2003 Committee Charter : LSS
AMENDED AND RESTATED
CHARTER OF THE
OF THE BOARD OF DIRECTORS OF
LONE STAR TECHNOLOGIES, INC.
(Adopted by the Audit Committee on November 6, 2002
and adopted on December 3, 2002 and amended on March 20, 2003 by the Board of Directors)
This Charter (the "Charter") shall govern the operations of the Audit Committee (the
"Committee") of the Board of Directors (the "Board") of Lone Star Technologies, Inc., a
Delaware corporation (the "Company"). The purpose of this Charter is to assist and direct the
Committee in performing the following primary responsibilities:
Company's financial statements and the Company's compliance with legal and
regulatory requirements; [NYSE Manual § 303A, ¶7(b)(i)(A) (Proposed)]
regarding finance and accounting; [NYSE Manual § 303A, ¶7(b)(i)(A) (Proposed)]
independence of) and, where appropriate, replace the "registered public accounting
firm"1 employed by the Company as its independent auditors to prepare or issue an
audit report or related work and to cause such independent auditors to report directly
to the Committee; [Sarbanes-Oxley § 301; NYSE Company Manual
§ 303.01(B)(1)(b); NYSE Manual § 303A, ¶7(b)(i)(A) (Proposed)]
financial and senior management of the Company, including the resolution of
disagreements between management and the independent auditors regarding financial
reporting and the establishment of procedures to handle complaints regarding
accounting, internal audit control and auditing matters; [Sarbanes-Oxley § 301]
statement; and [NYSE Manual § 303A, ¶ 7(B)(i)(B) (Proposed)]
The Committee is empowered to investigate any matter brought to its attention, with full
access to all books, records, facilities and personnel of the Company and, for this purpose, to
retain on behalf of the Committee outside counsel, accountants or other experts. [NYSE Manual
§ 303A, ¶ 7(B)(ii)(E) (Proposed)]
1 As defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002.
The Committee shall be comprised of three or more directors, each of whom has been
affirmatively determined by the Board to be an "independent director" satisfying the standards
and rules of the New York Stock Exchange (the "NYSE"). [NYSE Manual § 303A, ¶2
(Proposed)] The affirmative determination by the Board that Committee members are
independent directors shall be made no later than the first Board meeting held after the standards
and rules of the NYSE regarding director independence are adopted.
Each member of the Committee may not receive compensation from the Company other
than director's fees and may not, other than in his or her capacity as a member of the Committee,
the Board or any other Board Committee:
[Sarbanes-Oxley § 301, NYSE Manual § 303A, ¶6 (Proposed)]
Each member shall be financially literate, or must become financially literate within a
reasonable period of time after being elected to the Committee, and at least one member shall be
a "financial expert" within the meaning of the rules and regulations of the Securities and
Exchange Commission (the "SEC") who through education and experience as a public
accountant or auditor or a principal financial officer, comptroller, or principal accounting officer
of an issuer (or from a position involving the performance of similar functions) has
the preparation or auditing of financial statements of generally comparable
the application of such principles in connection with accounting for estimates,
accruals and reserves;
[Sarbanes-Oxley § 407].
Members of the Committee shall be elected by the Board at the annual meeting of the
Board to serve until their successors are duly elected and qualified. If a member is unable to
serve a full term, the Board shall elect a replacement. The Board shall appoint one of the
members of the Committee to be Committee Chairperson.
The Committee shall meet at least four times annually, and more frequently as
More specifically, the Committee shall meet:
Company's interim financial statements in accordance with Section VI.1;
independence and quality control issues involving such auditors pursuant to
Sections VI.14 and VI. 21; and [NYSE Manual § 303A, ¶ 7(b)(ii)(B) (Proposed); not
clear that meeting is required]
respect to the Company's audited year-end financial statements pursuant to
Section VI.4. [NYSE Manual § 303A, ¶ 7(b)(ii)(C) (Proposed)]
The Committee shall periodically meet separately with the Company's management, with
its internal auditors (or other personnel responsible for the internal audit function) and with its
independent auditors. [NYSE Manual § 303A, ¶ 7(b)(ii)(G) (Proposed)]
Committee meetings and communications shall be either in person or by conference
telephone call. Except to the extent separate meetings are otherwise required, meetings with
management and the independent auditors may be either separate or combined at the discretion of
the Committee. Minutes shall be prepared for each meeting of the Committee, which minutes shall
be submitted to the Committee for approval at a later meeting. The minutes of all meetings of the
Committee shall be sent to the Secretary of the Company for filing.
