, facilities and personnel of the Company for the purpose of
executing its authority and responsibilities.
7. Related-Party Transactions. The Committee shall review and approve
related-party transactions.
E. EVALUATION OF THE COMMITTEE
As referenced above, the Committee shall, on an annual basis, evaluate its
performance and this Charter. The Committee shall deliver to the Board a report
setting forth the results of its evaluation.
F. OUTSIDE ADVISORS
The Committee may retain, at the Company's expense, such independent
counsel or other advisors (including accounting firms and experts) as it deems
necessary or advisable for the full and faithful execution of its duties and
responsibilities hereunder.
G. ADOPTION
This Charter supersedes and replaces the Company's Audit Committee Charter
dated May 16, 2001. This Charter was approved and adopted by the Board on
February 18, 2004.
A-4
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PREFORMED LINE PRODUCTS COMPANY
PROXY
The undersigned hereby appoints Jon R. Ruhlman, Wilber C. Nordstrom and J.
Richard Hamilton, and each of them, attorneys and proxies of the undersigned,
with full power of substitution, to attend the annual meeting of shareholders of
Preformed Line Products Company to be held at 660 Beta Drive, Mayfield Village,
Ohio, on Monday, April 26, 2004, at 9:00 a.m., local time, or any adjournment
thereof, and to vote the number of common shares of Preformed Line Products
Company which the undersigned would be entitled to vote, and with all the power
the undersigned would possess if personally present, as follows:
1. _________ FOR, or ________ AGAINST, or _______ ABSTAIN the proposal to fix
the number of directors at eight (8), divided into two (2) classes of
four (4) members.
2. _________ FOR, or ________ WITHHOLD AUTHORITY to vote for, the following
nominee for election as director, to serve until the 2005 annual meeting
of the shareholders and until his successor has been duly elected and
qualified: John P. O'Brien.
3. _________ FOR (except as noted below), or ______ WITHHOLD AUTHORITY to
vote for, the following nominees for election as directors, each to serve
until the 2006 annual meeting of the shareholders and until his successor
has been duly elected and qualified: John D. Drinko, Wilber C. Nordstrom,
Jon R. Ruhlman and Randall M. Ruhlman.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY PARTICULAR NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.)
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(To be signed on reverse side)
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(Continued from other side)
4. On such other business as may properly come before the meeting.
THE PROXIES WILL VOTE AS SPECIFIED ABOVE, OR IF A CHOICE IS NOT SPECIFIED,
THEY WILL VOTE FOR THE PROPOSAL IDENTIFIED IN ITEM 1 AND FOR THE NOMINEES LISTED
IN ITEMS 2 AND 3.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
Receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement
dated March 26, 2004, is hereby acknowledged. Dated
Dated ____________________, 2004
________________________________
________________________________
________________________________
Signature(s)
(Please sign exactly as your
name or names appear hereon,
indicating, where proper,
official position or
representative capacity.)
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