The independent auditors shall be ultimately accountable to the Committee. The
Committee shall have ultimate authority and responsibility to select, appoint, compensate,
oversee, evaluate and, where appropriate, replace the independent auditors. [Sarbanes-Oxley
The responsibilities of the Committee are set forth in this Charter. The responsibility of
management is to prepare the Company's financial statements. The responsibility of the
independent auditors is to audit those financial statements.
VI. SPECIFIC DUTIES
To fulfill its responsibilities, the Committee shall:
Financial Reporting Review
1. In accordance with Statement on Auditing Standards No. 71, and
considering Statement on Auditing Standards No. 61 ("SAS No. 61") as it relates to
interim financial information, review and discuss the Company's quarterly operating
results with management and the independent auditors. If practicable the review and
discussion shall occur prior to release of the Company's operating results, but in any
event it shall occur prior to filing of the Company's quarterly report on Form 10-Q with
the SEC. The Chairperson of the Committee may represent the entire Committee for
purposes of this review and discussion.
2. Prior to distribution, review and discuss the quarterly financial statements
of the Company with management and the independent auditors, including the
Company's disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations." [NYSE Manual § 303A, ¶ 7(b)(ii)(C) (Proposed)]
3. On a quarterly basis (and as of a date within 90 days prior to the filing of
the Company's periodic reports on Form 10-K and Form 10-Q), review a report from the
Company's Chief Executive Officer and Chief Financial Officer disclosing to the
internal controls which could adversely affect the Company's ability to
record, process, summarize and report financial data and that such officers
have identified for the Company's auditors any material weaknesses in such
internal controls; and
employees who have a significant role in the Company's internal controls.
[Sarbanes-Oxley § 302(a)(5)]
4. Prior to distribution, review and discuss the annual audited financial
statements of the Company with management and the independent auditors, (i) with
specific attention to those matters required to be discussed by SAS No. 61, and (ii)
including a review and discussion of the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations." [NYSE
Manual § 303A, ¶ 7(b)(ii)(C) (Proposed)]
5. Based on the review and discussions described in
Sections VI.3, VI.4, VI.7 and other provisions of this Charter, determine whether the
audited financial statements of the Company be included in the Company's annual report
on Form 10-K to be filed with the SEC.
6. Prepare the Committee's report for inclusion in the Company's annual
proxy statement; [NYSE Manual § 303A, ¶7(b)(i)(B) (Proposed)].
7. Review and discuss the report from the Company's independent auditors
accepted accounting principles that have been discussed with
management of the Company, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by
such independent auditors; and
auditors and management of the Company.
[Sarbanes-Oxley § 204]
8. Review and discuss with the independent auditors their evaluation of the
Company's financial reporting processes, both internal and external.
9. Review and discuss with the independent auditors their judgment about
the quality, not just the acceptability, of the Company's accounting principles as applied
in its financial reporting (with management to be included in these discussions at the
discretion of the Committee).
10. Meet separately, periodically, with management, with internal auditors (or
other personnel responsible for the internal audit function) and with the Company's
independent auditors. [NYSE Manual § 303A, ¶7(b)(ii)(G) (Proposed)]
11. Review and discuss with the independent auditors and management the
extent to which changes in financial or accounting practices, as approved by the
Committee, have been implemented, and plans for future implementation.
12. Review with the Company's independent auditors any audit problems or
difficulties and management's response. [NYSE Manual § 303A, ¶7(b)(ii)(H)
13. Discuss earnings, press releases and financial information and earnings
guidance provided to analysts and rating agencies. [NYSE Manual § 303A, ¶7(b)(ii)(D)
14. (i) At least annually, obtain and review a report by the Company's
independent auditors describing all relationships between the Company and such
auditors; [NYSE Manual § 303A ¶7(b)(ii)(B) (Proposed); not clear that meeting is
required] (ii) receive the written disclosures and the letter required by Independence
Standards Board Standard No. 1 from the independent auditors and discuss with them the
disclosures, the letter and their independence; (iii) discuss with the independent auditors
any disclosed relationships or services that may impact the objectivity and independence
of the independent auditors; and (iv) take appropriate action in response to the
independent auditors' written disclosures for the Committee to satisfy itself of the
independent auditors' independence.
15. Approve in advance the engagement of the Company's independent
auditors to provide both auditing services (including comfort letters in connection with
securities underwritings) and non-audit services (including tax services); provided,
however, the Company's independent auditors may not be engaged to provide any of the
following non-audit services:
financial statements of the Company;
may determine, by regulation, to be impermissible.
[Sarbanes-Oxley § 201 and § 202]
16. Confirm that both the lead (or coordinating) audit partner at the
Company's independent accountants that has primary responsibility for the audit of the
Company's financial statements and the audit partner responsible for reviewing the audit
have not performed audit services for the Company in each of the five previous fiscal
years before the current audit. [Sarbanes-Oxley § 203; could delete, as requirement is
technically applicable to independent auditors]
17. Confirm that none of the following Company officers has been employed
by the Company's independent auditors and participated in any capacity in an audit of the
Company during the one-year period preceding the date that the independent auditors
commenced their audit:
[Sarbanes-Oxley § 206]
18. Set clear hiring policies for employees or former employees of the
Company's independent auditors. [NYSE Manual § 303A, ¶7(b)(ii)(I) (Proposed)]
19. Prior to commencement of work on the annual audit by the independent
auditors, discuss with them the overall scope and plan for the audit.
20. Following completion of work on the annual audit, discuss with the
independent auditors and management the adequacy and effectiveness of the Company's
systems of internal controls regarding finance and accounting.
21. At least annually, obtain and review a report by the Company's
independent auditors describing their internal quality-control procedures, any material
issues raised by the most recent internal quality-control review or peer review of the firm,
or by any inquiry or investigation by governmental or professional authorities within the
preceding five years with respect to one or more independent audits conducted by such
firm and any steps taken to deal with such issues. [NYSE Manual § 303A, ¶7(b)(ii)(B)
(Proposed); not clear that meeting is required]
22. Review the performance of the independent auditors annually.
23. Confirm, at least annually, that the members of the Committee continue to
meet all NYSE requirements for independence.
24. Confirm that the Company has made to the NYSE all required
affirmations regarding (i) the independence, financial literacy and accounting or related
financial management expertise of the members of the Committee and (ii) the annual
review and reassessment of this Charter.
25. Review and assess the adequacy of this Charter annually, recommending
appropriate changes for Board approval.
Legal and Other Matters
26. Review with the Company's legal counsel (i) legal compliance matters
and (ii) other legal matters that could have an impact on the Company's financial
27. Establish procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting controls
or auditing matters and (ii) the confidential, anonymous submission by the Company's
employees of concerns regarding questionable accounting or auditing matters.
[Sarbanes-Oxley § 301]
28. Discuss policies with respect to risk assessment and risk management.
[NYSE Manual § 303A, ¶7(b)(ii)(F) (Proposed)]
29. Report regularly to the Board. [NYSE Manual § 303A, ¶7(b)(ii)(J)
30. Annually perform an evaluation of the Committee's performance, report
the results of such evaluation to the Board and receive directions or suggestions from the
Board on areas in which the Committee's performance could be improved. [NYSE
Manual § 303A, ¶7(b)(iii) (Proposed)]